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Sintex Industries Li... v. Dcit, Range 8, Ahmed...
Factual and Procedural Background
These are cross appeals by the assessee and the revenue against the order of the Learned Commissioner of Income Tax (Appeals) XIV, Ahmedabad dated 20.09.2007 for the assessment year 2005–2006. The matters were heard together and disposed of by a common order. The assessee filed multiple grounds challenging allocations and disallowances made by the Assessing Officer and confirmed (in whole or part) by the CIT(A). The revenue filed cross-grounds challenging certain reliefs allowed by the CIT(A). The tribunal considered prior tribunal decisions in the assessee's own case for other assessment years and several authorities cited by the parties in disposing of these appeals.
Legal Issues Presented
- Whether director's remuneration, directors' traveling expenses, audit fees, computer expense and security charges (common/headquarter expenses) should be allocated to the Captive Power Plant for calculation of deduction under section 80-IA.
- Whether interest expenses should be allocated to the Daman and Baddi units, and if so, whether allocation should be in the ratio of investment (as contended by the CIT(A)) or otherwise, for calculation of deduction under section 80-IB.
- Whether salary expenses (allocations of Rs. 132.42 lakhs and Rs. 49.49 lakhs to Daman and Baddi units respectively) were correctly allocated and whether only common personnel salaries should have been considered.
- Whether administrative and general expenses (allocations of Rs. 57.93 lakhs and Rs. 21.33 lakhs to Daman and Baddi units respectively) were required to be apportioned for calculation of deduction under section 80-IB.
- Whether apportionment of the loss of the Daman unit to other units for calculating profit eligible for deduction under sections 80-IA and 80-IB was correct, or whether deductions should be computed unit-wise without adjustment for loss of other units.
- Whether disallowance under section 14A (apportionment of director's remuneration and other expenses as incurred for exempt income) was justified for assessment year 2005–2006.
- Revenue issues: correctness of the CIT(A)'s directions on (a) corporate office repairs/staff salary/general charges/miscellaneous expenses not being apportioned to the CPP unit, (b) restricting interest expenses attributable to Baddi and Daman units to specified amounts, and (c) deletion of certain section 14A disallowances.
Arguments of the Parties
Appellant (Assessee) - Principal Arguments
- Challenged allocation of common/headquarter expenses (director's remuneration, directors' travel, audit fees, computer, security) to the Captive Power Plant for 80-IA; submitted that no allocation was required.
- Contended that interest expenses should not be allocated to Daman & Baddi units for 80-IB, or if allocated, should follow the assessee's method (claimed reliance on prior tribunal decisions in the assessee's own case).
- Contended that the Assessing Officer improperly allocated total salary expenditure in the ratio of turnover to Daman & Baddi units; argued only common personnel at Headquarters should be considered and that amounts directly attributable to other units were wrongly allocated.
- Challenged allocation of administrative and general expenses to Daman & Baddi units, arguing that only corporate office general charges (as found by the AO) should be apportioned and that the CIT(A) erred in confirming a larger allocation.
- Argued that deduction under sections 80-IA/80-IB should be allowed on the basis of profit of each respective unit without making adjustments for the loss of other units, relying on the decision in CIT v. Dewan Kraft System P. Ltd. (297 ITR 305).
- Challenged disallowance under section 14A in respect of director's remuneration and other indirect expenses; relied on the Kerala High Court decision in CIT v. Catholic Syrian Bank Ltd. and the tribunal decision in ACIT v. Vepar Pvt. Ltd.
- For several issues, the assessee pointed to tribunal orders in the assessee's own case for assessment years 2003–04, 2004–05 and 2006–07 and relied on those decisions.
Respondent (Revenue) - Principal Arguments
- Supported the Assessing Officer's allocations and disallowances as upheld by the AO; sought restoration of AO's treatment where CIT(A) gave relief.
- Specifically supported allocations of corporate office repairs/staff salary/general charges and miscellaneous expenses to the CPP unit, and the higher amounts of interest expense allocated to Daman and Baddi units as determined by the AO.
