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2011 (12) TMI 49 - HC - Income TaxSTP unit - Exemption u/s 10A - Method of allocation of Common expenses - Head Count or Turnover - Rule of Consistency - Held That:- In view of CIT vs Hukam Chand Mills Ltd. (1976 - TMI - 6475 - SUPREME Court) "where alternative methods of apportionment of the expenses are recognized and there is no statutory or fixed formula, the endeavour can only be towards approximation without any great precision or exactness". In the present case, there is no finding by the revenue authorities that by adopting the head-count method which was hitherto being accepted by them there was a distortion of the profits nor have they said that the head-count method of accounting is not the correct method of accounting. All that they have said is that in their opinion the turnover basis of apportionment of the expenses is more logical and needs to be applied. Further, the Assessing Officer has accepted the head-count method adopted by the assessee in the past but has rejected it only for the years under appeal. This would disturb or distort the profits. Turnover method is to be applied in case for apportionment of profits but here we are concerned with the method by which the indirect or common expenses – expenses which are incurred for both the exempt and taxable units – are to be apportioned between the two units. To apply the formula prescribed in sub-section (4) may be appropriate in a given case considering facts. But applying the same formula to all cases of apportionment without having regard to the history of assessments and other relevant factors may not be justified. -Thus apportionment on head count method was valid. - Decided in favor of assessee.
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