Income Tax Appellate Tribunal - Chandigarh
Videotex International (P) Ltd, ... vs Addl. Cit, Ludhiana on 19 March, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
DIVISION BENCH, CHANDIGARH
BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER
AND MS.ANNAPURNA GUPTA, ACCOUNTANT MEMBER
ITA No.833/Chd/2016
(Assessment Year : 2009-10)
Videotex International (P) Ltd., Vs. The J.C.I.T.,
Ludhiana. Range III, Ludhiana.
P A N : AAACV5472C
And
ITA No.834/Chd/2016
(Assessment Year : 2009-10)
Videotex International (P) Ltd., Vs. The Addl. CIT,
Ludhiana. Range III, Ludhiana.
P A N : AAACV5472C
(Appellant) (Respondent)
Appellant by : Shri Navneet Sehgal, CA
Respondent by : Shri Manjit Singh, DR
Date of hearing : 21.12.2017
Date of Pronouncement : 19.03.2018
ORDER
PER ANNAPURNA GUPTA, A.M.:
B o t h t h e a b o v e a p p e a l s h a v e b e e n p r e f e r r ed b y t h e s a m e a s s e ss e e ag a i n s t s ep a r a t e o r d e r s o f L d . CI T ( A p p e a l s) - 1, L u d hi a n a d at e d 2 4 .5 . 2 0 1 6 a n d 2 7 .5 . 2 0 1 6 r e l a t i n g t o a s s e s s m e nt y e a rs 2 0 0 9 - 1 0 a n d 20 1 0 - 1 1 r es p e c t i ve l y .
2. Common i s su e s are i n v o l v ed in both the a pp e a l s , t h e r e f o r e, t h e y w e r e h e a r d t o g e th e r a n d a r e be i ng d i s p o s e d o f f b y t hi s c o m mo n o r d e r . F o r th e s a k e o f c o n v en i e n c e , we s h a l l b e de a l i n g w i t h t h e fa c t s i n t h e a p p e al o f t he a s s e s s ee i n I TA N o . 8 3 3 / Ch d / 2 0 1 6 a n d t he d e c i s i o n r e n d er e d t h e r e i n 2 would apply mutatis mundis to the appeal in I TA N o . 8 3 4 / C hd / 2 0 16 .
I T A N o . 8 33 / C h d/ 2 0 1 6 :
3. Th e a s s e s s e e h as r a i s e d f o l l o wi n g g r o u n d s of a p p eal :
"1. That the prejudicial observations made in the appellate order as well as in the assessment order are either unfounded or not susceptible of giving rise to any adverse conclusion.
2. That the learned Commissioner of Income tax (Appeals) has grossly erred in confirming the application of sec.14A read with Rule 8D of the Income tax Act on the basis of conjectures, surmises and confirming without any basis. The application of sec.14A read with rule 8D of the Act merits deletion.
3. That the action of the Learned Commissioner of Income tax (Appeals) has grossly erred in confirming the disallowance of Rs.2790/- is unwarranted, uncalled for and arbitrary and without appreciating the facts of the case under sec.14A read with Rule 8D of the Income tax Act. The .disallowance of Rs.2790/- merits deletion.