- Supported the AO's disallowance under section 14A for various indirect expenses (traveling, miscellaneous, general expenses), opposing the deletion of those disallowances by the CIT(A).
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| CIT v. DCW Ltd., 132 TTJ 442 (Mum.) | Relied upon by the assessee to support allocation/ apportionment positions (assessed by the assessee in argument). | The tribunal noted the assessee relied on this decision but held it had no relevance in the present appeals because the matters were covered by the tribunal's orders in the assessee's own case for other years; therefore the court did not apply this precedent to grant relief. |
| Addl. CIT v. DCW Ltd., 132 TTJ 442 | Relied upon by the assessee (cited in support of allocation/ apportionment arguments). | The court observed that this other tribunal decision was not relevant because the issue was covered by tribunal orders in the assessee's own case; it did not follow this authority to alter the outcome. |
| CIT v. Dewan Kraft System P. Ltd., 297 ITR 305 (Delhi High Court) | Cited by the assessee to support the proposition that deduction under sections 80-IA/80-IB should be allowed on the basis of profit of the respective unit and not adjusted for losses of other units. | The court noted the assessee relied on this decision but also observed that the same point had been considered in the tribunal's earlier decision in the assessee's own case and decided against the assessee; the court respectfully followed that outcome and rejected the assessee's ground on this basis. |
| ACIT v. Vepar Pvt. Ltd., I.T.A No. 1374/Ahd/2009 dated 08.07.2011 (Tribunal) | Applied to the question of disallowance under section 14A for assessment years prior to applicability of Rule 8D; held that administrative/overhead expenses should not be disallowed under s.14A for years prior to Rule 8D and that proportionate disallowance prior to Rule 8D should be limited to interest only. | The tribunal followed ACIT v. Vepar Pvt. Ltd. and deleted the section 14A disallowance (Rs. 3,25,868/- challenged in the present appeal) because the assessment year 2005–2006 is prior to 2007–2008; the court allowed the assessee's ground on this basis. |
| Godrej Boyce & Manufacturing Co. v. DCIT, [2010] 310 ITR 81 (Bom.) | Held that Rule 8D is not applicable to assessment year 2006–2007 (as cited within the tribunal decision considered by the court). | Referenced indirectly via the Vepar tribunal decision; used as part of the chain of authority supporting the proposition that Rule 8D (and associated overhead disallowances) are not applicable to years before 2007–2008. The present tribunal followed that line of reasoning through the Vepar decision. |
| CIT v. Catholic Syrian Bank Ltd., 9 Taxman.com 148 (Kerala High Court) | Held that until Rule 8D came into force, proportionate disallowance under section 14A should be limited to interest liability and not overheads/administrative expenditure; recommended reworking by AO for years prior to Rule 8D. | The tribunal and the present court relied on this Kerala High Court decision (via the Vepar tribunal decision) to hold that the section 14A disallowance for assessment year 2005–2006 was not justified and therefore deleted the disallowance. |
Court's Reasoning and Analysis
The tribunal proceeded ground-by-ground and applied the following analytical steps, relying substantially on earlier tribunal decisions in the assessee's own case and cited authorities where relevant:
- For several allocation issues (director's remuneration, directors' travel, audit fees, computer expense, security charges; salary allocations; administrative and general expenses), the tribunal observed that these matters were already adjudicated against the assessee in tribunal orders in the assessee's own case for earlier and later assessment years (notably assessment years 2003–04, 2004–05 and 2006–07). Because the issue was “covered against the assessee by the tribunal order in assessee's own case,” the tribunal declined to take a contrary view and rejected the assessee's corresponding grounds. The court repeatedly held that other tribunal decisions cited by the assessee (for example DCW Ltd.) were not relevant where the assessee's own-case tribunal decisions controlled.
