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2015 (3) TMI 270 - AT - Income TaxEligibility for deduction u/s 80IC - issue of substantial expansion at Parwanoo Unit was decided by the AO against the assessee by holding that the assessee has failed to substantiate that the plant and machinery at Parwanoo unit as on 1.4.2005 was only of ₹ 34,63,220 out of total plant and machinery - CIT(A) allowed the claim - Held that:- We are in agreement with the conclusion of the CIT(A) that this amount of increase of plant and machinery during the year under consideration viz. ₹ 18,35,423 is more than 50% of the opening value of the plant and machinery for Parwanoo i.e. ₹ 34,63,220 (as on 1.4.2005) then the claim of expansion of Parwanoo unit was rightly held in favour of the assessee. We also note that the Director of Industries, H.P. also acknowledged the substantial expansion of Parwanoo unit as on 24.11.2005 by the certificate dated 8.2.2006 which has not been controverted by the AO which clarifies that after substantial expansion as on 24.11.2005, the investment in plant and machinery was increased from ₹ 33.32 lakh to ₹ 52.36 lakh during the year under consideration.CIT(A) dealt the issue of substantial expansion as per letter and spirit of the provisions of the Act and the percentage of revenue of total turnover cannot be the sole basis for deciding the claim of substantial expansion of the assessee without appreciating the other surrounding circumstances and totality of the facts. - Decided in favour of assessee. Apportionment of expenses on the basis of sales ratio of Parwanoo and non-Parwanoo unit - Books of accounts rejected for invoking provisions of section 80IC(6) read with section 80IA(10) - Held that:- Although we note that deduction u/s 80IC was claimed for the first time by the assessee company during the year under consideration i.e. AY 2006-07 but as the scheme of statutory provisions of the Act is itself clear on this issue that on the issue of allocation of expenses with reference to computation of eligible profits for determination of the amount of deduction u/s either 80IB or 80IC is concerned, provisions of section 80IA(5), (7) to (12) of the Act shall apply. In this situation, it is also relevant to note that the conclusion of the Tribunal in assessee’s own case for AY 2001-02 in which has been upheld by the Hon’ble High Court, wherein approving apportionment of expenses placed by assessee has been approved by holding that the revenue has not pointed out any item which has been incurred for Parwanoo business and charged to non-Parwanoo business so as to increase the profit of the Parwanoo business which may result in higher deduction u/s 80IB of the Act. Thus the CIT(A) granted relief for the assessee on legal and cogent reasons - Decided in favour of assessee. Discount offered to the employees under ESOP Scheme disallowed - Held that:- expenditure in question is wholly for the purpose of business of the assessee and the fact that the parent company is also benefitted by a reason for motivated work benefits would be no ground to deny the claim of the assessee for deduction, which otherwise satisfies all the conditions referred to in section 137(1) of the Act. - Decided in favour of assessee.
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