4. That the Learned Commissioner of Income tax (Appeals) has grossly erred in confirming the part disallowance of deduction u/s 80IC of Rs. 6,69,128/- on account of apportionment of certain expenses of Head Office:-
Apportioned Directors Remuneration Rs.1,02,00,000/-
Keyman Insurance 30,82,210/-
Financial Expenses 25,14,832/-
(Interest only - Rs.6,38,997/-)
Auditor's Remuneration 90,000/-
------------------
Total Rs.1,58,87,042/-
-------------------
Part disallowance = 4,14,81,368 x 1,58,87,042 = Rs.6,69,128/-
98,48,88,110 To eligible unit:-
- when these expenses have been incurred wholly and exclusively relate to Head Office only
- and the goods have been sold by other units to the eligible unit at Market Rates and
- alternatively, and without considering the apportionment of income at Head Office on the basis of conjectures, surmises and without appreciating the facts of the case. The disallowance of deduction merits allowance.3
5.That the action of the Ld Commissioner Income tax (Appeals) in confirming the part disallowance of deduction u/s 80IC f Rs.6,69,128/- on account of apportionment of following expenses of Head Office:-
Apportioned Directors Remuneration Rs.1,02,00,000/-
Keyman Insurance 30,82,210/-
Financial Expenses 25,14,832/-
(Interest only - Rs.6,38,997/-)
Auditor's Remuneration 90,000/-
------------------
Total Rs.1,58,87,042/-
-------------------
Part disallowance = 4,14,81,368 x 1,58,87,042 = Rs.6,69,128/-
98,48,88,110 To eligible unit:-
- when these expenses have been incurred wholly and exclusively relate to Head Office only
- and the goods have been sold by other units to the eligible unit at Market Rates and
- alternatively, and without considering the apportionment of income at Head Office is arbitrary, unwarranted and uncalled for . The disallowance of deduction merits allowance."
4. Ground No.1 r ai s e d by the a ss e s s e e is g en e ra l in n a t u r e a nd n e e ds n o a d j ud i c a t i on .
5. G r o u n d No s . 2 an d 3 w e re n o t pr e s s e d a nd , t he re f o r e , a r e t r e a te d a s d i s m i s s e d .
6. G r o u n d N o s . 4 a n d 5 a r e t h e sa m e , b ei n g i d e nt i c a l l y worded an d r el a t e to r e d u c ti on of profits el i g i b l e for d e d u c t i o n u / s 80 I C o f t h e I n c om e Ta x A c t , 1 9 61 ( i n s h o rt 'the Act') on account of a l l o c a t i o n / ap p o r t i on m e n t of c o m m o n e xp e n s es t o t h e e l i g i b l e u n i t o f t h e a s se ss e e .
7. B r i e f f ac t s r e l a t i n g t o t h e i s s u e a r e t h a t t h e a s se s s ee c o m p a n y i s e n ga g e d i n t h e bu si n e s s o f m a n uf ac t u r i n g o f 4 colour TV s e ts and e l e c t r o ni c c h a s s i s, w i th units at L u d h i a n a , N o i d a a n d H i m a c ha l Pr a d e s h . V i s a v i s t h e u n i t a t H i m a ch a l P rad e s h t h e a s s e s see i s c l ai m i n g d e du c t i o n u /s 8 0 I C o f t h e A c t , w h i c h a m o un t ed t o R s . 4 6 ,7 1 , 3 74 / - d u r i n g t h e i m p u gn e d y ea r . D u r i ng a s s ess m e n t p r oc e e d i ng s f o r t he i m p u g n e d y e a r t h e A s s e s s i n g Of f i c e r n o t i ce d t ha t c e r t a i n expenses d e bi t ed to the Profit & Loss A c c o un t of the a s s e s s e e c o m p any w e r e n o t p r o p or t i o n a t e l y a pp o r ti o n e d an d d e b i t e d t o t h e e l i g i b l e u n i t a t H i m a c h a l P r a de s h . After s e e k i n g e xp l a n a ti o n f r o m t he a s se s s e e i n t hi s r e ga r d t h e AO a l l o c a t e d t h e f o l l o w i n g c o mm o n e x p e n s e s i n t h e p r o p o r t i on o f t u r n o ve r o f t he U n i t s i n c l u di n g t r a n s f e r t o ot h er u n i t s :
D i r e c t o rs R e m u ne r a t i o n R s . 1 , 0 2 , 00 , 0 0 0 /-
K e y m a n I ns u r a nc e 3 0 , 8 2 , 2 1 0/ -
F i n a n c i a l e x p e nse s 2 5 , 1 4 ,8 3 2 / -
S e r v i c e Co m p e n sa t i o n 1 8 , 3 0 , 9 7 5/ -
A u d i t o r s R e m u n er a t i o n 9 0 , 0 00 / -
R s . 1 , 7 7 , 18 , 0 1 7 /-
8 . A c c o r d i ng l y e x p e n s e s a m ou n ti n g t o R s . 7 , 37 , 37 4 / - w e r e allocated to the e l i g i bl e unit resulting in red u c t i o n of e l i g i b l e p r o f i ts a n d a d d i ti o n t o t h e t a x a bl e i n co m e o f t h e assessee to this extent.