- On the allocation of interest expenses to Daman and Baddi units (ground No. 3 of the assessee and revenue ground No. 2), the tribunal noted that, in the assessee's own case for assessment year 2006–2007, the tribunal had held that interest expenditure has to be allocated on the basis of investment in respective units (and not in the ratio of turnover). The CIT(A) had followed that approach. Thus, the tribunal found no error in the CIT(A)'s decision to allocate interest in the ratio of investment and rejected the revenue's challenge to the extent it sought to overturn that allocation.
- On the apportionment of the loss of the Daman unit (ground No. 6), the assessee relied on the Delhi High Court decision in CIT v. Dewan Kraft System P. Ltd. The tribunal observed that the same contention had been advanced in the assessee's own case for assessment year 2006–2007 and was decided against the assessee after considering that High Court judgment. Therefore, the tribunal respectfully followed the prior outcome and rejected the assessee's ground.
- On the section 14A disallowance (ground No. 7 of the assessee), the tribunal reviewed the authority in ACIT v. Vepar Pvt. Ltd., which itself relied on the Kerala High Court decision in CIT v. Catholic Syrian Bank Ltd. and the Bombay High Court decision in Godrej Boyce. The Vepar tribunal concluded that for assessment years prior to 2007–2008 (i.e., before Rule 8D came into force) administrative and overhead expenses should not be disallowed under section 14A and that proportionate disallowance should be limited to interest only. Because the present assessment year (2005–2006) is prior to 2007–2008 and the facts were similar, the tribunal followed Vepar and deleted the AO's section 14A disallowance of Rs. 3,25,868/-.
- In the revenue appeal, the tribunal accepted the CIT(A)'s view on the interest allocation (confirming CIT(A) on ground No. 2 of the revenue) because it conformed with the tribunal's own prior decision in the assessee's case; conversely, the tribunal allowed the revenue's ground challenging CIT(A)'s disallowance of certain corporate office expenses (reinstating the AO's order) where that issue was related to the assessee's ground which was covered against the assessee by the tribunal's own decision for assessment year 2006–2007.
- Where the CIT(A) had deleted part or all of the AO's disallowance under section 14A, the tribunal declined to interfere with that deletion because it followed the line of authority limiting s.14A disallowance for years prior to Rule 8D.
Holding and Implications
Holding: In the combined result, the appeals of the assessee and the revenue are partly allowed.
Direct consequences (as reflected in the order):
- Assessee's appeals: Mostly rejected on allocation and apportionment grounds because those issues were covered against the assessee by tribunal orders in the assessee's own case for other assessment years. However, the tribunal allowed the assessee's ground on section 14A (ground No. 7) and deleted the AO's disallowance of Rs. 3,25,868/- for assessment year 2005–2006, following the Vepar tribunal decision and Kerala High Court reasoning that administrative/overhead disallowance under s.14A is not justified for years prior to Rule 8D.
- Revenue's appeal: Partly allowed. The tribunal restored the AO's order on the corporate office expenses issue (reversing the CIT(A)) where that matter related to an issue already covered against the assessee by the tribunal's decision for assessment year 2006–2007. The tribunal rejected the revenue's challenge regarding interest allocation (confirmed CIT(A) which allocated interest in the ratio of investment) and rejected the revenue's challenge relating to section 14A where CIT(A) had deleted the disallowance.
Implications for precedent: The tribunal primarily followed prior tribunal decisions in the assessee's own case and relied on the Vepar tribunal decision and Kerala High Court authority concerning section 14A for years prior to the applicability of Rule 8D. The order does not purport to set a new legal precedent but applies and follows existing tribunal and High Court decisions to the facts before it.
Shri A.K Garodia, A.M:— These are cross appeals preferred by the assessee and the revenue which are directed against the order of Ld. CIT(A) XIV, Ahmedabad dated 20.09.2007 for the assessment year 2005–2006. Both these appeals were heard together and are being disposed of by this common order for the sake of convenience.
