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TMI Blog2023 (10) TMI 659X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 5,29,61,675/- is arbitrary, unjust and at any rate very excessive. 2. That the reduction of profits and gains of the unit eligible for deduction u/s 80JJA of the Act by the proportionate indirect expenses and the depreciation of plant and machinery of the whole business in ratio of total turnover of the business and total turnover of the exempt unit as made by the CIT (Appeals) is arbitrary, not based on any principle and bad in law. 3. That without prejudice to Grounds No. 1 and 2 above, the Assessing Officer ought not to have deducted the depreciation amounting to Rs. 1,12,94,053/- in relation of the turbine, ETP and the plant and machinery not connected with the eligible unit for working out the eligible profits and gains of the eligible unit claiming deduction u/s 80JJA of the Act. 4. That the disallowance of expenses of Rs. 8,21,317/- u/s 14A of the Act as made by the Assessing Officer and sustained by the CIT (Appeals) is arbitrary, unjust, bad in law and at any rate very excessive. 3. The ld. counsel submitted that the CIT (Appeals) ought not to have denied the deduction as claimed by the assessee and allowed by the Assessing Officer u/s 80JJA of the Income-tax Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... page 233 (SC), contended that the Hon'ble Supreme Court held that such profits are to be computed as if such eligible business is only source of income. Therefore, the devices adopted to reduce or inflate the profits of the eligible business have to be rejected. The ld. counsel thus submitted that the ld. CIT(A) while allocating the expenses between distillery unit and has accepted the total turnover of eligible unit as Rs. 9,26,17,112/- and expenses claim by the assessee on press mud of Rs. 2,16,85,058/- and expenses for bio gas generation of Rs. 66,76,326/- without any dispute. The ld. counsel further contended that in the calculation at page 9 the ld. CIT(A) has taken total depreciation of Rs. 2,76,64,099/- and propionate depreciation of Rs. 58,67,599/- to estimate deduction u/s. 80JJA of the Act which is not correct as per law. The ld. counsel further submitted that the ld. CIT(A) has also apportioned direct expenses towards manufacturing, selling and administrative purposes of Rs. 8,46,12,237/- without any basis as the same were related to non eligible distillery unit and not related with the deduction eligible unit of bio compost division therefore the action of ld. CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of Chairman, Company Secretary, Public Relations Department, salary and wages and staff welfare expenses relating to Chief Controller Finance against the profits from the respective undertakings. The Mumbai Bench of the Tribunal, after following its own judgment in the case of the said assessee itself, directed the Assessing Officer to exclude such expenditure from allocation while computing the profits of the eligible undertakings. On further appeal, the Bombay High Court upheld the order of the ITAT in CIT vs. Hindustan Lever Ltd. in 394 ITR 73. 8. Furthermore, pressing into service authority of Advance Ruling, Delhi in the case of National Fertilizers Ltd. in [2005] 142 Taxman 5 held that while computing the profit and gain derived from industrial undertaking eligible for deduction u/s. 80-I of the Act, the expenses incurred in corporate office as well as marketing divisions were not to be allocated to the industrial undertaking. The ld. counsel concluded his arguments by submitting that as per facts and circumstances of the case the ld. CIT(A) was not correct and justified in reducing entire amount of depreciation including proportionate depreciation and proportionate direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 1,12,94,053/- and calculated the amount eligible for deduction u/s. 80JJA at Rs. 5,29,61,675/-. The aggrieved assessee carried the matter before ld. CIT(A) who enhanced the reduction of depreciation to Rs. 2,76,64,099/- and proportionate depreciation of Rs. 58,67,599/-. The ld. CIT(A) also reduced the claim of deduction by reducing the proportionate direct expenses such as administrative, manufacturing and selling amounting to Rs. 8,46,12,237/- by finally calculating the net profit (-) eligible for deduction under section 80JJA of the Act at Rs. ( 2,62,24,108/-). 12. On careful consideration of above submissions first of all, we note that the Hon'ble Supreme Court in the case of CIT vs Sterling Food (supra) held that there must by a direct nexus between the profits and gains and the activities of eligible undertaking in the present case there is no dispute regarding turnover claimed by the assessee. In the case of Zandu Pharaceutical Works vs. CIT (supra) after following the proposition of Hon'ble Supreme Court (supra) held that the principal of direct nexus between the profit and gains of eligible industrial undertaking is equally applicable to the expenses also and there ..... X X X X Extracts X X X X X X X X Extracts X X X X
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