TaxTMI 
TaxTMI 
2017 (12) TMI 567
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.... the facts of ITA Nos. 1905 & 1895/Ahd/2011. 3. We will first take up the appeal of the Assessee in ITA No. 1905/Ahd/2011 for A.Y. 2007-08. 4. First ground is of general in nature and needs no separate adjudication. 5. Ground no. 2 relates to the disallowance of Rs. 98,898/- made in respect of employees' contribution of ESI u/s. 36(1)(va) of the Act. 6. This issue is no more res integra as the same has been decided against the assessee and in favour of the revenue by the Hon'ble Jurisdictional High Court in the case of GSRTC Ltd. 366 ITR 170. Respectfully following the same, we decide the impugned issue against the assessee. Ground no. 2 is allowed. 7. Ground no. 3 relates to the denial of deduction u/s. 80IB of the Act in respect of the following items: (i) Recovery of bad debts written off in earlier years Rs. 15,10,497/- (ii) Excess provision of earlier years written back Rs. 45,04,125/- (iii) Gain on foreign exchange fluctuation Rs. 15,23,875/- (iv) Insurance Claim Rs. 2,93,986/- (v) Other items Rs. 14,000/- 8. At the very outset, the ld. counsel for the assessee stated that he is not pressing the issue at Serial no....
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....plained that the value of such work carried out at Vatva unit hardly constitutes 2% of the value of the plant manufactured at Kathwada. The assessee contended that since more than 90% of the manufacturing is carried out at the Kathwada Unit, the deduction u/s. 80IB should not be disallowed. 13. The A.O. did not accept the contention of the assessee and stated that profit to the extent of 10% cannot be said to be derived from the manufacturing business of the unit. Hence the proportional profit is to be disallowed from the eligible profit of the assessee for deduction u/s. 80IB of the Act. The A.O. accordingly computed an amount of Rs. 13,17,89,498/- and disallowed the same from the deduction claimed by the assessee u/s. 80IB of the Act by reducing the claim of Rs. 39,53,685/-. 14. Assessee strongly agitated the matter before the ld. CIT(A) but without any success. 15. Before us, the ld. counsel for the assessee stated that when the assessee got its job work done at Vatva unit, job work charges were debited to the Profit and Loss account. It is the say of the ld. counsel that both the lower authorities have grossly erred in appreciating the facts in true perspective. Per co....
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....liance with the provisions of Companies Act, and since the expenditure are related to the corporate office of the assessee, they are allocated to Vatva Unit of the assessee. 1.1.2 With regards to the expenses of membership & subscription of Rs. 1,43,079/-, the assessee states that the said expenditure pertains to the membership & subscription of magazines subscribed at the Vatva unit of the assessee. Since the magazines are subscribed and used at Vatva Unit, the expenditure in respect of the same is allocated to the Vatva unit of the assessee. 1.1.3 With regards to the Municipal Taxes ofRs.1,50,453/-, the assessee states that, as the expenditure relates to the officer building of Vatva and other units of the assessee and not to the Kathwada or Kandia unit, the same has been allocate to the Vatva unit of the assessee. 1.1.4 With regard to the insurance premium on car of Rs. 2,31,037/- and insurance premium on two wheelers of Rs. 10,553/-, the assessee states that since the expenditure on insurance premium relates to the capital assets of the Vatva unit of the assessee. The corresponding insurance expenditure have been allocate to the Vatva unit of the asse....
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....llocation made by the assessee company is on systematic basis and the aforesaid basis of allocation is being followed by the company regularly on year to year basis and hence the same should be accepted. 20. After considering the afore-stated reply of the assessee, the A.O. was not convinced and observed as under:- " I have carefully considered submission made by Assessee. The ROC filing fees cannot be said to be related to only Vatva Unit. This expense of the assessee is to be equally distributed between ail units of the assesses. This being fixed expense cannot be allocated on turnover basis but it is to be allocated to all units equally; Membership and subscription expenses are made for benefit of the employees. The employees1 related expenses have been allocated on the basis of turnover among the unit. Hence, this expense is also required to be allocated between Vatva Unit and Kathwada Unit on the basis of turnover. Employees related expenses of Vatva and Kathwada cannot be allocated independently because the employee are looking after work of both units. Hence, the membership and subscription expenses are also allocated in the ratio of turnover. T....