2. First, we take up the appeal of the assessee in I.T.A No. 4352.Ahd/2007:—
3. The ground No. 1 is general.
4. Ground No. 2 is as under:
“2 The learned Commissioner of Income Tax (Appeals) has erred in confirming allocation of director's remuneration, directors' traveling expenses, audit fees, computer expense and security charges for calculating profit eligible for deduction u/s. 80-IA. In the facts and circumstances, no common head quarter expenses were required to be allocated to Captive Power Plant for calculating profit eligible for deduction u/s. 80-IA. It is submitted that it be so held now.”
5. It was fairly conceded by the Ld. A.R that this issue is covered against the assessee by the tribunal order in assessee's own case for the assessment year 2004–2005 and also by the tribunal order in assessee's own case for the assessment year 2006–2007 in I.T.A No. 4091.Ahd/2008 and 213.Ahd/2009 dated 25.11.2011 He submitted a copy of this tribunal order. He has submitted that as per para 6 of this tribunal order in assessment year 2006–2007, similar issue was decided against the assessee by following tribunal order in assessee's own case for the assessment year 2004–2005 but still he placed reliance on the tribunal order rendered in the case of CIT v. DCW Ltd., 132 TTJ 442 (Mum.).
6. Ld. D.R of the revenue supported the orders of authorities below.
7. We have considered the rival submissions, perused the material on record and have gone through the orders of authorities below. Since, admittedly, this issue is covered against the assessee by the tribunal order in assessee's own case for the earlier and later years, we do not find any reason to interfere in the order of Ld. by taking a contrary view. Other tribunal order cited has no relevance since the matter is covered by tribunal order in assessee's own case. This ground of the assessee is rejected.
8. Ground No. 3 of the assessee's appeals is as under:
“3 The learned Commissioner of Income Tax (Appeals) erred in confirming allocation of interest expenses to Daman unit & Baddi unit in the ratio of investment for calculating profit eligible for deduction u/s. 80-IB. In the facts and circumstances, no interest expenditure is required to be allocated to Daman & Baddi units for calculating profit eligible for deduction u/s. 80-IB. It is submitted that it be so held now.”
9. Regarding this issue, it was submitted by the Ld. A.R that this issue is covered in favour of the assessee by the same tribunal order in assessee's own case for the assessment year 2004–2005. He drawn our attention to para 7 on page 4 of this tribunal order.
10. Ld. D.R of the revenue supported the orders of authorities below.
11. We have considered the rival submissions, perused the material on record and have gone through the orders of authorities below and the tribunal decision in assessee's own case for the assessment year 2006–2007. We find that in that year, it was held by the Tribunal that by following earlier tribunal order in assessment year 2004–2005 and 2003–2004, the interest expenditure has to be allocated on the basis of investment in the respective units and not in the ratio of the turnover. Ld. CIT(A) had decided this issue on this basis that the interest expenditure has to be allocated in the ratio of investment. Hence, we find that relief as per the tribunal order has already been allowed by Ld. CIT(A) and hence, there is no merit in this ground No. 3 raised by the assessee. This ground is also rejected.
12. Ground No. 4 is as under:
“4. The learned Commissioner of Income Tax (Appeals) has erred in confirming addition on account of allocation of salary expenses amounting to Rs. 132.42 Lacs & 49.49 Lacs for Daman & Baddi unit respectively. In the facts and circumstances, the allocation made by the appellant was reasonable and justifiable and do not call any additional allocation thereto. It is submitted that it be so held now.
4.1 The Commissioner of Income Tax (Appeals) has erred in confirming the addition based on total salary expenditure of the company instead of considering only salaries of common personnel stationed at Headquarters in Kalol. In view of the fact that the appellant had already apportioned such common salaries while calculating deduction u/s. 80IB in the ratio of sales, no addition ought to have been made.
4.2 The Commissioner of Income Tax (Appeals) has erred in confirming addition of allocation of salary expense, which is directly attributable to units other than Daman & Baddi. The amount allocated by the Assessing Officer represents salary expenses, directly attributable to units other than Daman & Baddi and therefore no addition ought to have been made.
