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2015 (11) TMI 1059 - AT - Income TaxInterest u/s 234B and 234C - whether leviable on the tax liability of the assessee where the scheme of demerger is sanctioned by the High Court after the close of financial year and the demerger is effective from the appointed date? - Held that:- Once the default is attributed to the assessee , then the charging of interest becomes mandatory. The ratio decendie in the said decision was that where it was not possible for the assessee to have anticipated the events during the year which took place after the close of year ,there was no default on the part of the assessee and consequently interest u/s 234B could not to be charged. In the scheme of demerger, it was not possible for the assessee to estimate the income and pay the advance tax as the scheme was approved after the close of the financial year. We, therefore, respectfully following the above decisions reverse the order passed by the first appellate authority on this point and decide the issue in favour of the assessee. Apportionment of common administrative and other expenses between tonnage and non tonnage business in the ratio of 67: 33 - Held that:- AO accepted the system of apportionment adopted by the assessee qua total operating expenses, interest and finance charges and depreciation meaning thereby that the system adopted by the assessee is partly accepted by the AO. The CIT(A) decided the issue against the assessee on the ground that the AO is not bound by the system adopted and followed by the assessee and further observing that section 115VJ also empowers the AO to apportion on reasonable basis which is in the present case is actual revenue basis thereby sustaining an addition. In our opinion, the approach of the AO and CIT(A) is not correct especially when the system of allocation adopted by the assessee is accepted for three heads of expenses namely total operating expenses, interest and finance charges and depreciation and only rejected apportionment qua administrative and other expenses and more so when the revenue had accepted system of apportionment of common overheads followed by the assessee in the earlier year. In view of our observations and the decisions cited by the Ld AR , we are of the considered view that the order of CIT(A) deserves to be reversed.- Decided in favour of assessee. Disallowance of expenses u/s 35DD(1) - Held that:- We first refer to the provisions of section 35DD(1) which provides that w.e.f. 01.04.1999 where an assessee being Indian company, incurs any expenses wholly and exclusively for the purposes of amalgamation or demerger of an undertaking, the assessee shall be allowed 1/5th of such expenditure for each of the five successive previous years beginning with the previous year in which the expenses are incurred. After close look at the these provisions, we find that it no where speaks of the demerged or resulting company. It simply says that in case the assesseee incurs expenses of the nature as mentioned in section 35DD(1) , the assessee shall be entitled to 1/5th of such expenses. We, therefore, are of the considered view that the assessee is entitled to claim the said expenses which was rightly held so by the ld CIT(A). In view of this, we dismiss the appeal of the revenue. - Decided in favour of assessee.
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