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TMI Blog2015 (3) TMI 270X X X X Extracts X X X X X X X X Extracts X X X X ..... d 08 Feb 2006 regarding approval for substantial expansion of the assessee company by the Director of Industries, Himachal Pradesh was actually not the approval but the proposal for undertaking substantial expansion of the existing industrial unit for the manufacture of GIS Softwares. It was not the letter for approval for completion of the substantial expansion of the unit by the Director of Industries. 2. Whether on the facts and circumstances of the case, the Ld. CIT(A) has erred in not noting the fact that the specific opportunity was granted to the assessee for clarifying the issue of 'substantial expansion' of the Parwanoo unit vide notice u/s 142(1) dated 04.11.2009, which the assessee failed to comply with. The additional evidences were filed only during the appellate proceedings. 3. Whether on the facts and circumstances of the case, the Ld. CIT(A) has erred in not allowing the assessee's claim of substantial expansion without appreciating the fact that the assessee has shown Plant & Machinery at Parwanoo unit as on p1.04.2005 of Rs. 34,63,220/- only (20% of total assets), whereas the revenue of Parwanoo unit has been 60% of-total turnover on similar line of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was the proposal for undertaking substantial expansion of the existing industrial unit for the manufacturing of GIS Software. Ld. DR further contended that it was not the letter for approval for completion of the substantial expansion of the unit by the Director of Industries, Government of HP. Ld. DR vehemently contended that the CIT(A) ignored this important fact that the specific opportunity was granted to the assessee for clarifying the issue of "substantial expansion" of the Parwanoo unit vide notice u/s 142(1) dated 4.11.2009 which the assessee failed to comply with and the assessee filed additional evidence only during the appellate proceedings. Ld. AR also contended that the CIT(A) was not justified in allowing the assessee's claim of substantial expansion without appreciating the fact that the assessee had shown Plant & Machinery at Parwanoo Unit as on 01.04.2005 of Rs. 34,63,220/- only (20% of total assets), whereas the revenue of Parwanoo unit has been 60% of total turnover on similar line of manufacturing. 4. Ld. DR also pointed out that the CIT(A) granted relief for the assessee on the same lines in 2007-08 on the basis of this order for AY 2006-07 itself which i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upporting the order of the first appellate authority has also drawn our attention to this fact that the AO has not brought on record any adverse material or fact to dislodge the audited accounts of the assessee and, therefore, the AO was not justified in concluding that the assessee had failed to justify the opening value of plant and machinery at Parwanoo unit. Ld. AR supporting the order of the first appellate authority has also drawn our attention to this fact that the AO has not brought on record any adverse material or fact to dislodge the audited accounts of the assessee and therefore, the AO was not justified in concluding that the assessee had failed to justify the opening value of plant and machinery at Parwanoo unit. 6. On careful consideration of above submissions of both the sides and careful perusal of the relevant material placed on record, we note that the CIT(A) granted relief for the assessee with following observations and findings:- "4.3.4 The next issue to be decided is whether the appellant actually carried out substantial expansion during the relevant previous year so as to become eligible for deduction u/s 80IC in the instant Assessment Year. Provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chinery at Parwanoo unit. According to the appellant, the appellant had set up the unit in Parwanoo in the year 2000. The unit was entitled to deduction under section 80-18 of the Act and to claim deduction under the said section, the unit was required to prepare separate accounts for the said unit. In compliance with the aforesaid requirement, separate accounts were maintained by the Parwanoo unit, which were duly audited and filed along with the certificate of Chartered Accountant in Form 10CCB. The said documents were filed along with return of income year after year. The appellants contends that the accounts of the Parwanoo unit forming part of the record of the department disclosed the plant and machinery employed in such unit. A perusal of the balance sheet of the earlier year would show that as on 31.03.2005, the immediate preceding previous year, the closing gross block amounted to Rs. 34,63,220.Thus, the detail in respect of opening gross block of fixed assets at Parwanoo unit are already on record of the assessing officer and stand accepted in the earlier years' assessment in as much as (i) depreciation was allowed with respect to such value of assets at the Parwanoo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 445 are considered to be revenue expenses and are not considered part of plant and machinery for the purpose of substantial expansion and another amount of Rs. 16,020 spent for site survey and commissioning of internet Bandwidth pertaining to earlier year cannot be treated as part of substantial expansion during the relevant previous year even after disallowing other capitalized charges, the assessee has been able to justify the increase of plant and machinery to the tune of Rs. 18,35,423 (Rs.19,48,888 - Rs. 1,13,465) at Parwanoo unit. We are also in agreement with the conclusion of the CIT(A) that this amount of increase of plant and machinery during the year under consideration viz. Rs. 18,35,423 is more than 50% of the opening value of the plant and machinery for Parwanoo i.e. Rs. 34,63,220 (as on 1.4.2005) then the claim of expansion of Parwanoo unit was rightly held in favour of the assessee. We also note that the Director of Industries, H.P. also acknowledged the substantial expansion of Parwanoo unit as on 24.11.2005 by the certificate dated 8.2.2006 which has not been controverted by the AO which clarifies that after substantial expansion as on 24.11.2005, the investment in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aterial is brought on record to dispute this audit certificate. On behalf of the assessee, it was also contended that the recalculation of eligible deduction us/ 80IC of the Act on the basis of sales ratio between the eligible and non-eligible business was not legally valid because in the earlier year in assessee's own case the method of allocation of expenses to Parwanoo and non-Parwanoo business has been approved by the revenue authorities and the same was also followed for the year under consideration which could not be disturbed. 