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CIT. v. Mineral Enterprises Ltd (2019) 310 CTR 612 / 174 DTR 256 (Karn.)(HC)

S. 37(1) : Business expenditure-Accounts—Rejection—Apportionment of proportionate expenditure between two units—Each of the expenses allocated by the assessee has been rightly reflected in the books of accounts of both the units—AO was not justified in computing profits of both the units on the basis of allocation of proportionate expenditures, in the ratio of their respective turnover to the combined turnover. [S. 10B(7), 145]

Held by the High Court that:

  • Tribunal found that the AO has not pointed out any specific defect or mistake in the books of accounts so as to justify invocation of S.  145 of the Act.
  • Activity of non-EOU unit is largely trading, whereas in the case of EOU unit, it is manufacturing and production. Each of the expenses allocated by the assessee has been rightly reflected in the books of accounts of both the units, hence the AO was not justified in computing profits of both the units on the basis of allocation of proportionate expenditures, in the ratio of their respective turnover to the combined turnover.  (AY. 2005-06, 2006-07)