AI Drafter 
TaxTMI 
TaxTMI 
2016 (5) TMI 790
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.... and is in the business of manufacturing and trading in electronic components and goods. It manufactures, monitors, DVDs and other electronic items for LG and Set up boxes for Tatasky. The assessee has two manufacturing units, one at Greater Noida and the other at Rurdrapur, Uttaranchal. The assessee claimed deduction u/s 80IC in respect of Rudrapur Unit. It filed its return of income declaring net taxable income of Rs. 12,09,55,320/- on 29.9.2008. The AO completed assessment u/s 143(3) read with section 92CA(3) of IT Act 1961 (herein referred to Act) determining the total income at Rs. 13,36,35,770/- interalia disallowing an amount of Rs. 34,470/- u/s 14A and restricting the assessee's claim for deduction u/s 80IC to Rs. 2,57,263/- and mak....
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....enses are prior period expense are unjust, illegal and cannot be justified by any material on record. 7. That the AO erred in law and on facts in reducing the deduction Rs. 87,70,981/- u/s 80lC by reallocation of expenses and the CIT( A) erred in the upholding the same. 8. That in view of facts and circumstance, the CIT(A) erred on facts and in law in upholding the method adopted by the AO to reallocate the expenses and has failed to appreciate that the appellant has enough capital of its own. 9. The additions / disallowances made are unjust, unlawful, without jurisdiction and are also highly excessive. The income has been wrongly & illegally computed at Rs. 13,36,35,770/- as against income declared at Rs. 12,09,5....
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....levant assessment year and since the genuineness of the expenditure incurred by the assessee was not in doubt, no disallowance could be made under section 14A." 7. Respectfully following the same we allow ground No. 3. 8. Ground No. 4 is against the disallowance made by invoking section 40(a)(ia) of the Act . The assessee relies on the decision of Hon'ble Jurisdictional High Court in the case of 377 ITR 635 (Del) and submits that the second proviso to section 40(a)(ia), which was brought out by the Finance Act 2012 w.e.f 1.4.2013, was held as having retrospective operation and as a payee i.e Yash Raj Films and Saregama India P. Ltd. had filed their returns and paid taxes, no disallowance can be made u/s 40(a)(ia). On a query from the ....
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....d as follows :- a) Books of accounts are rejected without pointing out any defects, which act is bad in law. b) The explanation given by the assessee that insurance charges, bank charges and interest have been correctly allocated between the unit at Greater Noida and the unit at Rudrapur has been arbitrarily rejected by the revenue authorities. c) The assessee prepared unit wise working capital requirement and that these demonstrates as follows : "The working capital requirement at Noida as on 31.3.2008 was Rs. 28.23 crores and the fixed assets stood at Rs. 21.57 crores, totaling upto Rs. 49.80 crores. The reserves/profits as on 31.3.2008 at Noida stood at Rs. 26.57 crores and the credit facilities stood ....
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....t expenses pertaining to each unit are booked accordingly. There is no separate head office or corporate office of the assessee where expenses need to be bifurcated between units. The company is a private limited entity with limited -corporate overheads, hence, there is no need for bifurcation of expenses other than managing directors remuneration, his travel expenses and statutory audit fees, which have already been allocated. d) That the profit declared in the Greater Noida Unit was 6.30% of turn over and whereas the profit declared at Rudrapur Unit which is exempt was only 1.80% of turnover and hence the allegation of diversion of profits is factually incorrect. e) That the findings of the Ld. CIT(A) that the a....
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....de by the assessee between these two units. The assessee has made the allocation on in question in this year on the same basis. The books of account have been rejected by the AO without pointing out any defects. Books of account cannot be rejected first because the AO is not satisfied with the defects of expenses made by the assesee between the units. He has to point out as to what is wrong with the books of accounts. Such rejection is bad in law. Moreover in this case the assessee has made detailed submissions with facts and figures on the issue of allocation of expenses being insurance charges, bank charges and interest. These factual submissions have not been controverted by the AO or the Ld. CIT(A). The AO at page 5 records that the ass....