TMI Blog2012 (12) TMI 403X X X X Extracts X X X X X X X X Extracts X X X X ..... gible Daman Unit is 73.43%, it is fair and reasonable to allocate the expenses between the units on the basis of turnover in the absence of any contrary facts brought on record before us. Therefore appeal decides in favour of revenue Disallowance on account of delay in deposit of employees contribution to PF – Held that:- Employees contribution which is covered u/s 36(va) is to be allowed as deduction if the deposits are made within due date/grace period. Issue decides in favour of assessee Disallowance of interest expense - AO considered that amount is partly used for business purposes and partly used for non-business purposes – Assessee has used some money in purchasing the controlling stake in an company - Held that:- As the amount to that extent has been paid by the assessee to acquire capital assets and as such, borrowing money used to acquire controlling interest in the firm by purchase of shares and/or by acquiring assets could not be allowed as deduction and interest is to be disallowed in relation to loan which has been given to others, on which, no interest has been charged by the assessee. The assessee has not contended that the said loans to others have been given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ai and another at Daman. The unit at Daman is eligible for deduction u/s.80IB of the Act. In the assessment year under consideration, assessee received duty draw back of Rs.14,40,763. The assessee claimed deduction on the said amount @ 30% u/s. 80IB of the Act. The AO stated that said benefit has not been derived by the assessee directly from the business of the industrial undertaking and disallowed the claim of deduction u/s. 80IB of the Act on the amount of duty draw back. Being aggrieved, assessee filed appeal before ld CIT(A). 4. Ld CIT(A) held that the benefit of duty draw back has direct nexus with the industrial undertaking and, accordingly, allowed deduction u/s. 80IB of the Act. Hence, department is in appeal before the Tribunal. 5. At the time of hearing, ld D.R. submitted that the issue is squarely covered by the decision of Hon ble Supreme Court in the case of Sterling Food ltd., 237 ITR 579 (SC), wherein, Their Lordships have held while considering the provisions of section 80 HH of the Act that profit from sale of import entitlements are not profits from industrial undertaking. The benefit of import entitlements are granted by Central Government under an Export ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it and Daman Unit. The AO invoked provisions of section 145(3) of the Act and stated that he is not satisfied about correctness and completeness of accounts of the assessee. He has stated that the allocation of expenses between Mumbai unit and Daman unit can be based on the reasonable criterion of respective turnover. The AO has stated that the turnover of Daman unit is Rs.19,70,53,476 which is 73.43% of the total turnover of Rs.26,83,66,257 and, accordingly, allocated the expenses. The details of the said allocation made by the AO to Daman unit are given at pages 2 3 of the assessment order which is as under: Sr.No. Head of expenses Total expenditure Attributable to Daman unit @ 73.43% Allocated by assessee in the accounts Difference 1. Legal, professional fees and consultancy charges 21,75,163 15,97,158 8,26,120 7,71,038 2. Auditor s remuneration 82,650 60,687 - 60,687 3. Auditor s remuneration for taxation 99,100 72,769 - 72,769 4. Trademark charges 3,85,165 2,82,815 - 2,82,815 5. Tour traveling 7,75,023 5,69,078 1,03,414 4,65,664 6. Int. on unsecured loan 77,52, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he eligible business of Silvasa Unit. 13. On the other hand, ld A.R. made his submissions on the lines of submissions made before authorities below. He submitted that assessee debited to Daman Unit the expenditure concerning it while arriving at profits and gains of the said unit. He submitted that at the most the auditor s fee could be allocated on 50% basis to Daman Unit and Mumbai unit. 14. We have considered submissions of ld representatives of parties and orders of authorities below. We have also considered cases cited before us. 15. We observe that AO has specifically pointed out the heads of expenses for which the total expenditure has been incurred by the assessee. The AO has stated the amount of expenditure, which has been allocated by the assessee to its Daman Unit, and assessee has not given any basis for allocating such expenses, details given hereinabove, to Daman Unit. Therefore, The AO has adopted the expenditure for each of the unit on the basis of turnover and after deducting the actual expenditure allocated by the assessee; he arrived at aggregate amount of Rs.73,45,083, details given hereinabove, and has stated that assessee has under allocated the expendit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15.1 In the case before us, there is no dispute to the fact that the total turnover of the eligible unit i.e. Daman Unit is 73.43%. Considering the decision of coordinate bench of ITAT in the case of Nitco Tiles Ltd (supra), we are of the considered view that it is fair and reasonable to allocate the expenses between the units on the basis of turnover in the absence of any contrary facts brought on record before us. Hence, we hold that AO has rightly allocated the expenses between the units on the basis of turnover. Hence, we uphold the action of AO by reversing order of ld CIT(A). Hence, Ground No.3 of department is allowed. 16. In respect of Ground No.4, we observe that ld CIT(A) has held that employees contribution which is covered under section 36(va) is to be allowed as deduction if the deposits are made within due date/grace period. We are of the considered view that there is no infirmity in the order of ld CIT(A) to give above direction to the AO that if the payment is made within grace period, from the due date of payment, it has to be considered to be paid within time and no disallowance is to be called for. Hence, we uphold the order of ld CIT(A) by rejecting ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for purchase of shares to get control of 76% shares of the company. By virtue of purchasing stake in the company and becoming holding company, the assessee started a new diversified business activity and thus it is purely a business venture and cannot be attributed to non-business purpose. It was also submitted that assessee paid Rs.1.95 crores to M/s. Kewal Kiran Enterprises to take over the running business of the firm and the payment was made to acquire assets and business of the firm. Thus, the total disallowance made by the AO of Rs.43,59,984 is based on assumptions, presumptions and surmises. Ld CIT(A) considered submissions of the assesse and vide para 6.3 of the impugned order, confirmed the action of AO. The said para reads as under: I have carefully considered the appellant s submission as well as the aO s contention. It is a admitted fat that the appellant has paid Rs.2.28 crores to M/s. Korner Stone Retails Ltd., for purchase of shre and to get control of 76% stake in the said company. Besides this, the appellant ahs also paid Rs.1.95 crores to M/s. Kewal Kiran Enterprises to take over the business of the firm. The payment was made to acquire factory building at Va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hom interest @ 12% was charged. He submitted that disallowance of interest of Rs.43,59,984 is not justified. 24. On the other hand, ld D.R. supported the orders of authorities below. 25. We have considered submissions of ld representatives of parties and orders of authorities below and also relevant pages of PB (supra). There is no dispute to the fact that Hon ble Bombay High Court has held in the case of CIT vs. Amritaben R Shan(supra) that a tax payer borrowing money to acquire controlling interest in a company would not be entitled to deduction of interest. Further Hon ble Bombay High Court in the case of Chinal and Co. Pvt.Ltd., vs CIT, (supra) has held expenses incurred to protect investment was not admissible as business expenditure. At the time of hearing, ld A.R. also did not controvert above decisions of Hon ble Jurisdictional High Court. We observe that assessee paid a sum of Rs.2.28 crores to acquire purchase of shares of Korner Stone Retails Ltd., and also paid Rs.1.95 crores to take over the running business of Kewal Kiran Enterprises. Thus, amount to that extent has been paid by the assessee to acquire capital assets and as such, borrowing money used to acquire co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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