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TMI Blog2016 (10) TMI 887X X X X Extracts X X X X X X X X Extracts X X X X ..... atment of interest income of Rs. 23.94 lakhs. 2. Disallowance made under section 14A of the Act. 3. Apportionment of common expenditure between STPI and non STPI units. 3. The assessee company is engaged in information technology, computer software and IT enabled services, more particularly in web development and the website services such as domain name registration, web using services etc. The assessee is eligible for deduction under section 10A of the Act in respect of profits derived from STPI unit. 4. The first issue relates to treatment of interest income of Rs. 23.94 lakhs received by the assessee from inter-corporate loan given by it. During the year under consideration, the assessee had taken a loan of Rs. 3 crores from Karnatak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome from other sources'. 7. We have heard the rival contentions and perused the record. The assessee has furnished the copies of bank account and also ledger account copy of M/s. Acme Housing India Pvt. Ltd. A perusal of the bank account shows that the term loan amount of Rs. 3 crores has been credited to the account of the assessee on 29.09.06. On the very same day the assessee has transferred Rs. 1.50 crores to M/s. Acme Housing India Pvt. Ltd. and on 03.10.06 another amount of Rs. 1.50 crores has been transferred. Thus, we notice that the term loan of Rs. 3 crores has been fully utilized for giving loan to M/s. Acme Housing India Pvt. Ltd. We have noticed earlier that the business of the assessee is related to information technology and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e required to be made in other heads also. Accordingly we restore the alternative contention of the assessee to the file of the AO with a direction to examine the same afresh after affording adequate opportunity of being heard to the assessee and take appropriate decision in accordance with law. 9. The next issue relates to disallowance made under section 14A of the Act. The assessee has declared dividend income of Rs. 2,03,820/- and claimed the same as exempt. The AO computed the disallowance under section 14A of the Act at Rs. 5.70 lakhs by applying the provisions of Rule 8D of IT Rules. The Ld. CIT(A) however restricted the addition to Rs. 50,000/-, since the Hon'ble High Court has held that the provisions of Rule 8D shall not apply to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the assessee has followed a scientific basis for allocating various expenses and hence the same should be upheld. On the contrary, the Ld. D.R. submitted that the assessee has not given any justification for adopting different criteria for allocating various expenses. He further submitted that the Ld CIT(A) has also highlighted the flaw in the method adopted by the assessee. 13. We have heard the rival contentions on this issue and perused the record. We notice that the Ld. CIT(A) has upheld the action of the AO with the following observation: "8. I have considered the said submissions. There is no dispute as regards allocation of direct expense since they are charged to the respective units. The dispute is with regard to allocatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Sales Ratio. Thus, it is seen that different variables have been used for the purpose of allocation of common expenses. On a consideration of the standards used it cannot be stated that there is any scientific basis for the same. For example it is seen that electricity expenses has been allocated on the basis of employee ratio rather than space. Hence, I am unable to agree with the contention of the appellant that it is based on prudence and past practice that allocation as carried out by him has been made. On the other hand the A.O. has undertaken a pro-rata approach which appears to be most reasonable considering the fact that the variable as adopted by the appellant company is based on subjective judgment, rather than any rational or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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