KAYNES TECHNOLOGY INDIA PRIVATE LIMITED,MYSORE vs. JCIT, MYSORE

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ITA 655/BANG/2015Status: DisposedITAT Bangalore06 November 2015AY 2010-114 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal found that the assessee was not given a proper opportunity to present its case regarding the allocation of common expenses. Therefore, the issue was set aside to the Assessing Officer for fresh examination.

What were the facts?

The assessee claimed deduction under Section 80IC for its units in backward districts. The Assessing Officer (AO) reduced this claim by allocating common expenses, including advertisement, business promotion, interest, and bank charges, to these units. The CIT(Appeals) upheld the AO's decision.

What were the issues?

Whether common expenses can be allocated to units eligible for deduction under Section 80IC, and if the assessee was afforded a proper opportunity to present its case on this allocation.

Which sections of the Income-tax Act were involved?

Section 80IC

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “A” BENCH : BANGALORE

Before: SMT. ASHA VIJAYARAGHAVAN & SHRI JASON P. BOAZ

For Appellant: Shri K.P. Srinivas, CA
For Respondent: Dr. P.K. Srihari, Addl. CIT(DR)
Hearing: 05.11.2015Pronounced: 06.11.2015

Per Asha Vijayaraghavan, Judicial Member

1.

This appeal by the assessee is directed against the order dated 19.01.2015 of the CIT(Appeals), Mysuru relating to assessment year 2010-11.

2.

The assessee is engaged in the business of manufacture and sale of various electronic products including computer hardware and medical electronics for others. The assessee had two manufacturing units situated in backward districts of Himachal Pradesh and Uttarkhand, which are eligible for deduction u/s. 80IC of the Income-tax Act, 1961 [“the Act”]. It has also another manufacturing unit at Mysore.

3.

The assessee filed original return of income on 15.10.2010 declaring total income of Rs.5,49,51,084. The Assessing Officer assessed the total income at Rs.5,94,42,910 after reducing claim made u/s. 80IC to the extent of Rs.44,91,823.

4.

Aggrieved, the assessee filed appeal before the CIT(Appeals). The ld. AR for the assessee submitted that the AO erred in allocating the common expenditure to the units of the company situated in Parwanoo, Himachal Pradesh and Selaqui, Uttarkhand. It was also submitted before the CIT(A) that the AO erred in resorting to the disallowance in computing the claim u/s. 80IC of the Act, though there is no specific provision under Chapter VI-A.

5.

The CIT(Appeals) held at para 10 & 11 of the impugned order as follows:-

“10. I have considered the rival contentions carefully. While agreeing that the expenses like advertisement, business promotion, etc. benefit the company as a whole, at the same time the appellant reiterates the argument that the exempted units are running to their capacities. It is, but natural that, the appellant would exhaust the capacities in the exempted unit. However, I do not agree with the argument of the appellant that no benefit accrues out (of) these expenses like advertisement etc. to the exempted units. Maintaining the visibility and popularity is an essential ingredient for retaining the customer, however, exclusive they are. Hence, it is difficult to agree that no expenditure can be allocated to these units. These are general expenses which are required for running of the business in total and hence, expenses like advertisement, business promotion, etc. are correctly apportioned on turnover basis.

11.

Regarding interest charges and bank charges, even the appellant could not file the working, as suggested by the appellant even during appeal proceedings. That being the case, and considering the voluminous transaction, I agree with the findings of the AO and accordingly, even this working is confirmed.”

6.

Aggrieved by the order of the CIT(Appeals), the assessee is in appeal before us.

7.

We find that the CIT(Appeals) has upheld the allocation of common expenditure made by the AO and further he has observed that with respect to interest charges and bank charges, the assessee could not file the working even during the proceedings before him and therefore he confirmed the order of the AO on this issue.

8.

The ld. AR for the assessee appearing before us pleaded that one more opportunity be given to the assessee to present its case before the Assessing Officer. In the interest of justice, we set aside the issue of allocation of common expenditure to the units of the company including interest charges and bank charges to the file of the Assessing Officer for fresh examination, after affording reasonable opportunity of being heard to the assessee.

9.

In the result, the appeal is allowed for statistical purposes.

Pronounced in the open court on this 6th day of November, 2015.

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