TaxTMI 
TaxTMI 
2018 (1) TMI 781
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....orporated under the provisions of the Companies Act, 1956. It was a nodal agency of the Government of Karnataka for development of nonconventional energy sources in the State of Karnataka. It is engaged in the business of generation and sale of power and energy. Return of income for the assessment year 2009-10 was filed on 30/09/2009 declaring 'nil'. Against said return of income, the assessment was completed at total income of Rs. 8,44,10,526/- vide order dated 30/09/2011 passed u/s 143(3) of the Income-tax Act, 1961 [hereinafter referred to as 'the Act' for short]. The disparity between returned income and the assessed income is on account of restricting deduction u/s 80-IA(4)(iv) of the Act to Rs. 30,90,933/- and also disallowing prior period expenditure of Rs. 27,00,464/-, variation amount u/s 80-IA(4)(iv), the amount allowed by the Assessing Officer (AO) only in respect of profits derived from activity of power generation is on account of and also allocation of indirect expenditure by application of turnover key. 3. On appeal before the CIT(A), the CIT(A) upheld in principle allocation of indirect expenditure but adopted different figures for the purpose of working ....
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.... CIT (353 ITR 300)(Cal); and iii. DCW Ltd. vs. Addl.CIT (2010) 37 SOT 322(Mum) On the other hand, ld.CIT(DR) contested that indirect expenditure should be allocated to the unit of power generation for the purpose of calculating profit eligible for deduction u/s 80IA(4)(iv) of the Act. 7. We heard rival submissions and perused the material on record. The only dispute is with regard to method of working out of profits eligible for deduction u/s 80IV(4)(iv) of the Act. There is no challenge as to the eligibility of the unit for deduction u/s 80IA of the Act. The dispute is only with regard to the method of computation of profits eligible for deduction u/s 80IA(4)(iv) of the Act. The bone of contention between assessee and the AO is with regard to allocation of indirect expenditure/corporate expenditure to the activity of power generation. This issue had come up for consideration before the Hon'ble High Court of Calcutta in the case of Tide Water Oil Co.(India) Ltd.(supra) held as follows: "21. We have considered the submissions of the learned counsel for both the parties. It appears to us from the argument of Mr. Poddar appearing for the appellant-assessee that....
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.... of corporate expenditure which has been narrated by the learned Commissioner of Income-tax (Appeals) in his order at page 4 and found that no reasoning has been given by the learned Commissioner of Income-tax (Appeals) for treating this expenditure as not related to the Silvasa unit. No justification has also been given by the learned Commissioner of Income-tax (Appeals) for treating these expenses as corporate expenses and not related to the manufacturing activity of the assessee's unit. After going through the nature of the expenses like salary, wages and bonus of Rs. 56,93,453, it is very difficult to presume that such a heavy salary, wages and bonus will be paid just to maintain a corporate office . . . The Hon'ble High Court upheld the principle of allocation of common expenditure to the eligible units and non-eligible units. The Hon'ble High Court only ruled that application of rule of allocation for the entire head office expenditure may not reflect the correct method. In other words, expenses which are directly related to units should be allocated to that particular unit. In the light of this judgment of the Hon'ble High Court, there is no necessity of referri....
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....venue is partly allowed for statistical purposes. 12. The assessee raised the following grounds of appeal in its appeal ITA No.1490/Bang/2013 for assessment year 2010-11: 1. The order of the learned cIT[A] in so far as sustaining the additions and party allowing the oppeal is opposed to law, equity, weight of evidence, facts and circumstances of the appellant's case. 2. The learned CIT[A] is not justified in sustaining a sum of Rs. 1,20,864/- as against the addition of Rs. 12,97,843/- made as prior period expenditure under the facts and in the curcumstances of the appellant's case. 3. The learned CIT[A] is not justified in upholding the restriction in respect of the deduction u/s 80IA (4) (iv) of the Act, in respect of unallocated expenditure of Rs. 1,29,42,287/- and amortization of land of Rs. 14,17,560/- while working out the quantum of duduction u/s 80IA (4) (iv) of the Act, under the Facts and in the circumstances of the ppellant's case. 4. For The above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and justice rendered and the appellant may ....
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....s. 1,20,814/-. It is clear that the CIT(A) has deducted prior period income From prior period expenditure. This in our considered opinion, the approach of the CIT(A) is against the basic Principles governing allowbility of prior period expenditure. It is trite law that expenditure which is crystallized during the previous years relevent to assessment year under consideration should be allowed as deduction, different principle govern taxing prior income. Therefore, deducting prior period income From prior period expenditure is against well settled principles of law. Therefore, we remand this issue back to the file of the AO with a direction that after examining evidence filed before the CIT(A) to allow prior period expenditure, if liability of expenditure had occurred/crystallised during the previous year relevant to year under consideration and also to tax prior period income Keeping in view the salutary principle of law income of the year alone should be taxed. 18. In the result, the appeal filed by the revenue is party, allowed. 19. The Assessee raised the foillowing grounds of appeal in its appeal in ITA No. 713/Bang/2015 for assessment year 2011-12: 1. The order ....