4.3 The learned Commissioner of Income Tax (Appeals) has erred in confirming addition of Rs. 132.42 Lacs & 49.49 Lacs towards allocation of salary expenses for Daman & Baddi unit respectively. In the facts and circumstances, the addition ought to have been made only for the amount in excess of allocation already made by the assessee. It is submitted that it be so held now.”
13. It is submitted by the Ld. A.R that the A.O has allocated the entire salary expenditure in the ratio of the turnover to the Daman & Baddi Units. He also submitted that broadly this issue is decided against the assessee by the Tribunal order in the assessee's own case for the assessment year 2004–2005. But still he placed reliance on the tribunal order rendered in the case of Addl. CIT v. DCW Ltd. as reported in 132 TTJ 442. Ld. D.R supported the orders of authorities below.
14. We have considered the rival submissions and we find that since it is admitted position that this issue is covered against the assessee by the tribunal order in the assessee's own case for the assessment year 2004–2005, there is no merit in these grounds of the assessee and hence, these grounds are also rejected. Other tribunal order cited has no relevance since the matter is covered by tribunal order in assessee's own case.
15. Ground no. 5 is as under:
“5. The learned Assessing Officer has erred in allocating administrative and general expenses amounting to Rs. 57.93 Lacs & Rs. 21.33 Lacs for Daman & Baddi unit respectively for calculating profit eligible for deduction u/s. 80-IB. In the facts and circumstances, no allocation is required to be made for administrative and general expenses for calculating profit eligible for deduction u/s. 80-IB. It is submitted that it be so held now.
5.1 The Commissioner of Income Tax (Appeals) has erred in confirming the addition based on total general charges of the company instead of considering only common general charges incurred at Headquarters in Kalol. In view of the fact that the appellant had already apportioned such general charges while calculating deduction u/s. 80IB in the ratio of sales, no addition ought to have been made.
5.2 The Commissioner of Income Tax (Appeals) has erred in confirming addition of allocation of general charges, which is directly attributable to units other than Daman & Baddi. The amount allocated by the Assessing Officer represents general charges, directly attributable to units other than Daman & Baddi and therefore no addition ought to have been made.
5.3 The Commissioner of Income Tax (Appeals) has erred in confirming allocation of Rs. 1316.64 Lacs in sales ratio whereas the Assessing Officer himself has given a finding that general charges of Corporate office is only Rs. 159.22 Lacs. In any event, allocation of only general charges of Corporate office only should be made. It is submitted that it be held now.
5.4 The learned Commissioner of Income Tax (Appeals) has erred in confirming addition of Rs. 57.93 Lacs & Rs. 21.33 Lacs for Daman & Baddi unit respectively towards allocation of salary expenses for Daman & Baddi unit respectively. In the facts and circumstances, the addition ought to have been made only for the amount in excess of allocation already made by the assessee. It is submitted that it be so held now.”
16. It was fairly conceded by the Ld. A.R that this issue is covered against the assessee by the tribunal order in assessee's own case for the assessment year 2006–2007 and in this regard, he drawn our attention to para 8 on page 4 of the tribunal order. For this ground also, he placed reliance on the decision of the tribunal rendered in the case of DCW Ltd. (supra). Ld. D.R supported the orders of authorities below.
17. We have considered the rival submissions, perused the material on record and have gone through the orders of authorities below and the tribunal decision in assessee's own case of the assessment year 2006–2007. Admittedly, this issue is covered against the assessee by the tribunal order in assessment year 2006–2007 in assessee's own case and hence, there is no merit in these grounds raised by the assessee. Accordingly, all these grounds of the assessee are rejected. Other tribunal order cited has no relevance since the matter is covered by tribunal order in assessee's own case.
18. Ground No. 6 of the appeal is as under:
“6 The learned Commissioner of Income Tax (Appeals) has erred in confirming apportionment of the loss of Daman unit to other units for calculating profit eligible for deduction u/s. 80-IA & 80-IB. It is submitted that deduction u/s. 80-IA or 80-IB is required to be allowed on the basis of profit of the respective unit and without making any adjustment on account of loss of other units. It be so held now.”
