Commissioner of Income Tax vs M.E. Meeran

C.N. Ramachandran Nair, J.—The only question raised is whether the Tribunal is justified in cancelling the disallowance of a portion of the relief claimed by the assessee u/s 80-IB of the income tax Act, 1961, in respect of an industrial unit at Adimaly. We have heard senior standing counsel for the appellant and Shri Arun Raj, counsel appearing for the respondent-assessee.

The assessee is engaged in manufacture and sale of curry powder, masala, etc. He had factories at Theni in Tamil Nadu State and at Adimaly, Idduki district in Kerala State. Idduki being a backward district he was entitled for deduction u/s 80-IB on the profit derived from the industrial unit at Adimaly. However, in the course of assessment, the Assessing Officer noticed that in order to boost up the income of the eligible industrial unit at Adimaly, there was transfer of goods from the Theni unit to the Adimaly unit at cost price, accounting profit on sale as attributable to the Adimaly unit and claiming the benefit u/s 80-IB. Therefore, the Assessing Officer after discussions with the assessee made a part disallowance as attributable to the profit of final products brought from the Theni unit and sold from the Adimaly unit. The assessment is confirmed in first appeal and in second appeal by the assessee, the Tribunal held that the assessee was entitled to account transfers of goods from the Theni unit to the Adimaly unit on cost price basis. This finding of the Tribunal is under challenge in this appeal filed by the Revenue.

After hearing both sides and on going through the orders of the Tribunal, we notice that the assessment is an agreed assessment and the assessee''s representative in fact did not oppose the partial disallowance by the officer. In our view, the assessee has no right of appeal against this order. Therefore, the appeal filed challenging the disallowance itself is not tenable. In any case, since the matter is decided by the Tribunal, we are persuaded to consider the case on the merits. We do not know how the Tribunal can direct the Assessing Officer to treat the stock transfer of final products from the Theni unit to the Adimaly unit at cost price. In fact the finished products on sale obviously gets profits and the assessee has also no case that the profit is not derived on the sale of the products. The order of the Tribunal only helps to artificially jack up the profit of eligible industrial unit located in the backward area. Admittedly, the eligibility for deduction u/s 80-IB is only for the profit derived by the eligible unit and, therefore, the assessee cannot transfer the final products from other industrial unit, on cost price to inflate artificially the profit of the eligible unit to claim ineligible deduction. After making a claim of Rs. 3,65,98,935 the assessee requested the officer to make necessary adjustment in the claim. This obviously means that the assessee himself was admitting that the claim is high and the Assessing Officer is free to refix the claim eligible limit, it is thereafter the Assessing Officer in consultation with the assessee''s auditor made a part disallowance by adjusting the profit attributable to final products transferred to the eligible unit. We are of the view that the Tribunal had no authority to intervene with this order confirmed in the first appeal. Consequently, we allow the appeal by reversing the order of the Tribunal and by restoring assessment confirmed in first appeal.