TMI Blog2015 (7) TMI 831X X X X Extracts X X X X X X X X Extracts X X X X ..... ide accordingly. - Decided partly in favour of assessee for statistical purposes. Disallowance u/s 40(a)(ia) paid to Star India Pvt. Ltd. on account of advertisement - Held that:- Assessee while drawing our attention to the page 76 of the paper book, has submitted that a certificate dated 31.05.07 u/s 197 of the Income Tax Act has been issued in favour of Star Ltd., therefore there was no requirement of deduction of TDS for the sums paid by the assessee to the Star Ltd. Admittedly, the above stated document was not presented by the assessee before the AO at the time of assessment proceedings. This document is the shape of additional evidence and is required to be examined by the AO. We accordingly, restore this issue to the file of the AO for verification as to whether the assessee was not required to deduct TDS for the payments made to Star Ltd. and if found correct, the AO to give relief accordingly.- Decided in favour of assessee for statistical purposes. Setting-off the losses of non SEZ unit with the profit of SEZ unit for the purpose of determining deduction U/s 10A - Held that:- This issue is squarely covered with the decision of Hon’ble Bombay High Court in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f ₹ 6,78,872/- in the ratio of turnover of both the units, in addition to the 11,53,974/- already debited to the SEZ unit. 2. On the facts and circumstances of the case as well as in law, the Learned Assessing Officer as well as Commissioner of Income Tax (Appeal) erred in disallowing a sum of ₹ 12,44,050/- U/s 40(a)(ia) of the Income Tax Act, 1961, paid to Star India Pvt. Ltd. on account of advertisement, without considering the fact that no TDS is required to be deducted on the said sum. 3. On the facts and circumstances of the case as well as in law, the Learned Assessing Officer as well as Commissioner of Income Tax (Appeal) erred in setting-off the losses of non SEZ unit with the profit of SEZ unit for the purpose of determining deduction U/s 10A of the Income Tax Act, 1961. 4. On the facts and circumstances of the case as well as in law, the Learned Assessing Officer as well as Commissioner of Income Tax (Appeal) erred in not reducing deduction available u/s 10A of the Income Tax Act, 1961 from the book profit for the purpose of determining total income U/s 115JB of the Income Tax Act, 1961. The appellant craves leave to add, amend, alter or delete the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ors remuneration towards 10A unit out of the total expenditure claimed of ₹ 1,03,483/- with respect to Non-10A unit. The AO further allocated a sum of ₹ 246033/- towards 10A unit out of the telephone expenditure claimed with respect to Non-10A unit. The AO further held that in respect of salaries and bonus that one of the directors i.e. Shri Vikram Kelkar was designated as director-cum-international business who was incharge of international market and was fully occupied with export business. Similarly, another director Shri Subhash Kelkar was also active in export business. Besides that some staff members were also involved in the business of activity of 10A unit. However, from the salary registered furnished by the assessee, it revealed that the salaries of all the staff were debited in the P L Account of Non-10A unit. When asked as to why the salaries of above persons be not allocated to 10A unit, the assessee replied that the salary of ₹ 4,31,196/- paid to Shri Vikram Kelkar be allocated at the rate of 100% whereas out of salary amount of ₹ 4,31,196/- paid to Shri Subhash Kelkar, director 20% of the said amount be allocated. The assessee further submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Unit and so was the interest paid thereon appearing in the Profit Loss A/c. of the Non-10A unit. The Ld. AO further observed that throughout the year funds had been transferred from non-10A unit to 10A unit, which showed that the cash credit facility had been utilized to transfer the funds to 10A unit. However, the interest paid on the said cash credit had not been bifurcated between Nasik and Chennai Unit. The Ld. AO further held that the funds transferred from Non-10A unit to 10A unit were interest bearing funds and that the interest paid on such funds had not been allocated to Chennai unit. The Ld. AO therefore allocated the interest in the ratio of turnover, which was accepted by the AR of the assessee. Accordingly, the interest on cash credit amounting to ₹ 13,76,463/- was allocated according to sales ratio i.e. 50.68% for Non-10A unit and 49.32% for 10A unit. Being aggrieved by the above stated additions, the assessee preferred appeal before the Ld. CIT(A). 4. The Ld. CIT(A), however, held that the assessee during the course of assessment proceedings itself had agreed in principle regarding the allocation of expenses of Non-10A unit to 10A unit. The AO had apporti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . We accordingly, restore this issue to the file of the AO for verification as to whether the assessee was not required to deduct TDS for the payments made to Star Ltd. and if found correct, the AO to give relief accordingly. Ground No.3 8. The assessee, vide ground No.3, has agitated the action of the AO in setting-off the losses of non SEZ unit with the profit of SEZ unit for the purpose of determining deduction U/s 10A of the Income Tax Act, 1961. The Ld. A.R. of the assessee, at the outset, has stated that this issue is squarely covered with the decision of Hon ble Bombay High Court in the case of CIT vs. Black Veatch Consulting Pvt. Ltd. (2012) 348 ITR 72 (Bom) wherein the Hon ble Bombay High Court has categorically held that the deduction under section 10A has to be given at the stage when the profits and gains of business are computed in the first instance and thus the brought forward unabsorbed depreciation of the unit which is not eligible for deduction u/s 10A cannot be set off against current profit of the eligible unit for computing the deduction under section 10A. The Ld. D.R. has not brought any decision contrary to the above decision of the Hon ble Bombay H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as also inserted providing that provisions of section 115JB shall not apply to the income accrued or arisen on or after 1.4.2005 from any business carried on, or services rendered, by an entrepreneur or a Developer, in a Unit or Special Economic Zone, as the case may be. Hence, income of units located SEZ will not be included while computing book profit for the purpose of MAT as per section 115JB(6) of the Act. In view of above, we are of the considered view that there is merit in the contention of ld A.R. that irrespective of the fact that amendment has been made in clause (f) of Explanation (1) to section 115JB(2) of the Act to apply the provisions of MAT in respect of units which are entitled to deduction u/s.10A or 10B but the units which are in SEZ will continue to get benefits from the applicability of provisions of MAT in view of sub-section(6) of the Act. The contention of ld D.R. that assessee will not be entitled to get the benefit u/s.115JB(6) of the Act as assessee has claimed deduction u/s.10A of the Act is to be rejected for the reason that section 115JB (6) does not refer section 10A or section 10AA but it only refer that provisions of section 115JB will not apply to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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