TMI Blog2016 (9) TMI 1301X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer on the issue of allocation of transactions of Head office and on account of administrative, sales and interest expenditure, etc. to the other manufacturing units, including those eligible for deduction under section 80 IB and 80 IC of the Act. For the said reasons, we deem it fit and proper to set-aside the matter back to the file of Assessing Officer, who shall revisit the computation of deduction allowable to the assessee under section 80IC of the Act afresh. - ITA No. 786/Mum/2014 - - - Dated:- 23-9-2016 - G. S. Pannu (Accountant Member) And Ramlal Negi (Judicial Member) For the Appellant : J. D. Mistry For the Respondent : R. P. Meena ORDER G. S. Pannu (Accountant Member) The captioned appeal filed by the assessee pertaining to A.Y. 2009-10 is directed against the order of the ACIT, Cen. Cir.41, (in short the Assessing Officer) passed under section 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 (in short the Act) dated 04/12/2013, which is in conformity with the direction of the Dispute Resolution Pannel-1, Mumbai dated 20/11/2013. 2. In this appeal, assessee has raised the following grounds of appeal:- GROUNDS OF APPEAL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vate Limited) for applying the CUP method. 6. without prejudice to the above , failed to appreciate that the rate at which royalty is paid by Assessee to its AE ie MEW is at arm's length even as per internal controlled CUP applied by the learned TPO. Determining arms length price of royalty as Nil 7. erred in disallowing payment of royalty to its AE ie MEW by considering the Assessee as economic owner of the brand names/trademarks, ignoring the fact that the brand names/trademarks for which royalty is paid, are legally owned by MEW. 8. erred in making a factually incorrect observation that the Appellant used brand names/trademarks currently owned by its AE, MEW in earlier years without paying any royalty. Commercial expediency Benefit Test 9. erred in not appreciating the various benefits received/receivable by the Appellant from its AE and thereby challenging the commercial expediency of the Appellant. C. Corporate tax adjustments On the facts and in the circumstances of the case, the learned AO based on directions of the DRP has: Deduction under section 80IC of the Act Restricting the deduction under section 80IC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding profits have already been set off against the losses of other units and no deduction has been claimed under section 80IC of the Act on trading profits; 19. without prejudice to the above, should have reduced the trading profits only relating to Haridwar unit from the profits eligible for deduction under section 80IC of the Act; Deduction in respect of central excise incentive under section 80IC of the Act. 20. erred in considering that the central excise incentive amounting to ₹ 2,82,222 forms part of the Haridwar unit and thereby reducing the same from the deduction under section 80IC of the Act; Short credit granted in respect of Tax Deducted at Source 21. erred in not granting credit for tax deducted at source of ₹ 59,79,929, claimed by the Assessee during the course of the assessment proceedings Levy of Interest under section 234B of the Act 22. erred in levying interest of ₹ 6,89,75,151 under Section 234B of the Act; Initiation of penalty proceedings under section 271(1)(c) of the Act 23. erred in initiating penalty under Section 271(1)(c) of the Act. The Appellant craves, to consider each of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction under section 80IC of the Act in relation to the profits earned in Haridwar Unit. Before we proceed to adjudicate each of the Grounds, the brief background can be summarized as follows. The assessee company has multiple units and so far as its claims for deduction under chapter VIA of the Act is concerned, it pertains to Haridwar Unit for which deduction has been claimed under section 80IC of the Act and Daman Unit(1 2), for which deduction under section 80IB of the Act has been claimed. In so far as, the claim of the deduction under section 80IB of the Act is concerned, there is no dispute and it has been determined by the Assessing Officer at ₹ 85,71,578/-, as returned by the assessee. In so far as the claim for deduction under section 80IC of the Act in relation to the Haridwar Unit is concerned, the same has been restricted by the Assessing Officer to ₹ 53,59,76,608/- as against ₹ 158,02,82,213/- returned by the assessee. In the instant year, the aforesaid claims are not new in the sense that the instant year is 4th year of claim. There is no difference between assessee and Revenue on the issue of basic entitlement of the assessee for the benefits of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80IC has been computed by the Assessing Officer, it shows that