Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “A” BENCH, PUNE
Before: SHRI ANIL CHATURVEDI, AM & SHRI PARTHA SARATHI CHAUDHURY, JM
आदेश / ORDER PER PARTHA SARATHI CHAUDHURY, JM :
This appeal preferred by the Revenue emanates from the order of the Ld. Commissioner of Income Tax (Appeals)-9, Pune dated 31.08.2016 for the assessment year 2004-05 as per the grounds of appeal on record.
2 ITA No. 2687/PUN/2016 A.Y.2004-05
The crux of the grievance of the Revenue is whether the Ld. Commissioner of Income Tax (Appeals) was justified in directing the Assessing Officer to recalculate the profits after allocation of the corporate expenses on proportionate basis based on turnover of each unit and allow deduction u/s.80IB of the Income Tax Act, 1961 (hereinafter referred to as „the Act‟).
The brief facts of the case are that the assessee company is having three manufacturing plants one at Pimpri, Pune and two plants at Ahmednagar out of which one is manufacturing bearings and parts and other one which is manufacturing ferrous powder. The assessee had claimed deduction u/s.80IB of the Act for the production of its Bearings and Parts Plant at Ahmednagar. During the course of assessment proceedings, the Assessing Officer found that the assessee had claimed this deduction for its other income of Rs.21,29,859/- which it received at Ahmednagar Bearing Plant which included interest income also. These income were related to both the plants at Ahmednagar. Moreover, from the depreciation itself, it is clear that interest income, scrap sales and sales tax refund amounts are not income derived from manufacturing activities and hence, the Assessing Officer disallowed the deduction u/s.80IB of the Act.
Before the Ld. Commissioner of Income Tax (Appeals), the Ld. AR has argued that the assessee company maintained unit wise accounts wherein the income earned and expenses incurred by each unit are recorded. There are certain administrative expenses only at the head office and not allocated to the units as such expenses have been incurred for the management and sustenance of the company as a whole. As regard profitability aspects of
3 ITA No. 2687/PUN/2016 A.Y.2004-05
different units, the Ld. AR has contended that the products manufactured at Ahmednagar plant are different and therefore, profitability of the different plant cannot be made as comparable. The Ld. Commissioner of Income Tax (Appeals) after considering the facts and circumstances of the case, assessment order and the submissions of the assessee has held as follows:
“After careful consideration of fact it is clear that the overall management and sustenance of the company was controlled from the head office which is also admitted by the AR of the appellant in reply dated 04.08.2016 and expenses incurred have not been allocated to the different units. The AR’s argument that Ahmednagar plant’s product is different is also partially incorrect as the Pimpri Plant and the Ahmednagar Plant are manufacturing the same product i.e. Bearings and Parts. The AR of the appellant has relied on the decision of Hon’ble Pune ITAT in the case of Vanaz Engineers Ltd. wherein the Hon’ble ITAT has held that the said unit was separately manage as it had a separate managerial staff and other officers were employed for the management of unit and separate administrative expenses were incurred for that unit and therefore, AO was not justified in allocating the proportionate administrative expenses to the unit for calculating the process. Here the facts are clearly distinguishable. In the instant case the management and sustenance had been exercised from the head office as observed by the AO and also admitted by the AR of the appellant that administrative expenses incurred at head office for the management and sustenance of the company had not been allocated to the units. Therefore, the corporate expenses are to be allocated to different units in proportionate to the turnover. However, the AO has allocated the profits in proportionate of the turnover which is not justified as the separate books of accounts were maintained by the appellant for each unit and the AO has not pointed out any defects in the books of accounts and has not rejected the same. The AR of the appellant has submitted a working after allocation of corporate expenses on proportionate to the sales of the each unit and accordingly arrived at the profit of the unit of Ahmednagar ( bearing and parts plant) at Rs.8,85,82,614/- as reproduced in Para 6.2. The AO is directed to recalculate the profits after allocation of the corporate expenses on proportionate basis and calculate the profits and allow deduction u/s.80IB accordingly after apportionment of head office expenses in proportion to the turnover of each unit. Thus, the ground No.2 and 3 are partly allowed.”
We have perused the case records and heard the rival contentions. We observe that the Ld. Commissioner of Income Tax (Appeals) has analyzed in his order that administrative expenses incurred at head office for the management and sustenance of the company, had not been allocated to the units. Therefore, the Ld. Commissioner of Income Tax (Appeals) held that the
4 ITA No. 2687/PUN/2016 A.Y.2004-05
corporate expenses are to be allocated to different units in proportionate to the turnover. As regards the profitability of units, the Ld. Commissioner of Income Tax (Appeals) observed that the Assessing Officer has not pointed out any defects in the books of accounts and has not rejected the same. Therefore, relying on the computation submitted by the assessee, the Ld. Commissioner of Income Tax(Appeals) directed the Assessing Officer to recalculate the profits after allocation of the corporate expenses on proportionate basis based on turnover of each unit and allow deduction u/s.80IB of the Act.
We do not find any infirmity with the findings of the Ld. Commissioner of Income Tax (Appeals) and the part relief provided to the assessee is hereby sustained. Furthermore, the Ld. AR apprised the Bench that they have not filed any appeal with regard to the part disallowance made by the Ld. Commissioner of Income Tax (Appeals). Therefore, for all practical purposes as on date, the order of the Ld. Commissioner of Income Tax (Appeals) on the issue has attained finality even from the perspective of the assessee.
In the result, appeal of the Revenue is dismissed. 6.
Order pronounced on 27th day of June, 2019.
Sd/- Sd/- ANIL CHATURVEDI PARTHA SARATHI CHAUDHURY ACCOUNTANT MEMBER JUDICIAL MEMBER ऩुणे / Pune; ददनाांक / Dated : 27th June, 2019. SB
5 ITA No. 2687/PUN/2016 A.Y.2004-05
आदेश की प्रनिलऱपप अग्रेपषि / Copy of the Order forwarded to : अऩीऱाथी / The Appellant. 1. प्रत्यथी / The Respondent. 2. 3. The CIT(Appeals)-9, Pune. 4. The Pr. CIT-5, Pune. , आयकर अऩीऱीय अधधकरण, “ए” बेंच, 5. ववभागीय प्रतततनधध ऩुणे / DR, ITAT, “A” Bench, Pune. गार्ड फ़ाइऱ / Guard File. 6.
// True Copy // आदेशानुसार / BY ORDER,
तनजी सधचव / Private Secretary आयकर अऩीऱीय अधधकरण, ऩुणे / ITAT, Pune.
6 ITA No. 2687/PUN/2016 A.Y.2004-05
Date 1 Draft dictated on 26.06.2019 Sr.PS/PS 2 Draft placed before author 26.06.2019 Sr.PS/PS 3 Draft proposed and placed JM/AM before the second Member 4 Draft discussed/approved by AM/JM second Member 5 Approved draft comes to the Sr.PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr.PS/PS 7 Date of uploading of order Sr.PS/PS 8 File sent to Bench Clerk Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order