TaxTMI 
TaxTMI 
2026 (10) TMI 543
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....ted 26.07.2023 passed by the Ld. Income Tax Appellate Tribunal ["ITAT"] in ITA No. 2844/Del/2012. 2. Four questions of law were framed by the Appellant/Department at the time of filing the Appeal which read as under: "A) Whether the Hon'ble ITAT erred in considering that the AO has taken adverse inference in AY 2006-07 from the AY 2007-08 in reducing the claim of deduction u/s 10B of the Act? B) Whether the Hon'ble ITAT has erred in considering the verification of expenses incurred in EOU and Non-EOU made by the AO? C) Whether on the facts and circumstances of the case and in law, the Hon'ble ITAT has erred in allowing depreciation on @60% on computer accessories where it has been categorically esta....
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.... business of manufacture and sales of BOPP Films etc. The issue that arose was primarily regarding allocation of expenditure between theses five units of the Assessee. 7. Aggrieved by the Order dated 30.12.2009 passed by the Assessment Officer regarding apportionment of the expenditure in the five units, an Appeal was filed by the Assessee before the Commissioner of Income Tax (Appeals) ["CIT(A)"]. Noticing that the Assessment Officer had resorted to Section 80-IA(10) of the IT Act regarding apportionment of expenditure, the Appellate Authority i.e., CIT(A), held that the provision of Section 80-IA(10) of the IT Act have no application to the instant case. After examining the nature of product, the units and the manufacturing process in ....
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.... non-EOU Units are different and these products are having different margin of profit and therefore allocation of profits of the company as a whole in the ratio of sales of EOU and Non-EOU units cannot be justified. The invocation of provisions of Section 80IA(10) by the assessing officer is apparently erroneous and it is applicable to transaction between the assessee carrying on the eligible business and any other person, where for any reasons, the course of business between them is so arranged that the business transacted between them produces to the assessee more than the ordinary profits which might be expected to arise in such eligible business. In the appellant's case, there are no such transactions with any such "any other person....
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....on of the assessing officer cannot be legally justified. There is yet another important factor which clinches the issue in favor of the appellant. The A.O. has noted that the Profit of EOU Unit before tax are Rs.26.11 Crore on turnover of approx. Rs. 131.97 Crore which in percentage terms is approx 19.78%. It is seen that in the immediately preceding previous year i.e. A.Y. 2006-07, the appellant has shown profit of Rs.14.02 Crore in EOU unit on turnover of Rs.73.10 Crore which in percentage terms comes to 19.18%. Thus for the year under consideration, there is no material deviation in the % profit as compared to last year. The claim of deduction u/s 10B for the last year i.e. A.Y. 2006-07 was duly accepted in the assessment made u....
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....(M.P.) (156 ITR 835). d) CIT vs Shri Dev Enterprises (Cal.) (192 ITR 165). e) Dhansi Ram Agarwal Vs. CIT (Gauhati) 217 ITR 4 In view of the above, the action of the A.O. in reducing the claim of deduction u/s 10B cannot be justified. The assessing officer is directed to allow the deduction u/s 10B of Income Tax Act, 1961 as claimed by the appellant. These grounds of appeal are accordingly allowed." 8. The Order dated 06.03.2012 was further taken up in an Appeal filed by the Appellant/Department before the Ld. ITAT. The Ld. ITAT accepted the conclusion drawn by the CIT(A) as the principal challenge before the Ld. ITAT revolved around the payment of Senior Management Salary, which has been allocated by the Assess....