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2022 (8) TMI 245 - AT - Income TaxDeduction u/s 80IB - profits derived from its industrial undertakings located at Jammu - apportionment of common head office and selling expenses for the purpose of computation of profit of units eligible for deduction u/s. 80IB - Whether the CIT(A) was correct in rejecting the methodology of deduction u/s.80-IB computed by the A.O particularly when the actual expenses are determinable on actual accounts maintained in previous year in question was not the methodology to attribute expenses on the basis of inflation incorrect? - HELD THAT - As there is no change in the fact pattern and applicable law in respect of the claim of deduction made by the assessee u/s 80IB in the year under consideration before us vis- -vis the years for which appellate orders of Co-ordinate of ITAT Kolkata 2017 (4) TMI 106 - ITAT KOLKATA or that of Hon ble jurisdictional High Court of Calcutta in assessee s own case 2021 (12) TMI 728 - CALCUTTA HIGH COURT have been referred and relied upon. The methodology adopted by the assessee for apportionment of common head office expenses and selling expenses has consistently been followed year-on-year basis which has been held to be reasonable and scientific. It is thus noted that the issue in hand before us is no longer res integra considering the decisions in assessee s own case. Admittedly, it is a fact that this is a recurring issue from preceding assessment years. By adopting judicial consistency in the given facts and circumstances, we affirm the order of ld. CIT(A) and direct to delete the addition made by the ld. AO. Thus, ground no. 1 is dismissed. Disallowance u/s 14A read with rule 8D - CIT-A deleted the addition - HELD THAT - As hon ble Supreme Court in the case of South Indian Bank Ltd. 2021 (9) TMI 566 - SUPREME COURT wherein it was held that where interest free own funds available with assessee-banks exceeded their investments in tax-free securities; investments would be presumed to be made out of assessee's own funds and proportionate disallowance was not warranted under section 14A on ground that separate accounts were not maintained by assessee for investments and other expenditure incurred for earning tax-free income. As in respect of deletion of disallowance by the CIT(A), we note from the details of disallowance furnished by the assessee that this includes expenses towards electricity, lease rent, corporate tax, printing and stationery, upkeep/administration, telephone, books periodicals, in-house computer, depreciation and salary. These were considered by the assessee on the basis of facility/time utilized by the persons managing the investments. Thus, admittedly, it s a fact on record that assessee has incurred expenses which pertain to managing the investments yielding exempt income and the same have been suo motto disallowed by the assessee in its computation of total income reported in the return for the year. On a specific query by the bench on this factual position, ld. Counsel candidly admitted for its correctness of the suo motto treatment given by the assessee in the return. We thus, direct the ld. AO to restore and restrict the disallowance u/s 14A which has been suo motto disallowed by the assessee in its return of income. Accordingly, ground no. 3 is partly allowed. Deduction u/s 80IB on income from sale of scrap - income from sale of scrap whether income from sale of scrap generated in the manufacturing process employed in the eligible unit can be taken into consideration for deduction under section 80IB - HELD THAT - As decided in own case 2021 (12) TMI 728 - CALCUTTA HIGH COURT we direct to delete the addition made by the ld. AO which is eligible for claiming deduction u/s 80IB of the Act. Accordingly, this ground of appeal is dismissed.
Issues Involved:
1. Deduction of education cess. 2. Deduction under section 80IB for common head office and selling expenses. 3. Deduction under section 80IB on sale of scrap. 4. Disallowance under section 14A read with Rule 8D. Detailed Analysis: 1. Deduction of Education Cess: The assessee's appeal included a delay of 431 days for which a petition for condonation was filed. The solitary issue was the deduction of education cess. The assessee did not press this ground, and the appeal was dismissed as not pressed. 2. Deduction under Section 80IB for Common Head Office and Selling Expenses: The Revenue challenged the CIT(A)'s allowance of deductions claimed by the assessee under section 80IB, amounting to Rs. 18,15,18,800/-. The AO had apportioned indirect expenses based on turnover criteria, which the CIT(A) rejected, favoring the assessee's method of allocation. The Tribunal noted that this issue was consistently decided in favor of the assessee in previous years by both ITAT Kolkata and the Hon'ble Calcutta High Court, finding the method adopted by the assessee to be reasonable and scientific. The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal on this ground. 3. Deduction under Section 80IB on Sale of Scrap: The AO disallowed the deduction of Rs. 1,09,68,000/- claimed by the assessee on the sale of scrap, considering it not derived from the industrial undertaking. The CIT(A) allowed the deduction, referencing past decisions in the assessee's favor. The Tribunal affirmed this, citing consistent rulings in the assessee's favor, including the Hon'ble Calcutta High Court's affirmation. The Tribunal directed the deletion of the addition made by the AO, dismissing the Revenue's appeal on this ground. 4. Disallowance under Section 14A read with Rule 8D: The AO disallowed Rs. 3,05,68,576/- under section 14A read with Rule 8D, not satisfied with the assessee's suo moto disallowance of Rs. 1,63,498/-. The CIT(A) deleted the disallowance, noting that the assessee's own funds exceeded its investments, and there was no exempt income earned during the year. The Tribunal upheld the CIT(A)'s decision, referencing the ITAT Kolkata's and the Hon'ble Calcutta High Court's consistent rulings in the assessee's favor. However, the Tribunal restored the suo moto disallowance of Rs. 1,63,498/- made by the assessee in its return. Conclusion: The Tribunal dismissed the assessee's appeal on the deduction of education cess and partly allowed the Revenue's appeal, affirming the CIT(A)'s decisions on the apportionment of common head office and selling expenses, and the deduction on the sale of scrap. The Tribunal also upheld the deletion of the disallowance under section 14A read with Rule 8D, except for the suo moto disallowance of Rs. 1,63,498/-.
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