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TMI Blog2017 (12) TMI 567X X X X Extracts X X X X X X X X Extracts X X X X ..... o verify when the claim of loss was made whether the same was debited to the eligible profit of the assessee and if found so, then the Insurance claim should be allowed as eligible for deduction u/s. 80IB of the Act. The assessee is directed to furnish necessary details for verification. With these directions, ground no. 3 is treated as allowed for statistical purpose. Disallowance of deduction u/s. 80IB on Vatva unit - Held that:- It is true that some of the work was carried out at Vatva unit. It is equally true that the job work charges have been debited to the Profit and Loss account. We further find that the total job work done at Vatva unit constitutes hardly 2 to 5% of the total revenue of the assessee. Added with the fact that the job work charged have been charged to the Profit and Loss account. Therefore, we do not find any merit in the disallowance of the claim of deduction u/s. 80IB. We, therefore, set aside the findings of the ld. CIT(A) and direct the A.O. to allow the deduction u/s. 80IB of the Act. Disallowance of deduction u/s. 80IB - Membership & Subscription Expenses - Held that:- Since the Membership & Subscription Expenses pertain to the magazines which ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 07-08 and ITA Nos. 2210 1990/Ahd/2011 are cross appeals of the Assessee and the Revenue preferred against the order of the ld. CIT(A)-VI, Ahmedabad dated 24.06.2011 pertaining to A.Y. 2008-09. 2. Representatives of both sides agreed that the facts in issues in the captioned appeals are identical. Therefore, on such concession, we heard all these appeals and disposed of by this common order for the sake of convenience and brevity. We heard the rival submissions on the facts of ITA Nos. 1905 1895/Ahd/2011. 3. We will first take up the appeal of the Assessee in ITA No. 1905/Ahd/2011 for A.Y. 2007-08. 4. First ground is of general in nature and needs no separate adjudication. 5. Ground no. 2 relates to the disallowance of ₹ 98,898/- made in respect of employees contribution of ESI u/s. 36(1)(va) of the Act. 6. This issue is no more res integra as the same has been decided against the assessee and in favour of the revenue by the Hon ble Jurisdictional High Court in the case of GSRTC Ltd. 366 ITR 170. Respectfully following the same, we decide the impugned issue against the assessee. Ground no. 2 is allowed. 7. Ground no. 3 relates to the denial of deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - u/s. 80IB of the Act. 12. During the course of the scrutiny assessment proceedings, the A.O. noticed that the assessee is getting some of the manufacturing done at Vatwa. The A.O. was of the opinion that the assessee is entitled for deduction u/s. 80IB only on profit derived from manufacturing business of the unit and not on the profit which is attributable to other units or Job workers. The assessee was asked to explain its claim of deduction u/s. 80IB of the Act. In its reply, the assessee stated that the majority of the manufacturing work in respect to the water treatment plant is being carried out by the assessee at the Katwada Unit. Only the work of manufacture/fabrication of Skids, is carried out at Vatva unit. It was explained that the value of such work carried out at Vatva unit hardly constitutes 2% of the value of the plant manufactured at Kathwada. The assessee contended that since more than 90% of the manufacturing is carried out at the Kathwada Unit, the deduction u/s. 80IB should not be disallowed. 13. The A.O. did not accept the contention of the assessee and stated that profit to the extent of 10% cannot be said to be derived from the manufacturing business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax and Parking fee ₹ 1,04,009/- 19. The A.O. noticed that the assessee has allocated some of the indirect expenses which are not to a single unit of the assessee on the basis of turnover. The A.O. was of the firm belief that the aforementioned expenses should also have been allocated on the basis of turnover to Kathwada Unit which is eligible for deduction u/s. 80IB(10). The assessee was show caused to explain the same. The assessee filed a detailed reply vide letter dated 30.12.2009 and the same reads as under:- 1. From the unit wise P L A/c. submitted by the assessee during the course of assessment proceedings, your goodselves have asked the assessee to furnish explanation in respect of basis of allocation of certain expenses allocated to the Vatva Unit of the assessee. In this regard, the assessee submits as under: 1.1.1 With regards to ROC filing fees of ₹ 18,608/-, it is stated that the said expenditure is in respect of the filing fees paid in respect of filing of various documents in compliance with the provisions of Companies Act, and since the expenditure are related to the corporate office of the assessee, they are a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Fbt exempted allowance director 767655 174000 32077 28669 1002400 Fbt taxable allowance director 362321 74580 14883 13301 465085 House rent all - director 5117167 1108800 212083 189549 6627600 Key man insurance director 1753937 1296130 103898 92559 3246825 Medical reimbursementdirector 42273 1440 1287 45000 P.F exployer contribution director 954748 266112 41588 37169 1299617 Remuneration - director 5999522 2217600- 279910 250170 8747202 Total 26284575 7399 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Kathwada unit on turnover basis. Expenses of Toll tax are related to vehicles used for company. Hence, these expenses are to be allocated on the basis of turnover between Vatva and Kathwada unit. The contention of the assessee that the directors expenses have been allotted on the basis