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TMI Blog2010 (2) TMI 911X X X X Extracts X X X X X X X X Extracts X X X X ..... es being apportioned on the basis of goods manufactured. The learned CIT(A) directed to apportion these three types of expenses on the basis of turnover of both the Units – Held that:- Selling expenses have direct relation with the turnover, apportionment of selling expenses on the basis of the amount of turnover in both the Units is appropriate. The financial expenses represent the cost of money borrowed for use in business. Raw material for a product in Unit-I may cost Rs.100 while in the other unit may cost Rs.1000. Bifurcation of the expenses on the basis of quantity produced would obviously lead to absurd situation because the number of units manufactured with different values cannot be the basis of apportioning the expenses, apportionment of Financial expenses needs to be done on the basis of value of goods manufactured in both the Units. Administrative expenses which included rent, travelling and telephone expenses etc. contention of the ld AR is not acceptable for apportioning such expenses on the basis of number of units manufactured. There is no connection of such expenses with the quantity of goods manufactured. such expenses need to be apportioned on the basis of value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Shri Y.S.Udani, clearly brought out the fact that the condition laid down about the number of employees to be employed was not fulfilled. 4. The Assessing Officer issued notice to the assessee pointing out certain discrepancies in the expenses claimed vis- -vis turnover declared in Unit-I and Unit-II as under:- Unit-I (Rs.) Unit-II (Rs.) Sales 4,40,51,775 7,92,58,820 Cost of product sold 3,61,19,570 6,07,67,675 Administration expenses 41,91,049 7,43,817 Selling and distributing expenses 38,11,382 81,027 Financial expenses 10,34,312 15,348 Manufacturing expenses 4,93,594 77,555 5. The Assessing Officer observed that the employees shown as per the attendance register found during the course of survey did not tally with the number of employees for which deduction was claimed towards salaries and wages. On being called upon to give reasons for variation in the Attendance register found during the course of survey and the expenses claimed by the assessee, it was stated on behalf of the assessee that the survey action was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses between these two Units. Accordingly the profit of Unit-I was reduced by Rs.57,97,235. In view of his conclusion that the assessee did not set any new unit in the year, the A.O. allowed deduction u/s.80-IB at the rate of 25% being 7th year of the manufacturing activity on combined profit of Unit-I and Unit-II. 6. When the matter came up before the learned CIT(A) the assessee made elaborate arguments about the independence of two Units from each other. The learned CIT(A) concurred with the submissions advanced on behalf of the assessee and accepted the plea that both the Units were separate i.e. Unit-II was newly set up. Regarding the bifurcation of expenses in Unit-I and Unit-II, the learned CIT(A) accepted the view point of the AO in principle that the assessee had artificially increased the profit of Unit-II thereby shifting expenses of Unit-II to Unit-I. He noted that the expenses relating to consumption of raw material, electricity charges and wages were debited by the assessee as actually incurred in each Unit separately, while rest of the expenses were common which were incurred by Head office. Out of such common expenses, the learned CIT(A) segregated Manufacturing e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the impugned order. There is no reference in the assessment order to any contrary material found at the time of survey. On the question of discrepancy found by the Assessing Officer about the SSI certificate, we find that the learned CIT(A) has rightly taken note of the fact that the additional place of business was given to the assessee at Building no.2 Gala 8. In response to question no.15 about the contents of the letter taken note of by the Assessing Officer, Shri Kalpesh Shah, the partner of the assessee-firm stated that the certificate was issued by the District Industries at Daman as per Daman (DIC Rules) and the same was only for setting up a new Unit. We further note that in respect of Gala 6 and 7 i.e. Unit-I the license was issued to the assessee in 1997 whereas in respect of Unit-II a new license was issued in respect of Gala 8 on 11.9.2002. These facts amply indicate that view point of the Assessing Officer about Unit-II, being extension of Unit-I, has rightly not been sustained in the first appeal. We, therefore, uphold the view canvassed by the learned CIT(A) that Unit-I was separate and distinct from Unit-II. 9. Now coming to the assessee's grievance, here i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenses. In our considered opinion, the apportionment of Financial expenses needs to be done on the basis of value of goods manufactured in both the Units. Coming to the last item being Administrative expenses which included rent, travelling and telephone expenses etc. In our considered opinion, again the contention of the ld AR is not acceptable for apportioning such expenses on the basis of number of units manufactured. There is no connection of such expenses with the quantity of goods manufactured. In our view such expenses need to be apportioned on the basis of value of turnover in both the Units. We order accordingly. 11. The other objection of the assessee is against not giving any finding on the availability of deduction in respect of profits of Unit-I at the rate of 25%. The Assessing officer has recorded in the assessment order that it is 7th year of the existing Unit. Going by that standard the assessee is still entitled to deduction u/s.80-IB for the remaining period. We find that, in fact, the learned CIT(A) inadvertently omitted to give finding about allowability of deduction u/s.80-IB in respect of profits of Unit-I, when he categorically held that Unit-II was a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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