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TMI Blog2012 (12) TMI 403X X X X Extracts X X X X X X X X Extracts X X X X ..... rial undertaking whereas as per section 80IB(3) of the I.T.Act the deduction has to be allowed from profits and gains derived from industrial undertaking and, therefore, the facts of the assessee's case are squarely covered by the facts in the case of Sterling Food Ltd., 237 ITR 579(SC). 3. On the facts and in the circumstances of the case and in law, ld CIT(A) erred in allowing further deduction u/s. 80IB of Rs.22,03,525 holding that no disallowance u/s.80IB could be made on the basis of allocation of expenditure between the Daman Unit & Mumbai Unit since separate books of account were maintained for both the units without appreciating that the assessee has not allocated common expenses like auditor's remuneration, interest on unsecured loan, tour and traveling etc, whereas the benefit of these expenses were reaped by both the units including Daman unit. 4. On the facts and in the circumstances of the case and in law, ld CIT(A) erred in deleting the disallowance of Rs.1,06,637 (246249-139612) on account of employee's contribution of PF made beyond the due date prescribed for crediting the contribution to the employees account under the P.F.Act." 3. In respect of Ground Nos.1 & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, one for Mumbai unit and another for Daman Units. The Mumbai Unit is in the activity of job work of stitching garments. The Daman unit is in the activity of manufacturing readymade garments. The books of a/c are separately maintained at both the units on independent basis. Mumbai unit has stitched nearly 9,42,732 pieces as well as Daman unit has manufactured and sold 3,76,642 readymade garments. Mumbai unit is confined only to one activity while Daman unit is having multiple activities to manufacture the readymade garments. There is no comparison between the two units, nor there is any common activity between the units." 8. The AO did not accept above submission of the assessee. AO stated that assessee has claimed expenses under the heads "legal, professional fees and consultancy charges, auditor's remuneration, auditor's remuneration for taxation, trade mark charges, tour and traveling, interest on unsecured loans". That corresponding benefits are not just restricted to either Mumbai unit or to Daman Unit but to the business as a whole. AO has stated that it is not possible to exactly quantify the benefits arising from these expenses separately for Mumbai unit and Daman Unit. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnover. 11. Ld CIT(A) after considering submission of assessee held that there is no justification for allocating expenses on the basis of turnover and directed the AO to allow deduction as claimed by the assessee. Hence, department is in appeal before the Tribunal. 12. At the time of hearing, ld D.R. submitted that issue is squarely covered by the decision of ITAT Mumbai in the case of Nitco Tiles Ltd vs. DCIT, 30 SOT 47 (Mum), wherein, it was held that all the expenses of business whether direct or indirect; project specific or common; or head office expenses had to be considered for computation of profits and gains of an eligible business. Further the devices adopted to reduce or inflate the profits and gains of an eligible business, the only source of income should be rejected in view of the overriding provisions of section 80-IA(5) of the Act. Ld D.R. submitted that in the said case the Tribunal upheld the action of the AO to allocate the expenses between head office in Mumbai and eligible business at Silvasa, which enjoyed the provisions of section 80IB of the Act on the basis of their turnover while computing the profits and gains of the eligible business of Silvasa Unit. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess of the instant assessee, all the provisions relating to the head of income "Profits and gains from business or profession" would apply without any mutation. In other words, all the direct as well as indirect expenses had to be adjusted from the profit and gains of the eligible business. Further, on finding that the sub-section(5) refers to phrases i.e. "the profits and gains of an eligible business to which provisions of sub-section(1) apply... shall be computed as if such eligible business was the only source of income of the assessee", one should interpret and understand them by the meaning that the standalone unit has to be given to such eligible business. In other words, "as if such eligible business was the only source of income" shall mean that the alleged indirect expenditure or common or head office expenses were incurred for such eligible business, the only source of income of the assessee. Consequently, all the indirect expenses or common expenses have to be considered for the said computation. Thus, the provisions of section 80IB(1) convincingly advocate for the allocation of indirect expenses towards the Silvasa Unit as well." 15.1 In the case before us, there is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt is partly used for business purposes and partly used for non-business purposes. Therefore, AO allowed 50% of the interest expenses i.e. Rs.43,59,984 as deduction and treated the balance 50% i.e. Rs.43,59,984 attributable to non-business application of funds and disallowed the same. Being aggrieved, assessee filed appeal before ld CIT(A). 22. On behalf of assessee, it was contended that assessee had its own capital as on 31.3.2005 of Rs.1,00,00,000 as share capital and Rs.7,85,17,242 as reserve and surplus. It was contended that assessee procured secured loans of Rs.5.42 crores against lien on fixed deposits with banks. It was contended that assessee introduced unsecured loans for the business purposes of Rs.9.75 crores and thus overall total fund of the assessee is Rs.18.60 crores against the unsecured loan of Rs.5.42 crores. It was contended that the total application of fund is for the business purpose and there is no fund which is diverted for the personal use of the assessee. It was further submitted before ld CIT(A) that assessee, during the year, paid Rs.2.28 crores to M/s. Korner Stone Retails Ltd., for purchase of shares to get control of 76% shares of the company. By ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s. Kewal Kiran Enterprise). Thus, it can be seen that the appellant company has definitely utilized its borrowed fund for the purpose of non-business purpose and therefore, the disallowance made by the AO on account of interest for utilization of fund for non-business purpose is confirmed. This ground of appeal stands dismissed." Hence, assessee is in appeal before the Tribunal. 23. During the course of hearing, ld A.R. made his submissions in respect of availability of funds in line of the submissions made before ld CIT(A) as mentioned hereinabove. He further referred pages 24 & 25 of PB and submitted that assessee made payment of Rs.1.95 crores to M/s. Kewal Kiran Enterprise and Rs.2.28 crores to M/s. Korner Stone Retails Ltd., on 28.3.2005 and if at all interest is to be disallowed, it could be only for four days and not for the entire period. Ld A.R. also referred page 26 of PB and submitted that assessee paid Rs.1,42,54,113 to others and also charged interest from two parties, namely, Rajat Textiles @ 14% to whom loan aggregating to Rs.1,05,52,113 was given and P.M.Shah & Co., of Rs.1,00,000 from whom interest @ 12% was charged. He submitted that disallowance of interest o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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