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2018 (2) TMI 1768 - AT - Income TaxDisallowance of deduction u/s 80IC - disallowance of certain expenses by way of allocation out of common Head office expenses to the eligible Kotdwar Units - II and III - Held that:- Except for the fact that the assessee purchased raw material from its Noida Unit, there is no reference to any interconnectivity between Kotdwar-III unit and Noida Unit - not the case of the Assessing Officer that the raw material purchased by the assessee from the Noida unit was not at arm’s length price - the new unit at Kotdwar-III was set up for reducing the transportation cost from Noida to the State of Uttarakhand where the assessee was making supplies to M/s Hero Honda and its ancillary company which was located at Haridwar, Uttarakhand - the assessee did not transfer any old machinery from the existing unit at Noida to Kotdwar-III unit and the transactions of purchase of raw material from the Noida unit were at arm’s length price, we are of the considered opinion that the ld. CIT(A) was fully justified in holding that there was no splitting up or reconstruction of the business already in existence at Noida Unit and thereby allowing deduction u/s 80IC of the Act. Apportionment of head office expenses, we find that the same have been allocated in the ratio of turnover. It cannot be said that the Kotdwar units – II and III unit were running without any support and assistance from its head office. That being the position, head office expenses relatable to such units were, in our considered opinion, rightly allocated on the basis of turnover and disallowed. Respective grounds of the assessee as well as the Revenue are thus not allowed. Disallowance u/s 14A - whether AO recorded proper satisfaction before venturing to make disallowance as per Rule 8D? - Held that:- AO has nowhere recorded any satisfaction about the incorrect claim having been lodged by the assessee with reference to its accounts. There is no discussion whatsoever about the examination of the assessee’s claim about the actual incurring of expenses in relation to the exempt income. It can be seen from the impugned order that the Assessing Officer even did not consider the correct amount offered by the assessee for disallowance at ₹ 6.46 lac. In view of the fact that no proper satisfaction was recorded, in our considered opinion, the Assessing Officer did not acquire any valid jurisdiction for computing disallowance u/s 14A
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