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TMI Blog2025 (5) TMI 1177X X X X Extracts X X X X X X X X Extracts X X X X ..... he assesses had disclosed revenue of Rs. 4,18,84,350/- from agricultural operation and the total expense relating to agricultural activity was shown at Rs. 50,53,607/- only. Thus, the ratio of total expense to total revenue related to agricultural operation was 12.06% only, whereas the ratio of total expense to total revenue for the entire operation of the assessee was 92.06%. In the course of assessment, the Assessing Officer examined allocation of various expenses to the agricultural and non-agricultural activities and found that the allocation as made by the assessee was not on any rational basis. The Assessing Officer, therefore, reworked the allocation of the following common/indirect expenses to the agricultural activity on the basis of revenue from agricultural operations to total revenue: - (a) Employee benefit expenses Rs.2,58,39,481/- (b) Finance Costs Rs.1,22,44,626/- (c) Depreciation and amortization expenses Rs.75,64,035/- (d) Other Expenses Rs.8,29,23,452/- Total Rs.12,85,71,594/- 2.1 The Assessing Officer allocated total expense of Rs. 1,17,09,303/-, out of above four heads, towards agricultural expense and the agricultural income was according ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eted." Allocation of agricultural expense 5. The ground nos.1 to 3 pertain to addition of Rs. 66,55,696/- on account of excess expenses claimed in respect of exempt agricultural income. 6. Shri S.N. Divetia, Ld. AR of the assessee submitted that inadmissible expense under section 14A of the Act, in respect of exempt agricultural income, was Rs. 50,53,608/- which was duly reported in the Tax Audit Report. He submitted that the assessee was maintaining separate set of books of account in respect of agricultural activities which was neither disputed nor rejected by the Assessing Officer. The Ld. AR explained that the Assessing Officer had re-allocated the expenses under four heads in the ratio of revenue from agricultural operation to total revenue, which was not correct. As regards employee benefit expenses, the Ld. AR explained that only eight employees were engaged for agricultural operations whereas there were about 81 employees in Bio Division. With regard to finance cost, he submitted that no additional finance was required for agricultural activities and the assessee had its own surplus funds out of agricultural operations itself. With respect to depreciation of amortization ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpense of Rs. 10,26,383/- was shown to have been incurred. The details of these expenditures have been brought on record. It is found that the total direct expense pertaining to agricultural activity was Rs. 41,61,778/- against which proportionate expense of Rs. 40,27,228/- @ 96.67% was allocated to agricultural activity, the rationale for which was not explained. The assessee had also allocated 'administrative and selling expense' and 'depreciation expense' towards indirect agricultural expense but out of total expense of Rs. 10,60,676/- pertaining to agriculture, only a sum of Rs. 10,26,384/-, @ 96.67% was allocated to agricultural activity. This basis of allocating the direct and indirect expense incurred in respect of agricultural operation has not been explained by the assessee. Further, no separate account in respect of agricultural operation was produced before the Assessing Officer or the CIT(A); nor such account has been brought on record before us. In the Tax Audit Report, the Auditor had certified inadmissible expense under section 14A in respect of agricultural operation at Rs. 50,53,608/- without mentioning any break-up or the basis thereof. In the absence of any expla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agricultural activities. The assessee already had surplus from agricultural activity and had accumulated funds of past years. Further, a sum of Rs. 2.10 Crores was received by the assessee during the year on account of share premium which was also available for agricultural operation. The Assessing Officer has not brought any evidence on record that the borrowed funds were utilised for agricultural operations. Considering the fact that the assessee had its own surplus funds, the allocation of finance cost towards agricultural activity was not called for. Accordingly, the allocation of finance cost towards agricultural operation, as done by the AO, is deleted. 8.3 Depreciation and Amortisation Expenses The assessee has contended that it had already disallowed depreciation of Rs. 6,23,991/- in respect of the agricultural activities. However, the details of assets deployed for agricultural activities are nowhere appearing in Schedule-3 of audited annual account. The matter is, therefore, set aside to the jurisdictional Assessing Officer to verify the assets deployed for agricultural operation and, thereafter, disallow the depreciation on the assets which were actually utilised for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, set aside to the file of the jurisdictional Assessing Officer with a direction to verify the expenses which had a connection with the agricultural operation and thereafter allocate only those expenses which had a bearing on agricultural operation of the assessee and also considering our findings as recorded earlier. The expenses, which were not at all connected with the agricultural operation should not be allocated. The assessee is also directed to provide a proper justification in this regard before the Assessing Officer. 8.5 The grounds taken by the assessee are partly allowed for statistical purpose. Deduction u/s 80JJA 9. Ground no.-4 pertains to disallowance of deduction under section 80JJA of the Act. The assessee had claimed deduction of Rs. 12,30,554/- under section 80JJA of the Act which was disallowed by the Assessing Officer for the reason that the return of income was not filed within the due date as prescribed under section 139(1) of the Act. 9.1 Shri S.N. Divatia, Ld. AR submitted that the assessee had filed its return belatedly under section 139(4) of the Act on 30.03.2019 as against the due date of 31.10.2018 under section 139(1) of the Act. He subm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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