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TMI Blog2016 (7) TMI 383X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s.80IC of the Act. Before us, Revenue has not placed any material to controvert the findings of ld.CIT(A). We further find that the assessee had claimed deduction u/s.80IC in AY 2006-07 also and the claim has been allowed in the assessment framed u/s.143(3) of the Act, and that no reopening of assessment u/s.147/148 or u/s.263 has been initiated for withdrawing the claim meaning thereby that the claim of assessee has been accepted by Revenue and has attained finality. - Decided in favour of assessee - I.T.A. No.3216/Ahd/2011, I.T.A. No. 559/Ahd/2012 - - - Dated:- 6-6-2016 - SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER And SHRI S.S. GODARA, JUDICIAL MEMBER For The Appellant : Shri V.K.Singh, Sr.DR For The Respondent : Shri Vartik R.Choksi, AR and Vijay Ranjan, AR ORDER PER SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER : Both these appeals by the Revenue are directed against the separate orders of the Commissioner of Income Tax(Appeals)-6, Ahmedabad dated 03/10/2011 20/12/2011 for the assessment years 2007-08 2008-09 respectively. 2. Before us, at the outset, both the parties submitted that though the appeals of Revenue pertain to different assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... units. The AO on further verification of the details of the allocation of expenses concluded that there was misallocation of interest expenses which had resulted into inflation of profit of Baddi Unit to the extent of ₹ 22,83,883/-. He also noticed that the assessee was a long standing reputed company having well-established market for its goods, its products fetch good price in the market and had incurred expenditure to establish the Brand Value. He further noted that the brands of the assessee were well-established even before the Unit at Baddi commenced its production. He was of the view that on account of brand and marketing network, the assessee was generating profits and the profits accrued to the assessee even prior to set up of Baddi Unit. He, therefore, concluded that the ultimate sale price for the product of the assessee consists of profits derived from manufacturing of product, profit derived from the brand value of the products and the profit derived from the marketing network of the product. He also observed that Baddi Unit was dependent on the established network of Ahmedabad Unit for the purpose of marketing its product. He therefore concluded that the goods m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1C. Assessing officer quantified the gross profit derived from Brand and marketing at ₹ 40459475 on page 23 of the assessment order. It is not in dispute that what is quantified by the assessing officer for disallowance of deduction is gross profit attributable to marketing and brand value. The deduction under section 801C is claimed in respect of net profit and therefore disallowing gross profit attributable to marketing and brand value is not correct. It is argued by the appellant that If marketing, which is a cost centre in the case of appellant company, is considered a separate division then marketing expenses debited in the profit and loss account of Baddi unit has to be removed and reduced from the gross profit of marketing and brand activity attributed by the assessing officer. As per the details given, the marketing expenses debited in the profit and loss account of Baddi unit are ₹ 45732681. If marketing expenses debited in the P L account of eligible unit is reduced from the gross profit from marketing and brand activity of ₹ 40459475, then there can be no disallowance out of deduction claimed by the appellant. I agree with the appellant's logic th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ofit was not only derived from manufacturing of cars but also from marketing the same in India by Indian PE. The Indian PE was analyzing and scrutinizing the proposals and orders and actively involved in negotiating, concluding or fulfilling the contracts. Since Indian PE, which was the marketing division, was carrying out presale, sale and post sale activities, a definite profit was attributable to this undertaking. It cannot be said that Indian PE was not carrying out profitable activity. The issue involved was of transfer pricing in which the profits of Indian PE was to be worked out. The facts of the appellant's case are altogether different. There is no division or undertaking for marketing. The appellant's employees were handling the marketing through distributors and agents. Marketing was not an Independent activity. It was only for the products of the appellant company and accordingly a cost centre rather than a profit centre. Costs for marketing were distributed to both eligible and ineligible undertaking. Assessing officer did not find any fault with the said allocation. When there was no element of profit in the marketing, no profit can be attributed to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , ld.AR(s) reiterated the submissions made before the AO and ld.CIT(A). He submitted that the books of account of Baddi Unit are audited and no defect has been pointed out by the Auditors and therefore no adjustments to the profits of Baddi Unit could have been undertaken by AO. He further submitted that the claim of deduction u/s.80IC of the Act for the impugned year was second year of claim and that the assessee had also claimed deduction u/s.80IC of the Act in AY 2006-07 and the claim of assessee was allowed in the assessment order framed u/s.143(3) of the Act. He also placed on record the copy of the said order. He further submitted that the claim of deduction in AY 2006-07 has not been disturbed by Revenue either by reopening the assessment u/s.147/148 of the Act or by invoking revisionary powers u/s. 263 of the Act, meaning thereby that claim of the deduction u/s.80IC of the Act as made by the assessee has been found to be in order. He further submitted that since there are no change in the facts of the case between AY 2006- 07 and the year under consideration, the claim of assessee needs to be accepted in toto. He thus, supported the order of the ld.CIT(A). 6. We have hea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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