TaxTMI 
TaxTMI 
2013 (9) TMI 1114
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.... u/s.80P(2)(d) of the Act, without appreciating the fact that, assessee failed to prove direct nexus of funds for investment in share and deposit with cooperative bank." 3. Brief facts of the case are that assessee is a manufacturer of various milk products i.e. Paneer, Shrikhand, Dahi etc. since so many years and claiming deduction u/s. 80IB on undertakings of above items since its installation. The AO during the year under appeal has disallowed the deduction claimed u/s. 80IB on following grounds:- (i) As per the provisions of section 80IB of the Act, it is mandatory for the appellant to submit separate audited Profit and Loss account and Balance Sheet for each undertaking in respect of which deduction u/s 80-IB is claimed. (ii) Appellant has incurred huge loss continuously in respect of undertaking in which the appellant is not eligible for deduction u/s. 80IB of the Act. Showing huge loss in non-eligible unit is a device adopted by the appellant to avoid tax. (iii) The appellant has not produced any logical explanation for allocation of expenditure and allocated as per its convenience. 4. Before Ld. CIT(A) assessee relied on the following written submissions:- ....
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....nce with the provisions of the Act. (ii) The appellant maintains separate books of account for dairy as a whole (including Dahi, Paneer, Shrikhand & other plants) and also for cattle feed plant Cattle feed unit is physically separate unit and its books of accounts are also maintained separately. Loss shown is actual loss incurred for cattle feed plant. Cattle feed unit is established for the purpose of procuring cattle feed for animals and turns helping the farmers. (iii) The separate profit and loss account in respect of each division were worked out after allocation of common expenses on rational basis. The copy of division wise Profit and Loss account for the year is enclosed. (iv) All the products in dairy are manufactured by utilizing milk. To produce milk/curd/ cream, ghee/table butter, Amul spray, Paneer, Shrikhand etc. how much milk is utilized or how much milk can be consumed for specific product and specific quantity are fixed. This is arrived at as per past experience and on the basis of opinion of technical persons working in the project. * Similarly, expenditure like co-operative development, Salary, Machine Repairing, Insurance, Rent & Taxes, Audit ....
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....1,41,90,816 being 50% of amount claimed u/s. 80IB without reallocating the expenses or without providing any basis. (9)The appellant requests your Honour to delete the addition made by the AO as appellant has properly applied the method and basis for allocation of expenses which are consistently followed and which are accepted by the department over the years." 5. Assessee further filed following details before Ld. CIT(A) and also placed reliance on various case laws. "One of the ground of disallowance deduction u/s. 80-IB is not maintaining the separate account for each unit. In this regard appellant further submits that as per sub section 13 of section 80-IB of the Act, the provisions of section (5) and subsection (7) to (12) of the section 80-IA shall apply to the section. The subsection 13 is reproduced hereunder. "80-IB (13) : The provisions contained in sub-section (5) and subsections (7) to (12) of section 80-IA shall, so far as may be, apply to the eligible business under this section" Sub section 7 of section 80-lA deals with issue of maintenance of accounts and filing of audit report, which is re-produced hereunder: 80-IA (7): The deduction under sub-sectio....
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....of the AO that assessee has incurred huge losses in non eligible units and that the assessee has not produced any logical explanation for allocation of expenditure and allocated the same as per its convenience. The assessee's contention on the other hand has been that as far as keeping separate books of account was concerned, the assessee had filed the prescribed report in Form No. 10CCB including division-wise profit and loss account and it was sufficient to comply with the provisions of the Act. The separate profit and loss account in respect of each division were worked out after allocation of common expenses on the rational basis. The copy of division-wise profit and loss account for the year was placed on record along with basis of allocation of the expenses. The assessee had applied the same method and basis of allocation in all the previous years and the same was accepted by the revenue in assessments made u/s. 143(3) of the Act. The reliance was also placed before the lower authorities on the decision of Hon'ble ITAT in the case of Banaskantha District Co-operative Milk in 3599/Ahd/2008 for A.Y. 2005-06 wherein on identical facts it was held that even if no separate books w....
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....arties and perusing the record, we find that AO while disallowing the 50% of expenditure claimed by the assessee was of the view that interest expenses incurred by the assessee on borrowed funds might have been used for the purpose of making investment, income of which was claimed as deduction u/s. 80P(2)(d) of the Act. Before Ld. CIT(A) the assessee's submission was that they are having sufficient funds of Rs. 50.19 crore as on 31.03.2009 in the form of capital of Rs. 10.19 crore and reserve and surplus of Rs. 40 crore against which the fixed deposits with cooperative banks and societies were of Rs. 36.28 crore only. Since interest free funds were more than the investment made in such deposits with cooperative banks and since the funds were mixed funds the presumption was that the said deposits were made out of own non interest bearing funds. Reliance was also placed on the decision of Supreme Court in the case of Mungal Sales Corporation 298 ITR 298 and decision of Mumbai High Court in the case of Reliance Utilities and Power Ltd 313 ITR 340. Keeping these facts and the case laws in view, Ld. CIT(A) held that it was not required to look into the source of the funds. The plain ....