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TMI Blog2017 (5) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... was filed on 30/09/2011 declaring loss of Rs. 5,01,30,620/-. The assessee is engaged in development, operating and maintaining SEZ and the assessee is entitled for deduction U/s 80IAB of the Income Tax Act, 1961 (in short the Act), but for the year under consideration, the assessee has not chosen its first year of deduction. The assessee has declared income for the year under consideration out of lease rent premium, interest income as part of its business income. The assessee has shown working of MAT computation as under:- Profit as per part II & III of schedule VI 12685795 Less: Profit from SEZ 15408230 -2722435 The assessee has claimed net profit of Rs. 1,26,85,795/- in the P&L account as per the Companies Act. While computing the book profit for MAT purposes, the assessee has debited profit from SEZ at Rs. 1,54,08,230/- from the net profit of Rs. 1,26,85,795/-. Thus the assessee has calculated loss. The Assessing Officer noticed that the assessee has not proportionately bifurcated the expenses on the basis of turnover and after making various calculations regarding bifurcation of the various expenses, the Assessing Officer has finally calculated b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were grouped into the head 'other expenses' and bifurcated into DTA and SEZ expenses. These 'other expenses' include conveyance, telephone, audit fees, electricity, advertisement expenses etc. (iv) The AO, not satisfied with the explanation submitted by the appellant, recomputed the profits derived by the appellant company from its SEZ Operations by bifurcating the total Interest and Other expenses, for SEZ and DTA Operations, on the basis of turnover by observing as under: * It is impossible to precisely distinguish whether expenditure was incurred for SEZ or DTA Unit. * Many expenses for eg. Auditor's Fee, telephone expenses are intermingled and it is difficult to distinguish how much was incurred for SEZ Unit and DTA Unit. * It appears quite impractical that assessee has incurred interest expenditure to the turn of Rs. 17,45,35,313/- for DTA unit just earning revenue of 63,60,339. But in SEZ Unit it has incurred only Rs. 13,22,84,826/- to earn revenue of as high as Rs. 41,99,74,895/-. The only plea taken by the appellant is that it has separately demarcated its expense. But it appears more of an afterthought to cleverly shift all the expenses to DTA unit so that D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns to Capitol Work in Progress on the basis of the area developed and under development. * Interest expenses incurred on the loan utilized for the development of both DTA and SEZ ore bifurcated into revenue nature and additions to work in progress on the basis of area developed and area under development on a monthly basis. Further the revenue expenses are further bifurcated into that pertaining to DTA and SEZ on the basis of Area Occupied. * Balance interest expenses incurred by the assessee company added to the Capital Work In Progress:- * Interest expenses added to Work In Progress have been bifurcated into SEZ and DTA based on the month wise area under development/ Details are as under:- * Thus "Interest and Finance Charges'1 were added to the total expenditure in the profit and loss account of the assessee company for the relevant assessment year. However, major part of the expenses were subsequently added to the capital work in progress/work in progress. (viii) I have duly considered the submissions of the appellant company, assessment order and material placed on record and find merit in its submissions. During appellate proceedings, the appellate has submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Therefore, it is held that the AO was not justified in apportioning interest/finance charges and other expenses between SEZ and DTA units of the appellant company on the basis of turnover only. Therefore, the book profit determined by the AO for the purpose of MAT cannot be sustained." 4. Now the revenue is in appeal before us. The ld. CIT DR has vehemently supported the order of the Assessing Officer. On the contrary, the ld AR of the assessee has reiterated the arguments as made before the ld. CIT(A) and vehemently supported the order of the ld. CIT(A). 5. We have heard the rival contentions of both the parties, perused the material available on the record and also gone through the orders of the authorities below. The assessee has admitted during the appellate proceedings that no separate books of account for SEZ and DTA were maintained. However, it was claimed that the books of account are so maintained that revenue earned the expenditure incurred, the additions/deletions made to the work in progress could be precisely determined separately in DTA and SEZ at any point of time w.e.f. 01/4/2009. It was also claimed that the accounts were maintained in SAP software and for bif ..... X X X X Extracts X X X X X X X X Extracts X X X X
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