9. A g g r i e v e d b y t he s a m e , t he a s s ess e e f i l e d a p p e al b e f o r e t h e L d . CI T( A p p ea l s ) w h o a f t e r c o n s i d e r i n g t h e a s s e s s e es s u b m i s s i on s u ph e l d t h e a l l o c a t i o n o f e x p e n se s r e l a t i n g to D i r e c t o rs s a l a r y , k e y m a n i n s u r an c e p r e m i u m a nd A u d i t o rs r e m u n e r a ti o n s i n c e n o s u b m i s si o n s r el a t i n g t o t h e s a m e w e r e m a d e b e for e h i m . F u r t he r h e h e l d t h e a l l o c a t i o n o f s e r v i c e e xp e n s e s a s u n j u s t i f i e d s i n c e h e f ou n d t h a t t h e y 5 w e r e i n c ur r e d on l y v i s a v i s the o t h e r un i t s an d n o t t he eligible unit of the a s s e s s ee . R e g a r di n g th e f i n a n ci a l expenses, the al l o c a t i o n of th e same was a l so upheld, r e j e c t i n g a s s e sse e s c o n t en t i o n of n e t t i ng o f th e s a m e w i th i n c o m e e a rn e d . Th e r e l e v a n t f i n di n g s o f t h e Ld . CI T( A p p e a l s ) a t p a r a 6. 2 o f h er o r d e r i s a s un de r :
6.2 I have considered that facts of the case, the basis of the addition and the arguments of the AR during the course of the assessment as well as the appellate proceedings. The Assessing Officer has reallocated the expenses pertaining to all the units i.e. Director's salary, keyman insurance premium, financial expenses, service compensation and auditor remuneration. The appellant has not filed any submissions relating to the reallocation of Director's salary, keyman insurance premium and auditor's remuneration either before the Assessing Officer or during the appellate proceedings. The said reallocation done by the Assessing Officer pertaining to these expenses and the disallowance of the same u/s 80IC is upheld. However, the service compensation is paid only by the Ludhiana and Noida Unit to the service agents at the time of sales. No service compensation is paid to any outsider/ agent by the Himachal Pradesh unit and therefore reallocation of the said expense is not justified for the purpose of deduction u/s 80IC and the Assessing Officer is directed to recalculate the deduction u/s 80IC accordingly. Regarding the financial expenses, the plea that the interest received is more than the interest paid and also that if the interest paid is considered as a common expense, the credit for interest received should also be given, is not acceptable as no such netting can be allowed for calculating the deduction u/s 80IC. Interest income cannot be treated as profits and gains derived and undertaking by an enterprise from any business refer to in sub sec 2 of Sec 80IC. Therefore, this plea is not acceptable and reallocation of financial expenses by the Assessing Officer is held to be justified.
