Income Tax Appellate Tribunal - Chennai
Tvs Electronics Limited, Chennai vs Acit, Chennai on 22 February, 2018
आयकर अपील य अ
धकरण, 'बी' यायपीठ, चे नई
IN THE INCOME TAX APPELLATE TRIBUNAL, 'B' BENCH : CHENNAI
ी अ ाहम पी. जॉज , लेखा सद य एवं
ी ध$ु व%
ु आर.एल रे &डी, या)यक सद य के सम+ ।
[BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER
AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER]
आयकर अपील सं./I.T.A. No.820/CHNY/2017.
नधा रण वष /Assessment year : 2009-2010.
TVS Electronics Limited, Vs. The Assistant Commissioner of
''Jayalakshmi Estate''. Income Tax,
29, Old No.8, Haddows Road, Corporate Circle 3(1)
Chennai 600 006. Chennai.
[PAN AAACI 0886K]
(अपीलाथ./Appellant) (/0यथ./Respondent)
अपीलाथ क ओर से/ Appellant by : Shri.R.Vijayaraghavan, Adv.
यथ क ओर से /Respondent by : Shri. R.U. Aroon Prasad, IRS, JCIT.
सन
ु वाई क तार ख/Date of Hearing : 14-02-2018
घोषणा क तार ख /Date of Pronouncement : 22-02-2018
आदे श / O R D E R
PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER
Assessee in this appeal, which is directed against an order dated 23.01.2017 of ld. Commissioner of Income Tax (Appeals)-11, Chennai, has raised altogether two grounds.
:- 2 -: ITA No.820/CHNY /2017
2. Ld. Counsel for the assessee at the outset submitted that he was not pressing ground No.1. Accordingly, ground No.1 is dismissed has not pressed.
3. This leaves us with ground No.2, which assails disallowance of C2,96,34,074/- on account of apportionment of expenses while computing deduction u/s.80IC of the Income Tax Act, 1961 (in short ''the Act'').
4. Ld. Counsel for the assessee submitted that assessee a manufacturer and trader in computer equipment had filed its return of income for the impugned assessment year disclosing loss of C6,92,99,262/-. As per the ld. Authorised Representative, ld. Assessing Officer took a wrong presumption that assessee had claimed deduction u/s.80IC of the Act. As per the ld. Authorised Representative, it had incurred common overhead expenditure like corporate expenditure, sales and marketing expenditure, research and development costs, in addition to common expenditure incurred for providing assembly facilities. Contention of the ld. Authorised Representative was that assessee having not claimed any deduction u/s.80IC of the Act, apportionment of expenditure between various units did not have any effect on the net results. As per the ld. Authorised Representative, in the guise of apportionment, ld.
:- 3 -: ITA No.820/CHNY /2017 Assessing Officer had effectively denied the claim of expenditure of C2,96,34,074/-. Submission of the ld. Authorised Representative was that the ld. Commissioner of Income Tax (Appeals) confirmed the view taken by the ld. Assessing Officer without verifying the facts.
5. Per contra, ld. Departmental Representative strongly supported the orders of the lower authorities.
6. We have considered the rival contentions and perused the orders of the authorities below. What was held by the ld. Commissioner of Income Tax (Appeals) at para 5.3.4 to 5.3.6 of its order is reproduced hereunder:-
''5.3.4 In the appellant's case, there are units eligible for deduction u/s. 80ICand there are other units which are not eligible for the said deduction. The legislative intention is to give an assessee deduction u/s 80IC to the extent of net profit pertaining to the eligible units while computing the net profit, it is required that the common overhead expenditure such as corporate overheads, sales and marketing overheads, research and development overhead cost and common expenditure of assembly facilities are apportioned among all the units on a reasonable basis. The most reasonable method is to allocate the common expenditures according to the turnover of each and every unit. If this exercise is not done, then there is a possibility that the appellant could have claimed higher deduction u/ s 80IC as the net profit for the eligible unit would be much higher if common expenditure IS not debited to the eligible units .