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....mputing profit derived from Kathwda unit at Rs. 73,99,510 whereas if such expenditure is allocated on turnover basis, same works out to Rs. 2,83,76,269 hence profit derived from Kathwada unit is reduced by differential amount of Rs. 2,09,76,759 on which deduction u/s 80IB is disallowed at Rs. 62,93,028 (30% of Rs. 2,09,76,759). 21. Aggrieved by this, the assessee carried the matter before the ld. CIT(A) and reiterated its contention which did not find any favour from the ld. CIT(A). 22. Before us, the ld. counsel for the assessee stated that the assessee has duly explained the basis of allocation of expenditure to various units of the assessee. The ld. counsel that the expenditure on Membership & Subscription pertains to the magazines subscribed at the Vatva unit of the assessee and, therefore the same is debited at Vatva unit. ROC filing fees relates to the expenditure of the corporate office and therefore charged to Vatva unit. Similarly, Insurance claim on car and two-wheelers pertain to the vehicles relating to the capital assets of the Vatva unit. Total tax and Parking charges are in respect of the vehicles of the Vatva unit and therefore the same are debited to the Vatv....
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.... the A.O. found that the assessee has claimed deduction u/s. 80IB @ 100% of profit derived from Tamilnadu Water Supply & Drainage (TWAD) unit at Rs. 3,09,59,258/-. Assessee was asked to justify its claim for deduction u/s. 80IA in the light of the amended provisions of the Act. In its reply, the assessee stated that it has entered into agreement with TWAD for maintaining the infrastructure facility. It was strongly contended that the assessee satisfies all the conditions laid down in Section 80IA (4) of the Act and is therefore eligible for the deduction u/s. 80IA of the Act. The assessee is only a contractor and not the owner of the plant of TWAD but is a maintenance contractor. The A.O. was of the firm belief that the assessee is only executing works contract awarded by the State Government and therefore not eligible for the claim of deduction u/s. 80IA(4) of the Act. The A.O. accordingly denied the claim of deduction which was confirmed by the ld. CIT(A). 27. Before us, the ld. counsel for the assessee reiterated its claim of deduction. It is the say of the ld. counsel that the impugned project was commenced during A.Y. 2005-06 in which year the assessee had claimed deduction....
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....e agreement was done away with. These changes, however, would not alter the situation vis-a-vis the Explanation. The basic requirement of the enterprise carrying on the business of developing or operating and maintain or developing, operating and maintaining infrastructure facility was not done away with. Even as amended with effect from April, 2002, section 80IA(4)could be construed as not including execution of works contract as one of the eligible activities for claiming deduction. In 2007, the Explanation below sub-section (13) of section 80-IA came to be added which clarified that nothing contained in the section shall apply to a person who executes a works contract entered into with the undertaking or enterprise, as the case may be. However, this was not found to be sufficient. With a view to preventing such misuse of the tax holiday under section 80-IA, it was proposed to amend the Explanation to clarify that nothing contained in the section shall apply in relation to a business which is in the nature of a works contract executed by an undertaking. What the Explanation, did was to clarify a statutory provision which was at best possible of a confusion. If that be, s....
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....ered by the decision of the Tribunal in assessee's own case and directed the A.O. to allow the claim of deduction. 35. Before us, the ld. D.R. could not bring any distinguishing decision in favour of the revenue. 36. We have carefully gone through the orders of the authorities below. Since the First Appellate Authority has followed the decision of the Tribunal in assessee's own case, we therefore do not find any error or infirmity in the findings of the ld. CIT(A). Grievance of the revenue is accordingly dismissed. ITA No. 2210/Ahd/2011 Assessee's appeal for A.Y. 2008-09 37. Ground no. 1 is of general in nature and needs no separate adjudication. 38. Grievance raised vide ground no. 2 is identical to the grievance raised vide ground no. 2 in A.Y. 2007-08 (supra). For our detailed discussion therein, ground no. 2 is allowed. 39. Ground no. 3 of the present appeal is identical to the grievance raised in ground no. 3 in A.Y. 2007-08 (supra). For our detailed discussion therein, we direct accordingly. Ground no. 3 is treated as allowed for statistical purpose. 40. Ground no. 4 relates to the re-allocation of expenditure and the grievance is identical to groun....