DCIT, CIRCLE -8, KOLKATA, KOLKATA vs. M/S SICPA INDIA PVT. LTD., KOLKATA

The assessee in the present case is a Company, which is engaged in the business of manufacturing and trading of printing ink. The return of income for the year under consideration was filed by it on 28.11.2006 ./2012 Assessment year: 2006-2007 Page 2 of 3 declaring total income of Rs.8,13,39,293/-. In the said return, deduction in respect of profit of Sikkim Unit amounting to Rs.12,40,37,788/- was claimed by the assessee under section 80IC of the Act. During the course of assessment proceedings, it was noticed by the Assessing Officer that the assessee has not allocated some of the indirect expenses, such as salary of Staff at Head Office, Director’s remuneration, bonus, interest, depreciation on vehicles, etc. to the Sikkim Unit while calculating the profit of the said Unit eligible for deduction under section 80IC. He, therefore, worked out such expenses allocable to the Sikkim Unit at Rs.44,16,463/- and restricted the claim of the assesese for deduction under section 80IC of Rs.12,40,37,788/- to Rs.11,96,21,325/-.

On appeal, the ld. CIT(Appeals) did not agree with the Assessing Officer and allowed the claim of the assesese for deduction under section 80IC at Rs.12,40,37,788/- observing that no indirect expenses could be allocated for the purpose of computing deduction under section 80IC as the same were not directly attributable to the eligible Sikkim Unit. Aggrieved by the order of the ld. CIT(Appeals), the Revenue has preferred this appeal before the Tribunal.

We have heard the arguments of both the sides and also perused the relevant material available on record. Although the ld. D.R. has contended that the profit eligible for deduction under section 80IC is to be worked out after deducting all the direct and indirect expenses, the deduction under section 80IC, as pointed out by the ld. Counsel for the assessee, is in respect of any profit and gains derived by the eligible Undertaking. As submitted by the ld. Counsel for the assesese in this regard, the words “derived from” has a narrow meaning, inasmuch as it contemplates first degree connection with the eligible Unit as held, inter alia, by the Hon’ble Supreme Court in the case of Pandian Chemicals Limited reported in 262 ITR 278 and this principle laid down by the Hon’ble Supreme Court in the context of income is also applicable for the allocation of expenses as held by the Coordinate Bench of this Tribunal in the case of Balarampur Chini ./2012 Assessment year: 2006-2007 Page 3 of 3 Mills Limited –vs.- DCIT reported in 140 TTJ 73. In the said case, it was held by the Tribunal that expenses incurred by the assesese under the general head of Office Expenses, which are not directly incurred for the eligible Unit, cannot be said to have first degree connection with such Unit so as to reduce the same on pro rata basis for computing the profit of such Unit eligible for deduction. In our opinion, the issue involved in the present case thus is squarely covered by the decision of the Coordinate Bench of this Tribunal in the case of Balarampur Chini Mills Limited (supra) and respectfully following the same, we uphold the impugned order of the ld. CIT(Appeals) giving relief to the assessee on this issue.

In the result, the appeal of the Revenue is dismissed.