These grounds of appeal are partly allowed." 6
10. A g g r i e v e d b y the s a m e t h e a ss es s e e h a s c o m e u p i n a p p e a l b ef o r e us. D u r i ng t h e c ou r s e o f h e a r i n g b e f o r e u s, t h e L d . c o u n s e l f o r a s s e s s e e ra i s e d o n l y t w o a r g u m e n t s a g a i n s t th e a l l o ca t i o n o f e x p e n ses s u s t a i ne d b y th e CI T( A ) ;
i) that the goods were t r a n sf e r r ed f r o m o t h e r u n i t s to e l i g i b l e u ni t a t pr o f i t a n d , t h er e fo r e , n o e x p e n se s w e r e r e q u i r e d t o be al l o c a t e d t o t h e el i g i b l e u n i t . R eli a n c e w a s p l a ce d o n th e d e c i si o n of th e I . T. A . T. A h m ed a b a d Bench in the case of Cadila Healthcare Ltd . Vs. A d d l . CI T r e p o r te d in 21 TA x m a n n . c o m 4 83 and d e c i s i o n of t h e I TA T C h a n d i g a r h B e n c h i n t he ca s e o f A m a r t e x I n d u s tri e s L t d. V s . A dd l . CI T r e p o r te d i n 3 7 Ta x m a n n . c o m 4 55 ;
i i ) t h a t i n a n y c as e t h e e n t i r e f i na n c i a l e x pe n s e s c o u l d n o t b e sa i d t o be c o m m o n e x p e ns e s i n c u rr e d o n b e h a l f o f a l l t h e u n i t s o f a s s e s s e e s i n ce i t i n c l u d e d i n te r e st o n c a r l o a n a n d l e t t e r o f cr e d i t c h a r g e s w hi c h w e r e i n c u r r e d s o l e l y fo r t h e he a d of f i c e o n l y . It was also p l e a d e d t ha t t he f i n a n c i a l e x p en s e s a l l oc a t e d sh o u ld e x c l u d e i n t e r e st p a i d s i nc e t h e i n t e r e st r e c ei v ed w a s m u c h m o r e t h a n t h a t p a i d.
11. Th e L d . D R , o n t h e o t h e r h a n d , r e l i e d u p o n t h e o r d e r o f t h e L d. CI T( A pp e a l s ) .
12. W e h a v e h ea r d b o t h t h e pa r t i e s. Th e i s s u e b e fo r e us p e r t a i n s t o a l l o ca t i o n o f c o m m o n e x p e n s e s i n c u r re d b y t h e h e a d o ff i c e t o th e e l i gi b l e u n i t o f th e a ss e s s ee H i m a ch al 7 P r a d e s h u n i t f or t h e p u r p o s e ca l c u l a t i ng t h e qu a n t u m o f d e d u c t i o n a v a i l ab l e u / s 8 0I C o f t h e A c t . Th e f ac t t h a t t h e a s s e s s e e 's u n i t a t H i m a c h a l P ra d e s h i s e l i g i b l e t o c l a i m d e d u c t i o n u / s 80 I C o f t h e A c t i s u n d i s p u t e d . F u r t h e r t he f a c t t h a t f ol l o w i n g e x p e n s e s ha ve n o t b e e n a l l oca t e d t o t h e e l i g i b l e u n i t a t Hi m a c h a l Pr a d e s h i s a l s o no t u n di sp u t e d :
1) D i r e c t o rs r e m u ne r a t i o n R s . 1 , 0 2 , 00 , 0 0 0 /-
2) K e y m a n I ns u r a nc e 3 0 , 8 2 , 2 1 0/ -
3) F i n a n c i a l e x p e nse s 2 5 , 1 4 , 8 3 2/ -
4) A u d i t o r s r e m u n er a t i o n 90,000/-
13. Th e f i r s t c o n t e nt i o n o f t he L d . c o u n s e l fo r a s se s s ee against th e a l l o c a t i o n / ap p o r t i on m e n t of the a f o r e s ai d expenses to t he eligible unit is that the goods were t r a n s f e r re d t o the e l i g i b l e u n i t fro m o t h e r u ni t s a t a p r o f i t i n c l u d i n g a l l c os t s t h e re i n ,t h er e f o r e th e c omm o n c o s ts s t o o d a u to m a t i ca l l y a p p or t i o n ed o n t r a n s fe r o f g o o d s . It w a s s t at e d by t he L d . c o u n s e l f o r a s s e s s ee t h at t he a s s e s see c o m p a n y h a d t hr e e u n i ts i n L u dh i a n a , No i d a a nd K h a