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Income Tax Appellate Tribunal, “C” BENCH, CHENNAI
Before: SHRI B.R. BASKARAN & SHRI VIKAS AWASTHY
आदेश /O R D E R
PER B.R. BASKARAN, ACCOUNTANT MEMBER:
The assessee has filed this appeal challenging the order dated 31.12.2013, passed by Ld. Commissioner of Income Tax (Appeals)-III, Chennai and it relates to assessment year 2008-09.
The assessee is aggrieved by the decision of Ld. CIT(Appeals) with regard to apportionment of common expenses between two business activities carried on by it.
The Ld.counsel appearing for the assessee submitted that the assessee is carrying on two types of business activities, namely, web portal business and manufacturing and sale of ATM machines.
He submitted that, during the year under consideration, the assessee did not start the business of manufacturing and sale of ATM machines. Hence, during the course of assessment proceedings, the assessee agreed for apportionment of common expenses at the rate of 1/3rd towards the web portal business and 2/3rd towards ATM business and accordingly, it agreed for disallowance of expenses relating to ATM business. However, the Assessing Officer has considered following expenses also as common expenditure and accordingly disallowed 2/3rd of the same:- a) Manufacturing expenses : ` 5,60,403 b) Repairs & Maintenance : ` 7,23,779 ` c) Marketing expenses : 1,12,060 ` d) Depreciation : 25,93,943 e) Employee expenses (Part) : ` 1,05,24,637
The Ld. CIT(Appeals) has confirmed the disallowance on the reasoning that the assessee had agreed to the addition. The Ld.counsel submitted that the assessee had agreed for apportionment of common expenses and disallowance of expenses relating to ATM business. However, the above said expenses cannot be considered as common expenses and hence, the acceptance of the assessee would not cover the above expenses. and maintenance expenses and marketing expenses were exclusively incurred for the purpose of web portal business. He further submitted that the depreciation relating to assets pertaining to web portal business can be exactly determined. He submitted that the employee expenses can also be determined in similar manner and hence the ratio of 1:3 need not be applied for depreciation and employee expenses. Accordingly, he prayed that this issue can be restored to the file of the Assessing Officer for examining the same afresh.
The Ld. D.R. did not object for the factual details submitted by the Ld.counsel.
Having heard the rival contentions, we are of the view that there is a merit in the submissions of Ld.counsel. As contended by him, the acceptance of the assessee before the Assessing Officer pertained to common expenses which he cannot identify with a particular business of the assessee. The contention of the assessee is that the manufacturing expenses, repairs and maintenance expenses and marketing expenses are fully related to web portal business. With regard to depreciation and employee expenses, the contention of the Ld.counsel is that there is no need
4 to make apportionment but related expenses can be ascertained. We agree with the said submissions of the Ld.counsel. However, the claim of the assessee requires examination at the end of the Assessing Officer. Accordingly, we set aside the order of the Ld. CIT(Appeals) on this issue and restore the matter to the file of the Assessing Officer with the direction to examine this issue afresh by duly considering the information and expenses of the assessee and take appropriate decision in accordance with law after giving reasonable opportunity of being heard to the assessee.
In the result, the appeal filed by the assessee is treated as allowed for statistical purposes.
Order pronounced in the open court after conclusion of hearing on the 21st day of January, 2015 at Chennai.