of services given by the directors cannot be accepted. The services of directors are for the company and not limited to any unit. They work as a whole for the assessee company. Further no evidence furnished by the assessee that service of Directors were limited to some specific unit. The bifurcation given by the assessee in this regard is not acceptable. The lump sum allocation made by the assessee is without any justification and supporting evidence. In absence of any specific method available for allocating indirect expenditure, best way to allocate such expenditure is on turnover basis. Hence, these expenses required to be allocated between all units on the basis of turnover. Considering same on turnover basis, revised, allocation of aforesaid expenditure is as under: Particulars Vatva Others Amt Kathwada unit eligible for 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ets of the Vatva unit. Total tax and Parking charges are in respect of the vehicles of the Vatva unit and therefore the same are debited to the Vatva unit. It is the say of the ld. counsel that insofar as the Directors remuneration and other incidental expenses are concerned; the assessee has considered only expenditure in relation to the directors who are looking after the work at Kathwada Unit. Therefore, the entire amount cannot be considered for proportionate disallowance. 23. It was explained that expenditure relating to the two of the directors namely Mr. Rakshit Doshi and Aashit Doshi have been allocated to Kathwada Unit as these two directors were looking after Kadhwada Unit. The ld. D.R. supported the findings of the ld. CIT(A). 24. We have given a thoughtful consideration to the facts in issue. We have already exhibited hereinabove, various items of expenditure which have been reallocated by the A.O. In our considered opinion, since the Membership Subscription Expenses pertain to the magazines which are supplied to the Vatva unit, the expenditure can be wholly charged to Vatva unit only. ROC filing fees being for corporate office of the assessee has been rightly a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction. It is the say of the ld. counsel that the impugned project was commenced during A.Y. 2005-06 in which year the assessee had claimed deduction of ₹ 2,11,87,992/- and while allowing the claim of deduction, the A.O. had verified the details of such claim in the light of the provisions of Section 80IA(4) of the Act. The ld. counsel strongly stated that since the claim of deduction in the initial year has been allowed by the A.O. therefore, the same cannot be denied in the subsequent assessment years. The ld. counsel drew our attention to the various clauses of the Agreement No. CER/SR/MDU/25/2003-04/ DT. 27.02.2007. The ld. counsel further drew our attention to the responsibilities of the contractor as exhibited on page 254 of the paper book. The ld. counsel further drew our attention to the fact that after completion of 7 years period, the entire plant has to be handed over to the Board in good working condition. The ld. counsel concluded by saying that the claim of deduction cannot be denied on flimsy ground. 28. Per contra, the ld. D.R. strongly supported the findings of the A.O. It is the say of the ld. D.R. that there is no error in the findings of the ld. CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct executed by an undertaking. What the Explanation, did was to clarify a statutory provision which was at best possible of a confusion. If that be, so, the Explanation must be seen as one being in the nature of plain and simple Explanation and not either adding or subtracting anything to the existing statutory provision. If the Explanation was purely explanatory in nature and did not mend the existing statutory provisions, the question of levying any tax with retrospective effect would not arise. The Explanation only supplied clarity where confusion was possible in the unamended provision. In that view of the matter, this cannot be seen as a retrospective levy. 30. The assessment before us is 2007-08 2008-09, therefore the binding decision of the Hon ble High Court of Gujarat (supra) is directly applicable on the case in hand. As mentioned elsewhere, the initial assessment year is A.Y. 2005-06 and after thorough examination, the claim of deduction was allowed by the Department. In our understanding of the law without disturbing the claim of the initial assessment year, a similar claim cannot be denied in the subsequent assessment years. Considering the facts of the case in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. Ground no. 3 is treated as allowed for statistical purpose. 40. Ground no. 4 relates to the re-allocation of expenditure and the grievance is identical to ground no. 4 of A.Y. 2007-08 (supra). For our detailed reasons given therein, we hold accordingly. 41. Grievance raised vide ground no. 5 is identical to the grievance raised vide ground no. 5 in A.Y. 2007-08 (supra). For our detailed discussion therein, ground no. 5 is allowed. 42. Ground no. 6 relates to the disallowance of deduction of ₹ 66,69,840/- u/s. 10AA of the Act. 43. We find that the A.O. has disallowed the claim of exemption by re-allocating the indirect expenditure. The re-allocation of indirect expenditure have been considered by us at length while deciding ground no. 4 in the appeal for A.Y. 2007-08 (supra). For out detailed discussion therein, we direct the A.O. to consider our directions and decide this issue afresh. Ground no. 6 is treated as allowed for statistical purpose. ITA No. 1990/Ahd/2011 Revenue s appeal for A.Y. 2008-09 44. The only grievance of the revenue relates to the deletion of the addition of ₹ 27,96,202/- on account of profit of work contract sales. 45. ..... 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