d e en K a m i l , H i m ac h a l P r a d e s h . Th e L d . c o u n s e l f or a s s e s s ee s t a t e d t h at w h i l e u n i t s i n L ud h i an a a n d N o i da w er e e n g a g e d i n t h e m a n u f ac tu r i n g e l e c tr o n i c s u b a s s e m b l y a nd c o l o r TV s e t s , th e u n i t i n K h a d e en K a mi l w a s e n g a g e d on l y i n t h e m a n u f a c t ur i n g of color TV s e ts . Th e Ld. co u n s e l f or assessee s u b m i tt e d that the el e c t r o n i c sub as s e m b l i es r e q u i r e d by t h e el i g i b l e un i t w e re t r a n s f e r re d f r o m t h e o t h e r u n i t s t o el i g i b l e u n i t a t t h e s am e p r i c e a s i t w a s s o l d to o t h e r s , a t c o s t p l u s m a r g i n a s r e q u i r e d un d e r th e C e n t r a l E x c i s e A ct . The L d . c ou n s e l fo r a s s e ss e e s ta te d t h a t i n 8 such a s i t u a ti on there was no question of tr a n s f e r of a d m i n i s t ra t i v e expenses to the eligible unit. Th e Ld. c o u n s e l f or a s s es s e e s t a t ed t h a t t h e a b o v e s ub m i s s i o n s h a d b e e n m ad e t o t he A s s e ss i n g O f f i c e r a n d d r e w o ur a t t e nt i on t o t h e l e t t e r f i l ed b e f o r e t h e A s se s s i n g O f f i ce r p la c e d i n t h e P a p e r B o ok . Th e L d . A R s ta t e d th a t t h e Ce n t r a l E x c i s e A ct p r e s c r i b es e x ci se t o b e c h a rg e d a t c o s t p l u s a dm i n i s t r at i v e overheads and other charges and the assessee h ad t r a n s f e r re d t h e e l e c t r o n i c s u b as s e m b l y a t m a r ke t p r i c e t o its eligible unit. Th e L d . c o u n s el f o r a s s e s se e al so d r e w o u r a t t e n t i o n t o t h e c o m p a r a t i v e sa l e b i l l s o f t h e e l e ct r o n i c s u b a s s e m b l y t o t h e e l i g i b l e u n i t a nd o t h e r un i t s t o p r o v e i t s p o i n t p l ac e d i n th e P a p e r B o o k .
14. Th e c o n t e n t i o n o f t h e R e v e n u e , on t h e o t h e r h a n d, w a s t h a t t h e g o od s h a d b e e n t r an s fe r r e d a t s a l e p ri c e d i d n o t a n d c o u l d n o t ra i s e a p r e s u m p ti o n t h a t a l l a d mi n i s t r a ti v e c o s t h a d b e e n t r a n s f e r re d p r o po r t i o n a t el y t o th e e l i g i b l e units.
15. W e h a v e c o n si d er e d t h e a r g um e nt s o f b o t h t he p ar t i e s .
W e d o n o t f i n d me r i t i n t h i s a r g um e n t o f t h e L d . co u n s e l f o r a s s e s s e e , fi r s t l y f o r t h e r e a s on th a t t h e i m p u gn ed e x p e n s e s a s a m a tt e r o f re c o r d a r e n o t i nc u r r e d i n t h e no n - e l i g i bl e units b ut are common e x p e n se s which have not b ee n a l l o c a t e d t o a ny o f t h e u ni t s o f t he a s s e s s ee w h e t he r e l i g i bl e o r n o n - e l i g i b l e. Th e f i n d i n g o f f a c t i n t h i s re g ar d b y t h e A s s e s s i n g O f f i c er a t p a r a 3 .2 o f h i s o r d er c at e g o r i c a l l y s t a t i n g th i s fa c t i s a s u n de r :
9
" 3 . 2 T h e f ac t r e mai n s th e f ol l o wi n g e x p e n s e s ar e p e r ta i n i n g to al l th e u n i ts b u t th e s a me h av e n o t b e e n al l o c at e d at al l o r e v e n if al l o c ate d n o t p r o p o r ti o n at e l y. T h e f ol l o wi n g e x p e n se s p e r ta i n to al l th e u n i ts an d r e q u ir e d to b e al l o c ate d to al l t h e U n i ts i n p r o p o r tio n to to t al tu r n o v e r .
