COMMISSIONER OF INCOME TAX, KOTTAYAM vs. THE PARAGON POLYMER PRODUCTS PVT.LTD

The assessee has two units; one at Salem and the other at Hyderabad, manufacturing chappals. The industrial undertaking of the assessee at Salem was -3- entitled to deduction under Section 80IB of the Income Tax Act, 1961 ('Act', for short) being an industrial undertaking covered by sub-Section (3) of Section 80IB. The particular issue in the case is as to the dis- allowance having been interfered with by the Income Tax Appellate Tribunal. In the subject assessment year 2004-05, the profit and loss account of the Salem Unit showed the eligible deduction under Section 80IB at Rs.21,85,24,989/-. The consolidated profit and loss account of the units at Salem and Hyderabad showed the figure at Rs.19,53,96,288/-. The first appellate authority by Annexure-B computed the difference and the deduction at 30% as against the difference between the figures were disallowed. Hence, the dis-allowance of Rs.69,38,609/- was confirmed. The Tribunal reversed the same and directed the allowance to be granted in full as claimed in the profit and loss account of the Salem Unit.

The difference, according to the assessee, occurred due to the accounts having shown separately, the sale from the retail business of the -4- assessee, to which the manufactured items were stock transferred from the Salem Unit. The learned counsel for the assessee, in fact, takes us to Section 80IB(13) to point out that sub-Sections (5) and (7) to (12) of Section 80IA, would be applicable for Section 80IB also. Sub-section (8) of Section 80IA indicates that where any goods or services held for the purpose of eligible business are transferred to any other business or where any goods held for the purposes of any other business carried on by the assessee are transferred to the eligible business, the consideration, if any, for such goods and services shall be computed, so as to correspond to the market value of such goods. In such circumstances, the provision recognises transfer of goods and services between businesses and even if the sale is made from the retail centers of the assessee itself, it can be deemed to be the business of the eligible undertaking.

The Tribunal too has noticed the fact and specifically referred to the no. of units produced at Salem and what is actually sold from the undertaking -5- and that sold through different branches. On a verification of the actual sale for the current year, the Tribunal has found that the claim for allowance made by the assessee is proper. We, hence, find that the Tribunal has gone into the facts and allowed the allowance claimed. The sale figures taken is obviously not the consolidated figure of the Salem and Hyderabad units and the question of law framed as (1) is not relevant. We do not find any infirmity in the findings of the Tribunal. We answer the question of law (2) in favour of the assessee and against the Revenue. The Income Tax Appeal stands dismissed. No costs. K.VINOD CHANDRAN JUDGE ASHOK MENON JUDGE -6-