Tribunal dismisses Revenue's appeals, directs A.O. to rectify double allocation of expenses.

The Tribunal dismissed Revenue's appeals due to low tax effect as per CBDT Circular No. 21 of 2015. Regarding the assessee's appeals, the Tribunal held that only expenses directly related to the undertaking should be deducted, directing the A.O. to delete the re-drawn allocations. It was found that there was a double allocation of managerial commission, leading the Tribunal to direct the A.O. to verify and rectify the computation. The assessee's appeal was allowed in part for statistical purposes.

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Issues Involved:
1. Dismissal of Revenue's Appeals due to low tax effect.
2. Allocation of Managerial Commission and Salary & Wages to Silvassa Units.
3. Double Allocation of Managerial Commission.

Detailed Analysis:

1. Dismissal of Revenue's Appeals due to Low Tax Effect:
The Revenue's appeals in ITA Nos. 1073 & 1074/Ahd/2013 for A.Ys. 2008-09 and 2009-10 were dismissed based on CBDT Circular No. 21 of 2015 dated 10.12.2015. The tax effects in these appeals were Rs. 8,55,473/- and Rs. 8,53,024/- respectively, which fall below the threshold limit specified in the circular. Therefore, both appeals were dismissed.

2. Allocation of Managerial Commission and Salary & Wages to Silvassa Units:
The common grievance in the assessee's appeals (ITA Nos. 1086 & 1087/Ahd/2013 for A.Y. 2008-09 & 2009-10) related to the allocation of Managerial Commission and salary and wages in the ratio of turnover to the Silvassa Unit-I and II. The assessee claimed deductions under Section 80IB for two units at Silvassa, while maintaining three other units at different locations. The A.O. believed that the assessee had not allocated expenses properly to its Silvassa units, thereby increasing their profits eligible for deduction under Section 80IB. The A.O. re-computed the profits of the Silvassa units by allocating various expenses, including managerial commission, foreign travel, and local expenses, among others.

The assessee contended that the Managerial Commission and salary & wages should not be allocated to the Silvassa units as these expenses were related to strategic matters and not day-to-day operations. The Tribunal agreed with the assessee, stating that only expenses with a direct nexus to the undertaking should be deducted. The Tribunal referred to various judicial decisions, including the case of CIT vs. Hindustan Lever Ltd. and Zandu Pharmaceutical Works Ltd., to support this view. Consequently, the Tribunal directed the A.O. to delete the allocations re-drawn by him.

3. Double Allocation of Managerial Commission:
The second grievance was related to the double allocation of Managerial Commission. The assessee argued that the common expenses, including managerial remuneration, had already been allocated to the profits of the Silvassa unit while computing the deduction under Section 80IB. The A.O. further allocated these expenses, leading to double allocation. The Tribunal found merit in the assessee's contention and directed the A.O. to verify the computation and decide the issue afresh.

Conclusion:
In summary, the Tribunal dismissed the Revenue's appeals due to low tax effect as per CBDT Circular No. 21 of 2015. For the assessee's appeals, the Tribunal held that only expenses with a direct nexus to the undertaking should be deducted and directed the A.O. to delete the re-drawn allocations. Additionally, the Tribunal found that there was a double allocation of managerial commission and directed the A.O. to verify and rectify the computation. The assessee's appeal was allowed in part for statistical purposes.

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