2013 (11) TMI 1539 - AT - Income Tax

Local doctors meeting expenses/individual doctor s services disallowed - Held that - By the Code of Ethics Regulations 2002 expenditure on the doctors became unethical in the hands of doctors and it is stated so. However whether the said expenditure is for the purpose of business or not is entirely a different aspect. Therefore those observations will not have any binding on the issue. The claim of expenditure has to be examined vis-a-vis the provisions of section 37(1). Therefore we do not see any reason to modify the directions in the order. The Assessing Officer is however directed to keep the above aspects in mind while deciding the issue. Allocation of corporate overheads to the unit entitled to deduction under sections 10B and 80-IB - Held that - In the assessee s own case for the assessment year 200304 the issue was discussed and allocation of basic turnover was accepted in the assessee s case and so we are of the opinion that the decision of the hon ble Madras High Court in the case of Hindustan Unilever 2012 (12) TMI 166 - MADRAS HIGH COURT has no bearing as binding precedent being on the facts. As rightly pointed out by the learned Departmental representative the hon ble Madhya Pradesh High Court in the case of Prestige Foods 2012 (6) TMI 266 - MADHYA PRADESH HIGH COURT has upheld apportionment of expenditure between two units based on turnover and this judgment was distinguished by the hon ble Madras High Court vide paragraph 7 on the reason that the assessee did not furnish expenses incurred by the units for the purpose of considering the deductibility. Since common expenditure is directed to be examined by the Assessing Officer and allocated to various units on the basis of turnover we do not see any reason to differ from the order of the Tribunal. - Decided against assessee. Rate of interest to be charged on loans granted to associated enterprises - TPA - Held that - 7 per cent. rate is reasonable which is equivalent to LIBOR 2 per cent. Be that as it may since the assessee has accepted 7 per cent. in the earlier year and that is the basis for directing to adopt 7 per cent. by the Tribunal we do not see any reason to modify the directions of the Tribunal in this regard.- Decided against assessee. Non-consideration of revised return filed by the assessee giving effect to merger - Held that - Since the ground is only with reference to consideration of revised return and not for the information therein the Tribunal restricted itself to acceptance of revised return and rejected the contention as the revised return was belated. Further the decision of NEPC India Ltd. 2012 (7) TMI 661 - MADRAS HIGH COURT now being relied in miscellaneous application has not been placed before the Bench at the time of arguments. Therefore consideration or non-consideration of the same does not arise. Moreover the assessee has not taken any alternate ground that effect of merger should be considered in the assessment proceedings on merits. Consequently the Tribunal cannot traverse beyond the ground raised before it and accordingly restricted itself whether the revised return can be considered as valid or invalid. In these circumstances the contention raised by the assessee has no merit and accordingly rejected.- Decided against assessee.

Issues involved:
1. Expenditure on local doctors' meeting and individual doctor's services
2. Allocation of corporate overheads to units entitled to deductions
3. Rate of interest on loans granted to associated enterprises
4. Consideration of revised return post-merger

Detailed Analysis:
1. The first issue pertains to the expenditure incurred on local doctors' meeting and individual doctor's services for the assessment year 2006-07. The Assessing Officer disallowed these expenses, which were upheld by the Dispute Resolution Panel. The Income-tax Appellate Tribunal remitted the issue to the Assessing Officer to examine whether the expenditure was incurred for the business purpose of the assessee. The Tribunal clarified that the Code of Ethics Regulations, 2002, applicable from the assessment year 2003-04, does not determine the business nature of the expenditure. The Tribunal directed the Assessing Officer to evaluate the claim under section 37(1) without considering the ethical aspect, as the nature of expenditure is crucial.

2. The second issue concerns the allocation of corporate overheads to units entitled to deductions under sections 10B and 80-IB. The Assessing Officer allocated corporate overheads based on turnover, which was approved by the Dispute Resolution Panel. The Tribunal upheld the allocation following its earlier decision in the assessee's case for the assessment year 2003-04. The Tribunal rejected the contention of the assessee citing the decision of the Madras High Court in Hindustan Unilever and upheld the allocation based on turnover, emphasizing the need for examination by the Assessing Officer.

3. The third issue revolves around the rate of interest on loans granted to associated enterprises. The Transfer Pricing Officer determined the arm's length interest rate at 14%, which was challenged by the assessee. The Tribunal upheld the 7% rate based on the assessee's acceptance in previous years. The Tribunal rejected the plea for LIBOR linked interest rate, citing various judgments and co-ordinate Bench decisions, and emphasized the reasonableness of the 7% rate considering past acceptance.

4. The fourth issue relates to the non-consideration of the revised return filed post-merger as per the order of the Andhra Pradesh High Court. The Tribunal dismissed the claim as the revised return was filed beyond the prescribed time limit under section 139(5). The Tribunal focused on the acceptance of the revised return rather than its content, emphasizing the limitation of its review powers and the absence of a plea for considering the merger's impact on assessment proceedings.

In conclusion, the Appellate Tribunal dismissed the miscellaneous application filed by the assessee, addressing each issue comprehensively based on legal provisions, precedents, and factual circumstances, ensuring a thorough analysis and reasoned decision-making.

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