2012 (12) TMI 166 - HC - Income Tax

Deduction u/s 10B, 80I and 80HH - Apportionment of common head office expenses Whether common HO expenses can be apportion to the various units on the basis of their respective turnover for the purpose of calculation of deduction u/s 10B, 80I and 80HHH - the accounts for these units were separately maintained Assessee had taken the contention that the expenses incurred was for the overall management of the units as well as for providing finance - Held that - No, Revenue had no grievance as regards the order passed by the Tribunal for preceding years 1984-85 onwards and that the expenses incurred were pure and simple administrative expenses, monitoring the requirements of finance and other action which are necessary in running of the business. In favour of assessee

Summary

Issues:
1. Apportionment of common head office expenses for deduction under Sections 10B, 80I, and 80HH.
2. Treatment of processing charges in total turnover.
3. Eligibility of cash discount and rebate for Section 80HHC benefit.
4. Disallowance of expenditure on the Guest House under Section 143(1)(a).

Issue 1 - Apportionment of Common Head Office Expenses:
The case involved appeals by the Revenue against the Income Tax Appellate Tribunal's order for various assessment years. The main question was whether common head office expenses could be apportioned to different units based on their turnover for calculating deductions under Sections 10B, 80I, and 80HH. The Tribunal allowed relief to the assessee, stating that such expenses were general business expenses benefiting all units. The Tribunal's decision was upheld, emphasizing that the expenses were for the overall management of units and providing finance, not specific to individual units.

Issue 2 - Treatment of Processing Charges:
Another issue was whether processing charges received should be included in total turnover for deduction purposes. The Tribunal held that these charges, though part of business profits, should not form part of total turnover. This decision was based on the argument that processing charges were not to be considered in the turnover calculation for deductions.

Issue 3 - Cash Discount and Rebate Eligibility:
The eligibility of cash discount and rebate for Section 80HHC benefit was also in question. The Tribunal ruled in favor of the assessee, allowing these benefits under Section 80HHC. This decision was based on the interpretation that cash discount and rebate were eligible for the deduction.

Issue 4 - Disallowance of Guest House Expenditure:
Regarding the disallowance of expenditure on the Guest House under Section 143(1)(a), the Tribunal considered it a debatable issue, previously decided in regular assessments. The Tribunal granted relief to the assessee, stating that the issue was recurrent and had been decided in earlier assessments. The Revenue's appeal against this decision was rejected, and the Tribunal's order stood.

In conclusion, the High Court rejected the Revenue's appeals, upholding the Tribunal's decisions on various issues related to deduction calculations and expenditure disallowances for the assessed years. The judgment emphasized the general nature of certain expenses and their allocation among units based on overall business management rather than individual unit-specific considerations.