the allocation of Head office transactions over different units done by the assessee has not been accepted. It was pointed out that this is in variance to the stand of the Assessing Officer in earlier assessment years of 2006-07, 2007-08 and 2008-09, wherein the computation of unit-wise profit/lose made by the assessee has been accepted. It is pointed out that in the current assessment year of 2009-10, it is the first year when the basis for arriving at the unit-wise profits/losses has been disturbed. The copy of the assessment order for assessment year 2008-09 passed under section 143(3) r.w.s. 144C(13) dated 15/12/2010 has been placed on record to say that the method by which the unit-wise profits/losses have been computed was accepted by the Assessing Officer. In particular, attention was invited to a chart annexed to the assessment order for assessment year 2008-09 showing working of the unit-wise income for eligibility of deduction under section 80IC and 80IB of the Act. It was pointed out that the manner of working is similar to the chart, which was furnished at the time of hearing before us, albeit in relation t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Paper Book and the net profit depicted therein is ₹ 186,15,73,678/-, and this difference has prompted the Assessing Officer as well the DRP to hold that there was an incorrect quantification of the deduction under section 80IC of the Act. 6.3 In this context, we have perused the relevant reconciliation at page 137 of the Paper Book, which was also before the lower authorities. In terms of the said reconciliation, the profit of the Haridwar Unit computed in the P L Account at ₹ 186,15,73,678/- has been adjusted for interest, selling and distribution expenses and administrative and miscellaneous expenses to ₹ 193,70,15,244/-, which corresponds to the figure in chart of unit-wise computation of profits, which in-turn has formed the basis for filing the return of income. Once this figure is seen in the chart of unit-wise computation of income, it would be clear that after allocation of the profits of other branches and income tax disallowances pertaining to the Haridwar Unit, the net income of Haridwar Unit comes to ₹ 158,02,82,213/-. In our considered opinion, the Assessing Officer and the DRP have merely noted the difference in the figures without ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,04,27,014/- and ₹ 12,23,568/- respectively while computing the deduction under section 80 IC of the Act. In this context, the Ld. Representative for the assessee pointed out that assessee has itself excluded rent and interest income for the purposes of computing the deduction eligible for deduction under section 80IC of the Act for Haridwar Unit and referred to the chart of computation in this regard. It was pointed out that in any case, the figures adopted by the Assessing Officer are wrong as they pertain to the assessee as a whole and not to the Haridwar Unit alone. On this aspect, we restore the matter back to the file of Assessing Officer, who shall verify the claim of the assessee and exclude the amounts of rent and interest income for computing deduction u/s. 80IC of the Act to the extent it pertains to Haridwar Unit only. 8. Ground of appeal No.13, does not require any specific adjudication as we have already remanded the matter relating to the computation of deduction u/s.80IC of the Act back to the file of Assessing Officer in the earlier paras. 9. In Grounds of appeal No.14 15, the issue relates to exclusion of income by way of scrap sales for the purposes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting deduction u/s. 80IC of the Act on the ground that the same related to the trading activity. In this context, the Ld. Representative for the assessee pointed out that the said figure adopted by the Assessing Officer is wrong and is a part of the transactions of Head office account, which have been appropriately allocated over all the units. On this aspect also, the matter is remanded back to the file of Assessing Officer to verify the same afresh and reduce the trading profits relating to Haridwar Unit only for computing the deduction u/s. 80IC of the Act. 12. By way of Ground of appeal No.20, assessee has contested the action of the Assessing Officer in excluding Central Excise incentive of ₹ 2,82,222/- for the purposes of computing deduction u/s. 80IC. The said Ground of appeal has not been pressed at the time of hearing and is accordingly dismissed as not pressed. 13. The issue in Ground of appeal No.21 relates to non-grant of credit for tax deducted at ₹ 59,79,929/- claimed by the assessee during the assessment proceedings. In this context, Ld. Representative for the assessee submitted that the assessee has already moved a rectification application u/s. 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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