Tribunal remands issue, directs assessee to provide documents on SEZ & DTA expenses. Revenue appeal allowed for stats.

The Tribunal remanded the issue to the Assessing Officer for a fresh decision, instructing the assessee to provide all pertinent documents on expenses in SEZ and DTA units. The appeal by the revenue was allowed solely for statistical purposes.

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Issues Involved:
1. Whether the CIT(A) was justified in not sustaining the re-computation of book profit made by the Assessing Officer (AO) after bifurcating the interest expenses and other expenses between Special Economic Zone (SEZ) and Domestic Tariff Area (DTA) units.

Detailed Analysis:

1. Background and Facts:
The appeal by the revenue emanates from the order of the CIT(A)-I, Jaipur, dated 08/12/2015, for the A.Y. 2011-12. The assessee, engaged in developing, operating, and maintaining SEZ, filed a return declaring a loss of Rs. 5,01,30,620/-. However, the assessee did not choose its first year of deduction under Section 80IAB of the Income Tax Act, 1961. The assessee declared income from lease rent premium and interest income as part of its business income and showed a working of MAT computation, resulting in a loss after debiting profit from SEZ.

2. Assessing Officer’s Re-computation:
The AO noticed that the assessee did not proportionately bifurcate expenses based on turnover. The AO re-computed the book profit at Rs. 1,26,85,795/- by bifurcating interest and other expenses between SEZ and DTA units. The AO observed that it was impractical to distinguish expenses precisely between SEZ and DTA units and suggested that the only logical basis for dividing expenses was the ratio of turnover.

3. CIT(A)’s Findings:
The CIT(A) deleted the addition, holding that:
- The appellant company, a joint venture between the Rajasthan Government and Mahindra Group, filed its return declaring a loss and worked out the book profit for MAT purposes to be NIL.
- The company maintained separate accounts for SEZ and DTA, bifurcating various expenses like cost of land, development, interest, and depreciation based on separate accounts.
- The AO’s method of bifurcating expenses based on turnover led to absurd results, such as showing a profit of Rs. 1,26,85,795/- from DTA operations on revenue of Rs. 63,60,339/-.
- The company consistently followed a systematic method for bifurcating expenses using SAP software, allocating expenses to various cost centers on a predetermined and scientific basis.

4. Tribunal’s Analysis:
The Tribunal noted that:
- The assessee admitted that no separate books of account for SEZ and DTA were maintained but claimed that the accounts were maintained in a manner that revenue and expenses could be precisely determined separately.
- The Tribunal found the assessee’s claim contradictory and misleading, as the allocation of expenses between SEZ and DTA was not adequately substantiated.
- The Tribunal emphasized the obligation on the assessee to identify borrowed amounts spent on SEZ and DTA development separately, given the tax implications.

5. Tribunal’s Conclusion:
The Tribunal remanded the issue to the AO for a de novo decision, directing the assessee to produce all relevant documents and information regarding expenses incurred in SEZ and DTA units. The appeal of the revenue was allowed for statistical purposes only.

Order Pronounced:
The order was pronounced in the open court on 27/04/2017.

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