TMI Blog2009 (12) TMI 994X X X X Extracts X X X X X X X X Extracts X X X X ..... ccepting the income declared by the assessee. However, AO subsequently noted that the income of the assessee has escaped assessment and therefore after recording the reasons for reopening of the assessment and issuing notice u/s.148 of the Income Tax Act, he reopened the assessment u/s.147 of the Act. During the re-assessment proceedings, AO observed that the assessee has claimed deduction amounting to ₹ 1,64,81,392/- during the year under consideration. He further observed that there was some discrepancy in the GP ratios of the 80IA and non-80IA units. He also observed that the expenses allocation was not proper which has resulted in a higher profit percentage in the 80IA unit. He therefore asked the assessee to substantiate its claim that the expenditure allocation was done properly. In response to the same, assessee filed its submissions stating that the expenses apportioned amongst the units and the profit declared in Goa unit are true and correct. Assessee also gave comparison of the GP declared of the Goa unit at 47.97% as against GP of other unit at 34.38%. After considering the assessee s submissions, AO held that the assessee s submission is not convincing to accept ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act is to be allowed. He also made a reference to the order of his predecessor in the assessee s own case for the year 1998-99 wherein similar adjustment was deleted. Aggrieved by the relief given by the CIT[A] , the revenue is in appeal before us. 5. The ld. DR placed strong reliance upon the order of the AO while the ld. counsel for the assessee placed reliance upon the order of the CIT[A] and drew our particular attention to the relevant portion of the order of the CIT[A] wherein the assessee s submissions have been recorded. 6. After hearing both the parties and having considered the relevant material placed on record, we find that the assessee is eligible for deduction u/s.80IA of the Act with regard to its Goa unit. The reasons for the disallowance made by the AO is that the Goa unit had shown higher GP rate as compared to the other non eligible units. The assessee has given detailed reasoning as to why the difference in the GP ratio of eligible as well as non eligible units has arisen. As rightly pointed out by the CIT[A] , the AO has not pointed out any specific items of expenditure which has not been properly allocated by the assessee to all the units. The reasoni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sallowance is to be made therefrom. This ground is accordingly rejected. 10. As regards ground No.4, the ld. counsel for the assessee fairly admitted that this issue is covered against the assessee by the decision of the Special Bench of the Tribunal in the case of Hindustan Mint reported in 119 ITD 107. This ground is accordingly rejected. 11. As regards ground No.5, we find that this is consequential in nature and the AO is directed to give consequential relief to the assessee accordingly. 12. Ground No.6 is premature and is accordingly rejected. 13. In the result, assessee s appeal in I.T.A.No.4433/M/07 is partly allowed. 14. I.T.A.No.4782/M/07 [revenue s appeal] A.Y 2001-02: In this appeal, the only grievance of the revenue is against the order of the CIT[A] in directing the AO to allow the claim of the assessee u/s.35[1][iv] of the Income Tax Act amounting to ₹ 8,93,64,936/- in respect of capital expenditure incurred for the construction of building for the purpose of research without appreciating that the AO has rightly invoked the provisions of sec.35[2AB] of the Income Tax Act for disallowing the claim of the assessee. 15. Brief facts of the case a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arch and development, [except for the expenditure in the nature of cost of any land or building] whereas sec.35[1][iv] allows deduction of 100% of any expenditure of a capital nature on scientific research and therefore the scope of both the sections is different. He further held that the expenditure claimed u/s.35[2AB] requires approval of the prescribed authority, which is not the case u/s.35[1][iv] and that the AO has not disputed the fact that the building is used for research and development purpose. He, therefore, allowed the assessee s appeal. Against the relief given by the CIT[A] , the revenue is in appeal before us. 17. The ld. DR supported the order of the AO and drew our particular attention to the provisions of sec.35[2AB] wherein deduction is not allowable on the expenditure incurred on land and building. Thus according to him, the assessee is not entitled to deduction u/s.35 of the Act. 18. The ld. counsel for the assessee, on the other hand, supported the order of the CIT[A] and submitted that the assessee has claimed deduction u/s.35[1][iv] where there is no exception to the capital expenditure and there is no restriction on the expenditure incurred on buildi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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