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TMI Blog2017 (5) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... has been claimed that various cost centers assigned different codes bifurcate the expenses between the SEZ and DTA and then the expenses are further bifurcated into revenue and capital and then further again revenue expenses were finally bifurcated into DTA and SEZ on the turnover basis. Further with regard to the interest cost it is claimed that it is based on the area developed under DTA and SEZ. In our considered view, although the assessee has claimed that he is maintaining books of account and SAP software and various expenses are allocated by the various cost centers on a predetermined and scientific basis and revenue component of the interest expenses were allocation on turnover basis, appears to be misleading. The assessee has got various types of loans and the loans are utilized for the development of SEZ and DAT. Since the area is demarcated and the loan expenditure incurred on these areas can be identified without any difficulty. Further the income of the one area qualified for deductions while the income of other area is taxable. Therefore, the obligation is on the assessee to identify the borrowed amount spent on the development of SEZ and DTA separately. Simply ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urposes, the assessee has debited profit from SEZ at ₹ 1,54,08,230/- from the net profit of ₹ 1,26,85,795/-. Thus the assessee has calculated loss. The Assessing Officer noticed that the assessee has not proportionately bifurcated the expenses on the basis of turnover and after making various calculations regarding bifurcation of the various expenses, the Assessing Officer has finally calculated book profit at ₹ 1,26,85,795/-. 3. The ld. CIT(A) has deleted the addition by holding as under:- 3.1.2 (i) The facts of the case are that the appellant company Mahindra World City (Jaipur) Ltd. (herein after referred to as MWCJL or Company ) is a joint venture between Rajasthan Government (through RIICO) and Mahindra Group (through Mahindra Life Space Developers Ltd.) in the ratio of 26:74 whereby MWCJL is a project company incorporated to develop Special Economic Zone( SEZ ) and Domestic Tariff Area ( DTA ) in Jaipur City in an area of 2636 acres of land. The appellant company filed its return of income for the year under consideration declaring loss of ₹ 5,01,30,620/-. The Book Profit for the purpose of calculation of MAT was also worked out to be NIL by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenses are intermingled and it is difficult to distinguish how much was incurred for SEZ Unit and DTA Unit. * It appears quite impractical that assessee has incurred interest expenditure to the turn of ₹ 17,45,35,313/- for DTA unit just earning revenue of 63,60,339. But in SEZ Unit it has incurred only ₹ 13,22,84,826/- to earn revenue of as high as ₹ 41,99,74,895/-. The only plea taken by the appellant is that it has separately demarcated its expense. But it appears more of an afterthought to cleverly shift all the expenses to DTA unit so that DTA's profit is reduced and SEZ profit is increased, thereby evading tax. * The only logical basis for dividing the expenses is on the ration of its turnover. This is the only scientific basis on which assessee could have divided his expenses while making MAT computation. (v) In view of the above, the AO worked out loss from SEZ at ₹ 18,16,35,777/- instead of profit of ₹ 1,54,08,230/- as declared by the appellant company and thus, while computing the MAT, the AO taken the book profit at 1,26,85,795/- against NIL shown by the appellant company. (vi) During appellate proceedings, it wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ork In Progress have been bifurcated into SEZ and DTA based on the month wise area under development/ Details are as under:- * Thus Interest and Finance Charges'1 were added to the total expenditure in the profit and loss account of the assessee company for the relevant assessment year. However, major part of the expenses were subsequently added to the capital work in progress/work in progress. (viii) I have duly considered the submissions of the appellant company, assessment order and material placed on record and find merit in its submissions. During appellate proceedings, the appellate has submitted in detail how it has bifurcated expenditure between DTA and SEZ operations and further, the bifurcation of revenue expenditure into DTA and SEZ units. The AO has worked out loss of SEZ at ₹ 18,16,35,777/- against profit of ₹ 1,54,08,230/- shown by the appellant company. The AO has not disturbed the book profit of the appellant company as a whole shown at ₹ 1,26,85,795/- which means that profit in DTA unit was to the tune of ₹ 19,43,21,572/- which is absurd. It is noted that according to the calculation of AO, the appellant company earned a pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and vehemently supported the order of the ld. CIT(A). 5. We have heard the rival contentions of both the parties, perused the material available on the record and also gone through the orders of the authorities below. The assessee has admitted during the appellate proceedings that no separate books of account for SEZ and DTA were maintained. However, it was claimed that the books of account are so maintained that revenue earned the expenditure incurred, the additions/deletions made to the work in progress could be precisely determined separately in DTA and SEZ at any point of time w.e.f. 01/4/2009. It was also claimed that the accounts were maintained in SAP software and for bifurcation of expenses between the SEZ and DTA, various cost centers which has been assigned different codes in SAP are maintained and it was claimed that once the expenditure has been bifurcated in the cost centers then they are further bifurcated into the revenue or capital. The revenue expenses further bifurcated between the DTA and SEZ on the basis of turnover. This claim of the assessee itself appears to be contradictory as once it has been claimed that various cost centers assigned different codes bi ..... 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