S.No Particulars of expenses Amount Rs.
1 Director salary 10200000 2 Keyman insurance premium 3082210 3 Financial expenses 2514832 4 Service compensation 1830975 5 Auditor remuneration 90000 Total 17718017
16. Th e said fact has not been c o n t r o v e rt e d by the assessee e i t h er before the Assessing Of f i c e r , the C I T( A p p e al s ) o r e v e n b e f o r e us . M o r e o v e r t he a ss e s s e e h a s a l s o n o t e s t ab l i sh e d a s a m a t t e r o f f a c t t h a t t he c o s t i n g of s u b a s s e m b l i e s w o r k e d o u t b y th e n o n - e l i g i b l e un i t s f o r t h e purpose of tr a ns f e r t o t h e e l i gi b l e u ni t s i n c l ud e d such u n a l l o c a te d e x pe n s e s . Th e a s s e s s e e h a s n e i t h er f i l e d a ny c o s t s h e et i n t hi s r e g a r d b e f o r e u s o f t h e s u b a s s e m b l i es t r a n s f e r re d or t he c a l c ul a t i o n o f t h e c o st f or t h e p u r p o s e o f l e v y o f e x c i s e d ut y a s c l a i m ed b y t h e a s s e s s ee . Th e r e f o r e , w h e n t h e f a c t th a t t h e s a i d e xp e n s e s a r e i n c l ud e d i n t h e c o s t o f t h e su b a s s e m b l i es t r an sf e r r e d to t h e e l i g i b l e u ni t s b y t h e n o n - e l i gi b l e u n i t s h a s no t b e e n e s t a b l i sh e d , the c l a i m o f t h e a s s es s e e t h a t b y v i r tu e o f t r a n s f e r ri ng g o o d s b y non-eligible units to the e l i gi bl e units at selling price r e s u l t s i n a l l o c at i n g c o m m o n e xp e n s e s t o t h e e l i g i b l e u n i t , falls flat. E x c ep t f o r m a k i n g su c h c l a i m t h e as s e s s e e h a s m a d e n o e f fo r t fo r e s t a b l i s h i n g th e s a i d f a ct s b e fo r e a n y of t h e a u t h o r i t i e s . Th e c l a i m o f t h e a s s e s s e e i s , t h e r e f o r e , 10 l i a b l e to b e d i s mi s s e d f or t h i s r e as o n a l o ne . F u r th e r e v e n i f t h e c o n t e nt i o n of t h e L d . c ou n s e l f o r a s s e s se e t h at t h e c o st of sub a s s e mbl i e s t r a n sf e r r e d includes i nd i r e c t and i m p u g n e d u n a l l oc a t e d e xp e n s e s, i s a c c e pt e d t h i s f a c t a l o n e d o e s n o t e s t a bl i s h t h e al l o c a ti on o f t h e i m p ug ne d c o m m on expenses to t he e l i g i bl e u n i t s. As per the a s s e s s e e 's c o n t e n t i on t h a t t h e i n d i re c t c o mm o n c o s t ar e a l l o c a t e d to the eligible units on t r a n sf e r of sub a s s em b l i e s , what e m e r g e s i s t h at th e s a i d c o s t ar e a l l o c a t e d t o th e e x t e n t an d i n r e l a t i o n t o t he g o o d s t r a n s f err e d t o t h e e l i g i b le u n i t s b y the non-eligible units. N o w , wi th o u t b r i n g i n g o n r e c o r d h e q u a n t u m o f g o od s s o t r a n sf e r r ed t o t h e e l i g i b l e u n i t s , t h e e x t e n t o f c o mmo n c o s t / e x pe n s es a l