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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 ..... m ₹ 33.32 lakh to ₹ 52.36 lakh during the year under consideration.CIT(A) dealt the issue of substantial expansion as per letter and spirit of the provisions of the Act and the percentage of revenue of total turnover cannot be the sole basis for deciding the claim of substantial expansion of the assessee without appreciating the other surrounding circumstances and totality of the facts. - Decided in favour of assessee. Apportionment of expenses on the basis of sales ratio of Parwanoo and non-Parwanoo unit - Books of accounts rejected for invoking provisions of section 80IC(6) read with section 80IA(10) - Held that:- Although we note that deduction u/s 80IC was claimed for the first time by the assessee company during the year under consideration i.e. AY 2006-07 but as the scheme of statutory provisions of the Act is itself clear on this issue that on the issue of allocation of expenses with reference to computation of eligible profits for determination of the amount of deduction u/s either 80IB or 80IC is concerned, provisions of section 80IA(5), (7) to (12) of the Act shall apply. In this situation, it is also relevant to note that the conclusion of the Tribunal in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies. 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 ₹ 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. Whether on the facts and circumstances of the case, the Ld. CIT(A) has erred in holding that Books of accounts needs to be rejected for invoking provisions of section 80IC(6) read with section 80IA(10), since the provision of section 80IC(6) read with section 80IA(10) does not require that for determining the correct profit of eligible undertakings, when there is close co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 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 is not a proper and legal approach of first appellate authority and the issue should have been adjudicated on the facts and circumstances of the relevant assessment year not only on the basis of earlier years. 5. Replying to the above, ld. Sr. Counsel of the assessee supporting the impugned order submitted that the issue of substantial expansion was very well dealt b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Provisions of section 80IC stipulate that deduction under that section will be available to an undertaking engaged in manufacturing or producing any article or thing not included in the Thirteenth Schedule if the undertaking had undertaken 'substantial expansion' within the period 07101/2003 to 31/03/2012 in any Export Processing Zone or Integrated Infrastructure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement, 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 ₹ 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 unit and (ii) the said amount of depreciation was taken into account while computing deduction under section 80-IB of the Act admissible to the Parwanoo unit. As mentioned earlier, the submission of the appellant were remanded to the AO for his examination and comments, but the AO has not controverted the above contentions of the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levant 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 ₹ 18,35,423 (Rs.19,48,888 - ₹ 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. ₹ 18,35,423 is more than 50% of the opening value of the plant and machinery for Parwanoo i.e. ₹ 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 plant and machinery was increased from ₹ 33.32 lakh to ₹ 52.36 lakh during the year under consideration. 9. On the basis of foregoing discussion and facts and circumstances emerged and noted by us, we are inclined to hold that the CIT(A) dealt the issue of substantial expansion as per le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 case, the CIT(A) has also noted this fact while allowing ground of the assssee on this issue. The relevant operative part of the impugned order reads as under:- 5.3 I have carefully considered the facts on issue, the contentions of the appellant and the position of law. The AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 that the AO has not controverted this contention of the assessee in his remand report submitted during first appellate proceedings. Although we note that deduction u/s 80IC was claimed for the first time by the assessee company during the year under consideration i.e. AY 2006 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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, ground no. 4 of the revenue being devoid of merits is dismissed. C.O.No.315/Del/2012 of the assessee for AY 2006-07 19. The assessee company has raised sole cross objection for this year which reads as under:- l. That the Commissioner of Income Tax (Appeals) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount of ₹ 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 ₹ 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 same was notional loss, not allowable expenditure under Section 37(1) of the Act. 1.1 That the CIT(A) erred on facts and in law in not appreciating that discount offered to the employees under ESOP Scheme, being in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent 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 in India. The CIT(Appeals), however, presumed that the facts in the instant case of the assessee was that the shares were allotted to the employees of the affiliate in India at the behest of the foreign co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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