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2016 (1) TMI 741 - ITAT DELHI

2016 (1) TMI 741 - ITAT DELHI - TMI - Excess deduction u/s 80IC - whether the assessee has claimed less expenses against 80IC units, thereby manipulating the accounts? - AO held that the assessee has claimed travelling expenses, legal and professional expenses, tender fee, commission, audit fee and director’s remuneration disproportionately without any basis and the same was to be allocated and claimed in proportionate to the sales allocated to the eligible 80IC units and non 80IC units, made th .....

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ted by the competent auditors and the claim of the assessee u/s 80IC of the Act was also verified and certified, then while the AO has not pointed out any defect in the financial statement and separately maintained books of accounts of the assessee and the AO has not raised any doubt in regard to the correctness, completeness of the financial statement and results of the assessee, then the notional disallowance made by the AO by taking proportionate sales of eligible 80IC and non 80IC units cann .....

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26/Del /2012 - Dated:- 30-9-2015 - SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER SHRI L.P. SAHU, ACCOUNTANT MEMBER For The Appellant : Shri K.K. Jaiswal, DR For The Respondent : Shri Amit Goel, CA ORDER PER CHANDRA MOHAN GARG, JUDICIAL MEMBER This appeal by the Revenue has been preferred against the order of the CIT(A)-III, dated 21.08.2012 in Appeal No. 457/2010-11 for AY 2008-09. 2. Ground Nos. 3 and 4 are general in nature, which need no adjudication. The remaining grounds of the Revenue read as u .....

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was selected for compulsory scrutiny and notice u/s 143(2) was issued to the assessee on 12-05-2009 and served upon the assessee on 18.8.2009. Subsequently, a fresh notice u/s 143(2) and 142(1) alongwith detailed questionnaire was issued on 23.8.2010 and served upon the assessee through speed post. In response to this notice, the assessee s representative attended the assessment proceedings. The AO noticed that the assessee company has claimed deduction u/s 80IC of the Act to the tune of ₹ .....

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ts disproportionately. The AO further observed that the assessee company has allocated maximum expenditure to the non 80IC units to get the maximum deduction of the 80IC in the other 80IC units. The assessee was asked to explain as why the disproportionate allocation should not be reallocated and by reallocation of such expenditure the amount so arrived at should not be disallowed. After perusing the reply filed by the assessee, the AO held that the assessee has claimed travelling expenses, lega .....

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order and the AO was directed to delete the entire impugned addition. Now the aggrieved revenue is before this Tribunal in this second appeal with the grounds as reproduced hereinabove. 5. We have heard the arguments of both the sides and have carefully perused the relevant material on record. The ld. D.R supporting the action of the AO submitted that in the consolidated profit and loss A/c of all the units, the assessee company had claimed expenses on account of director s remuneration, tender .....

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A) granted relief to the assessee without any basis and justified reasons. Therefore, the impugned order may be set aside by restoring that of the AO. 6. Replying to the above, the ld. A.R reiterated his submissions made before the lower authorities dated 17.8.2012 and submitted that the action of the AO as erroneous, arbitrary and was based on surmises and conjectures as the AO has failed to appreciate as to how the travelling expenses can be in proportionate of sales. The ld. A.R further point .....

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d. A.R vehemently contended that the tender fee was booked in the non 80IC units from which tender bidding was made and commission was made on sales made by non 80IC units and therefore, such commission expenses were booked in non 80IC units. The ld. A.R also explained that the audit fees of ₹ 65, 211/- being small expenses was booked at head office because the audit was conducted at head office and director s remuneration was allocated to 80IC units based on time devoted to 80IC units. 7. .....

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erein. The ld. A.R further drew our attention towards the submissions of the assessee before the first appellate authority dated 17.8.2012 and submitted that the details of all the expenses were also furnished before the AO and there is no dispute by the AO in this regard and the expenses have been booked in the respective units on actual basis viz the expenditure have been booked in units to which they pertain and hence the action of the AO in allocating expenses in ratio of sales is totally ar .....

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atio of the decision of the ITAT Mumbai in the case of DCIT Vs. Reliance Infrastructure [2011] 9 ITR [Trib] 84 and submitted that the AO was not justified in allocating head office expenses on the basis of turnover instead of method of allocation of expenses as adopted by the assessee. The ld. A.R also took us through the findings of the first appellate authority at para 4.2 at page 6 of the impugned order and submitted that the assessee has submitted separate audited balance-sheet and profit an .....

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nnot be held as justified without any basis as these expenses have been claimed in the consolidated profit and loss account. However, the ld. D.R fairly and candidly acknowledged that the assessee has allocated the director s remuneration of ₹ 7,28,770/-, legal and professional charges of ₹ 2,95,035/- and auditor s fees of ₹ 65,211/- to the eligible 80IC units. 10. On careful consideration of the rival submissions of both the sides, at the very outset, we note that the AO has d .....

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to make additions in this regard by taking sales ratio of eligible 80IC and non eligible 80IC units. When we consider the ratio of the order of the ITAT Mumbai Bench in the case of Reliance Infrastructure [supra], then we note that the co-ordinate bench of the Tribunal has held that allocation of head office expenses for the purpose of computation of deduction made proportionate to the turnover of the respect units . 11. Adverting to the facts and circumstances of the present case in hand, we n .....

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et in respect of two units i.e, one at Haridwar and the other at Dehradun had been furnished. Perhaps the doubt was raised in the mind of the AO while comparing the profit and loss account of these two units with the consolidated profit and loss account of the assessee company wherein he noted that certain expenses have been allowed to the 80IC units and non 80IC units disproportionately. At the same time, we observe that the AO has not raised any doubt about the correctness, completeness and fi .....

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e AO and discrepancy or deficiency was pointed out by the AO in them. The AO could not raise any defect to this fact that the expenses have been booked in respective units on actual basis and the same have been booked in the profit and loss account of the respective units to which they pertain. In view of the above noted facts and circumstances, we decline to approve the action of the AO in allocating expenses in ratio of sales because when the AO himself has noted that separate profit and loss .....

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