:- 4 -: ITA No.820/CHNY /2017 5.3.5 Under similar facts and circumstances, I rely on the following decisions which support the AO's point of view:
a} In the case of Controls & Switchgear Co. Ltd. Vs DCIT, l2011J 16 taxmann.com 375 (Delhi/(2012) 204 Taxman 53 (Delhi)(MAG.), the Hon'ble High Court of Delhi has decided in favour of Revenue on the issue of apportionment of head office expenses where an assessee has claimed deduction under section 80-IC while having both eligible and non-eligible units. The decision is briefly mentioned below Section 80IC of the Income tax Act, 1961 - Deductions - Special provisions in respect of certain undertakings or enterprises in certain special category States - Assessment year 2006-
07 - Assessee-company had three units located at Noida, Kasna and Haridwar - Unit at Haridwar was eligible for deduction under section 80-lC - Assessee claimed total head office expenses of Rs.5.23 crores as expenditure - Assessing Officer noticed that assessee had failed to consider expenses for purpose of allocation of common expenses to Haridwar unit - Assessing Officer, accordingly, made an addition of Rs. 69.68 lakhs thereby reducing claim of deduction under section 80IC - Whether since statement of profit and loss account, which had been relied upon by assessee did not give. bifurcation or details of head office expenses, same could not be accepted as justifying their exclusion in computing deduction - Held, yes - Whether Rs. 69.68 lakhs was correctly reduced from amount deductible under section 80-IC - Held, yes [In favour of revenue]'' The relevant portion of the said decision is reproduced hereunder:
In Liberty India vs. CIT (2009) 317 ITR 218/ 183 Taxman 349 (SC) on which the assessee had placed reliance, the Supreme Court had interpreted the words 'derived from' and had highlighted the legislative intent. Further, it was stated that devices adopted to reduce/inflate the profits of eligible business had to be checked.
Thus, this decision was not of any help to the appellant-assessee. Regarding the contention raised by the assessee on the basis of profit and loss account as on 31-3-2006 of the Haridwar unit, which had been audited by the Chartered :- 5 -: ITA No.820/CHNY /2017 Accountant, the same was not relevant and did not deal with the contention and the findings recorded by the Commissioner (Appeals) and the Tribunal. The question raised and which had been dealt elaborately by the Commissioner (Appeals}/Tribunal was with regard to the head office finance expenses and whether the said expenses were common head office expenses, which were also relatable to the Haridwar unit. The assessee, as per the Commissioner (Appeals) and the Tribunal, did not furnish and give the said bifurcation and details or justify their exclusion. The statement of profit and loss account, which had been relied upon by the appellant did not show that the bifurcation or details of the head office expenses was given and, therefore, could not be accepted as justifying their exclusion.
The appellant-assessee had raised contention in respect of the findings recorded by the Tribunal with regard to the proposed dividend, dividend tax, Court fees for old cases, expenses recovered from respective units. This aspect had been dealt with and examined by the Commissioner (Appeals). This contention was not impressive. It could not be said that the order passed by the Tribunal was factually perverse. [Para 14] Thus, there was no perversity in the order of the Tribunal and, accordingly, the appeal was not to be admitted. The same was to be dismissed (Para 15) 5.3.6 In view of the above remarks and the decisions relied on, the AO's allocation of common expenditure among the units eligible for deduction u/s. 80IC is upheld and the appellant's ground on this issue is dismissed''. What the ld. Commissioner of Income Tax (Appeals) held was that assessee had units eligible for deduction u/s.80IC of the Act. Neither ld. Assessing Officer nor ld. Commissioner of Income Tax (Appeals) :- 6 -: ITA No.820/CHNY /2017 has stated that what was the amount claimed by the assessee as deduction u/s.80IC of the Act and on which units such deduction were claimed, if any. Ld. Assessing Officer has indeed stated that assessee had claimed deduction u/s.80IC of the Act on certain units. However, as mentioned by us, there is nothing on record to show which were these units and what was such amount if any, claimed by the assessee. If the assessee had made no claim for deduction u/s.80IC of the Act, there is no doubt in our mind that apportionment of expenditure would not as such result in any disallowance. Working result will be same irrespective of the allocation of head of expenditure. Relevance of apportionment is only there, when assessee claimed deduction under any provision of the Act on some of the units and not in others. In our opinion, the issue requires a fresh look by the ld. Assessing Officer. We set aside the orders of the lower authorities and remit it back to the file of the ld. Assessing Officer. If the assessee had preferred no claim u/s.80IC of the Act, there is no question of any disallowance. On the other hand, if assessee indeed had made any claim, ld. Assessing Officer is free to go ahead with the allocation of head office expenditure after giving due opportunity to the assessee to explain its case, and thereafter proceed in accordance :- 7 -: ITA No.820/CHNY /2017 with law.
7. In the result, the appeal of the assessee is partly allowed for statistical purpose.
Order pronounced on Thursday, the 22nd day of February, 2018, at Chennai.
Sd/- Sd/-
(ध$ु व%
ु आर.एल रे &डी) (अ ाहम पी. जॉज )
(DUVVURU RL REDDY) (ABRAHAM P. GEORGE)
या)यक सद य/JUDICIAL MEMBER लेखा सद य /ACCOUNTANT MEMBER
चे#नई/Chennai
$दनांक/Dated: 22nd February, 2018.
KV
आदे श क त'ल(प अ)े(षत/Copy to:
1. अपीलाथ /Appellant 3. आयकर आयु*त (अपील)/CIT(A) 5. (वभागीय त न/ध/DR
2. यथ /Respondent 4. आयकर आयु*त/CIT 6. गाड फाईल/GF