2018 (9) TMI 957

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....unt of proportionate allocation of head office expenses to MEPZ (10M) unit. 3 On the facts and circumstances of the case and in law Ld. CIT(A) has erred in deleting the addition of Rs. 36,29,525/- made by AO on account of proportionate allocation of bank and loan processing charges to MEPZ (10M) unit. 4 On the facts and circumstances of the case and in law Ld. CIT(A) has erred in deleting the addition of Rs. 1,05,902/- made by AO on account of allocation of bad debts written off to MEPZ (10M) unit. 5 On the facts and circumstances of the case and in law Ld. CIT(A) has erred in deleting the addition of Rs. 70,13,384/- made by AO on account of price difference in respect of goods transferred to MEPZ (10AA) unit from other units. 6. On the facts and circumstances of the case and in law Ld. CIT(A) has erred in deleting the addition of Rs. 27,15,753/- out of total addition of Rs. 43,60,825/- by directing to treat the same as revenue expenditure instead of capital as treated by the AO." 2. Briefly stated the facts necessary for adjudication of the controversy at hand are : The assessee is in the business of manufacturing and selling of automobile po....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....rcular No.7/DV/2013 dated 16.07.2013, that the provisions of section 10A is not in the nature of exemption and as such, the assessee was entitled to set off of losses sustained by eligible unit u/s 10A against the normal business income. 6. In the backdrop of the aforesaid facts and circumstances of the case, the first question arises for determination in this case is :- "as to whether the assessee is entitled for set off of loss of MEPZ Unit u/s 10AA while computing the gross total income of eligible undertaking under Chapter IV of the Act?" 7. The ld. AR for the assessee relied upon the judgment of Hon'ble Apex Court in CIT vs. Yokogawa India Ltd. - (2017) 391 ITR 274 (SC) and CBDT Circular No. 7/DV/2013 dated 16.07.2013. The ld. AR for the assessee further relied upon the judgments of Hon'ble Apex Court in Allied Motors (P.) Ltd. vs. CIT - (1997) 224 ITR 677 (SC) and CIT vs. Gold Coin Health Food (P.) Ltd. - (2008) 304 ITR 308 (SC) to support his contention that the amendment relied upon by the Revenue is declaratory in nature. However, on the other hand, ld. DR for the Revenue relied upon the decision rendered by AO and contended that the decision relied upon by the ld. A....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....l income. The somewhat discordant use of the expression "total income of the assessee" in Section 10A has already been dealt with earlier and in the overall scenario unfolded by the provisions of Section 10A the aforesaid discord can be reconciled by understanding the expression "total income of the assessee" in Section 10A as 'total income of the undertaking'. 18. For the aforesaid reasons we answer the appeals and the questions arising therein, as formulated at the outset of this order, by holding that though Section 10A, as amended, is a provision for deduction, the stage of deduction would be while computing the gross total income of the eligible undertaking under Chapter IV of the Act and not at the stage of computation of the total income under Chapter VI. All the appeals shall stand disposed of accordingly. 10. Even para 5.2 of Circular No.7 dated 16.07.2013 is also categoric enough to decide the issue in controversy and para 5.2 thereof is extracted as under for ready perusal :- "5.2 The income computed under various heads of income in accordance with the provisions of Chapter IV of the IT Act shall be aggregated in accordance with the provision....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....e, we are of the considered view that the ld. CIT (A) has taken valid, legal and plausible view that the deduction is to be allowed from the total income of the unit and not from the total income of the assessee under Chapter IV of the Act and not at the stage of total income under Chapter VI of the Act. So, ground no.1 is determined against the Revenue. GROUNDS NO.2, 3, 4 & 5 15. Since grounds no.2, 3, 4 & 5 are offshoot of Ground No.1 being the addition on account of allocation of head office expenses; allocation of bank and loan processing charges; bad debts written off and addition on account of goods transferred to 10AA unit, the same have been rightly decided by ld. CIT (A). So, finding no illegality or perversity, the same are determined against the Revenue. GROUND NO.6 16. Assessee claimed expenses to the tune of Rs. 43,60,825/- for acquiring computer software out of which the AO has provided depreciation @ 60% and thereby made addition of Rs. 17,44,330/- to the total income of the assessee. However, ld. CIT (A) allowed the depreciation @ 60% on the amount of Rs. 16,54,000/- as against total expenses of Rs. 43,60,825/- made by the AO by returning following findi....