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TMI Blog2016 (4) TMI 1116X X X X Extracts X X X X X X X X Extracts X X X X ..... o be deleted. 2. The Hon'ble CIT(A) erred law and in the facts and circumstances of the case in confirming disallowance of Rs,20.00 lakhs on adhoc basis in respect of other income of 801B/10B units. The Hon'ble CIT(A) failed to appreciate that the said incomes were earned in the normal course of its manufacturing business and accordingly the Appellant is entitled to the relief u/s. 801B/10B in respect of the same 3. The Hon'ble CIT(A) erred in law and in the facts and circumstances of the case in conf irming the action of the Assessing Off icer in invoking provisions of section 14A(2) read with rule 8D. 4. The Hon'ble CIT(A) erred in the facts and circumstances of the case in computing disallowance uls.14A at Rs. 154.30 lacs as against the disallowance of Rs. 56.17 lacs computed by the Appellant. 5. The Hon'ble CIT(A) erred in law and in the facts and circumstances of the case in conf irming action of the Assessing Off icer in charging interest under section 234A of the Income Tax Act, 1961 even though there was no delay in filing the return of income. 6. Each one of the above grounds of appeal is independent and without prejudice to each other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and purchases/ sales and other operations were also handled by the specialized staff deputed at the respective units. It was further contended that the employees of corporate office look after the broader policies of the company and deal with the matters relating to the affairs of the company with State/ Central Government. It was thus submitted in nutshell that no expenditure of the corporate office/HO should be allocated and entire addition made by the AO for Rs. 96,87,500/- should be deleted. The Ld. CIT(A) considered the submissions of the assessee but held that common expenses and head office expenses have to be apportioned amongst the various units or undertakings of the assessee because the HO/Corporate Office incurs expenditure for providing facilities and services which are common to all the units. He further held that appellant had a number of units which were independent of each other. Thus, in case common expenses of head office are not allocated to tax exempt units, it will lead to inflation of profits of such units. Ld. CIT(A) relied upon the judgment of Mumbai Bench of the Tribunal in the case of ACIT v. Asea Brown Boveri Ltd. 110 TTJ (Mum) 502, in support of his vie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e broadly the common HO expenses which are to be considered for allocation among 13 units as under:- S. No. Particulars (Rs. In lacs) 1 Salaries (S. No.15) 97.53 2 Payment of Auditors (S.No.14) 73.82 3 Expenses under the heads mentioned at S. Nos. 4,5,6,7,8,9,10,11,12,13,17 & 18 of the working furnished by the appellant 165.70 4 Rates and taxes (out of Rs. 24.51 lakhs debited to P & L Account, only Rs. 15.22 lakhs is relatable to income from house property) 9.29 TOTAL 346.34 The above table contains the following variations from the working furnished by the appellant:- Only 50% of the Managing Director's remuneration (Rs.13.1.$ lakhs) has been considered for allocation to the units and the balance Rs. 13.17 lakhs is considered attributable to investment activity involving management of investment portfolio of over Rs. 1800 crores. Payment to auditors has been apportioned equally among the units as well as the corporate office. Investment management fees (Sr.No.16) for debentures (Rs.50.37 lakhs) is relatable to the activities carried out at the corporate office and has direct nexus with interest income earned by the corporate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dvanced by the Ld. Counsel on the basis of aforesaid judgment. We find that lower authorities have already accepted this proposition and there is no quarrel by any one on this well settled proposition. But the issue involved here is that there are certain common expenses which have to be allocated in different units so that true profits of the units could be worked out. The assessee has also accepted this proposition that common expenses needs to be worked out. The only quarrel is upon the issue i.e. how and how much of the expenses need to be allocated amongst different units. The AO has done the allocation on ad-hoc basis, Ld. CIT(A) did accept the working of the AO, and on the basis of his own analysis he made an attempt to give relatively more rational working. The assessee has accepted the decision of the Ld. CIT(A) in principle, but contended that only 50% of the HO expenses could be allocated and remaining 50% should be charged to HO only. The only reasoning given by the Ld. Counsel of the assessee is that the head office has its own stream of income and therefore, only 50% of the expenses should be allocated. 4.8. We have carefully gone through the submissions of the Ld. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.1. During the course of assessment proceedings the AO made an ad-hoc disallowance of Rs. 20.00 lakhs on the ground that assessee did not furnish unit wise details as to how the items like interest, miscellaneous income etc. in respect of taxexempt units were accounted by these units in their books of accounts. 5.2. Being aggrieved, the assessee contested the matter before Ld. CIT(A) and submitted that there is no reason to make disallowance of Rs. 20.00 lacs on estimate basis which was totally without any evidences. But Ld. CIT(A) without giving any specific findings confirmed the stand of the AO. 5.3. Since we have sent the issue raised in ground no.1, back to the file of the AO, and we find that the issue raised in ground no.2 is related to the issue raised in ground no.1 therefore, we find it appropriate to send this also back to the file of the AO, in terms of our direction as given in ground no.1 above. Thus, ground no.2 also may be treated as allowed for statistical purposes. 6. Ground Nos. 3 & 4: These grounds are with regard to the issue of disallowance made by the AO u/s 14A which has been partly deleted by the Ld. CIT(A). The assessee has filed an appeal against dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to corporate office and the balance above 91% of expenditure was allocated among all the 13 units. It was further observed by him that the basis of allocation of common expenses were also peculiar and unacceptable. He also observed that the assessee did not apply any logical or scientific basis for the purpose of allocation of common HO expenses and that the basis of allocation kept changing depending upon own convenience of the assessee, and accordingly he rejected the basis of allocation done by the assessee. 6.4. It is noted by us that we have sent back to the file of the AO ground nos.1 & 2 wherein the issue of allocation of head office of expenses is involved. We find that the factual analysis to be made by the lower authorities may have bearing upon this issue, and therefore, in the interest of justice and fairness we find it appropriate to send the issue of disallowance of expenses (excluding interest) back to the file of the AO to be decided afresh, after giving adequate opportunity of hearing to the assessee. The assessee shall be free to raise all the factual and legal issues before the AO. Thus, ground nos. 3 & 4 are may be treated as partly allowed for statistical pu ..... 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