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TMI Blog2012 (11) TMI 660X X X X Extracts X X X X X X X X Extracts X X X X ..... round no.2 in the assessee's appeal and Ground no.2 in the Revenue's appeal i.e. ITA no.115/Ahd/2009, relate to deduction u/s 80IA of the Income-tax Act, 1961 [hereinafter referred to as the "Act"] i.e. allocation of director's remuneration, director's traveling expenses, audit fees, computer expenses and security charges for calculating profit eligible for deduction u/s 80IA of the Act. The brief facts of the case are that the assessee company is a Public Limited Company engaged the business of manufacturing of thermoplastic mouldings, prefab structures, etc. in its plastic division and manufacturing of blended & cotton fabrics and yarns in its textile division. Major business (of approximately 72 %) is undertaken in its plastic division, under which the assessee company is manufacturing and marketing its various products mentioned above under the brand name SINTEX. The assessee company has -we units located at Baddi in Himachal Pradesh and Daman (U.T.). During the year the assessee company has claimed deduction u/s.80IB on the income derived from Daman Unit of SINTEX INDUSTRIAL LIMITED and deduction u/s 80IC on the income derived from Baddi Unit of SINTEX INDUSTRIAL LIMITED. In a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me is Rs.4138.26 lacs as against this the turnover of the assessee company as per the audited accounts is Rs.111776.26/- lacs. Thus the turnover of CPP works out to be 3.70% of the audited Turnover. The common head quarter expenses debited in me P & L Account which are held to be attributable to the CPP also are as under: S.No. Particulars Amount (Rs.in lakhs) 1. Directors' remuneration 476.93 2. Directors' traveling 24.40 4. Audit Fees 17.95 5. Computer maintenance expenses 82.74 6. Security charges 34.06 7. General Charges of Corporate Office 318.11 8. Miscellaneous expenditure 128.25 Total 1082.44 The AO accordingly held that, therefore, on account of the above, 3.70% of Rs.1082.44 lacs work out to Rs.40.05 lacs and the same is reduced from the assessee company's claim of total deduction of Rs.15,47,18,850/- on account of the reasons, as mentioned above. 8. Aggrieved by this order, the assessee went in appeal before the learned CIT(A). The learned CIT(A) has granted relief in respect of the general charges of the corporate office and miscellaneous expenses amounting to Rs.16.52 lakhs (i.e. 3.70% of 446.36 lacs) by considering that the expenses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction u/s 80IB/80IC of the Act. Similar issue arose in AYs 2003- 04, 2004-05, 2005-06 & 2006-07, wherein the issue was decided against the appellant. Following the order of CIT(A) in earlier years, the issue is decided against the appellant for this year also and it is held that the AO has correctly worked out the deduction u/s 80IB in respect of this unit." 13. Before us, both the parties agreed that the issue is covered against the assessee by the decision of the Tribunal in assessee's own case for AY 2004-05 in ITA no.691/Ahd/2007 & C.O. no.99/Ahd/2007, order dated 30-06-2011. 14. We have heard both the parties and perused the records. We have also gone through the orders of the authorities below and the decision of the Tribunal in the assessee's own case for AY 2004-05 in ITA no.691/Ahd/2007 & C.O. no.99/Ahd/2007, order dated 30-06-2011. We find that as per para 21 of its order, this issue has been decided by the Tribunal against the assessee. For the sake of convenience, we reproduce para 21 from the Tribunal's order in assessee's own case for AY 2004-05, which reads as under:- "21. We have considered the rival submissions and perused the material on record and gone through ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also relied on the decision of Delhi Tribunal in the case of Wimco Seedlings Ltd. reported in 107 ITD 267 & Oriental Bank of Commerce as well as the Mumbai Tribunal decision in the case of ACIT vs. Citicorp Finance (India) Ltd., 111 TTJ 82 (Mum). 16. The learned CIT(A) has decided the issue by observing as under:- "8.2 I have considered the facts of the case and the submissions of the appellant. I find that no expenditure was incurred for salary of any employee for earning this income. As per the decision of ITAT Chennai Bench in the case of Southern Petro Chemicals Industries Ltd. Vs. CIT, 93 TTJ 161, Investment decisions are very strategic decisions in which top management is involved. Therefore, proportionate management expenses are required to be deducted for computing dividend income. Further, it was held in the case of Rhythm Exports (Pvt.) Ltd., Vs. ITO, 2 SOT 429 (Mum), that the expenditure incurred in relation to earning income which is exempt should be taken out and in case the appellant fails to do so, the A.O. has no option then to take the same on proportionate basis. As held in A.Y. 2005-06 and A.Y. 2006-07 travelling expenses, miscellaneous expenses and general exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 099.33 lacs against which the appellant has allocated interest expenses of Rs.40.46 lakhs to Baddi unit. The A.O. observed that the appellant has a common pool of funds as well as common bank accounts for its entire business being carried out from headquarters .The CC account with banks and financial institutions and loans raised by them have been utilized as per requirement of running the entire business including Baddi unit .The A.O. therefore allocated interest proportionately to this unit on the basis of ratio of sales of the undertaking which comes to Rs.518.28 lakhs. 22. The learned CIT(A) has dealt with the issue in the following manner:- "5.2 It was submitted by the appellant that the allocation made by the appellant was reasonable and ought not to have been disputed by the A.O. The appellant has claimed that since no other specific loans were taken for establishment of the said unit, no interest cost should be allocated to the said unit. Alternatively, even if it has to be apportioned, it should be apportioned on the basis of investment made in these units. I have considered the facts of the case and the submissions of the appellant. I find that similar issue arose in A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal is against allocation of salary expenses amounting to Rs.5.61 lakhs & Rs.636.68 lakhs on the basis of the sales ratio on the Daman unit u/s. 80IB and Baddi unit u/s. 80IC of the Act. The appellant has pointed out that it has already allocated salary amounting to Rs.4.28 lacs towards Daman unit and Rs.114.38 lacs towards Baddi unit respectively, which the A.O. has not reduced while making further allocation of salary on these units. The A.O. is, therefore, directed to verify this fact and while allocating the salary expenses reduce the expenses already allocated by the appellant. The appellant has further submitted that the A.O. has allocated the salary expenditure of all the employees of the appellant and not only salaries of employees managing corporate affairs. It was further submitted that salaries of employees working with other units are identifiable expenditure of the other units and therefore in no event the same can be allocated to either Daman or Baddi units. The appellant has alternatively submitted that only salary of plastic division of Rs.23.83 crores should be allocated in the ratio of sales of Daman and Baddi units." 27 The learned CIT(A) has granted relief t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contention that to the extent of allocation of salary already made by the appellant, the same should be reduced to avoid double disallowance, I agree with the appellant and direct the A.O. to grant relief accordingly. The other alternative contention that only salary of plastic division should be allocated among Daman and Baddi units in the ratio of sales of these units is found to be reasonable and the same is accepted, the A.O. is directed to grant relief accordingly." 22. From the above para, we find that the Ld. CIT(A) has in principle approved the stand of the A.O. but he has given direction to the A.O. that to the extent of allocation of salary already allocated by the assessee, the same should be reduced to avoid double disallowance. He has not given finding as to what extent, there is double disallowance and hence, we feel that this aspect should be examined by the A.O. We set aside the order of Ld. CIT(A) on this issue and restore the matter back to the file of the A.O. The assessee should bring evidence on record to show as to how much was the total salary expenses and how much was the allocation by the assessee itself and how much was the remaining portion out of which ..... X X X X Extracts X X X X X X X X Extracts X X X X
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