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TMI Blog2022 (8) TMI 245X X X X Extracts X X X X X X X X Extracts X X X X ..... common head office expenses and selling expenses has consistently been followed year-on-year basis which has been held to be reasonable and scientific. It is thus noted that the issue in hand before us is no longer res integra considering the decisions in assessee s own case. Admittedly, it is a fact that this is a recurring issue from preceding assessment years. By adopting judicial consistency in the given facts and circumstances, we affirm the order of ld. CIT(A) and direct to delete the addition made by the ld. AO. Thus, ground no. 1 is dismissed. Disallowance u/s 14A read with rule 8D - CIT-A deleted the addition - HELD THAT:- As hon ble Supreme Court in the case of South Indian Bank Ltd. [ 2021 (9) TMI 566 - SUPREME COURT] wherein it was held that where interest free own funds available with assessee-banks exceeded their investments in tax-free securities; investments would be presumed to be made out of assessee's own funds and proportionate disallowance was not warranted under section 14A on ground that separate accounts were not maintained by assessee for investments and other expenditure incurred for earning tax-free income. As in respect of deletion of di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the revenue. Ld. Counsel for the assessee has placed on record, a brief note on the submissions made along with paper books and chart substantiate the claims made by the assessee in the assessment year under appeal. 3. In respect of appeal of assessee in ITA Nos. 2299/Kol/2019, Ld. Counsel submitted that there is a delay in filing the appeal by 431 days for which a petition for condonation of delay along with affidavit is placed on record. He further submitted that the solitary issue involved in the appeal of the assessee is against the action of Ld. CIT(A) in upholding the action of the Ld. AO on account of deduction of education cess. Ld. Counsel for the assessee did not press this ground of appeal against which ld. CIT, DR did not raise any objection. After hearing both the sides, we condone the delay for adjudication and dismiss this appeal of assessee as not pressed. 4. Accordingly, the appeal of the assessee is dismissed. 5. Now, we take up the appeal by the Revenue in ITA No.1741/Kol/2018. 6. Revenue has challenged the merits of the addition which have been deleted by the Ld. CIT(A). Grounds taken by the revenue are extracted below: 1. The Ld. CIT(A) has e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order itself. It was submitted that assessee maintains separate books of account for the units eligible for deduction under section 80IB of the Act. The profits derived from such units are computed on the basis of such books of account, maintained separately. Business of the assessee being unified, viz., manufacture and sale of paints, there are certain common head office and selling expenses which are incurred by the assessee on account of both the eligible and non-eligible units and are therefore required to be apportioned between such units. 7.2 On this issue, ld. AO noted that Assessee has already prepared a separate profit loss account for each fiscal unit and claimed the profits from these fiscal units as eligible for deduction under chapter VI-A. Now it remains to be seen whether the profits and gains have been correctly computed as if these units are the only source of income. These are submitted in Form 10CCB. To determine the profit gains from these units assessee has considered both direct cost and indirect cost (selling and head office expenses). Now it remains to be seen whether the quantum of indirect cost attributed to these fiscal units are as if these units ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fice expense and selling expenses which has been held to be scientific and reasonable by the Co-ordinate bench of ITAT Kolkata in the assessee s own case for (a) AY 2000-01 and 2001-02 in ITA Nos. 1889(K)/04, 268(K)/05, CO Nos. 107 65(Kol)2005, vide order dated 17.10.2006 (b) AY 2002-03 in ITA Nos. 290 1166/Kol/2006 vide order dated 13.08.2007 7.5 However, ld. AO proceeded to hold that apportionment of indirect expenses should be made on the basis of turnover and thus made an addition of Rs.18,15,18,000/- as proposed by disallowing the deduction u/s 80IB to that extent. 7.6 Aggrieved, assessee went in appeal before the ld. CIT(A) who by placing reliance on the decisions of the Co-ordinate bench of ITAT Kolkata in assessee s own case for earlier years held that ld. AO was not justified in his action and granted the relief to the assessee. Aggrieved, Revenue is appeal before this Tribunal. 