TaxTMI 
TaxTMI 
2017 (12) TMI 567
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..... 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. 5 for the smallness of the amount. Therefore, the same is dismissed. 9. In respect....
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....lue 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 contra, the ld. D.R. strongly supported the findings of the A.O. 16. We have carefully considered th....
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.... 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 assessee. With regards to the expenses of Toll Tax of Rs. 1,04,009/-, it is submitted that the said expenditure relates to the Toll Tax and parking charges in respect of the f....
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.... " 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. The Municipal taxes related to Vatva Officers' building is to be allocated to Vatva Unit only. The contention of the assessee in this regard is accepted Vehicles are used by the employees which is not limited for the purpose of Vatva Unit only. They are used for the purpose of work related to Vatwa and Kathwara Unit. No evidence fu....
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.... 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 Vatva unit. It is the say of the ld. counsel that insofar as the Directors remuneration and other incidental expenses are concerned; the assessee has considered only expenditure in relation to the directors who are looking after the work at Kathwada Unit. Therefore, the entire amount cannot be considered for proportionate disallowance. 23. It was explained that expenditure relating to the two of the directors namely Mr. Rakshit Doshi and Aashit Doshi hav....
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....e 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 of Rs. 2,11,87,992/- and while allowing the claim of deduction, the A.O. had verified the details of such claim in the light of the provisions of Section 80IA(4) of the Act. The ld. counsel strongly stated that since the claim of deduction in the initial year has been allowed by the A.O. therefore, the same cannot be denied in the subsequent assessment years. The ld. counsel drew our attention to the various clauses of the Agreement No. CER/SR/MDU/25/2003-04/ ....
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....ng 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, so, the Explanation must be seen as one being in the nature of plain and simple Explanation and not either adding or subtracting anything to the existing statutory provision. If the Explanation was purely explanatory in nature and did not mend the existing statutory provisions, the question of levying any tax with retrospective effect would not arise. The Explanation only supplied clarity where confusion was possible in the unamended provision. In that view of the matter, this c....