TaxTMI 
TaxTMI 
2015 (7) TMI 842
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....nd circumstances in ITA No.4664/Mum/2013 (AY 2007-08) have been taken into consideration. ITA No.4664/Mum/2013(AY 2007-08) 2. In this case, the assessee claimed deduction u/s. 10B of Rs. 1,30,10,207/- being 90% of profit of EOU (Export oriented Unit) unit at Roha, District Raigadh which has been engaged in manufacturing BTCA, a chemical used in Textile industry. The AO noted that this unit has been functioning since F.Y.1999-2000. However it was converted into EOU w.e.f. July 2005. As per the Audit report the date of commencement of production was mentioned as 07.07.2005. However, as per the letter dated 21-12-09, it has been functioning since FY 99-00.The AO further noted that another non- EOU unit has also been functioning....
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....he remand report in this respect. 4. The AO in the first remand report dated 02-08-2010, reported that the actual and specific identification of the expenses that had been shifted from 10B to non l0B units would be extremely time consuming and cumbersome. The AO reported that the addition in the assessment order was based on ratio and proportionate method. The AO,however, compared the expenses of 10B and non 10B unit to show the difference between the expenditure incurred by both the units. The AO further reported as under:- "In fact, in the submissions of the break up of the expenses given by the assesseeat the time of appellate proceedings, they have themselves admitted that only the actual expenses have been allocated and....
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.... the three remand reports given by the AO and considering the comments and explanations of the assessee in respect of remand reports, allocated certain expenses of the non-10B unit to the 10B eligible unit. He accordingly restricted the disallowance of deduction u/s.10B to the extent of Rs. 33,54,723/- and directed the AO to allow the balance amount of Rs. 1,11,01,062/- as deduction u/s.10B of the Act. The relevant part of the observations made by the ld. CIT(A) is reproduced as under: "The assessee was having one Export Oriented 10B unit and other non 10B units also. In the 10B unit, the assessee has shown profit and deduction of such profit u/s. 10B of Rs. 1,30,10,207/- has been claimed by the assessee. The AO has disallowed assess....
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.... 10B units. The assessee has explained that 10B unit and non 10B unit were manufacturing different products and the raw material for both the units were totally different. The Raw material of 10B unit could not have been used/consumed for production in non 10B unit. The assessee has explained that the actualexpenses incurred for 10B unit have been claimed to arrive at the profit of 10B unit. In the comparison of expenses, the total raw material consumption was 41.03 crore. The consumption of raw material in 10B units was 1.82 crore whereas, consumption in non 10B units was 39.21 crores. The total power 86 fuel expenses were at Rs. 8.16 crores. The allocation to 10B unit was at Rs. 20,66,114/- whereas allocation of power & fuel expenses to....
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....B units were entirely different and could not have been used in other unit and consequently there was no question of shifting of raw material expenses of 10B unit to non 10B unit and vice versa. The assessee has also explained that its consumption of raw material has been duly reported to the Excise Dept. on monthly basis and which has been supervised by the Excise Department and therefore, only the actual raw material consumption expenses have been allocated to the 10B units. Similarly, firstly, the less consumption of power & fuel were required in 10B Unit and secondly, in some months there was no production in 10B units. Consequently, the power and fuel consumption of 10B units was much lesser than non 10B units. In view of assessee'....
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....ellate proceedings, the assessee filed working/allocation of expenses and the profit of 10B unit was worked out at Rs. 1,32,52,724/- as against original profit of Rs. 1,44,55,785/-. Thus, it was noticed that the assessee has adopted different criterias for different expenses. Some of the expenses have been claimed to have been allocated on actual basis. These included salaries and selling and distribution. However, it would be more appropriate and logical if the salary and distribution expenses would have been apportioned on the basis of turnover. The allocation of other expenses was not required to be disturbed. The allocation of salary and selling and distribution expenses on turnover basis will be as under: Particulars Total Ex....