Karnataka High Court
The Commissioner Of Income Tax vs M/S Water'S (India) Pvt Ltd on 20 July, 2010
Bench: N.Kumar, B.V.Nagarathna
IN THE HIGH counr OF KARNATAKA AT
Dated this the 20"' day_0i7.Iu).y, _:2.OH1"0':
PREsEN1 i _ _ _ é _
THE HON'BLE lVIR.7JI__JaSTIVCE 'N 3
THE HON'BLE ~N;AGA§§A THNA
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ITA Nd. .1V0i 2005'
BETWEEN:
Inconle 'FaX* -,
C Rauiicung " "
Queéns Road _ ,
Bangaldrc -560 001
1 Tile COfr1;*I;issi{')r1er4 df. _. --
" V' '*2 - Th,.c,Deputy Cdfiirhissioner
cf_I11.come~V-Tax
_ " 'c1'rc_1e~».1=;1{3}--..
C VVRBa1_i1di1'ig
, VQueens'._Road
~ Bangaldre . . Appellants
(By Sri M V Seshachala, Advocate}
M/s. Waters {India} Pvt. Ltd.,
RMV Extension
Bangalore
H " ' .
{By Smt. Gayathri $tfidh'ai'an &
M/ s. K R Prasad, Advocates} AA " '
This ITA filed under segiien 2604 Act 1961'
arising out of order datedV_____2:?-_08;V2004"passed in ITA
No.341/Bang/2000 for 1996-97, praying
to {1} formulate the substantiaf'v(fi.iestior1.§.:wV.of_i.Iaw (ii) allow the
appeal and set"asi_de the Income Tax
Appellate Barigaiiore 'F$~encl'iV:'i'fi' rm No.34.~1/Bang/
2000 dated the order passed by the
Comm1ss1o.r1er'oi i{aznaiaka--I, Bangalore.
4'I'_I'A' for hearing this day,
N. KUMAR J1,-V ci_e1iVei'ed'v_th'e:following:
JUDGMENT
'"'IA'his« is by the revenue, challenging the order I passed .}:iy«:_the Tribuna} which has allowed the appeal of the V' tcassessee and set aside the order of the revisional authority the order of the assessing officer which had granted LA/or deduction under Section 80 I of the Income to_._:Aihe ESSGSSBB.
2. The facts of the case are-,1:ha't, income from the following fourfltypaes V [i) Sale of systems, _a:ndAvvvaccessofies in rupees. A A if
(ii) Consu_1tancyj..and--.. I._Cf1arges in foreign
(iii) (1:2) ffff H V rupees.
The assesseem Section 80 I with respect of activity linasale of systems, modules, spares and accessories in rupees and _jr'el_ief under Section 80-O for consultancy and p'rofe'sstio'11eLipharges in foreign exchange. The relief claimed under. see-tisn1'~"80 I was Rs.39,37,oe5/-. The assessing officer allowed the said claim. The Commissioner in his revisional :ju.rv1'sdi.ction set aside the said deduction allowed by the ""s..a.ssessing officer and held that as the assessee had not maintained separate accounts, he is not benefit. In appeai, the Tribunal heid that, Section 80 I, maintenance of separateVbool;s«iof-; b it a condition precedent. The of undertaking has to be compute:d"V.on oiflreasonabie allocation of profits between variousactiyities' and the basis of such allocation if «derived from the industrial undertai-:,ing,::' 'deduction shouid be given. Sincetime the profit of such industiia}__Vund.ertaitji;;;_g been found correct by the assessing izvas rightly allowed deduction under Section it set aside the order of the rev1'sic§n'aiIr..authoi°it}r and iupheid the assessment order. ' 'V counsel for the revenue contends that, even if the.assessee"i;s entitled to deduction under Section 80 I, though Xseparate accounts are not maintained, when deductions are ".fc1ai1n'e.d, before it is granted the expenses have to be Wascertained in a manner known to law. Without actually h/it ascertaining the said expenses incurred, on awe expenses cannot be given deduction to as hasppbeen assessing officer. Therefore, he contends by if the Tribunal is erroneous and prequiresiltoiibe se;.::.as»ide matter is to be remitted "to the officer to ascertain first What is the dedt.t-ctiorisiiiopwhich'the-assessee is entitled to from such the Act and thereafter to give' as a permissibie deduction it i 4:; iiii Vmcounsel for the assessee submitted that of separate accounts is not a condition prece€ient;. Froih the accounts maintained by the 'VV'«..asse:Ssee_..rthe expense-'s'Vincurred in respect of the industrial undiertgakirigvécouid be ascertained and even in the absence of as rightly held by the assessing officer ',deduction«:_ is permissible under Section 80 I in the ratio of ifeonitribution from the expenditure units and, therefore, no fault i/ could be found with such a mode adopted by the assessing officer.
5. Section 80 1 provides for deductionsflinv V' profits and gains from industrial d j, date, etc., Where the gross total.__ includes any profits and derixred.. uindustriaiff undertaking, be allowed in con1pttt_ing"-~the total-tinciorne of the assessee and a deductiond_s_i"roln1 and gains of an amount equal to 20% thereof made. Therefore, ittis clear 2,06/{off profits and gains. Now, it is well settled. tlrzatfniow accounts are required to be maintained""by"1:he._ assessee. On that score the deduction Section 80ivean'not be denied to the assessee. Because Vhtof f f11ot"v..rria_intaining separate accounts, if it is difficult to ascertain if profits and gains, virtually the accounts has to be looked into, profits and gains referable to if undertaking is to be separated as well as the exfpenditure and thereafter, after ascertaining the actual profits 1/ and gains, an amount equal to 20% thereof should beppgiven deduction thereto. If the assessee does not producing relevant material, then it is officer to proceed to assess under of' at the same time What the asspessingaofticer is right thing to do. It cannot be"'ca1cu1ated---- on of ratio V of contribution from the~..expen'ditu§r'cunits asriglitly held by the revisional authorityl it View the proper course would Set V'ofitVhe Tribunal as well as the revisionvpal matter back to the assessing -. opportunity to the parties to ascertain the industrial undertaking. the exppenlses. incuirepdvl and the profits and gains of the said Vbusiness:and.__giving the permissible deduction under Section A t"'SO'-I. of the matter, we pass the following order:--
' {a)_ 'Appeal is allowed.
.{b}'«;_a"he order passed by the Tribunal as well as by the revisionai authority and the assessment order are h/.