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2017 (6) TMI 398 - AT - Income TaxDisallowance of deduction claimed under section 80IC - allocation/apportionment of expenses relating to auditors remuneration and directors remuneration to the eligible unit thereby reducing its eligible profits to that extent - Held that:- We find the contention of the assessee that the manufacturing operation involved in the eligible unit did not require too much time and effort of the directors since the parts sold involved minimal variations and sale was made to a single party, also merits no consideration since the directors are not necessarily required to be involved in the day-to-day operations but have to be involved in strategic decision making, which at no stage, has been denied by the Ld. counsel for the assessee. Therefore we have no hesitation in rejecting the argument of the assessee that no portion of directors remuneration was required to be apportioned to the eligible unit at Pant Nagar. It is undisputed that the remuneration paid in the preceding year amounting to ₹ 20.25 lacs, when the eligible unit of the assessee was not functioning, was to be attributed entirely to the non eligible unit at Ludhiana. It is only increase in the remuneration in the impugned year vis-à-vis that in the preceding year, which can be apportioned between the two units. The same amounting to ₹ 9.75 lacs, apportionment of ₹ 6.94 lacs to the eligible unit in Pant Nagar is unjustified considering the fact that while apportioning the increase in remuneration, efforts of the directors of the company in increasing turn over of the non eligible unit should be taken into consideration and also to the contribution of the new director appointed in the company to the activities of the non eligible unit. Considering the same, we are of the view that apportionment of directors remuneration to the extent of ₹ 3 lacs to the eligible unit is just and reasonable, considering the fact that considerable amount of efforts must have been given by the directors for setting up of the new unit in Pant Nagar. We uphold the apportionment to the eligible unit, of auditors remuneration to the extent of ₹ 59,800/- and the directors remuneration to the extent of ₹ 3 lacs. The disallowance of deduction claimed u/s 80IC by the eligible unit to the said extent of ₹ 3,59,800/- is, as a consequence, also upheld. - Decided partly in favour of assessee.
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