INCOME TAX ACT, 1961

Section 10B

Deduction under section 10B - Allowability of - -

Assessee engaged in business of manufacturing of agro-chemical and pharma products was having its administrative office at Navi Mumbai. In addition, assessee had manufacturing units situated at various locations including at Taloja, Panoli and Bangalore, which were EOU units and eligible for deduction under section 10B of he Act. Assessee had other manufacturing units, which were non-EOU units. AO held that Dombivali incinerator plant was providing its services to Taloja unit and there was loss in Dombivali unit during the year, and assessee must allocate such expenses to the Taloja unit, while computing deduction under section 10B. Accordingly, AO allocated total expenses amounting to Rs. 50,82,383 of Dombivali plant to EOU Taloja unit. Assessee contended that even prior to setting up of the Dombivali unit, EOU unit was finding ways to other units for incineration and discontinuation of Dombivali unit would not affect EOU as it could still send waste to other units and also to Maharashtra Pollution Control Board's incineration unit. Held: There was no examination by AO as to whether EOUs were utilising the services of the other units or of Maharashtra Pollution Control Board for incineration process during the period Dombivali unit was non-operational. Further, if that be the case then allocation of expenditure of Dombivali unit to EOU, without availing any service, would result in additional allocation of expenditure to the EOU of assessee. Thus, all the aspects in respect of the issue were not examined by AO and in such a scenario, impugned allocation of expenditure of Dombivali unit only to the Taloja EOU of assessee, while computing deduction under section 10B was set aside. Issue was remanded to AO for de novo adjudication.

REFERRED :

FAVOUR : Matter remanded.

A.Y. : 2007 -- 08

INCOME TAX ACT, 1961

Section 10B

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