19. It was fairly conceded by the Ld. A.R that this issue is also covered against the assessee by the same Tribunal order in assessee's own case for the assessment year 2006–2007. He drawn our attention to para 13 page 7 of this tribunal order. He placed reliance on the decision of Hon'ble Delhi High Court rendered in the case of CIT v. Dewan Kraft System P. Ltd. as reported in 297 ITR 305. Ld. D.R supported the orders of authorities below.
20. We have considered the rival submissions, perused the material on record and have gone through the orders of authorities below and the tribunal order in the assessee's own case for the assessment year 2006–2007 and the judgment of Hon'ble Delhi High Court cited by the Ld. A.R We find that in assessment year 2006–2007 also, reliance was placed by the Ld. A.R on this very judgment of Hon'ble Delhi High Court and the issue was decided against the assessee after considering this judgment of Hon'ble Delhi high Court and hence, in the present year also, there is no reason to take a contrary view and hence, this ground of the assessee is also rejected by respectfully following the precedent.
21. Ground No. 7 of the assessee's appeal is as under:
“7. The learned Assessing Officer has erred in confirming disallowance u/s. 14A in respect of apportionment of director's remuneration, as having been incurred for the purpose of income exempt from tax. It is submitted that, in the facts and circumstances, no disallowance u/s. 14A is required to be made. It is submitted that it be so held now.”
22. It was submitted by the Ld. A.R that in assessment year 2006–2007, this issue was not pressed by the assessee as the amount involved was small. For the current year, reliance was placed by him on the judgment of Hon'ble Kerala High Court rendered in the case of CIT v. Catholic Syrian Bank Ltd. as reported in 9 Taxman. com 148 (Kerala). He also placed reliance on the tribunal decision rendered in the case of ACIT v. Vepar Pvt. Ltd. in I.T.A No. 1374.Ahd/2009 dated 08.07.2011 Ld. D.R supported the orders of authorities below.
23. We have considered the rival submissions, perused the material on record and have gone through the orders of authorities below. In the present case, the A.O has made disallowance of Rs. 3,25,868/- u/s 14A in respect of various indirect expenses incurred by the assessee such as directors' remuneration, traveling expenses etc. On this similar issue, the tribunal in the case of ACIT v. Vepar Pvt. Ltd. (supra) has decided the issue in favour of the assessee by observing as under in para 12 of this tribunal order which is reproduced below.:—
“12. Having heard both the sides, we have carefully gone through the orders of the authorities below. In the assessment order, the AO disallowed Rs. 2,38,430/-, being 5% of total expenditure of Rs. 47,68,5967-. In the impugned order, the Id. CIT(A) restricted this disallowance to 3%. Recently, the Hon'ble Bombay High Court in the case of Godrej Boyce & Manufacturing Co. v. DCIT reported in [2010] 310 ITR 81 (Bom.) held that Rule 8D is not applicable to the assessment year 2006–2007. Apart from this, there are various decisions, which have held that if department does not find any nexus between expenditure sought to be disallowed and activity of producing tax exempt income, no disallowance can be made under section 14A. Recently, the Hon'ble High Court of Kerala, vide judgement dated 21.10.2010, in I.T Appeal No. 467 & Ors. of 2010 in the case of CIT v. Catholic Syrian Bank Ltd., Trissur, held as under:
“6. So far as the disallowance of administrative expenditure is concerned, we feel considering the fact that there is no precise formula for proportionate disallowance, no disallowance is called for, for proportionate administrative cost attributable to earning of lax free income until Rule 8D came into force. We, therefore, dispose of the appeals by setting aside the orders of the Tribunal and that of the first appellate authority on this issue and remand all the assessments back to the Assessing Officer for reworking disallowance under Section 14A in the case of each assessee for each assessment year. The proportionate disallowance under Section 14A should be limited to only interest liability and not overheads or administrative expenditure; which should be considered for disallowance under Rule 8D from 2007–2008 onwards.”
