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ACIT Circle-7, Ahmedabad Versus M/s. Ashish Chemicals Lane

2015 (10) TMI 1003 - ITAT AHMEDABAD

Addition on account of reallocation of expenses relating to raw materials, manufacturing expenses, administrative expenses, selling expenses and financial expenses amongst Unit-I & Unit-II in proportion to the sales in these units - CIT(A) deleted the addition - Held that:- CIT(A) while granting partial relief has noted that similar addition made by the A.O in the preceding year [2015 (9) TMI 1340 - ITAT AHMEDABAD] was not approved by his predecessor in 2007-08 and further A.O has not pointed ou .....

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the expenses were not logical and without any documentary evidence and with respect to those expenses he had directed to the A.O to apportion the expenses in the ratio of turnover. Before us, Revenue has not brought any material on record to controvert the findings of ld. CIT(A)

We further find that while dismissing the appeal of Revenue for A.Y. 2007-08 in Assessee’s own case wherein CIT(A) while deleting the addition has noted that no defect or the differences in the product, proces .....

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ER 1. This appeal filed by the Revenue is against the order of CIT(A)-XIV, Ahmedabad dated 04.10.2011 for A.Y. 2008-09. 2. The relevant facts as culled out from the material on record are as under. 3. Assessee is a partnership firm stated to be engaged in the business of Manufacturing and Trading of Synthetic, Organic Reactive Dyes and Chemicals. Assessee electronically filed its return of income for A.Y. 2008- 09 on 14.09.2008 declaring total income at ₹ 7,65,410/-. The case was selected .....

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and on facts in directing the Assessing Officer to delete the addition of ₹ 1,31,16,642/- made on account of reallocation of expenses relating to raw materials, manufacturing expenses, administrative expenses, selling expenses and financial expenses amongst Unit-I & Unit-II in proportion to the sales in these units. 2. The Ld. Commissioner of Income tax (A) has erred in law and on facts in directing the Assessing Officer to apportion only the expenses relating to Consultancy Charges, I .....

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udication and therefore dismissed as not pressed. 5. Ld. D.R. submitted that ground no. 1 & 2 are interconnected. 6. During the course of assessment proceedings, A.O noticed that Assessee was having 2 units namely Unit-I & Unit-II. The profits of the Unit-I was not exempt from tax while profit from Unit-II, being a 100% Export Oriented Unit, enjoyed tax exemption u/s. 10B of the Act and that both the units were located adjacent to each other. While verifying the gross profit ratio of bot .....

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ere appearing only in Unit-I and not in Unit-II and the expenses for wages and salaries have increased in Unit-I but decreased in Unit-II though the process of manufacturing according to him was almost similar in both the units. He therefore concluded that there was no apparent reason for a decline in gross profit ratio in Unit-I and steep rise in gross profit ratio of Unit-II. He was of the view that Assessee has increased the exempt profit in Unit-II by debiting excessively expenses in Unit-I .....

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ted that the G. P. of EOU has increased and the G. P. of the domestic unit has declined. He, therefore, relocated the expenses in proportion to the sales in both units. The appellant has submitted that it was maintaining separate set of accounts for both the units and the accounts have been separately audited. Separate excise records were also maintained. It was further pointed out by him that similar action by the A. O. in the preceding year was disapproved by my predecessor in the appellate or .....

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ed and audited by the auditors of the appellant. Labour and staff pertaining to respective units were distinctly allocated and hence there was no question of any allocation of these expenses. The appellant, therefore, submitted that actual expenses pertaining to Unit - 1 & Unit - II were debited to the accounts of that unit respectively. During the course of appellate proceedings, the appellant has also given a chart reflecting all the items in the P & L Account and the amount of expendi .....

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oted that raw material purchases for both the units are made separately. Other items of expenditure such as manufacturing, administrative, selling and distribution and financial expenses have also been by and large accounted for according to the unit for which it is incurred. Considering the fact that A. O. has not recorded any specific findings and pointed out any defect in the books of account of both the units shown by the appellant, the A. O. was not justified in reallocating the expenses in .....

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es shown by the appellant in the books of accounts in respect of the following expenses are not accepted. The expenditure should ideally be distributed on the basis of turnover of both the units as this expenditure pertains to both the units. The A. O. is, therefore, directed to apportion the above mentioned expenses in ratio of the turnover of both the units. Regarding the other expenses, as has been held above, the reallocation done by the A.O is directed to be deleted. The grounds of appeal a .....

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ld. CIT(A). 9. We have heard the rival submissions and perused the material on record. We find that ld. CIT(A) while granting partial relief has noted that similar addition made by the A.O in the preceding year was not approved by his predecessor in 2007-08 and further A.O has not pointed out any specific defect in the books of accounts which have been audited. He has further given a finding that Assessee has kept separate production record for both the units which indicate the quantitative of r .....

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