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TMI Blog2013 (6) TMI 568X X X X Extracts X X X X X X X X Extracts X X X X ..... as well as unsecured loans throughout the year. The loan fund has been utilized towards investment in fixed assets, inventories, sundry debtors and cash & bank balances. The assessee company has inflated profit of Rudrapur unit for the purpose of higher deduction u/s 80IC. He further observed that the actual profit of Rudrapur Unit can be determined after allocating finance charges and head office expenses to this unit. He observed that the average value of fixed assets and current assets including loans and advance for all the three units in crores are as under :- Kolkata Unit Faridabad Unit Rudrapur Unit Average value of Fixed Assets, Current Assets, Loans & Advances in crores ½ (7.5 26.0+2.2+17.9) 2= 26.8 ½(10.8+18.8+11.2+15.6 2= 28.2 ½(9.1+3.2+4.2+1.3)2= 8.9 He further observed that ratio of the Average Value of Fixed Assets, Current Assets, Loans and advances is expressed as under : 268 : 282 : 89. The AO further observed that the total financial charge excluding hire charges and bill discount is Rs.1,53,25,937/-. The sum of ratio (268 + 282+ 89) is 639. The finance charge for Rudrapur Unit is allocated in the above ratio as under :- 89 / ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied and uncalled for. As regards Faridabad Unit, it was submitted that some persons were deputed for supervising the work of Rudrapur Unit at the initial stage of starting such unit and for this purpose Faridabad unit has already debited the account of Rudrapur unit by Rs.6,45,753/- in respect of salary and other allowances of those executives and out which Rs.85,829/- has been capitalized. Hence it was submitted that the action of the AO in further allocating Rs.3,00,000/- to Rudrapur unit regarding expenditure was wholly bad, illegal, unjustified and uncalled for because Rs.6,45,753/- had already been transferred form Faridabad unit to Rudrapur unit on account of such expenditure. Hence it was submitted that the action of the AO in restricting the addition allowable u/s 80IC to Rs.90,62,385/- claimed by the assessee should be vacated. The ld. CIT(A) after considering the submissions of the assessee has held as under :- 6. I have duly considered the observations of the Assessing Officer and submissions of the assessee. The Assessee is engaged in the business of Engineering and is running two Units separately Le., one at Faridabad and the other at Rudrapur in Uttaranchal. Both th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c principle has to be followed even in the case of where the deduction @ 100% is being claimed by the assessee from the income of a Unit. The provisions of sub-section 8 of section 801A as per 8018 (13) are also applicable as the services of taxable unit in the form of finance charges, Interest and loan raised funds are being used directly by a unit claiming exemption u/s 8018 of the Income-tax Act, 1961. The Assessing Officer has rightly used the reasonable method {as provided in the proviso to section 801A(8) of I.T.Act,1961} for allocation of expenses to the exempted unit. There is a huge difference in the net profit shown from both the Units which shows that the assessee has allocated more expenses to the older Unit for claiming higher deduction of expenses to show lesser income and thereby avoiding payment of Income-Tax. Therefore, the plea of the assessee is not accepted. The reasons and allocation basis adopted by the Assessing Officer has been found to be fair and reasonable and is accordingly upheld the addition of Rs.24,34,598/-. The appeal of the assessee is dismissed on this ground. 5. The ld. AR of the assessee reiterated the submissions made before the ld. CIT(A). 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no mistake was brought before us to show that the allocation of expenditure on the basis of the sales was not proper in the instant case and there should have been any other better method for allocation of Head Office expenses to the units. Therefore this part of the ground of appeal is dismissed. 7.2. In respect of interest expenditure of Rs.1,53,25,937/- the ld. AR of the assessee contended that no part of the borrowed funds were utilized for Rudrapur unit. The ld. AR filed before us a statement showing loan balance of 31.03.2006, 31.03.2007 and 31.03.2008 and pointed out that loan amount have gradually decreased each year. From this he argued that it shows that no loan amount was utilized for setting up of Rudrapur unit. He also filed a statement showing internal accruals of the company for three years ended on 31.03.2006, 31.03.2007 and 31.03.2008. The said statement shows that the net profit of the company before depreciation for the year ended 31.03.2006 was Rs..6,30,38,583/-, for 31.03.2007 was 5,10,88,326/- and for 31.03.2008 was Rs.19,98,67,950/-. From the above statement it was contended that the investment in Rudrapur unit was made out of internal accruals only. 7.3. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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