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2009 (12) TMI 994 - ITAT MUMBAI

2009 (12) TMI 994 - ITAT MUMBAI - TMI - I.T.A. NOS. 4781 And 4782/Mum/2007, & I.T.A.NO.4433/Mum/2007 - Dated:- 7-12-2009 - Shri P.M.Jagtap, AM,And Smt. P.Madhavi Devi, JM For the Revenue : S/Shri Pragati Kumar & Mohd.Usman For the Assessee : Shri Vijay Mehta. ORDER Per P.MADHAVI DEVI, JM: These cross appeals are directed against CIT[A] s separate orders for A.Ys.1999-2000, 2001-02 & 1999-2000 respectively. 2. I.T.A.No.4781/M/81 - [revenue s appeal] A.Y 99-00: The only grievance of the re .....

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/-. The same was processed u/s.143[1] accepting 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 considerati .....

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nd 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 the ratio of profit shown in Goa unit. He therefore held that the claim of deduction u/s.80IA as made by the assessee on Goa unit is not allowable and restricted the same to ₹ 56,65,126/- and computed the income accordingly. 4. Aggrieved, assessee filed a .....

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igible units. The assessee submitted a chart giving the product-wise profit margins for the non eligible units and also that the turnover of the Goa unit was hardly 10% of the total turnover of the assessee company. It was also submitted that Goa unit was established in the year 1996-97 and therefore there were added advantages of latest equipment and modern technology resulting into low repairs and maintenance cost, low material consumption etc. resulting in a higher GP. It was also submitted t .....

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AO has not pointed out any discrepancy in the books of accounts maintained by the assessee and has also not pointed out any particular item of common expenditure, which the assessee has not properly allocated. He held that there is bound to be some variation in profits between the different products manufactured and between the different units due to various factors. He, thus, held that the AO has allocated the profit amount of each unit on the basis that the net profit ratio of all the units is .....

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ance 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 eligib .....

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[A]. In view of the same, we do not see any reason to interfere with the order of the CIT[A] and the revenue s appeal in I.T.A.No.4781/M/07 for A.Y 1999-2000 is dismissed. 7. I.T.A.No.4433/M/07 [assessee s appeal] A.Y 99-00: The assessee as raised the following grounds of appeal- 1) The Hon'ble Commissioner of Income-tax [Appeals] has erred in law and in facts in upholding the impugned assessment order passed by the learned Assessing Officer, which was illegal and bad in law. 2) The Hon' .....

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n of closing stock of finished goods and raw materials. 4) The Hon'ble Commissioner of Income-tax [Appeals] has erred in law and in facts in confirming the action of the Assessing Officer in holding that while computing profits of the business for the purpose of section 80HHC, deduction allowable u/s.80IA should be reduced. 5) The Hon'ble Commissioner of Income-tax [Appeals] has erred in law and in facts in confirming the action of the Assessing Officer in charging interest u/s.234B & .....

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the Act, we find that this ground also needs no adjudication in view of our upholding the finding of the CIT[A] that the assessee is eligible for deduction u/s.80IA as claimed by the assessee that no disallowance 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 .....

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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 are that the assessee company filed its return of income declaring loss of ₹ 27,53,75,569/- for the relevant a .....

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After perusal of the records, AO observed that the assessee has claimed deduction amounting to ₹ 8,93,64,936/- being expenditure incurred in respect of building, which does not fall in the ambit of eligible expenditure for deduction under sec.35 of the Act. In view of the same, he reopened the assessment by issuance of notice u/s.148 dated 31-3-2003. The assessee s explanation was called for as to why the expenditure on building should not be disallowed in view of the provisions of sec.35[ .....

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the AO stating that the claim was made u/s.35[1][iv] which does not prohibit allowance of deduction of expenditure incurred for the purpose of construction of building used for the scientific research related to the business carried on by the assessee. The CIT[A] held that the provisions of sec.35[1][iv] do not restrict the purview of deduction and as a consequence allows the expenses incurred for construction of building unlike the provisions of sec.35[2AB] which restricts the deduction to be a .....

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e 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 th .....

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