14. On careful consideration of above submissions, at the outset, we note that as per section 80IC(7) of the Act, the provisions contained in sub-section (5), (7) to (12) of section 80IA shall, also so far as may be, apply to the eligible undertaking or enterprise under the section. 15. As per section 80IA(7) of the Act, the deduction claimed to have been audited by the accountant as defined in the explanation below, sub-section (2) of section 282 of the Act and the assessee furnishes the report of such audit in the prescribed form no. 10CCB as per Rule 18BBB of the Income Tax Rules, 1962 duly signed and verified by such accountant. In the present ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the Parwanoo Unit on the basis of such adverse material . However, no such action has been taken by the AO in the instant case. The deduction has been claimed on the basis of Audit Certificate in Form 10CCB issued by a Chartered Accountant as prescribed in Rule 18BBB. The AO has not brought any adverse material on record so as to dispute this Audit Certificate either. Therefore, it is held that the recalculation of eligible deduction u/s 801C on the basis of sales ratio between the eligible and non-eligible businesses was not legally valid and, therefore, cannot be upheld. This ground of appeal is ,therefore, decided in favour of the appellant. " 16. On bare reading of above operative part, we observe that the CIT(A) has also taken cognizance of the earlier decision of Hon'ble Delhi High Court and the Tribunal on the issue of allocation of expenses with reference to the computation of eligible profit for determining the amount of deduction u/s 80IB of the Act in the earlier years in the assessee's own case wherein the method of allocation of expenses to Parwanoo and non-Parwanoo business has been approved by the jurisdictional High Court of Delhi. The CIT(A) has also noted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d CIT (A) in deleting the addition u/s 80IB of the Act." 17. On the basis of foregoing discussion, we reach to a fortified conclusion that the CIT(A) considered provisions of the Act and also considered audited certificate in Form No. 10CCB issued by the competent CA as prescribed in Rule 18BBB of the Act as per provisions of section 80IA(7) of the Act which are also applicable to section 80IC of the Act. We cannot ignore that the order of the Tribunal for AY 2001-02 (supra) has been upheld by the Hon'ble High Court dismissing the appeal of the assessee in ITA No. 1209/2008 order dated 21.10.2008 (available on paper book page no.126) wherein aforesaid conclusion of the Tribunal has been upheld dismissing the appeal of the revenue on this issue. 18. Therefore, we are inclined to hold that the CIT(A) granted relief for the assessee on legal and cogent reasons and by following the statutory provisions of the Act and earlier orders of the Tribunal and Jurisdictional High Court in assessee's own case for AY 2001-02. We are unable to see any infirmity, perversity or any other valid reason to interfere with the same and we uphold the conclusion of the CIT(A) on this issue. Accordingly, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany itself has given an alternate calculation excluding amount of internet brandwith testing charges, then the same cannot be considered for the purpose of calculation of substantial expansion. We further observe that undisputedly an amount of Rs. 16,020 was spent for site survey and commissioning of internet brandwith during earlier financial year, therefore, the same cannot be treated as part of substantial expansion during the relevant financial year. Hence, we are of the view that the CIT(A) was right in excluding the said amounts at the time of calculation of substantial expansion. We are unable to see any valid reason to interfere with these findings of the CIT(A) and therefore cross objection of the assessee for AY 2006-07 is dismissed. Assessee's appeal in ITA No.814/Del/2013 for AY 2007-08 23. The assessee has raised following grounds in this appeal:- "1. That the CIT(A) erred on facts and in law in confirming the disallowance of Rs. 1,29,7911- made in the assessment order in respect of discount offered to the employees on allotment of shares of the parent company, viz., NIIT Technologies Ltd. under a Employees Stock Option Plan ("ESOP Scheme") on the ground that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8/- incurred by the assessee on the ground that this expenditure is not the expenditure of assessee company but that expenditure is of parent company and the benefit of such expenditure accrues to the parent company and not assessee. The CIT(A) deleted the addition made by the AO. The CIT(A) found that the common shares of Accenture Ltd. the parent company, have been allotted to the employees of ASPL, the Indian affiliate/Assessee and not to the employees of the parent company. The CIT(A) also found that though the shares of the parent company have been allotted, the same have been given to the employees of the Assessee at the behest of the Assessee. The CIT(A) thus held that it was an expense incurred by the assessee to retain, motive and award its employees for their hard work and is akin to the salary costs of the assessee. The same was therefore business expenditure and should be allowable in computing the taxable income of the assessee. The tribunal upheld the view of the CIT(A). It can be seen from the decision in the case of Accenture (supra) that the shares of the foreign company were allotted and given to the employees of affiliate in India at the behest of the affiliate i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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