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TMI Blog2011 (11) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... nvoking the provision contained in section 14A. The disallowance was upheld by following the decision of Special Bench of Mumbai Tribunal in the case of ITO Vs. Daga Capital Management Pvt. Ltd., 119 TTJ 289, in which it was held that section 14A is applicable in respect of direct and indirect expenses incurred for earning any income, which is not included in the total income. The onus of proving that no such expenditure has been incurred is on the assessee. The retroactive operation of Rule 8D was also approved. In the course of hearing before us, it was submitted by both the parties that the aforesaid decision stands modified in view of the decision of Hon'ble Bombay High Court in the case of Godrej & Boyce Manufacturing Co. Ltd. Vs. Dy. CIT, (2010) 194 Taxman 203, in which it has been held that provisions contained in section 14A and Rule 8D are not ultra-vires. However, Rule 8D is applicable prospectively from assessment year 2008-09. Prior to that, the AO could examine all the facts and make reasonable disallowance on the basis of conclusion arrived at from the facts. It is also the common ground that the issue is pending before Hon'ble Delhi High Court. Therefore, it has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f transfer of goods from Kasna unit to Haridwar unit of Rs.6,62,900/-. This addition of Rs.6,62,900/- could not be seriously contested during the course of arguments. This addition was made on the basis of market value of the goods transferred to the Haridwar unit. 8. In the first appeal, CIT(Appeals) examined the issue in great detail and has recorded as under:- "4.1 Briefly stated facts of the case are that the assessee company has claimed deduction u/s 80IC for Uttaranchal Unit of Rs. 4,42,62,395/-. The Assessing Officer raised various queries with regard to claim u/s 80IC and observed that the stock has been transferred at cost plus overhead expenses to Haridwar Unit. As per the working furnished by the assessee, the difference between the market rate and the rate at which goods are transferred is Rs. 6,62,900/-. IN view of the provisions of section 80IC (7), read with sub-section (5), (8) & (10) of section 80IA, the Assessing Officer concluded that the market value of the transfer of goods is to be taken. He, therefore, reduced Rs. 6,62,900/- from the profits of the Unit. He also observed that the assessee has not considered the financial expenses of Rs. 1,30,91,339/- for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 990/- is concerned, I find that the same has been made strictly in view of the legal provisions of section 80IC(7) read with sub-section (5), (8) & (10) of Section 80IA of the Act. The same is, therefore, upheld. As regards allocation of common expenses, including financial expenses of Rs.1,30,91,339/-, it is observed that these expenses are common in nature and include financial expenses e.g. interest paid to bank, interest to directors, interest to others etc. The appellant was specifically required during the appellate proceedings to give details of expenses pertaining to EOU and Non-EOU Units and the justification as to why they should not be apportioned. The appellant has filed the consolidated statement without specifying & substantiating individual items as to why these should not be considered for the purpose of allocation of common expenses. Ld. AR has also relied on the case of ACIT Vs. Tide Water India Ltd. (Kolkatta (sic) ITAT). However, neither the complete citation of this case was given nor the copy of complete judgment was submitted. Only the extracts of the case were filed. In such circumstances, the applicability of the above judgement (sic) to the facts of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the reason that those contained proposed dividend, proposed dividend tax, court fee for old cases and expenses recovered from the respective units, being Rs.4,53,401/- from other units and Rs.12,26,065/ from eligible unit. We do not find the necessity of making any interference with these findings as these are based on sound logic. He has also granted relief to the assessee to calculate the disallowance for the period 23.10.2005 to 31.3.2006 as the eligible unit was set up on 23.10.2005 and not on 1.10.2005. There seems to be no scope for any further relief in this matter also. Accordingly, it is held the ld. CIT(appeals) was right in disallowing Rs.69,67,762/- from the deduction subject to some adjustment to be made by AO on verification. Thus, this ground is dismissed." 11. As noticed above, the Tribunal has also given a factual finding that the appellant assessee has not tried to bifurcate the common head office expenses, which are also relatable to the Haridwar unit as well as the units at Noida and Kasna. Thus, there is a concurrent finding of fact both by the CIT(Appeals) and the Tribunal that the aforesaid bifurcation exercise was not undertaken by the assessee. 12. Durin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance of the words "derived from industrial undertaking" as against "profits attributable to industrial undertaking"." 13. In the aforesaid decision the Supreme Court has interpreted the words "derived from" and has highlighted the legislative intent. It states that devices adopted to reduce/inflate the profits of eligible business have to be checked. We fail to understand how this decision helps appellant. Regarding the contention raised on the basis of profit and loss account as on 31st March, 2006 of the Haridwar unit, which has been audited by the Chartered Accountant, the same is not relevant and does not deal with the contention and the findings recorded by the CIT(Appeals) and the Tribunal. The question raised and which has been dealt elaborately by the CIT(A)/Tribunal was with regard to the head office finance expenses and whether the said expenses are common head expenses, which are also relatable to the Haridwar unit. The assessee, as per the CIT(Appeals) and the tribunal, did not furnish and give the said bifurcation and details or justify their exclusion. We do not think the statement of profit and loss account, which has been relied upon by the appellant before us show ..... X X X X Extracts X X X X X X X X Extracts X X X X
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