2018 (3) TMI 671 - HC - Income Tax

Addition of interest expenditure for its exempt unit at Baddi - assessee had wrongly proportioned the interest for the exempt unit vis-a-vis the non-exempt units - Held that - In Control and Switchgear Ltd. (2014 (6) TMI 46 - DELHI HIGH COURT), the Court utilized the formula because the assessee could not indicate in the facts of that case, the actual figures relatable to interest expenditure. In both the cases, the ITAT and the CIT(A) have considered the assessee s explanations and concluded that it was in a position to indicate that the concern could in fact allocate interest-free funds that enabled it to gain substantial relief. There is no error, therefore, in the findings. So far as the grievance with respect to CIT(A) s permitting the assessee to file a second or fresh application Form 10CCB, the Court holds that there is no error of law per se and that the Revenue s contention on this score could have been aired or agitated before the ITAT.

Summary

Issues:
Question of law regarding expenditure claimed for interest deduction under Section 80IC of the Income Tax Act.

Analysis:
1. The case involved appeals for Assessment Years 2008-09, 2009-10, and 2010-11 concerning the justification of expenditure claimed for interest deduction under Section 80IC of the Income Tax Act. The Assessing Officer disallowed a significant portion of the claimed interest expenditure for the exempt unit, citing incorrect proportioning of interest for the exempt unit versus non-exempt units. However, the CIT(A) revised the calculations after considering the segregation of figures by the assessee and the utilization of funds allocated by the Head Office. The ITAT upheld the CIT(A)'s decision, providing detailed reasoning for allowing relief to the assessee based on the actual usage of funds and the apportionment of indirect expenditure according to sales turnover ratios.

2. The ITAT's decision was based on the principle of apportioning common expenditure between eligible and non-eligible units, following the precedent set by the Delhi High Court in Control & Switchgear Ltd. v. DCIT. The ITAT found that the CIT(A) correctly allowed relief to the assessee by considering the actual usage of funds and analyzing the allocation of indirect expenditure for the exempt unit. The ITAT rejected the Revenue's contentions regarding the allocation of expenditure and the allowance of accumulated profits, emphasizing that the CIT(A)'s order was comprehensive and addressed all objections raised by the Assessing Officer.

3. The Court affirmed the decisions of the lower appellate authorities, stating that there was no error in allowing the expenditure claimed for interest deduction under Section 80IC. The Court noted that both the ITAT and the CIT(A) had considered the explanations provided by the assessee and found them satisfactory in demonstrating the allocation of interest-free funds, leading to substantial relief. Additionally, the Court dismissed the Revenue's grievance regarding the CIT(A) permitting the filing of a fresh application, Form 10CCB, stating that there was no error of law. The Court held that the Revenue could have raised this contention before the ITAT if necessary, and concluded that no substantial question of law arose, ultimately dismissing the appeals.

Overall, the judgment centered on the justification of claimed expenditure for interest deduction under Section 80IC, with the Court upholding the decisions of the lower appellate authorities and dismissing the appeals brought by the Revenue.