2013 (10) TMI 1541 - AT - Income Tax

Summary

Issues involved:
1. Disallowance of expenses on account of articles presented to doctors.
2. Allocation of expenses as HO and unit eligible for claim of deduction u/s 80IC.

Issue 1: Disallowance of expenses on account of articles presented to doctors:
- The appeal pertains to the disallowance of expenses of Rs. 21,40,123/- on account of articles presented to doctors.
- The coordinate Bench of the ITAT had sustained the disallowance at 15% due to unverifiable and unavoidable elements in the expenses.
- The order directed the AO to consider the allowability of the expenses under section 37 of the Act after necessary verification.
- The issue was restored to the AO for verification in assessment years 2001-02, 2002-03 & 2008-09.
- The order of the CIT(A) was set aside, and the issue was restored to the AO for further consideration.

Issue 2: Allocation of expenses as HO and unit eligible for claim of deduction u/s 80IC:
- The AO allocated certain expenses resulting in the reduction of profit claimed for deduction u/s 80IC for the Baddi unit.
- The CIT(A) deleted the allocation based on the decision of his predecessor in assessment year 2007-08 and the orders of the ITAT.
- The department appealed before the ITAT against the deletion of the allocation made by the AO.
- The DR argued for the allocation of expenses to the Baddi unit based on turnover proportion.
- The AR contended that the issue had attained finality at the CIT(A) stage and was covered by previous decisions.
- The ITAT found discrepancies in the allocation made by the assessee and the AO, especially regarding R&D expenses and depreciation.
- The issue was restored to the AO for verification of expenses allocability based on maintained books for HO and Baddi unit.

In conclusion, the ITAT allowed the appeal filed by the department for statistical purposes, directing further verification and consideration of expenses allocation by the AO for both the issues raised in the appeal.