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2014 (9) TMI 604 - AT - Income TaxAllocation of certain expenses – Allocation of interest and finance charges - Advertisement and Publicity expenses Held that:- When the company's name and products are being advertised or published, or the expenditure is for the purpose of the company as a whole, as for publishing financial results; in the register of Indian manufacturers, ITEZ, etc., there is no rationale for segregating the same unit wise - the company, toward this, apart from making a bald statement that the product/s advertised is not manufactured at the 80-IC unit, has made no specific case on the said lines at any stage, other than the expenditure on placement, which we have clarified to be unit specific, the balance impugned expenditure would stand to be allocated on some reasonable basis, as 'turnover'. Legal and professional charges – Held that:- The nature of the expenditure classified as 'others' being not specified, though listed under different units, it is not possible for us to express any opinion in its respect, so that the allocability of the same, as in the case of other expenses listed above, would stand to be determined upon stating their nature and purpose - The matter require restoration for the purpose of verification of indeterminate expenditure, and allocation, as appropriate, i.e., either to the specific unit or on the basis of turnover, to the file of the A.O. Audit Expenses – Held that:- The assessee operates through different production units, the common expenditure at the entity or the corporate level is necessarily required to be allocated to the different operating units to determine the income attributable thereto, on some reasonable basis - The turnover stands regularly followed, across the length and breadth of the country, as a reasonable basis for allocation among different functional units – relying upon Consolidated Coffee Ltd. Versus State Of Karnataka [2000 (11) TMI 136 - SUPREME Court] - The assessee has also not suggested any more appropriate parameter for allocating the common expenditure, incurred for the purpose of more than one unit or all the units or as a company as whole, so that there was no reason not to uphold the allocation based on this parameter, representing the volume of activity at a particular unit. Interest attributable to capital work-in-progress disallowed – Held that:- The assessee's case is unimpeachable in-as-much as, rather than witnessing an outlay on CWIP, there has been, on the contrary, a decline at 31.03.2009, the relevant year-end, the addition for the year - the capital and reserves have also witnessed an increase during the current year – Decided against revenue. Adjustment u/s 145A – Held that:- Section 145A being mandatory in its application - irrespective and notwithstanding the method of accounting being regularly followed by the assessee in computing the business income assessable to tax u/s.28, section 145A, to the extent applicable, would have to be given effect to – the order of the CIT(A) is upheld – Decided against revenue. Prior paid expenses disallowed – Held that:- There is no correlation whatsoever between the income booked by the assessee, which stands to be assessed u/s.28 r/w s.5, and the expenditure, similarly claimed - No material or evidence in this respect stands led by the assessee at any stage, there is no basis to hold that the expenses had crystallized during the current year - there is nothing to evidence even the delayed receipt of claim by the creditor, i.e., during the current year, which though would be of little moment in-as-much as the expenditure would stand incurred only on the basis of the underlying contracts and, in any case, could be provided for on the basis of the best assessment as on the date of finalization of the accounts for the relevant year – Decided in favour of revenue.
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