TMI Blog2011 (8) TMI 307X X X X Extracts X X X X X X X X Extracts X X X X ..... ding the case to the Assessing Officer for re-working of the apportionment. - 413 of 2005 - - - Dated:- 17-8-2011 - MRS.JUSTICE CHITRA VENKATARAMAN, MR.JUSTICE M.JAICHANDREN, JJ. For appellant : Mr.K.Subramaniam For respondent : Mr.Venkatanarayanan, For M/s.Subbaraya Aiyar JUDGMENT CHITRA VENKATARAMAN, J. The Tax Case Appeal is fled by the Revenue against the order of the Income Tax Appellate Tribunal, Madras A Bench dated 20.09.2004 in ITA.No.474/Mds/96 relating to the assessment year 1992-93 raising the following substantial question of law:- Whether in the facts and in the circumstances of the case, the Tribunal was right in directing the assessing officer to re-compute the business profits of the Hyderabad Unit taking into account the formula laid down by the Delhi Tribunal in the case of Food Specialities Ltd.? 2. The assessee is a Public Limited Company engaged in the manufacture of pharmaceuticals and packaged fast foods. The assessee has three manufacturing units in Madras, Hyderabad and Bangalore. In the statement of income filed, the assessee claimed deduction of a sum of Rs.19,33,104/- under Section 80-I of the Income Tax Act, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the expenses of the assessee company was reimbursed by the principal company. The sales of the Pharmaceutical Division at Chennai was apportioned at 6.47% of the total sales of all the pharmaceutical products. The assessee further pointed that after the merger, there was only a marginal increase in the staff cost and traveling expenses. Thus, any attempt to allocate the marketing cost of other competitive goods to the Antibiotics Unit at Hyderabad without considering the direct selling cost incurred by the Unit itself would distort the relief. 5. In considering the same, the Commissioner of Income Tax (Appeals) pointed out that it was not the case of the assessee that the Hyderabad Unit was a separate business concern and the Corporate Office had no responsibility therefor and did not enjoy the fruits thereof. If the company, as a whole, enjoyed the fruits of the operations of a particular Unit, the expenditure relatable to that Unit but debited only in the books of the Corporate Office, would necessarily be required to be apportioned to the Hyderabad Unit to ascertain its true and actual profits. 6. The Commissioner of Income Tax (Appeals) pointed out that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny. He pointed out that given the fact that the total income and expenditure are calculated only at the Corporate Office and that the expenses on traveling and field staff cost were not separately maintained, on the admitted facts, the only method by which the expenditure could be apportioned to the Hyderabad Unit was by taking the ratio of the turnover relatable to the Hyderabad Unit to the total turnover relatable to the business of the assessee. He pointed out that even though the assessee contended that the Hyderabad Unit had its own Marketing Division, yet, no evidence was placed before any of the authorities to support the said plea. The expenses allocation, hence, had to be made on the basis of the percentage of turnover of the Hyderabad Unit to the total turnover of the Pharmaceutical Divisions. Thus, supporting the order of the Commissioner of Income Tax (Appeals), learned Standing Counsel pointed out that the Tribunal committed a serious error in the reasoning by placing reliance on the decision of the Delhi Tribunal in Food Specialities Ltd. Vs. ACIT reported in (1995) 54 ITD 352, which has no relevance to this case. 10. Per contra, learned counsel appearing for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to arrive at the correct profit, for the purpose of deduction under Section 80-I of the Income Tax Act, 1961, the Assessing Officer took note of the total turnover of the Pharmaceutical Divisions and the Hyderabad Unit to work out the percentage and thus, rightly arrived at the profit of the Hyderabad Unit. The traveling expenses to be allocated to the Hyderabad Unit being at 38.77% of Rs.1,42,27,766/-, was arrived at Rs.55,16,105/- and the field staff cost to be allocated to the Hyderabad Unit being 38.77% of Rs.1,34,17,689/-, was arrived at Rs.52,02,038/-. In so working out the formula, we do not find that there is any illegality or arbitrariness to make the results illogical for this Court to accept the case of the assessee. Considering the fact that the assessee did not place any material before any authorities, we do not find any fallacy in the reasoning of the Assessing Officer. Thus, on the admitted fact that there should be apportionment on the expenditure towards traveling expenses and field staff cost, we uphold the order of the Assessing Officer. 14. As regards the claim of the assessee to treat the pre-merger expenses at 6.47% incurred in 1988 to be treated as the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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