PRINCIPAL COMMISSIONER OF INCOME TAX 4 vs. SYNPOL PRODUCTS PVT LTD

These appeals filed by the Revenue arise out of the   common   judgment   of   the   Income   Tax   Appellate Tribunal in case of the respondent assessee for the assessment year 2007­08. Questions framed in both appeals are identical, we may refer to the documents in Tax Appeal No.524 of 2018. 2. Revenue is in appeal against the judgment of the Income   Tax   Appellate   Tribunal   dated   18.10.2017 raising following questions for our consideration: “[A] Whether   the   Appellate   Tribunal   has substantially erred in law and on facts in deleting the disallowance of excess claim of C/TAXAP/524/2018 ORDER exemption   of   Rs.24,26,814/­   u/s   of   10B   of the Income Tax Act? [B] Whether   the   Appellate   Tribunal   has substantially erred in law and on facts in deleting the disallowance of Rs.45,739/­ u/s 14A of the Income Tax Act, 1961? [C] Whether   the   Appellate   Tribunal   has substantially erred in law and on facts in deleting the disallowance of Rs.10,73,375/­ u/s 40(a)(ia) for non­deduction of TDS ?”

Question­A pertains to disallowance of claim of exemption under section 10B of the Income Tax Act, 1961 ('the Act' for short), ordered by the Assessing Officer on the ground that the assessee had inflated the profit of the unit eligible for exemption, being an   EOU   unit.     The  Commissioner   of   Income   Tax (Appeals)  examined   the   individual   heads   where   the Assessing Officer had found inflation and partially confirmed   the   Assessing   Officer's   finding   while giving partial relief to the assessee.  The Tribunal in further appeal by the assessee, deleted the entire disallowance, inter alia, observing that the assessee had maintained separate books of accounts for both the units; eligible and ineligible.   The Assessing Officer   ought   to   have   pointed   out   a   particular expenditure incurred for earning income in the EOU. He   could   not   have   artificially   apportioned   the C/TAXAP/524/2018 ORDER expenditure merely on the basis of production of the stakes.  The Tribunal also noted that in the earlier years, the accounting method adopted by the assessee was not disturbed by the Assessing Officer.

From the perusal of the materials on record, it can be seen that entire issue is factual in nature. The Tribunal having found that the accounts of the assessee were properly maintained and could not have disturbed   by   the   Assessing   Officer   mechanically applying   the   ratio   of   production   or   sell   of   two units, no question of law arises.

Question­B pertains to a sum which is extremely small   and   we   are   therefore   do   not   entertain   this question on this ground.

Question­C   pertains   to   disallowance   under section   40(a)(ia)   on   the   ground   that   on   several payments   made   in   excess   of   Rs.50,000/­   though required,   tax   was   not   deducted   at   source.     The Tribunal in this respect confirmed the view of the Commissioner   of   Income   Tax   (Appeals)  and   to   that extent held in favour of the Revenue.   While doing so, the Tribunal provided that the Assessing Officer C/TAXAP/524/2018 ORDER would separate out those disallowances pertaining to the   EOU   unit.     If   a   particular   disallowance   of expenditure pertains to EOU unit, the profit of such unit   would   increase   and   resultantly,   the   claim   of exemption may also go up.   We find no error in the view of the Tribunal.

In   the   result,   both   the   Tax   Appeals   are dismissed. (AKIL KURESHI, J) (B.N. KARIA, J) ANKIT SHAH