8. Ground no. 1 (supra) is with regard to apportionment of common head office and selling expenses for the purpose of computation of profit of units eligible for deduction u/s. 80IB of the Act. 9. Before us, at the outset, Ld. Counsel for the assessee submitted that methodol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uestion of law answered against the revenue. (e) AY 2008-09 ITA Nos. 1105 and 1403/Kol/2013 dated 14.12.2016 [Page 181 at pages 186- 187 of the Corporate Tax Paper Book]. Revenue's appeal being ITAT 256 of 2017, was dismissed by the Hon'ble Calcutta High Court by an order dated 14.12.2021 [Page 2 of the Corporate Tax Compendium of Case Laws] and the question of law was answered against the revenue. (f) AY 2011-12 [Order dated December 31, 2018 in ITA No. 1257/Kol/2017 - Page 193 at page 203 of the Part A - Corporate Tax Paper Book] (g) AY 2012-13 [Order dated November 14, 2018 in ITA No. 2161/Kol/2017 - Page 217 at page 225 of the Part A - Corporate Tax Paper Book] 9.1 Ld. Counsel thus emphasized that the reasons given by the ld. AO for not accepting the assessee's basis of allocation in the impugned AY 2014-15 are the same as those in the earlier and subsequent years and that this Hon ble Tribunal has accepted the assessee's basis as reasonable and scientific and this view has received the approval of the Hon'ble jurisdictional High Court of Calcutta as well. Hence, he urged before the bench to allow the claim of the assessee. 10. Per co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2006 is reproduced herein below: 5.5 We have given a careful consideration to the facts of the case and the position in law. We have also considered the method/basis of estimation of common HO selling expenses. We noted that the assessee has filed an audited certificate with the return to substantiate its claim u/s. 80IB. The profit loss account of Pondicherry unit has been certified by the auditors to be true fair subject to the aforesaid note. From the audit report it is clear that the auditors' arrived at the profit of the Pondicherry unit after considering apportioning all expenses related to the unit except for common HO selling expenses. Therefore the auditors' clearly stated that the profit loss account of the Pondicherry unit gives a true fair view as regard income expenditures derived by the unit except for common HO selling expenses . It was only relating to the common HO selling expenses the Auditors' gave the said note, The company as a whole has an audited account from this audited accounts common HO selling expenses attributable to the Pondicherry unit has not been considered by the auditors. We agree with the A/R that this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e audited accounts of the company, the assessee maintains separate accounts for the Pondicherry unit to ascertain its profit which again is certified by the auditors. The same should be accepted. We are in agreement with the contention of the Ld. A/R which is supported by the decision of the Hon ble Supreme Court as stated above that once the Department has accepted a decision on a particular issued by not challenging the same before any higher forum it is not open for it to contend in the contrary on the sme issue in a later year. We would reiterate that in the present case the Department has accepted the basis of allocation of common head office and selling expenses in the AY 98-99 and there is no dispute as to the fact that the same basis has been adopted by the assessee in AY 2000-01 which are before us. Following the ratio laid down in the decisions rendered by the Hon ble Supreme Court, we uphold the decision of the CIT(A) on this issue and thus dismiss Ground Nos. (iii) (iv) raised by the Department. 11. On perusal of the orders for AY 2000-01 and 2001-02 in ITA No s. 1889/Kol/2004, 268 /Kol/2005 and CO No s. 107 65 /Kol)/2005 in assessee s own case placed at pag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by disregarding that there were borrowed capitals of Rs.78.05 crores and investments out of such borrowed funds were also made in making investments that yielded exempt income? We have heard Mr. P. K. Bhowmik, learned standing Counsel assisted by Mr. Madhu Jana, learned junior standing counsel appearing for the appellant/revenue and Mr. J.P. Khaitan, learned Senior Counsel assisted by Mrs. Nilanjana Banerjee Pal, learned junior standing Counsel appearing for the respondent/assessee. So far as the first substantial question of law is concerned, the Tribunal followed the assessee s own case for the assessment years, namely, 2000-01 and 2001-02 and allowed the deduction as claimed under Section 80IB of the Act. As against the said order of the Tribunal, the revenue preferred appeal before this Court and the appeal preferred by the revenue in ITA No. 117 of 2009 was dismissed by a judgement dated 20th November, 2009 on the ground of unexplained and inordinate delay. With regard to the assessment year 2002-03, the Tribunal granted relief to the assessee and the revenue carried the matter on appeal to this Court in ITA No.230 of 2009 which was dismissed by judgment dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investments were made from time to time out of the common fund (interest bearing loan fund and own capital) gathered by the assessee for the business which is indivisible. Thus, being not satisfied with the correctness of the claim of the assessee, computed the disallowance of interest of Rs. 2,37,85,324/- under rule 8D(2)(ii) and of Rs. 69,46,750/- under rule 8D(2)(iii) of the Rules. Thus total disallowance of Rs. 3,05,69,576/- was made after considering the amount of suo motto disallowance made by the assessee of Rs.1,63,498/-. Aggrieved, assessee went in appeal before the ld. CIT(A). 