TaxTMI 
TaxTMI 
2017 (11) TMI 57
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....als) has failed to appreciate that once there are separate books of accounts maintained for each of the units and no defect was pointed out in such books of accounts, the conclusion to reduce the eligible profits for claim of deduction on account of alleged common expenses is incorrect and unsustainable. 2. That without prejudice the learned Commissioner of Income Tax (Appeals) has failed to appreciate that the method adopted by the learned Deputy Commissioner of Income Tax to allocate the alleged expenses on turnover basis instead of order basis is not justified and thus, untenable. It is therefore prayed that disallowance made and sustained of Rs. 46,62,180/- may kindly be deleted and appeal of the appellant company be allowed." 2 In ITA No. 2239/D/2013, the Revenue has raised following grounds of appeal: "1. The learned CIT(A) has erred in law and on facts in holding that the 4th proviso to section B of the Act is merely directory and not mandatory by ignoring the fact that his proviso was inserted as an amendment with specific legislative intent. 2. The ld. CIT(A) has erred in law and on facts in allowing deduction u/s 10B of the Act where....
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....tory and since assessee had no reasonable cause for delay in filing of return, claim of deduction ought to have been disallowed. 6 The CIT(A) while allowing the claim of deduction has held as under: "The assessment records and the order sheet entries gave no indication of any query being raised by the AO regarding the belated filing of return. From the evidence available the return of income must have been either filed on 30.09.2009 or on 01.10.2009 as the date of filing reflected in the efiling receipts is 01.10.2009. the possibility of any computer hitch happening around the midnight of 30.09.2009 cannot be ruled out completely. The likelihood of computer accepting the return filed by the appellant after midnight of 30.09.2009 and therefore giving the acknowledgement date as 01.10.2009 cannot be ruled out. There is nothing on record to indicate the time when the appellant started entering the details regarding the return of income in the department's computer system and at what time this process was actually completed. The provisions relating to the filling of return envisages manual filing of return which usually corresponds with officer hours while e-filing can take....
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....above submission, disallowance made is upheld and, ground raised is allowed. ITA No. 1790/DEL/2013 (Assessee's appeal) 10. Now we take up assessee's appeal. All the grounds raised relate to the disallowance sustained by the CIT(A) u/s 10B of the Act. The factual matrix of the case is that AO has held that alternatively deduction u/s 10B is to be restricted by Rs. 98,75,934/-. The aforesaid figure was arrived by allocating common expenditure on turnover basis to the eligible unit. The CIT(A) has restricted the aforesaid allocation to Rs. 46,62,180/- for which the assessee is in appeal before us and there is no appeal by the revenue against the relief granted of Rs. 52,13,754. 11. The CIT(A) while approving the allocation has relied on the provisions contained in section 80IA(10) of the Act. He has held as under: "Even if 801A(8) is not applicable, 80A(10) is clearly applicable in this case in view of 10B (7) and the relevant provisions of section 80A (10) is as follows: Where it appears to the AO that, owing to the close connection between the assessee carrying on the eligible business to which this section applies and any other person, or for any other re....
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....tion provides as under: "(10) Where it appears to the Assessing Officer that, owing to the close connection between the assessee carrying on the eligible business to which this section applies and any other person, or for any other reason, the course of business between them is so arranged that the business transacted between them produces to the assessee more than the ordinary profits which might be expected to arise in such eligible business, the Assessing Officer shall, in computing the profits and gains of such eligible business for the purposes of the deduction under this section, take the amount of profits as may be reasonably deemed to have been derived therefrom." 15. The perusal of the aforesaid said section shows that same it comes into application only where there is any satisfaction of the Assessing Officer that owing to the close connection between the assessee carrying on the eligible business and any other person or for any other reason the course between there is so arranged that business transacted produces more than ordinary profits. In other words the statutory and mandatory precondition for invoking section 80IA(10) of the Act is that there must be t....
