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Ganesh Polychem Limited Versus Income Tax Officer Range–10 (3) (1) , Mumbai

2016 (2) TMI 510 - ITAT MUMBAI

Adjustment of brought forward loss and depreciation before allowing exemption under section 10B - Held that:- We direct the Assessing Officer to consider assessee’s claim of set–off / adjustment of unabsorbed depreciation and business loss keeping in view the decision of the Tribunal and Hon'ble Jurisdictional High Court in assessee’s own case holding that unabsorbed depreciation and brought forward loss of non–eligible unit cannot be set–off against the current profit of eligible unit while com .....

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shown in Schedule–11, neither appears to common sense nor logical as in that case, there is no need to show such expenditure separately for Dombivali Unit as the assessee has also claimed such expenditure in respect of Dombivali unit under Schedule–11 like Vapi Unit. Therefore, as the assessee has failed to demonstrate with convincing reason that no indirect expenditure on account of salary and bonus was incurred in respect of Vapi Unit, we uphold the view of the Departmental Authorities that sa .....

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ingly. We make it clear that the Assessing Officer while deciding the issue should bear in mind that the same income cannot be taxed twice. - Decided in favour of assessee by way or remand - ITA no.3270/Mum./2014 - Dated:- 6-1-2016 - SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER For The Assessee : Shri Bhavin M. Dedhia For The Revenue : Shri Shrikant Mamdeo ORDER PER SAKTIJIT DEY, J.M. Instant appeal by the assessee is directed against the order dated 17th January .....

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wing grounds of appeal:- 1. The order passed by the Learned Commissioner of Income Tax (Appeals) - 22 is bad in law and on facts. 2. Re: Adjustment of brought forward losses and depreciation before allowing exemption u/s 10B: 2.1 On the facts and in the circumstances of the case and in law, the learned CIT(A) grossly erred in not deciding the principal issue of adjustment/set off of brought forward losses and depreciation of non eligible unit against profit of eligible unit for computing deducti .....

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basis without appreciating that the Appellant had correctly allocated salary of actual basis. 4. Re: Non-consideration of additional ground of appeal in respect of the interest income of ₹ 1,17, 254/- included twice while computing the Gross Total Income: 4.1 On the facts and in the circumstances of the case, the learned CIT(A) grossly erred in not adjudicating the additional ground of appeal filed by the Appellant in respect of the interest income of ₹ 1,17,254/- included twice whi .....

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ring of chemicals. For the assessment year under consideration, assessee filed its return of income on 26th September 2009, declaring nil income after claiming exemption under section 10B of the Act. During the assessment proceedings, the Assessing Officer, while verifying assessee s claim of exemption under section 10B, noticed that assessee has two manufacturing units i.e., one at Vapi which is an eligible unit under section 10B and another unit at Dombivali, which is a non-eligible unit. He f .....

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the view that claim of deduction under section 10B from total income before setting-off brought forward loss is incorrect. He also noticed that similar claim made in the assessment year 2008-09 was also disallowed in assessment completed under section 143(3) of the Act against which assessee is in appeal. Though, assessee contended that similar claim made for the assessment year 2007-08, by the assessee was upheld by the Tribunal while dismissing Department s appeal but the Assessing Officer opi .....

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d unabsorbed depreciation and business loss of non-eligible unit cannot be set-off of against the current profit of the eligible unit before computing deduction under section 10B of the Act. The learned Commissioner (Appeals), finding that the Assessing Officer before allowing assessee s claim of deduction under section 10B has not made any such set-off unabsorbed depreciation and business loss of non-eligible unit against profits of eligible unit rejected assessee s claim. 8. The learned Counse .....

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-07 and 2007-08. 9. The learned Departmental Representative, on the other hand, supported the order of the learned Commissioner (Appeals). 10. We have considered the submissions of the parties and perused the material available on record. On a careful reading of the impugned assessment order, we notice that though the Assessing Officer, in the assessment order has, observed that brought forward business loss has to be set-off before claim of deduction under section 10B but while computing the de .....

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t be set-off against the current profit of eligible unit while computing deduction under section 10B. Moreover, the High Court has upheld the aforesaid view of the Tribunal while dismissing Department s appeal for the assessment year 2006-07 and 2007-08 in ITA no.2083 of 2012 and 2301 of 2011 respectively. Since the learned Commissioner (Appeals), while deciding ground no.3 raised by the assessee has directed the Assessing Officer to verify and allow assessee s claim of set-off of unabsorbed dep .....

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assessee are considered to be allowed. 11. In grounds no.3 and 3.1, assessee has challenged the decision of the Departmental Authorities in reallocating salary expenditure of ₹ 10,88,678, while computing deduction under section 10B. 12. Briefly stated the facts are, during the assessment proceedings, the Assessing Officer, while verifying the Profit & Loss account noticed that assessee has allocated salary expenditure of ₹ 10,88,678 only to the non-eligible unit at Dombivali whi .....

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ditures also are bifurcated, accordingly, the salary expenditure claimed in respect of non-eligible unit (Dombivili Unit) cannot be re-allocated to both the units. The learned Commissioner (Appeals), after considering the submissions of assessee, noticed that as per Schedule-11 of the Profit & Loss account, expenditure under the head manufacturing and other expenditure wages, salary and bonus have been allocated separately to the eligible unit as well as non-eligible unit. Whereas, under Sch .....

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under the head office and administrative expenditure consisting of salary expenditure would have been incurred for the eligible (Vapi) unit. He observed, without administrative staff, it would not be possible for the assessee to maintain the details of various expenditures under different heads. He held, when such huge turnover is reported by both the units, there is need for matching staff to carry out various administration and other related works. Accordingly, he upheld the decision of the As .....

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mitted, the observation of the Departmental Authorities to the effect that no salary expenditure was incurred by the eligible (Vapi) Unit is not correct as salary expenditure in respect of the eligible (Vapi) unit has been claimed under the head personnel cost as appearing in Schedule-11 to the Profit & Loss account and forms part of the amount of ₹ 67,57,752, shown as wages, salary and bonus. He, therefore, submitted, the conclusion drawn by the Departmental Authorities that salary ex .....

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Schedule-12 to the Profit & Loss account. It is interesting to note that while the assessee has allocated directed expenditure relating to wages, salary and bonus to both eligible and non-eligible units, as far as indirect expenditure relating to salary and bonus shown under the head office and administration expenses as per Schedule-12 has only been allocated to the non-eligible unit without making any allocation to the eligible unit. This, in our view, is not acceptable. We agree with the .....

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te natural and logical that assessee must be maintaining administrative set-up for both the units incurring similar expenditure. Therefore, it cannot be accepted that assessee has not incurred any expenditure towards salary and bonus in respect of Vapi Unit when admittedly, it must have maintained an administrative set up also for Vapi Unit. The contention of the learned counsel that salary and bonus of Vapi Unit have been included under the head Personnel Cost as shown in Schedule-11, neither a .....

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88,678, has to be allocated to both the units on the basis of turnover. Thus, grounds no.3.1 and 3.2 are dismissed. 16. Ground no.4, relates to assessment of interest income of ₹ 1,17,254 twice by the Assessing Officer. 17. The learned Counsel for the assessee submitted before us, assessee treating the interest income of ₹ 1,17,254, as business income, has credited it to the Profit & Loss account. The Assessing Officer, while completing the assessment has assessed the interest in .....

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