l o c a t e d to th e e l i g i b l e units c a n n ot be e s t a b l i sh e d . Th e r e f o r e , it ca n n o t be d e t e r m i n ed w h e th e r r e a s on a b l e co m m o n e x pe n s e s h a v e b e en a l l o c a t e d to t h e e l i g i b l e u n i t s by a d o p t i n g t h i s m e t h o d o f a l l o c a t i on o f e x pe n s e s . Th e c o n te n t i o n o f th e a ss e s s e e i s , t h e r e f o r e, d i sm i ss e d f o r t h i s re a so n a l s o . W e m a y c o n c l u d e t h a t i n t h e a b s en c e o f a n y r e l e v an t f a c tu a l da t a pr o v i d e d by t h e L d . c o u n se l fo r a s s e s s e e, t h e c o n t e n t i on o f t h e a s s e s s e e that t h e i m p ugn e d c o m m o n c os t s t o o d a l l oc a te d t o t h e e l i g i b l e u ni t s w he n t h e s u b a s s em b l i e s w e r e t ra ns f e r r e d t o t h e e l i gi b l e u n i ts b y t h e n o n -e l i g i b l e u ni t s a t ma r k e t p ri c e i s d i s m i s s e d . F or t h e s am e r ea so n w e al s o h ol d t h a t n o b e n e f i t c a n b e d e r i v e d b y th e a s s e s s e e b y r e l yi n g o n a ny j u d g e m e n t s i n c e e a c h j u d ge m e n t i s r e n d er e d i n th e c o n t e xt o f t h e p e c u l i a r f a c t s o f t h e c a se w h i c h h a v e to b e r e ad 11 alongwith the sa m e for a co r re c t i n t e r pr e t a ti on of the j u d g e m e n t.
17. Th e n e x t c o n t e n t i o n r a i s e d w a s v i s - à - v i s t he f i na n c i a l expenses. Th e Ld . c o u n se l f or as s e s s e e d r e w o ur a t t e n ti o n t o t h e d e t a i l s o f f i n a n c i a l e x p en se s p l a ce d a t P a pe r B o o k- 1 2 as under:
I n te r e s t R s . 5 4 8 1 5 4. 0 8 C r e d i t Ch a r g e s 1 3 1 9 1 25 . 5 4 P r o c e s s i ng c h a rge s 5 33 4 6 . 0 0 I n te r e s t t o o t he rs 1 06 0 1 . 2 2 I n te r e s t o f C re d i t C h a r g e s 5 0 3 36 4 . 0 0 I n te r e s t o n C a r Lo a n 80 2 4 2 . 0 0 _ _ _ _ __ _ _ _ _ _ __ To t a l R s . 2 5 14 8 3 2 . 8 4
- - -- - - - - -- - - - - -
18. Th e L d . c o u n s e l f o r a s s e s s e e th e r e a f t e r p oi n t ed o u t t h a t t h e l e t t e r of c r e d i t c ha r g e s w e r e i n c u rr e d v i s - à - v i s th e imports m a d e o f s u b a ss e m b l y b y t h e he a d of f i c e f rom C h i n a w h i c h w as s u b m i t te d t o t h e A s s e ss i n g Of f i c e r a l so during as s e s s me n t p r o ce e d i n g s. Th e Ld. c ou n s e l f or a s s e s s e e , t h e re fo r e , s ta t e d t h a t t h e r e w a s n o r e a s o n t o a l l o c a t e th e s a me t o t h e e l i g i b l e u n i t . Th e L d . c o u n s e l f o r a s s e s s e e f u r t h e r s t a t e d t ha t t h e i n t e r e s t o n c a r l o a n a l so p e r t a i n e d t o c ar p u r c h a s e d b y t h e h e a d o f f i ce a n d h a d n o t h i n g t o d o w i t h t h e e l i g i b l e un i t a n d w as a l s o, t h e r e f or e, n o t r e q u i r e d t o be a l l o c a te d .