12.2 Before the ld. CIT(A), assessee submitted that assessee had common pool of funds. It submitted that as on 01.04.2013 i.e. on the opening date of the year under consideration, share capital and reserves and surplus was of Rs.984.43 crores and Rs.1131.89 crores as on 31.03.2014. Against this, total investments as on 31.03.2013 were Rs.90.58 crores and Rs.187.29 crores as on 31.03.2014. The entire investments were out of assessee s own funds. Assessee submitted the details of investments made during the year, all of which, according to it will yield taxable income. Further, assessee took loans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that all the details relating to said expenditure were filed before the AO and without satisfying the precondition as required to be followed before application o f Rule 8D, disallowed the impugned addition arbitrarily. The CIT-A observed that the AO rightly applied the Rule 8D as he was not satisfied with the expenditure as offered by the Assessee on its own and confirmed the impugned addition made by the AO. 21. Before us the ld.AR submits that the assessee on its own disallowed to an extent of Rs.21,921/- which involves electricity, corporation tax and telephone charges. The AO did not examine the workings of assessee as offered by the assessee before him in the assessment proceedings. He did not make any reference to such workings in his order and without proving the nexus between the borrowed funds and investments made applied Rule 8D. The Ld.AR referred to page no- 192 of the paper book to show the details of expenditure as made by the assessee. The Ld.AR also referred to page no-8 of the paper book to show that the assessee has reserve of Rs.200 crores of common fund and referred to page no-9 of the paper book to substantiate its claim. The ld.AR of the assessee also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t satisfactory and mechanically invoked and applied rule 8D of the Rules. Ld. Counsel also pointed that Revenue is not in appeal on the deletion of Rs.1,63,498/- which pertains to suo motto disallowance made u/s. 14A of the Act by the assessee in its return. He stated that ld. CIT(A) deleted the said disallowance by holding that since there is no exempt income earned during the year, no disallowance is warranted u/s. 14A of the Act. 14. We have heard the rival submissions, gone through the facts and circumstances of the case. After perusing the order of Coordinate bench of ITAT Kolkata in assessee s own case for AY 2008-09 (supra) and also the decision of Hon ble jurisdictional High Court of Calcutta affirming the same (supra), we find that facts and circumstances are similar in the present case before us as discussed above and thus respectfully following the said decisions, we delete the disallowance of Rs.3,05,68,576/- made by the ld. AO and upheld the findings given by the ld. CIT(A) in this respect. While holding so on the given set of facts, we also find force from the decision of Hon ble Supreme Court in the case of South Indian Bank Ltd v. CIT [2021] 130 taxmann.com 178 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B in respect of receipt from sale of scrap arising out manufacturing process was decided by this Tribunal in the assessee's favour in its own case for AY 2008-09 (supra). He further stated that against the said order, revenue preferred an appeal before the Hon'ble Calcutta High Court, vide appeal no. ITAT 256 of 2017, which was dismissed by the Hon'ble Calcutta High Court by order dated 14.12.2021 by answering the question against the revenue (judgment reproduced above). It was thus submitted by the Ld. Counsel of the assessee that the said ground is squarely covered against the revenue and in favour of the assessee. 15.2 Ld. CIT, DR placed reliance on the order of ld. AO. 16. We have heard the rival submissions and gone through the facts and circumstances of the case. We note that there is no change in the factual matrix and applicable law on the issue before us when compared with the preceding years. We have perused the order of Co-ordinate bench of ITAT Kolkata in assessee s own case for AY 2008-09 (supra), relevant extracts of which are reproduced as under: 12. Ground no.2 is relating to disallowance of deduction u/s. 80IB of the Act in respect of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ld.AR of the assessee before us. We find that the AO following the same allowed the deduction and relevant finding of which is reproduced herein below: With respect to the second issue the assessee submitted that .....other income' of Rs.15,86,OOO/- as appearing in the Profit Loss A/c of the Unit at Pondicherry comprises of income arising on account of sale of scrap generated in the manufacturing process employed at said Unit. The said fact would be apparent from the complete set of invoices reused by the unit In this regard. Since such general of scrap is directly connected with the production process employed by the company at its Unit at Pondicherry the profit derived from which is eligible for deduction under sect/on 80-IB of the Act. The generation of scrap has therefore a direct nexus with the goods produced by the company at the said eligible Unit and the profit derived therefrom is incidental to the activity of the industrial undertaking. The provision of section 80-IB under which the impugned deduction has been allowed by the Assessing Officer is in pari material to section 80-I and 80IA. It is submitted that in the under noted decisions which have been re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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