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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 ..... direction to compute expenditure under Section 14A is not justified and contrary to law and secondly, the findings recorded by the tribunal in para 5.5 relating to apportionment of head office expenses to compute the deduction under Section 80IC is perverse and does not take into account the contentions and arguments raised by the appellant. 3. With regard to apportionment of expenses under Section 14A of the Act, the Tribunal has held as under:- 4. Ground no. 1 is that ld. CIT (Appeals) erred in disallowing a sum of Rs. 16,67,053/- by invoking 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticed that the assessee had furnished working of common expenses at Haridwar unit but as per the said working the assessee had not considered financial expenses of Rs.1,30,91,339/- for the purpose of allocation of common expenses. He, accordingly, apportioned administrative personal expense etc. incurred at the head office and held that they were partly relatable to Haridwar unit. In view of the reason given in the assessment order an addition of Rs.69,67,762/- was made, reducing the claim of deduction under 80IC. This included addition on account of 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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in that unit itself and the expenses directed to Haridwar unit are being accounted for in that unit. Reliance was place on the case of Kolkata ITAT in the case ACIT Vs. Tide Water India. 4.3 I have carefully considered the submissions by ld. AR and have gone through the assessment order. The Assessing Officer has made addition on two accounts i.e. on account of difference between the market rate and the rate at which the goods are transferred, amounting to Rs. 6,62,900/-; an on account of allocation of common expenses. As far as addition of Rs. 6,62,990/- 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 the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t furnished unit-wise details with narration to find out which expenses could be allocated to eligible business from the head office. In absence thereof, the ld. CIT(Appeals) correctly came to the conclusion that common expenses have to be allocated to the eligible business in the ratio of turnover of the eligible business to the total turnover. He has also adequately justified the reasons for calculating financial expense for the purpose of allocation. The assessee had furnished details of some expenses, which could not be considered for allocation for 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the said Sections provide for incentives in the form of deduction(s) which are linked to profits and not to investment. On analysis of Sections 80IA and 80IB, it becomes clear that any industrial undertaking, which becomes eligible on satisfying Sub-section(2), would be entitled to deduction under Sub-section (1) only to the extent of profits derived from such industrial undertaking after specified date(s). Hence, apart from eligibility, Sub-section(1) purports to restrict the quantum of deduction to a specified percentage of profits. This is the importance 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 conte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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