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TMI Blog2015 (9) TMI 61X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Assessing Officer to examine the alternative contention made by the Learned AR in this regard and while allocating the expenses to the eligible units take into consideration the expenses, if any, already debited by the assessee in these eligible units while computing the deduction claimed under sec. 80IA and 80IC of the Income-tax Act, 1961 on proportionate basis to avoid double addition, after affording opportunity of being heard to the assessee. - Decided in favour of assessee for statistical purposes. Reduction of insurance claim received from the income eligible for exemption under sec. 80IC reducing the exemption - Held that:- Assessing Officer following the decision of Hon'ble Supreme Court in the case of Liberty India (2009 (8) TMI 63 - SUPREME COURT) held that there is no first degree nexus between the insurance/interest receipt and business undertaking hence, it does not form part of net profit of eligible industrial undertaking and the same cannot be treated as income derived from industrial undertaking. The Learned CIT(Appeals) has upheld the same with this noting that the assessee did not furnish evidence to substantiate that the claim that these were only re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting of ₹ 71,27,544 on account of valuation of power @ ₹ 4.68 per unit + ₹ 14,49,000 on account of allocation of expenditure relatable to power unit) under sec. 80IA and ₹ 18,36,000 under sec. 80IC of the Income-tax Act, 1961. The Learned CIT(Appeals) has deleted ₹ 71,27,544 i.e. the addition made on account of valuation of power unit at the rate of ₹ 4.68 per unit upheld the remaining disallowances. 4. Similar are the facts with different amounts in the remaining assessment years involving the same issue i.e. reallocation of expenses for the eligible units under sec. 80IA for power unit and under sec. 80IC for paper unit at Kala Amb. 5. In support of the ground, the Learned AR reiterated submissions made before the authorities below. The Assessing Officer had apportioned the expenses incurred on directors remuneration, travelling and conveyance of directors and audit fees towards paper manufacturing unit in Punjab and the power unit in Punjab as well as paper unit in Kala Amb in respect of which deduction under sec. 80IA and 80IC of the Act were claimed. He submitted that the assessee had separate directors for the power unit in Punjab an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort. Thus, the deduction of the claim under sec. 80IA of the Act for the power unit in Punjab and under sec. 80IC for the paper unit in Kala Amb made by the Assessing Officer in the claim of eligible profit of the power unit in Punjab and the paper unit in Kala Amb. should be held to be unjustified. The Learned CIT(Appeals) was thus not justified in upholding the assessment order. The Learned AR referred page No. 1 to 14 of the paper book i.e. copy of Punjab Unit balance sheet, profit and loss account and schedule of director s, manager s remuneration, travelling expense etc. 7. Without prejudice to the above submissions and in alternative plea, the Learned AR submitted that the reduction of the eligible profit under sec. 80IA and 80IC of the Act by allocating directors remuneration, travelling expenses, etc. merely on estimate and not on concrete material on record is unjustified and wrong on facts and in law. He contended that the allocation made by the Assessing Officer is excessive and disproportionate in as much as the allocation of directors remuneration, travelling expenses etc. to the Punjab Paper Unit amounted to double Directors remuneration, travelling expenses, et ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.80 Nil Director s travelling expenses 4.97 4.43 4.43 Nil Audit fee 0.82 0.73 0.09 Nil Total 142.49 127.16 15.43 Disallowance in eligible profit as per A.O 13.86 13.68 Difference as a result of allocation to the 2 units only as per Submissions. + 1.57 -13.68 Relief allowable = ₹ 13.68 Lac (-) ₹ 1.57 Lac = Net ₹ 12.11 Lac 9. The Learned Senior DR on the other hand tried to justify the orders of the authorities below with the submission that they have made and upheld the claimed disallowances after discussing the issue in detail in compliance of the order of the ITAT. The Assessing Officer in the second round again afforded sufficient opportunity to the assessee to establish genuineness of its claim made unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(Appeals) allowed relief of ₹ 71,27,544 in assessment year 2007-08 on the issue of adoption of value of power per unit @ ₹ 4.92 per unit for computation of deduction under sec. 80IA of the Act on power unit. The Learned CIT(Appeals) has however, upheld the action of the Assessing Officer regarding the disallowance of ₹ 14,49,000/- under sec. 80IA in relation to power plant in Punjab and ₹ 18,36,000 under sec. 80IC with regard to paper unit at Kala Amb. The Assessing Officer has dealt with the issue in para No.3.2.2 to 3.2.3 of the assessment order reproduced hereunder: 3.2.2 In the course of present proceedings the assessee reiterated its earlier reply and also drew attention to para 3 of ITAT s order wherein the claim of having separate directors for power unit, paper unit at Kala Amb (HP) and head office (read paper unit in Punjab) was made. 3.2.2 The contention of the assessee that every unit had different director is not verifiable from the record. In the profit and loss account of Power Unit not a single rupee has been debited on this account. The contention that MD s remuneration has been booked at head office only because he is not directly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Unit (In Lakhs) Turnover of HP (Kala) Paper Unit (In Lakhs) Rs.14920.57 Rs.11614.76 Rs.1461.15 Rs.1844.66 Director s remuneration ₹ 136.80 ₹ 106.49 ₹ 13.34 Rs.16.91 Directors Travelling ₹ 11.03 ₹ 8.58 ₹ 1.08 ₹ 1.36 Audit Fee ₹ 0.75 ₹ 0.58 ₹ 0.07 ₹ 0.09 Additional Expenditure to be allowed ₹ 14.49 ₹ 18.36 Eligible units 11. Similar orders on the issue of allocation of expenses in eligible units under sec. 80IA and 80IC have been passed by the authorities below in the remaining assessment years 2008-09 and 2009-10. We do not find reason to interfere with the orders of the authorities below regarding the making of reduction in the disallowances under sections 80IA and 80IC of the Act on account of reallocation of directors remuneratio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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