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2023 (12) TMI 969 - AT - Income TaxComputation of deduction u/s 80IB/80IC - allocation of advertisement expenses to the eligible units in the ratio of turnover of eligible units to the total turnover of the assessee - HELD THAT - The assessee has relied on the word derived from as per the provision which according to the assessee relates to the expenses which have direct nexus pertaining to the eligible units for claiming deduction u/s. 80IB/80IC of the Act. The Revenue, on the other hand, has contradicted the same by stating that this interpretation of the assessee is not to be considered and only the allocation in proportion to the turnover of the eligible units to the proportion of the total turnover of the assessee company should be allocated for determining the profit eligible for deduction u/s. 80IB/80IC - Assessee has relied on the decision of the coordinate bench for A.Y. 2001-02 which has held that the assessee has itself allocated 50% corporate expenses including advertisement expenses of head office as per the rate of turnover of the eligible unit to the turnover of the assessee company which was duly certified by a Chartered Accountant. The co-ordinate bench has accepted the allocation made by the assessee and directed the ld. A.O. not to make any further allocation for computation of deduction u/s. 80IB of the Act. Decided in favour of assessee. Nature of expenses - advertisement expenses incurred on brand building - revenue or capital expenditure - HELD THAT - As decided in Asian Pains (India) Ltd. 2016 (11) TMI 258 - BOMBAY HIGH COURT wherein it was held that the expenditure incurred for advertisement in respect of a brand is to be seen whether the same was for a business which is to be commenced or which is for an ongoing business. Further, it held that the expenditure for advertisement of a brand of an existing ongoing business is in the nature of maintaining the brand and not for creation of a brand We hold that the expenditure incurred towards Brand Building is for the maintenance of the existing business and not for commencement of a new business and the same is held to be revenue expenditure in nature. Hence, ground raised by the assessee is allowed. Addition offered by the assessee in respect of impact of section 145A of the Act on inventories - assessee has offered tax as per the tax audit report clause 12B which is the difference between cenvat credit on closing inventories and cenvat credit on opening credit - assessee has contended that the tax auditor has inadvertently failed to consider the fact that while computing adjustment u/s. 145A the purchase and sales which also have to be adjusted as it was recorded in the note and mere adjustment in the value of opening and closing stock in isolation is contrary to the provision of section 145A of the Act as per the revised guidance note - HELD THAT - As this additional ground raised by the assessee requires factual verification, we deem it fit to remand this issue back to the file of the ld. A.O. for verification of the facts. Hence, the additional ground raised by the assessee is allowed for statistical purpose. Accrual of income - exclusion of the amount of retention money included in sales, since the same has not accrued during the year, in computing total income under the normal provisions of the Act - HELD THAT - We direct the ld. A.O. to decide this ground after verification of the facts as when the retention money has accured based on the decision of the Hon'ble Bombay High Court in the case of CIT vs. Associated Cables Pvt. Ltd . 2006 (8) TMI 135 - BOMBAY HIGH COURT . The ground raised by the assessee is allowed for statistical purpose. Disallowance u/s. 14A read with Rule 8D - HELD THAT - It is admitted fact that the assessee has offered the dividend income received out of the investment made in foreign company and the interest income out of the investment in Unit Trust of India and Krishna Bhagya Jala Nigam Ltd. The ld. CIT(A) has rightly directed the ld. A.O. to recompute the disallowance u/s. 14A of the Act on the basis of the decision of Godrej Boyce and Manufacturing Co.Ltd. 2010 (8) TMI 77 - BOMBAY HIGH COURT where the assessee has mixed fund consisting of own fund and borrowed funds. We do not find any infirmity in the order of the ld. CIT(A) in directing the ld. A.O. to recompute the disallowance u/s. 14A of the Act. We, therefore, dismiss ground raised by the Revenue.
Issues Involved:
1. Allocation of Advertisement Expenses for Deduction under Sections 80IB/80IC. 2. Treatment of Advertisement Expenses as Capital or Revenue Expenditure. 3. Sales Tax Incentive as Capital Receipt. 4. Deduction for Provision for Leave Encashment. 5. Erroneous Addition under Section 145A. 6. Exclusion of Education Cess. 7. Exclusion of Retention Money. 8. Disallowance under Section 14A. 9. Allocation of Head Office Expenses and Depreciation for Deduction under Sections 80IB/80IC. 10. Allocation of Travelling Expenses for Deduction under Sections 80IB/80IC. Summary: 1. Allocation of Advertisement Expenses for Deduction under Sections 80IB/80IC: The assessee challenged the allocation of advertisement expenses amounting to Rs. 648.15 lacs to eligible units in the ratio of turnover. The Tribunal found that the assessee had already allocated 50% of such expenses and upheld the allocation method used by the assessee, following the decision of the co-ordinate bench for A.Y. 2001-02. 2. Treatment of Advertisement Expenses as Capital or Revenue Expenditure: The CIT(A) treated Rs. 737.27 lacs of advertisement expenses as capital expenditure. The Tribunal, following the decision of the Hon'ble Jurisdictional High Court in CIT vs. Asian Pains (India) Ltd., held that the expenditure was for maintaining the existing business and should be treated as revenue expenditure. 3. Sales Tax Incentive as Capital Receipt: The assessee claimed that the sales tax incentive of Rs. 17,98,29,328/- received for setting up industries in backward areas should be treated as a capital receipt. The Tribunal remanded the issue back to the A.O. for factual verification and decision based on the merits of the case. 4. Deduction for Provision for Leave Encashment: The additional ground for deduction of provision for leave encashment was not pressed by the assessee and was dismissed as infructuous. 5. Erroneous Addition under Section 145A: The assessee sought to withdraw the erroneous addition of Rs. 1,19,27,000/- under Section 145A. The Tribunal remanded the issue back to the A.O. for factual verification. 6. Exclusion of Education Cess: The additional ground for exclusion of education cess amounting to Rs. 43,89,279/- was not pressed by the assessee and was dismissed as infructuous. 7. Exclusion of Retention Money: The assessee contended that retention money of Rs. 9,09,22,620/- should be excluded from income as it had not accrued. The Tribunal directed the A.O. to verify the facts and decide based on the decision of the Hon'ble Bombay High Court in CIT vs. Associated Cables Pvt. Ltd. 8. Disallowance under Section 14A: The Revenue's appeal on disallowance of Rs. 8,16,995/- under Section 14A read with Rule 8D was dismissed. The CIT(A) was directed to recompute the disallowance based on the decision of the Hon'ble Jurisdictional High Court in Godrej Boyce and Manufacturing Co. Ltd. 9. Allocation of Head Office Expenses and Depreciation for Deduction under Sections 80IB/80IC: The Tribunal upheld the allocation of 50% of head office expenses and depreciation by the assessee, following the decision of the co-ordinate bench in earlier years. 10. Allocation of Travelling Expenses for Deduction under Sections 80IB/80IC: The Tribunal upheld the allocation of travelling expenses made by the assessee, following the decision of the co-ordinate bench in earlier years. Conclusion: The appeal filed by the assessee was partly allowed, and the appeal filed by the Revenue was dismissed.
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