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TMI Blog2009 (4) TMI 547X X X X Extracts X X X X X X X X Extracts X X X X ..... provides for the allowing deduction in respect of the profits and gains derived from the eligible business. Sub-section (13) of section 80-IB provides for the applicability of the provisions of sub-section (5) and sub-sections (7) to (12) of sections 80-IA, so far as may be, applicable to the eligible business under section 80-IB. On perusal of the provisions of the said sub-section (5), it is noticed that it provides for manner of computation of the profits and gains of an eligible business. Accordingly, such profits and gains are computed as if such eligible business were the only source of income of the assessee. Therefore, it is fact that the assessee is under legal obligation by virtue of section 80-IB(1) to compute the profits and gains of the eligible business separately and that of the others separately. It is so held in the case of Eastern Medikit Ltd.[ 2005 (11) TMI 201 - ITAT DELHI-F] too. The arguments of the Counsel, that common expenses, since they were not incurred in connection with the Silvassa Unit, should not be booked to the section 80-IB unit, we find that there are express provisions in the statute against the devices which inflates the tax-free pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other decision in the case of Eastern Medikit Ltd. (supra). Further, the Delhi Bench Tribunal has already taken view in support of the allocation of the head office expenses among all the section 80-IB units. Under these circumstances, we find no reason to interfere with the order of the CIT(A) in this regard. Accordingly, the ground of assessee s appeal is dismissed. The, appeal of the assessee is dismissed. - R.S. PADVEKAR AND D. KARUNAKARA RAO, JJ. Vimal Punamiya for the Appellant. S.K. Mahapatra for the Respondent. ORDER D. Karunakara Rao, Accountant Member. - These are the cross-appeals filed by the assessee and the revenue against the order of the CIT(A)-Central VI, Mumbai, dated 2-7-2007. 2. The grounds raised by the revenue read as under: " 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) was not correct in not upholding the action of the Assessing Officer of applying the provisions of section 143(3) of the Income-tax Act, 1961. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) was not correct in not upholding the addition of Rs. 1,79,70,997 made by the Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for earlier years, we confirmed the order of the ld. CIT(A) on this issue for the years under consideration also as the facts are similar." [Emphasis supplied] 4. Thus, it is a fact that the facts of instant appeal are akin to the facts of earlier years. As evident from above, both the CIT(A) as well as the Hon ble Tribunal has decided the issue in favour of the assessee holding that the invoking of the provisions of section 145(3) are done without jurisdiction and consequently, the addition made by the Assessing Officer on account of suppression of sales of to the tune of Rs. 1,79,70,997 by applying the provisions of section 145(3) of the Income-tax Act, 1961 is incorrect. Considering the above referred extract of the Tribunal order and also considering that the revenue has not any material to help us deviating from the said finding of the Tribunal, we are of the considered opinion that the order of the CIT(A) does not call for any interference. Accordingly, the grounds 1 2 of the revenue are dismissed. 5. Regarding ground 3 relating to considering the labour charged receipts of Rs. 8,96,811 for the purpose of calculating deduction under section 80HHC, ld. Counsel has a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ld. CIT(A), who allowed the issue following the decision of for earlier year. The order of the ld. CIT(A) for earlier year was not challenged before the Tribunal. Therefore, we see no reason to interfere with the findings of the ld. CIT(A). Accordingly, we confirm the order of the ld. CIT(A) on this issue." [Emphasis supplied] 6. On finding that the facts are similar and the issue was decided relying on the jurisdictional High Court in the case of CIT v. Bangalore Clothing Co. [2003] 260 ITR 371 1 (Bom.), we find no reason to deviate from the same. Accordingly, ground 3 of the revenue is also dismissed. 7. In the result, appeal of the revenue is dismissed. ITA No. 5701/Mum./2007 - Assessee s appeal 8. The only ground in this appeal of the assessee relates to the decision of the revenue authorities restricting the deduction under section 80-IB to Rs. 14,80,138 as against the claim of Rs. 19,51,796. 9. Briefly stated, the facts are that the assessee has Head Office in Bombay and has eligible business at Silvassa and it enjoys the benefits of the provisions of section 80-IB. While computing the profits and gains of the eligible business of the Silvassa Un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the provisions of section 80-IB on the issue. 12. The provisions of section 80-IB/80-IA are the code by themselves as they contain both substantive as well as procedural provisions. Therefore, we need to examine what these provisions prescribe to the issue of the manner of computation of the profits and gains of the eligible business . In this regard, the relevant sections i.e., 80-IB(1), 80-IB(13) and 80-IA(5) of the said sections are important and they are reproduced hereunder for ready reference. "80-IB. Deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings. (1) Where the gross total income of an assessee includes any profits and gains derived from any business referred in sub-sections (3) to (11), (11 A) and (11B) (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to such percentage and for such number of assessment years as specified in this section. 80-IB. (13) The pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ible business, the only source of income , should be rejected in view of the overriding provisions of section 80-IA(5). 14. To take the discussion further, the determination of the allowable revenue expenses for the purposes of computing the profits and gains of the eligible business of the instant assessee, in our opinion, all the provisions relating to the head of income "Profits and gains from business or profession" apply without any mutation, in other words, the all the direct as well as the indirect expenses have to be adjusted from the profits and gains of the eligible business. Further, on finding that the sub-section (5) refers to phrases i.e., the profits and gains of an eligible business to which the provisions of sub-section (1) apply . . . , shall be computed as if such eligible business were the only source of income of the assessee , we proceed to interpret and understand them by the meaning that the stand alone unit has to be given to the such eligible business. In other words, as if such eligible business were the only source of income shall mean that the alleged indirect expenditure or common or head expenses were incurred for such eligible business, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duction under section 80-IA of the Act. Moreover, this provision is of overriding nature providing specifically that ...the assessee is entitled to deduction under section 80-IA of the Act, this provision will be applied as if the industrial unit is an independent unit and is the one and only source of income possessed by the assessee." [Emphasis supplied] 16. Further, regarding the arguments of the Counsel, that common expenses, since they were not incurred in connection with the Silvassa Unit, should not be booked to the section 80-IB unit, we find that there are express provisions in the statute against the devices which inflates the tax-free profits of such eligible businesses. While sub-section (7) provides for auditing of the accounts of the eligible business and furnishing of the relevant report with the view to ensuring the accurate computation of the profits and gains of the eligible profits, sub-section (8) provides for applying the principles of an arm s length price (ALP) and its proviso conditionally permits the Assessing Officer to resort to reasonable estima- tions, although the same is in respect of the transactions between eligible business and others c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome. For instance, section 44C relating to deduction of head of expenditure in case of non-resident provides for allowing certain percentage of the head-office expenditure of a non-resident provides for allowing certain percentage of the head office expenditure of a non-resident to its branches in India. Similarly, section 80HHC defines the indirect cost, which means the cost not being direct cost allocated in the ratio export turnover in respect of the trading goods to the total turnover . Finally, section 14A relating to expenditure incurred in relation to income not includible in the total turnover was brought into statute with retrospective effect from 1-4-1962 by the Finance Act, 2001 to provide for allocating the expenditure in relation to the exempt income not forming part of the total income. All these provisions of the Act, approves the existing of the concept of allocating expenditure in the context of not allowing the same when the relatable income is not exigible to tax either by way of exempt income under section 10 or by way of deductions under Chapter VI-A or otherwise. As discussed in the preceding paragraphs, the proposition that the common expenses have t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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