The assessment year involved in the present appeal is 2006–2007. We, therefore, following the decision of the Hon'ble Kerala High Court, hold that no disallowance can be made prior to 2007–2008. Hence, the disallowance of Rs. 2,38,430/- made by the AO is deleted.”
24. In the present case also, facts are similar and the assessment year involved is previous to assessment year 2007–2008 being assessment year 2005–2006, and hence, in the present case also, as per this tribunal decision, disallowance made by the A.O is not justified and hence, we delete the same by respectfully following this tribunal order. This ground of the assessee is allowed.
25. Ground No. 8 is regarding interest which is a consequential issue.
26. In the result, appeal of the assessee is partly allowed.
27. Now, we take up the revenue's appeal in I.T.A No. 4357.Ahd/2007:
28. Ground No. 1 is as under:—
“The Id, Commissioner of Income-tax (A)-XIV, Ahmedabad has erred in law and on facts in holding that the expenses towards repairs as also staff salary of corporate office, general charges of corporate office and miscellaneous expenses which are incurred not for this CPP Unit and hence the same cannot be apportioned thereby the assessee got relief of Rs. 22.81 lacs.”
29. Ld. D.R supported the assessment order whereas it is submitted by the Ld. A.R that his issue is related to ground No. 2 of the assessee's appeal and the matter involved is covered against the assessee by the tribunal order in assessee's own case for the assessment year 2006–2007. Accordingly, this ground of the revenue is allowed. Order of Ld CIT(A) on this issue is reversed and that of the A.O is restored.
30. Ground No. 2 is a under:
“The Id. Commissioner of Income-tax (A)-XIV, Ahmedabad has erred in law and on facts in directing the Assessing Officer to restrict the interest expenses attributable to Baddi Unit to Rs. 10.14 lacs as against Rs. 40.26 lacs and for Daman Unit to Rs. 20.91 lacs as against Rs. 110.47 lacs adopted by the Assessing Officer and to recalculate the deduction under section 80IB of the Act accordingly.”
31. Ld. D.R supported the assessment order whereas Ld. A.R supported the order of Ld. CIT(A). He further submitted that this issue is covered in favour of the assessee by the tribunal order in assessee's own case for the assessment year 2006–2007 and the relevant para is para 19 page 8 of this tribunal order. We find that in that year, it was held by the Tribunal that interest expenditure to Baddi and Daman units should be allocated in the ratio of investment instead of turnover for allowing deduction u/s 80-IB of the Income tax Act, 1961. Since the order of Ld. CIT(A) is in line with this tribunal order, we confirm the same. This ground of the revenue is rejected.
32. Ground No. 3 is as under:
“The Id. Commissioner of Income-tax (A)-XIV, Ahmedabad has erred in law and on facts in directing the Assessing Officer not to take into account the traveling expenses, miscellaneous expenses and general expenses are in the nature of indirect expenses and it should not be apportioned to calculate disallowance under section 14A of the Act there by the assessee got relief of Rs. 2,85,436/-.
On the facts and in the circumstances of the case, the Id. Commissioner of Income-tax (A)-XIV, Ahmedabad ought to have upheld the order of the Assessing Officer.
It is therefore, prayed that the order of the Id. Commissioner of Income-tax (A)-XIV, Ahmedabad may be set-aside and that of the Assessing Officer be restored.”
33. Ld. D.R supported the assessment order whereas the Ld. A.R submitted that this ground is related to ground No. 7 of the assessee's appeal. Since, we have deleted the disallowance confirmed by the Ld. CIT(A), no interference is called for in the order of Ld. CIT(A) on this part also as per which he has deleted the part disallowance. This ground of the revenue is also rejected.
34. Grounds No. 4 & 5 of the revenue's appeal are general grounds and no separate adjudication is called for.
35. In the result, appeal of the revenue is partly allowed.
36. In the combined result, the appeal of the assessee and the revenue are partly allowed.
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