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2006 (6) TMI 198 - ITAT PUNE-ADeduction u/s 80-IA and 80B - Profits And Gains From Infrastructure Undertakings - adjustment of deemed losses against profit - reallocation expenses - Bad debts written-off - HELD THAT:- We are of the view that the confusion in the line of argument of the learned counsel arises out of insufficient appreciation of the import of the provisions contained in sub-section (5) and sub-section (1) of section 80-IA. Sub-section (5) creates a fiction that for the purpose of computing deduction u/s 80-IA, the eligible unit was the only unit operated by the assessee in the initial assessment year and in subsequent years for which the deduction is available. Therefore, its carried forward losses and unabsorbed depreciation have to be kept separately from other units operated by the assessee, if any, as also its profits. In view thereof, the provisions contained in section 80B(5) will have to be taken into consideration for finding out the gross total income as if eligible unit was the only unit operated by the assessee. It will also have to be held that profits and gains mentioned in sub-section (1) of section 80-I cannot exceed in quantum terms the gross total income defined in section 80B. We are also of the view that the decision of Hon'ble Supreme Court in the case of IPCA Laboratories Ltd. v. Dy. CIT [2004 (3) TMI 9 - SUPREME COURT] supports our view for the reason that section 80HHC also uses the words "profits derived by the assessee form the export of such goods or merchandize", which are similar to the words "profits and gains derived by any eligible undertaking" used in section. Thus, ground No. 1 of the appeal of the assessee is dismissed. Reallocation of expenses from Pimpri unit to Chakan unit - deduction u/s 80-IA - We are of the view that the learned CIT(A) has rightly come to the conclusion that the expenses which are properly relatable to one or the other unit should be allocated to that unit only. We are also in agreement with him that head office expenses and directors' remuneration should be allocated on the basis of turnover of the two units as that seems to be only the rational way to allocate these expenses. Thus, we do not find any reason to interfere with the order of the learned CIT(A). Thus, ground No. 2 of the appeal of the assessee is dismissed. Bad debts written-off - A debt, which is otherwise a proper bad debt and the recovery of which has been pending for quite sometime, does not become a good debt merely on the reasoning that no step has been taken to recover the debt. In some cases, such a legal pursuit may amount to throwing good money in litigation for recovery of an amount whose recovery was doubtful on account of counter claims of the debtors. Therefore, we are of the view that the argument of the learned DR does not lead to a conclusion that the debts were not bad. Further, the debts have been written-off from the books of account, they pertained to the trading transactions of the assessee and in most of the cases legal proceedings were barred by limitation. Thus, we are of the view that it is a case where bad debts have been written-off from the books of account, which have been considered earlier in computation of income of the assessee. In view thereof, we do not find any reason to interfere with the order of the learned CIT(A) on this issue. In result, the appeal of the assessee is dismissed.
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