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TMI Blog2010 (2) TMI 911X X X X Extracts X X X X X X X X Extracts X X X X ..... fits pertaining to Unit-II at the rate of 100% of profit. Separate Profit and loss accounts and Balance sheets were filed for both the Units. No deduction was claimed u/s.80-IB in respect of Unit-I in this year for no positive income therein. The assessee had claimed 100% deduction from assessment year 1997-98 to 2001-2002 and 25% for assessment year 2002-2003 in respect of Unit-I profit. 3. In order to ascertain the correct position about the compliance of the relevant conditions for the claim of deduction u/s.80-IB(10), a survey action was taken u/s.133A on 28.9.2005 during which the following facts emerged:- (i) Salary/wages register showed 10 persons employed per unit i.e. 10 for unit-I and 10 for Unit-II. The Attendance Register, which was common for both the Units showed 12 to 14 persons attending per day for both the units put together. (ii) Production register maintained was common for both the units. (iii) Letter issued by Daman authority spoke about permitting the assessee to have additional business facility in the existing business. It did not speak about starting a fresh unit. The S.S.I. certificate mentioned in the letter by the Daman a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enced in September 2002, the assessee claimed that it was entirely a different Unit distinct from the existing Unit. The Assessing Officer found certain discrepancies in the certificate issued by Chief Inspector of Factory inasmuch as the first license was dated 20.1.1997 and the second was dated 11.9.2002. The only difference observed by the AO in two certificates was that in the second certificate building no.2 gala 8 was added. It was also noticed that the letter dated 5.7.2002 issued by the Chief Manager (DIC) Daman spoke about additional space of business which, in the opinion of the AO indicated that it was a case of extension of the existing Unit. The Assessing Officer proceeded to examine the expenses claimed in Unit-I and Unit-II and found that the assessee had shifted expenses of Unit-II to Unit-I with a view to shift the profit to Unit-II on which 100% deduction was claimed u/s.80-IB(10). Chart of such Unit-wise expenses has been drawn at pages 9 and 10 of the assessment order. He, therefore, came to the conclusion that the turnover of each Unit was to be considered with reference to the total turnover of Units-I and II put together for bifurcation of expenses between th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ench it was stated on behalf of the assessee that both Units were separately located. Whereas Unit-I was at Gala 6 and 7, on one side of the road and Unit-II was located at Gala 8, being the other side of the road. On a pertinent query, the learned Departmental Representative accepted that the machinery in Unit-II was new one and no part of the machinery of existing Unit-I was used in Unit-II. About the items manufactured in Unit-I and Unit-II vis-à-vis common production register, we find from the orders of the authorities below that the survey team found separate Issue register and Purchase register for both the Units. Common production register, on which the AO has placed strong reliance, was maintained by the Production Manager only for his record as was stated so during the course of survey itself. The said statement was not found to be incorrect. We find from the statement recorded at the time of survey that the items produced in Unit-I was mainly Toxin which was not very costlier, while Unit-II produced mainly Vitamins which were costlier. Even the raw material used for both the Units is different as was stated in reply to question no.19 which has been reproduced at pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roducts of both the units and the ultimate finished product is also different in value, then apportionment of expenses on the basis of number of units produced will not divulge correct picture of profitability in both the units. 10. Coming to the bifurcation of expenses, we find that dispute is only qua Administrative expenses, Selling expenses and Financial expenses. The assessee has no objection on the manufacturing expenses being apportioned on the basis of goods manufactured. The learned CIT(A) directed to apportion these three types of expenses on the basis of turnover of both the Units. In our considered opinion, the Selling expenses have direct relation with the turnover. We, therefore, hold that the apportionment of selling expenses on the basis of the amount of turnover in both the Units is appropriate. The financial expenses represent the cost of money borrowed for use in business. Raw material for a product in Unit-I may cost Rs.100 while in the other unit may cost Rs.1000. Bifurcation of the expenses on the basis of quantity produced would obviously lead to absurd situation because the number of units manufactured with different values cannot be the basis of app ..... X X X X Extracts X X X X X X X X Extracts X X X X
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