19. Th e L d . D R h a s n o t b e e n a b l e t o c o n t r o v e rt t h e a b o v e c o n t e n t i on o f t he L d . c o u n s el f or a s s e ss e e a n d , t h e r e f o r e, w e a g r e e w i th t he s e c o n t e n ti o n s a n d d i r e c t t ha t th e l e t t e r o f c r e d i t c h a r ge s an d i n t e r e s t o n ca r l o a n b e e x c l ud e d f o r t h e 12 p u r p o s e o f a l l o ca t i o n to t h e e l i gi b l e u ni t . Th e Ld . c o u n se l f o r a s s e s s e e st at e d t h a t t h e i n te r e s t e x p e n se s i n c l u d e d i n t h e f i n a nc i a l e xp e n s e s s h ou l d be n e t t e d w i t h th e i n t e r est r e c e i v e d d ur i n g th e y e a r o r a l t e rna t i v e l y t h e i n t e r es t e a r n e d s h o u l d a l s o b e al l o c a t e d t o t h e e l i g i b l e u n i t s . W e f i n d m er i t in this c o n t e nti o n of the Ld. counsel for as s e s s e e . If i n t e r e s t e x p e n ses i n c u r r ed b e n ef i t i n g a l l t h e u ni t s a r e t o be logically a l l o c ate d to all the units, s i mi l a rl y i n t e r e st i n c o m e , c o mm o n t o a l l t h e u n i ts a n d n o t p a r t i c u l a r l y e a r n e d b y a n y o n e u n i t i s a l s o t o b e a l l oc a t e d t o a l l t h e u n i t s . Th e b e n e f i t o f n et t i ng i s t h u s t o b e al l o w e d t o t h e a sse s s e e . W e , t h e r e f o r e, a g r e e w i t h t h i s co n t e nt i o n o f t h e Ld . co u n s e l f o r assessee also. In view of the above, we up h o l d the a l l o c a t i on of common expenses be i n g d i r e c t or s r e m u n e r a ti o n , keyman insurance and a u d i t o rs r e m u n e r a ti o n , wh i l e t h e f i n a nc i al e x p e n s es t o b e a l l o c a te d a r e t o b e r e d u ce d b y t h e l e t t e r o f c r e d i t c h a r ge s a n d t he i n t e r e s t o n c ar l o a n a n d t h e r em a i n i n g i n te r e s t e x p e n s es a r e t o b e a l l o w ed a f t e r ne t t i n g. G r o u n d o f a p p e al n o . 4 & 5 a r e t h e r ef o r e pa rt l y a l l o w e d I n v i e w o f t h e a bo v e , t h e a p p e al o f t h e a s s e s s e e sta n d s p a r t l y a l l o w e d.
I T A N o . 8 34 / C h d/ 2 0 1 6 :
20. It is r e l e va n t to o b s e rv e he r e that the facts and c i r c u m s t an c e s of t h i s a p p e a l a re s i m i l a r t o t h e f a c t s a nd c i r c u m s t an c e s i n I TA N o . 8 3 3 /Ch d / 2 0 1 6 a n d the f i n d i n g s g i v e n i n I TA N o . 8 3 3 / C h d /2 0 1 6 s h a l l a p p l y t o th i s a p p e a l 13 a l s o w i th e q u al fo r c e . Th e a p pe al o f t he a s s es s e e i s p a r tl y allowed.
21. I n t h e r es u l t , bo t h t h e a pp e a l s o f t h e a ss e s s ee a re p a r t l y a l l o w e d.
O r d e r p r on o u n c ed i n t h e O p e n Cou r t .
Sd/- Sd/-
(SANJAY GARG) (ANNAPURNA GUPTA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated : 19 t h March, 2018
*Rati*
Copy to:
1. The Appellant
2. The Respondent
3. The CIT(A)
4. The CIT
5. The DR
Assistant Registrar,
ITAT, Chandigarh