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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 ..... ial undertaking and the expenses which were sought to be apportioned by the AO. In the present appeal AO rightly deducted the depreciation as the amount of depreciation related to eligible ETP unit and findings recorded in this regard are upheld and the amount of depreciation and proportionate depreciation reduced by the CIT(A) is restricted to the said deduction of depreciation and contention of ld. counsel against action of Assessing Officer reducing depreciation amount from the claim of deduction is dismissed. Other expenses like administrative manufacturing and selling are concerned the CIT(A) could not establish any direct nexus or relation with the eligible ETP unit and the audited accounts of assessee clearly shows that the same are related to eligible distillery unit therefore no apportionment or reduction was required to be made in this regard and the action of the ld. CIT(A) allocating such unrelated expenses with the eligible unit is not correct and justified. Accordingly, findings of AO are upheld and action of ld. CIT(A) further reducing claim is set aside. Amount calculated by the AO eligible for deduction u/s. 80JJA is quite correct and as per mandate of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rbitrary, unjust and at any rate very excessive. He further submitted 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. It is also been contended 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. Precisely reiterating written submissions/synopsis dated 20.04.2023 of assessee, the ld. counsel submitted that the provision of Section 80JJA is contained in Chapter VIA of the Act. The provision of Section 80AB of the Act of Chapter VIA states that where any deduction is required to be allowed under any section included in this Chapter under the head C-Deduction in res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her expenses which were also not related to eligible unit from the amount of deduction u/s. 80JJA of the Act was perverse and thus not sustainable therefore Assessing Officer may kindly be directed to accept the claim of assessee for deduction of u/s. 80JJA of the Act by considering the actual profit derived from bio compost division and by considering the depreciation pertaining ETS unit and directed expenses for press mud and bio gas generation only. For above preposition the ld. counsel has relied on following judgments:- (i) Zandu Pharmaceuticals Works Ltd. vs. CIT [2013] 350 ITR 366 (Bom) (ii) M/s. Hindustan Lever Ltd. vs. DCIT Cir 1(1), Mumbai 2012 (2) TMI 571- ITAT Mumbai (iii) CIT vs Jiyajeerao Cotton Mills Ltd. IT Reference No. 600 of 1979 order dated 25th Jan 1990 (iv) National Fertilizers Ltd. [2005] 142 Taxman 5 (AAR) 6. The ld. counsel also submitted that In the case of Zandu Pharmaceuticals Works vs. CIT in 350 ITR 366, the Bombay High Court, after following the principle laid down in the judgment of Supreme Court in the case of Sterling Foods (supra) held that the principle of direct nexus between the profits and gains of an industrial undertak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch are connected with the non eligible distillery unit and they have no connection with the eligible unit for deduction u/s. 80JJA of the Act hence the Assessing Officer may kindly be directed to allow deduction to the assessee accordingly. 9. Replying to the above supporting the orders of the authorities below the ld. Senior DR submitted that in para 4.7 the ld. CIT(A) has recorded sustainable findings wherein we have held that no separate books of accounts have been maintained by the assessee for eligible and non eligible distillery unit, the assessee failed to substantiate that only one employee/supervisor was appointed to look after the functioning for eligible ETP unit and the loans appearing in the books of accounts relates to non eligible distillery unit and not to eligible ETP unit. Therefore the ld. Senior DR submitted that in such a situation the ld. CIT(A) was right in allocating depreciation and other direct expenses such as administrative, manufacturing and selling between eligible and non eligible unit and hence appeal of assessee may kindly be dismissed. 10. Placing rejoinder to the above the ld. counsel submitted that before the ld. CIT(A) the assessee submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndertaking and the expenses which were sought to be apportioned by the Assessing Officer. In this judgment the Hon ble Bombay High Court also followed the preposition rendered by Hon ble High Court of Madras in the case of Bush Boake Allen (India) Ltd. vs ACIT (supra) and excluded the expenses relating to R D unit while working eligible profit and deduction u/s. 80HH/80I of the Act. 13. In the present appeal the Assessing Officer rightly deducted the depreciation amounting to Rs. 1,12,94,053/- as the amount of depreciation related to eligible ETP unit and findings recorded in this regard are upheld and the amount of depreciation and proportionate depreciation reduced by the ld. CIT(A) is restricted to the said deduction of depreciation to the extent of Rs. 1,12,94,053/- and contention of ld. counsel against action of Assessing Officer reducing depreciation amount from the claim of deduction is dismissed. So far as other expenses like administrative manufacturing and selling are concerned the ld. CIT(A) could not establish any direct nexus or relation with the eligible ETP unit and the audited accounts of assessee clearly shows that the same are related to eligible distillery uni ..... X X X X Extracts X X X X X X X X Extracts X X X X
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