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....wledge the complexity of the exercise. 9. It is not in every case that the CIT (A) has to ask for a remand report from the AO to make up for what was missed to be done in the first place by the AO. In the circumstances, the CIT (A) and the ITAT cannot be faulted for not undertaking themselves the required exercise under Section 80-I (10) of the Act." 17. Also the Chandigarh Bench of Tribunal in the case of ITO v. Gilvert Ispat ITA No. 1303/Chd/2012 has specifically held that section 80IA(10) of the Act has no application viz-a-viz allocation of common expenses. It has been held as under: "7 After considering the rival submissions we find that identical issue came up for consideration of the Tribunal for Assessment year 2007-08 and the same was decided against the revenue vide para 5 which reads as under: "5 We find that similar issue arose before the Chandigarh Tribunal in the case of M/s Navkar Polyplast Company v. ITO in ITA No. 953/Chd/2009 order dated 9.4.2010, relating to Assessment year 2004-05, wherein the Tribunal in turn relying on its earlier order in the case of ITO v. A.K. Impex in ITA No. 766/Chandi/2009 relating to assessment year 2004-05....
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....ween them produces to the assessee more than the ordinary profits. In the present case, the charge of Assessing Officer is that the assessee has not debited any expenditure on remuneration to its partners and interest on partners' capital contribution and therefore, such arrangement between the assessee and its partners have resulted in more than ordinary profits to the assessee. In so far as the first condition is concerned, regarding close connection ostensibly, the same stands fulfilled as the assessee and its partners can be said to have a close connection. The moot question is as to whether there can be said to be an arrangement of transaction of business between the assessee and its partners whereby the assessee earned more than the ordinary profits. A related question is as to whether payment of remuneration and interest on capital contribution to the partners can be said to be an activity falling within the scope of the expression "business transacted between them". In our view, the meaning of expression "business transacted between them" appearing in section 80IA(10) only refers to such transactions which relate to the trading activity of the assessee. Viewed in this l....
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....ecide this issue against the Revenue." 18 Furthermore, the Hon'ble Jurisdictional High Court in the case of CIT v. Delhi Press Patra Prakashan 355 ITR 1has held as under: "26. In the present case, there is no material to support the view that the job work charges charged by Unit No.4 from Unit No.1 were not at market rates. We are agreement with the view taken by the Tribunal that in absence of any defect or manipulation found by the Assessing Officer in the books maintained for Unit No.4 and in absence of any material to indicate that the amount charged by Unit No.4 from Unit No.1 was not at comparable market rates, it would not be open for the revenue to disregard the profits of Unit No.4 as disclosed by the assessee only on the basis that the profits were significantly higher than profits earned by the assessee from other undertakings." 19 Likewise the Hon'ble Allahabad High Court in the case of CIT v. Translam Ltd. 231 Taxman 901 following the above decision has held as under: "10. On the similar analogy, the Hon'ble Apex Court in the case of Arisudana Spinning Mills Ltd. v. CIT [2012] 348 ITR 385/210 Taxman 233/26 taxmann.com 39 held that benefi....
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....units on the basis of turnover. The sales including job work of taxable units is Rs. 83,45,26,173/- and that of the exempted units is Rs. 54,88,14,641/-. The AO disallowed the salary allocable to exempt units of Rs. 9,52,155/-, worked out on the basis of turnover. The above action of the AD was contested in ground no. 3 of appeal. Before me, the AR submitted that there was no material to conclude that part of salary paid to partners pertains to exempt units and as such the disallowance is based on surmises and conjectures. The AR submitted that the AD has no power to allocate expenses arbitrarily as held in the case of DCIT Vs Delhi Press Samachar Patra (P) Ltd. 296 ITR 210 (Del.). Further, in the case of the appellant itself, Hon'ble ITAT Delhi Bench 'F' in ITA No. 554 (Del.) 2009 for the AY 2005-06 vide order dated 17.09.2009, deleted the disallowance of salary paid to partners. Without prejudice to the above, the partners to whom the salary of Rs. 24.00 lacs was paid, are assessed to tax and paying tax at 30% and as such there is no loss to revenue." 5. In view of above findings of ld. Commissioner of Income Tax(A), we are inclined to hold that we are unable....