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TMI Blog2017 (6) TMI 398X X X X Extracts X X X X X X X X Extracts X X X X ..... inst the facts and circumstances of the case. 3. That the detailed submissions filed by the assessee during the course of hearing as per para 2.1 to 2.17 of the order has not been considered by the Worthy CIT (A) property. 4. That the Appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off." 3. All the grounds raised by the assessee pertain to the issue of disallowance of deduction claimed under section 80IC of the Income Tax Act, 1961 (in short 'the Act') amounting by Rs. 7,53,223/-, on account of allocation/apportionment of expenses relating to auditors remuneration and directors remuneration to the eligible unit thereby reducing its eligible profits to that extent. 4. Brief facts relevant to the issue are that during the assessment proceedings, the Assessing Officer noticed that the assessee had two units, one located in Ludhiana and the other in Sidcul, Pant Nagar, Uttrakhand.The Pant Nagar unit was eligible to claim deduction under section 80IC of the Act. The Assessing Officer further noticed that the assessee had claimed deduction on account of auditors remuneration amounting to Rs. 2,60,000/- and directors remun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofit of the exempt unit it would not have done so. The assessee further placed reliance on a number of decisions. The learned CIT (Appeals) after considering assessee's submissions upheld the order of the Assessing Officer stating that the Assessing Officer had duly noted that the duties of the auditors are far more for the exempt unit being newly setup and similarly regarding directors remuneration that the directors had to administer all units of the company and it could not be said that they had no duties vis-à-vis exempt unit. The learned CIT (Appeals) also took note of the fact that the assessee had not filed any evidence in support of its claim that no duties were performed by the directors vis-à-vis the exempt unit. The CIT (Appeals), therefore, held that the Assessing Officer had given reasonable justification for apportioning the said expenses and thereby upheld the order of the Assessing Officer in this regard. The relevant findings of the CIT (Appeals) at para 2.2 of his order are as under: "2.2 I have carefully considered the facts of the case, the basis of the disallowance and the arguments of the AR. The turnover of Ludhiana unit is Rs. 15.90 crore and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer was justified in apportioning auditors remuneration and Directors remuneration to the exempt unit for the purpose of calculating the disallowance u/s 80IC. This ground of appeal is dismissed." 6. Before us, the Ld. counsel for the assessee conceded that it had no case vis-à-vis apportionment of auditors expenses. As far the apportionment of directors remuneration of the exempt unit, the Ld. counsel for the assessee reiterated the submissions and contentions made before the lower authorities stating that the directors had been paid remuneration amounting to Rs. 20,25,000/- in the preceding year when the exempt unit was not in existence and the same had been increased to Rs. 30 lacs in the impugned year. The Ld Counsel contented that out of the increase of Rs. 9.75 lacs, Rs. 3 lacs was attributable to the remuneration paid to the new director Shri Sahil Aggarwal inducted during the year, and whose duties was Product Development at Ludhiana unit only. As far the balance increase in directors remuneration the Ld. counsel for the assessee contended that the same was attributable to the increase in turn over in the Ludhiana unit. The Ld. counsel for the assessee contended th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the non eligible unit of the assessee at Ludhiana and the eligible unit of the assessee at Pant Nagar thereby resulting in restriction of profits eligible for deduction under section 80IC to Rs. 16,55,716/- by apportioning Rs. 59,800/- of audit expenses and Rs. 6,93,424/- of directors remuneration to the said eligible unit as against nil apportioned by the assessee. The apportionment of audit expenses amounting to Rs. 59,800/- to the eligible unit was not challenged before us by the Ld. counsel for the assessee and restriction of deduction under section 80IC of the eligible unit on account of the same is, therefore, upheld. As for restriction of deduction under section 80IC on account of apportionment of directors remuneration to the extent of Rs. 6,93,424/- on the basis of turn over of two units, we find no merit in the contentions raised by the Ld. counsel for the assessee before us that no apportionment at all is required. We are in complete agreement with the justification of the Assessing Officer which has been upheld by the Ld. CIT(A) also vis-à-vis the apportionment of directors remuneration to the eligible unit. Undeniably, directors of company are required to admini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sesse had also challenged the basis of allocation of the said expenses, being turnover based. The Ld. counsel for the assessee has stated that the turn over could not be a good basis for apportioning the said expenses. The Ld. counsel for the assessee has pointed out that as compared to the remuneration paid in the preceding year of Rs. 20.2 5 lacs, the remuneration paid to the directors in the impugned year is Rs. 30 lacs reflecting an increase of Rs. 9.75 lacs. The Ld. counsel for the assessee has pointed out that in the preceding year, the eligible unit was not functioning. Therefore, to the extent of Rs. 20.25 lacs the entire remuneration paid in the preceding year can be attributed to the Ludhiana unit only. The allocation, if any, can be made of only the increase in the remuneration in the current year as compared to the preceding year i.e. Rs. 9.75 lacs. The Ld. counsel for the assessee pointed out that apportioning directors remuneration to the extent of Rs. 6,93,424/- out the said increase is not justified. The Ld. counsel for the assessee pointed out that the non eligible unit had also showed an increase in turn over as compared to the previous year which was on account o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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