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TMI Blog2018 (5) TMI 1273X X X X Extracts X X X X X X X X Extracts X X X X ..... dvertisements, the quality of paper and the printing quality were the same. The cost of the news paper also remained the same. Merely because greater number of news papers printed at Nilgiri unit were diverted for circulation in Ahmedabad would not, in our opinion, make any material difference insofar as income allocation is concerned. When we find that the formula devised by the CIT(A) and approved by the Tribunal lacks scientific basis, the same must be discarded. The question is of its substitution. As noted, the assessee had not maintained separate accounts for its two units of Ahmedabad one being eligible for deduction under section 80-I, the other not so eligible. Both printing units printed and published news papers which were marked as Ahmedabad edition. Such news papers were circulated in and around the city of Ahmedabad including North Gujarat. The news papers, in all respects, were identical. The quality of paper used, the printing material and the cost of each such news paper sold in Ahmedabad as well as outside Ahmedabad were the same. Under the circumstances, the most fair and equitable means of dividing the income between the two units would be in the proportio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch disallowance inter alia on the grounds that the period of delay was extremely small running into barely few days and also holding that such disallowance was not justified. From the impugned judgement of the Tribunal, it is not clear whether such payments were in the nature of employer's contribution to the said funds or those of the employees. Depending on this question, the parameters for making additions would change. Counsel for the Revenue would rely on the judgement of Division Bench of this Court in case of Commissioner of Income Tax vs. Gujarat State Road Transport Corporation reported in 366 ITR 170 taking a view that non-payment of employees' contribution to the Provident Fund, Employees State Insurance Scheme within the due date specified in section 36(1)(va) would dis-entitle the assessee from claiming deduction thereof. At the same time, as per settled provision, if the late payment to the said funds is of the employer's contribution, such disallowance would not apply. Our attention was drawn to a detailed discussion in the assessment order forming part of Tax Appeal No. 954 of 2006 in which, the Assessing Officer has consciously and consistently r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Khanpur Unit and Nilgiri Unit was 60.35% and 39.65% respectively. 5. The Assessing Officer did not approve the higher allocation of advertisement income in the hands of the eligible unit. He was also not convinced about the Ahmedabad edition receiving 89.97% of the advertisement revenue. He was of the opinion that such figure included advertisement income of other editions also. He noted that in the assessment year 1994-95, he had made adjustment in this head and computed the advertisement income of Ahmedabad edition at 71%. However, in such year, since the circulation of Ahmedabad edition was 45% of the total circulation of the news paper, he decided to allocate advertisement income to Ahmedabad unit at 80% considering that in current year, Ahmedabad edition circulation was 67.% of the total circulation. 6. He therefore, attributed 80% of total advertisement income of ₹ 13,54,84,703/- i.e. ₹ 10,83,87,762/- to Ahmedabad unit. Having done that he discarded the assessee s contention that such advertisement income was largely generated only out of city sale of news papers and therefore, the profit margins in case of Khanpur and Nilgiri units should be equally devis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the property and other events in Ahmedabad City such as besna and classified advertisements had contributed to 70.81%, 63.37% 59.33% in the news papers published on 03.06.1990, 18.11.1990 and 15.06.1990 respectively. By such comparison, he was satisfied that his formula did not give any distorted result. 9. The Revenue carried the matter in appeal. Before the Tribunal, Revenue raised several contentions including pointing out that the formula evolved by the CIT(A) had no scientific basis. It was contended that there is only one Ahmedabad edition of the news paper which is circulated within as well as around the city in areas like Surendranagar, Mehsana and whole of north Gujarat. The news papers printed at Nilgiri press and Khanpur press are identical in all respects containing the same articles, the same advertisements, same photographs and same news. Even quality of news prints is same. The Revenue also questioned the very assertion of the assessee that Nilgiri Unit had sold 81% of the copies sold within the city, the remaining 19% being the share of Khanpur Unit. In the alternative, it was also contended that in any case, this would have no effect insofar as the profit all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the advertisements representing Ahmedabad events from the three news papers randomly picked and checked by the CIT(A). The fact, that Ahmedabad edition earns greater revenue in the form of advertisement income, is not in dispute. A weighted deduction therefore had to be given for publication of such news paper. Even Assessing Officer accepted this proposition. He however, committed an error in modifying the figures presented by the assessee. This was without any basis. 14. Having heard learned counsel for the parties and having perused documents on record, relevant facts can be recapitulated as under: 1. The assessee has five editions of its Gujarat Samachar daily. These are Ahmedabad, Surat, Baroda and Rajkot and Mumbai editions; 2. Ahmedabad editions are printed at Khanpur and Nilgiri units. The Nilgiri unit is eligible for deduction under section 80-I of the Act whereas Khanpur unit is not. 3. The assessee has not maintained separate accounts for these two units. 4. The news papers printed at both these units are circulated within the city as well as in the surrounding areas including the whole of north Gujarat. The news papers are identical viz. those circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for income division between Nilgiri and Khanpur units. Firstly, if we recall, the Assessing Officer having divided the income between the said two printing units in the proportion of their publication inter se, the CIT (A) provided for a complex formula as under: Weighted average of advertisement revenue to be allocated to Nilgiri Unit = 100 x X Y X= X=Percentage of news papers printed and circulated from Nilgiri Unit out of total number of copies of Ahmedabad edition. Y= Percentage of news papers sold in the city of Ahmedabad and printed at Nilgiri Unit 17. Firstly, the Revenue has raised strong objection to the very foundation adopted by the CIT(A) viz. to hold that 81% of the publication in the city of Ahmedabad was printed in Niligir unit. The Revenue contends that, no evidence was led to establish this fact. We find considerable force in this contention. The assessee's representation before the CIT(A) was that for its business considerations out of the total number of copies of the news pape ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is of its substitution. As noted, the assessee had not maintained separate accounts for its two units of Ahmedabad one being eligible for deduction under section 80-I, the other not so eligible. Both printing units printed and published news papers which were marked as Ahmedabad edition. Such news papers were circulated in and around the city of Ahmedabad including North Gujarat. The news papers, in all respects, were identical. The quality of paper used, the printing material and the cost of each such news paper sold in Ahmedabad as well as outside Ahmedabad were the same. 21. Under the circumstances, the most fair and equitable means of dividing the income between the two units would be in the proportion of their internal publication and circulation of Ahmedabad edition. That is what the Assessing Officer has done. We restore the formula. 22. In the result, the question is answered in favour of the Revenue subject to the observations made in the judgement. The Assessing Officer shall recompute the assessee's income from eligible and none-eligible units in the manner provided in this judgement. All Tax Appeals are disposed of accordingly. - - TaxTMI - TMITax - Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X
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