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TMI Blog2014 (9) TMI 604X X X X Extracts X X X X X X X X Extracts X X X X ..... stand to be determined upon stating their nature and purpose - The matter require restoration for the purpose of verification of indeterminate expenditure, and allocation, as appropriate, i.e., either to the specific unit or on the basis of turnover, to the file of the A.O. Audit Expenses – Held that:- The assessee operates through different production units, the common expenditure at the entity or the corporate level is necessarily required to be allocated to the different operating units to determine the income attributable thereto, on some reasonable basis - The turnover stands regularly followed, across the length and breadth of the country, as a reasonable basis for allocation among different functional units – relying upon Consolidated Coffee Ltd. Versus State Of Karnataka [2000 (11) TMI 136 - SUPREME Court] - The assessee has also not suggested any more appropriate parameter for allocating the common expenditure, incurred for the purpose of more than one unit or all the units or as a company as whole, so that there was no reason not to uphold the allocation based on this parameter, representing the volume of activity at a particular unit. Interest attributable to capit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allocation of certain expenses to the assessee's Dehradun Unit, exigible to deduction u/.80-IC of the Act, viz. advertisement expenses, legal and professional expenses, audit expenses. The assessee is in the business of manufacture of rectifiers, transformers, devices, thyristors, etc. for telecommunication, railways and defence departments, operating through different units, of which only the Dehradun unit is an eligible undertaking u/s.80-IC. Besides, the assessee has its head office, corporate office and registered office at Mumbai. While the assessee claimed a meager allocation to the Dehradun (section 80-IC) unit, so that the bulk of the expenditure under the said heads of account stood allocated to non-80-IC units, purportedly on the basis of actual, the Assessing Officer (A.O.) did not find the same acceptable in the absence of proper substantiation of its claims by the assessee and, accordingly, allocated the same on the basis of the turnover of the different units. In appeal, the ld. CIT(A) found in respect of the advertisement expenditure, as indeed had the A.O. prior thereto, that the said expenditure stood incurred for the company's products and, therefore, c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r which the expense has been incurred. The allocation for the Dehradun unit, at ₹ 21,400/-, is in respect of the advertisement for placements. The same is decidedly in order in-as-much as the expenditure is unit specific. In fact, we observe another expense for ₹ 4,83,018/- (to Musycom 2K) toward placement, which includes for two positions at Dehradun and Mumbai units each, so that the expenditure on the said insertion would stand to be divided equally between the Dehradun and Mumbai units, which has not been made. Apart there-from, the advertisement expenditure is in respect of products, in the national media; for fixed deposits; for publishing results; and in commercial publications. We are in agreement with the Revenue authorities that the same cannot be separated. When the company's name and products are being advertised or published, or the expenditure is for the purpose of the company as a whole, as for publishing financial results; in the register of Indian manufacturers, ITEZ, etc., we do not see any rationale for segregating the same unit wise. In fact, as we observe, the company, toward this, apart from making a bald statement that the product/s advertised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c unit or on the basis of turnover, to the file of the A.O. c) Audit Expenses (Rs.2,70,882/-): The details are at PB pg.55. The same are for the assessee as a company and, therefore, would require being allocated amongst its different operating units. The allocation is accordingly upheld. The assessee relied on the decision in the case of CIT vs. Hindustan Liver Limited TC(A) No. 219 of 2006 . As a perusal of the said decision shows, the hon'ble court upheld the order by the Tribunal principally on the ground that it had only followed its order for the immediately preceding years (being A.Ys. 1981-82 to 1991-92) and which had not been challenged by the Revenue. The issue before us is primarily factual, which in our view does not give rise to any question of law, much less a substantial question of law. When the assessee operates through different production units, the common expenditure at the entity or the corporate level is necessarily required to be allocated to the different operating units to determine the income attributable thereto, on some reasonable basis. The turnover stands, in fact, regularly followed, across the length and breadth of the country, as a reas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndings of fact, and after allowing reasonable opportunity of hearing to the assessee. We decide accordingly. 5. Assessee's ground no. 4 is in respect of denial of deduction u/s.80-IC on interest income of the Dehradun unit, on the basis that it is not derived from the eligible undertaking, relying on the decision in the case of Liberty India vs. CIT [2009] 317 ITR 218 (SC) (refer para 6.3 of the assessment order). Though the assessee we observe did raise a ground in its respect before the ld. CIT(A) (Gd. 5.10), we find he has not adjudicated the same, answering the assessee's ground no. 5 on the basis of the principal objections leading to the difference in the amount of deduction u/s.80-IC, i.e., as claimed and allowed (refer para 6 of the appellate order). The said ground thus does not arise out of the impugned order, so that it is not maintainable before us. The assessee though may take such recourse as is permissible to it under law. We decide accordingly, dismissing the assessee's ground, as raised, as not maintainable. Revenue's Appeal (ITA No. 784/Mum/2013) 6. The first ground of the Revenue's appeal agitates the deletion of the disallowance in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or by the apex court, having been brought to our notice for us to consider revisiting the issue. We decide accordingly, dismissing the Revenue's ground. 8. The third ground by the Revenue relates to an adjustment u/s.145A of the Act in the sum of ₹ 26,36,604/- toward Modvat/Vat by the A.O. in computing the assessee's business income u/s.28 of the Act. The basis of the A.O.'s addition is the assessee's tax audit report (TAR/PB pgs.78-87), wherein, in respect of the Question at Sr. No. 12(b) of the report, the assessee's auditors have certified a decrease in the profit by the impugned sum, being in respect of: - Modvat (excise duty) ₹ 16,43,744/- (Annexure 8 of TAR/PB pg.86) - VAT (sales tax) ₹ 9,92,860/- (Annexure 8 of TAR/PB pg. 87) In appeal, it found favour with the ld. CIT(A) on the basis that the assessee had consistently followed a scientific method in valuing its stocks from year to year. Accordingly, it had paid taxes on the enhanced profit due to the valuation of the closing stock till the immediately preceding year. However, for this year, on account of a decrease in the closing stock, there has been a decline in the valua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and perused the material on record. We find no substance in the assessee's case, which has since found acceptance by the ld. CIT(A). There is, firstly, no correlation whatsoever between the income (for the prior period) booked by the assessee, which stands to be assessed u/s.28 r/w s.5, and the expenditure, similarly claimed. The expenditure would, on the other hand, stand to be allowed u/s. 37(1) of the Act. The assessee admittedly maintaining its accounts on mercantile basis, the claim for expenditure could be allowed to it only on the basis of its' accrual. No material or evidence in this respect stands led by the assessee at any stage, including before us. That is, the issue is legal, and different considerations, based on the relevant provisions of law, coupled with facts, would apply, and no general plea, by netting income and expenditure, which is without any basis in law, would hold. No doubt, where the expenditure is in dispute, it would stand to arise or inure only on the resolution of the dispute. However, as afore-stated, there is no whisper or an iota of evidence toward any subsisting dispute, so that the same is only a bald plea. There is, accordingly, no basi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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