TMI Blog2016 (5) TMI 790X X X X Extracts X X X X X X X X Extracts X X X X ..... and furnish the same to the AO - Decided in favour of assessee for statistical purposes. Disallowance of deduction claimed u/s 80IC - Held that:- Factual submissions have not been controverted by the AO or the Ld. CIT(A). The AO at page 5 records that the assessee has provided the working capital requirement of the two units. This note was rejected only of the ground that the majority of the purchases of Rudrapur Unit are made through Greater Noida unit. This is a rejection based on surmise. We find that the percentage of profit declared by Greater Noida unit are much higher than the percentage of profit declared by Rudrapur unit. The assessee has also demonstrated that the working capital required by the Rudrapur unit is much lessor that the working capital required by the Greater Noida unit. The banks which have granted loans, have done so for Greater Noida unit only. Ld. DR could not controvert this factual submissions of the Ld. Counsel for the assessee. Under these circumstances, we are of the considered opinion that the AO should have been consistent in his stand on allocation of expenditure in all the years in which the account of the assessee have been scrutinised. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and wrongly rejected and the said rejections of books of account cannot be justified by any material on record. 3. That in view of the facts and circumstances, the CIT(A) erred in law and on facts in upholding the disallowing the sum of ₹ 34,4701- U/s 14A r.w.r 8D made by the AO. 4. That, in view of the facts and circumstances, CIT(A) erred in law and on facts in upholding the action of the Aa in disallowing the sum of ₹ 38,75,0001- U/s 40(a)(ia) of the Act. 5. The CIT(A) has failed to appreciate that the payment was paid in March 2006 for the music right from Yash Raj Films and Saregama India P. Ltd as Royalty and there was no liability to deduct the TDS as per provision of the Act in the year the payments were made. 6. That the observation of the AO CIT(A) in holding that the royalty expenses are prior period expense are unjust, illegal and cannot be justified by any material on record. 7. That the AO erred in law and on facts in reducing the deduction ₹ 87,70,981/- u/s 80lC by reallocation of expenses and the CIT( A) erred in the upholding the same. 8. That in view of facts and circumstance, the CIT(A) erred on facts and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2012 w.e.f 1.4.2013, was held as having retrospective operation and as a payee i.e Yash Raj Films and Saregama India P. Ltd. had filed their returns and paid taxes, no disallowance can be made u/s 40(a)(ia). On a query from the bench he submitted that the issue should be set aside to the file of the AO for fresh adjudication. On further query, he filed a letter dated 30th April, 2011 of M/s. Yash Raj Films written to the office of the Asstt. Commissioner of Income Tax C.R. Building, New Delhi, in response to a requisition of information u/s 133(6) of the Act and submitted that the payee s have recorded the amounts received from the assessee in their books of accounts. In our considered view the assessee should have made every effort to gather necessary evidence from the payees i.e. M/s. Yash Ram Films Pvt. Ltd. and M/s. Saregama India Ltd. that they have paid taxes on these receipts from the assesee and then sought for set aside of the case. The assessee should prima facie demonstrate that in its case the second proviso to section 40(a) (ia) is attracted before seeking set aside of the matter. As in this case the revenue has already obtained some information u/s 133(6) of the Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As can be seen from-the above the borrowing for working capital is purely to meet the needs of the Noida unit aJ:1d more specifically for Set Top Boxes as the payment terms for it require external funding. This is confirmed by the fact that the Sundry Debtors/Sales ratio for Noida is 0.28 and for Rudrapur is 0.04 as on 31.3.2008. The Noida unit needs funding to fill up this gap. Hence, interest booked at Noida is specifically for that unit. On the issue of other expenses the assessee states as follows :- Regarding the other mentioned expenses, we state that the two units function independent of each other and all direct/indirect expenses pertaining to each unit are booked accordingly. There is no separate head office or corporate office of the assessee where expenses need to be bifurcated between units. The company is a private limited entity with limited -corporate overheads, hence, there is no need for bifurcation of expenses other than managing directors remuneration, his travel expenses and statutory audit fees, which have already been allocated. d) That the profit declared in the Greater Noida Unit was 6.30% of turn over and whereas the profit d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at page 5 records that the assessee has provided the working capital requirement of the two units. This note was rejected only of the ground that the majority of the purchases of Rudrapur Unit are made through Greater Noida unit. This is a rejection based on surmise. We find that the percentage of profit declared by Greater Noida unit are much higher than the percentage of profit declared by Rudrapur unit. The assessee has also demonstrated that the working capital required by the Rudrapur unit is much lessor that the working capital required by the Greater Noida unit. The banks which have granted loans, have done so for Greater Noida unit only. Ld. DR could not controvert this factual submissions of the Ld. Counsel for the assessee. Under these circumstances, we are of the considered opinion that the AO should have been consistent in his stand on allocation of expenditure in all the years in which the account of the assessee have been scrutinised. The AO should have give specific reasons as to why he does not agree with the calculations furnished by the assessee or the note on requirement of the working capital for both the units before rejecting the allocation made by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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