TaxTMI 
TaxTMI 
2018 (11) TMI 642
X X X X Extracts X X X X
X X X X Extracts X X X X
.... assessee filed its return of income admitting total income of Rs. 43,13,820/-after claiming deduction under section 80IC to the extent of Rs. 1,27,81,458/-. The case of the assessee was selected for scrutiny and the assessment was completed under section 143(3) of the Act. The Assessing Officer allowed the deduction claimed under section 80IC and there is no dispute that the assessee is entitled for the same. Subsequent to the completion of the assessment, Pr. CIT, Vijayawada has called for the record and observed that the Assessing Officer has not examined certain issues properly, hence, assessment order held to be erroneous and prejudicial to the interests of the Revenue. Therefore, he issued show-cause notice under section 263, dated 30/11/2016 stating that assessee has claimed deduction under section 80IC from Rudrapur plant, amounting to Rs. 1,25,93,958/, against the aggregate total income of all the units at Rs. 1,70,95,278/-, which is excessive. The Ld. Pr. CIT further observed that the turnover of Rudrapur plant was Rs. 22,06,73,657/- and that of Vijayawada plant was Rs. 51,77,15,033/-, aggregate total turnover of all the units was Rs. 1,21,83,20,721/- including Porur unit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....not incurred for Rudrapur plant and incurred only for Vijayawada plant. In the case of power and fuel, the assessee has explained the reasons for less expenditure in the case of Rudrapur plant stating that Vijayawada unit is operating 'Electrical flameless furnaces' for the purpose of manufacturing rough castings and there is no such activity in Rudrapur unit. Not being satisfied with the explanation of the assessee, the Ld. Pr. CIT held that the assessment order was erroneous and prejudicial to the interests of the revenue as the assessment record revealed that the AO has not called for all the relevant details/documents along with vouchers and examined the same. The Ld. Pr. CIT also relied on the additions made by the Assessing Officer while giving effect to the order of the Ld. Pr. CIT passed section 143(3) r. w. s. 263 of the Act for the Assessment Year 2011-12. 5. Aggrieved by the order of the Ld. Pr. CIT, the assessee is in appeal before us. 6. During the appeal hearing, ld. counsel for the assessee reiterated the submissions made before the Ld. Pr. CIT and the ld. DR supported the order passed by the Ld. Pr. CIT and argued that Ld. Pr. CIT has rightly taken the assesse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....jayawada plant and Porur independently in the paper book and submitted that the said information was also placed before the AO. By referring to page No. 99 of the paper book, the ld. counsel for the assessee has shown the Form No. 10CCB submitted before the Ld. Pr. CIT wherein the statutory Auditors after due verification has quantified the profit of Rs. 1,25,93,958/- relating to Rudrapur plant on the total turnover of Rs. 22,06,73,657/-, which was placed before the Assessing Officer, who examined the issue in detail at the time of making the assessment. The Assessing Officer also called for the details of maintenance of books of account separately, which was replied by the assessee vide letter dated 16/07/2014, copies of which are placed before us at page No. 109 to 117 of the paper book. The assessee explained before the Ld. Pr. CIT that there are various reasons for getting more profit from the Rudrapur plant, such as difference in manufacturing of the articles, details of the reinforces, less staff, non incurrence of expenses relating to labour and exemption from sales tax etc. The ld. counsel for the assessee has submitted comparable chart in a tabular format before the Ld. Pr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lakhs 20 Travelling & Conveyance 28. 71 lakhs 59. 71 lakhs 8. Similarly, the assessee also submitted the details explaining the excess expenditure at Vijayawada plant, the details of which are as follows:- S. No Description of Expenditure Amount incurred in Vijayawada unit during FY 2011-12 (in Rs) Amount incurred in Rudrapur unit During F. Y 2011-12 Reasons for incurring excess amount in Vijayawada Unit 1. Employees Benefit Expenses 6,32,67,719 1,52,82,472 1. Strength of Employees is more. 2. Labour cost per head is more in Vijayawada 3. The staff welfare cost is more because the worker hove to work before Electrical Furnace in Vijayawada. 4. Dress code and other amenities have to be provided to workers in Vijayawada as per the norms of ISO/QS 9000. 5. Since the plant area is large in Vijayawada, more labour is required. 6. Basic wage structure is high because of aged workforce. 2. Depreciation 3,84,41,046 53,35,536 1. The cost of machinery is more in Vijayawada because sophisticated machinery is required to maintain quality standards. 2. The machinery in Vijayawada is required for ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lume of production and this is head office of the assessee - company. 9. In respect of managerial remuneration to the Vijayawada unit, it was explained by the assessee that after commencement of Rudrapur plant, there was no increase in managerial remuneration, therefore, no expenditure is required to be allocated and debited to Rudrapur plant. In the case of labour expenses, ld. counsel for the assessee explained that labour expenses were totally related to the Vijayawada plant. Regarding power and fuel, the assessee explained that it was dependent on the plant capacity, usage of the plant and average consumption, power backup etc. and the details furnished in the tabular information. The assessee also submitted before the Ld. Pr. CIT that Vijayawada unit is operating Electrical flameless furnaces for the purpose of manufacturing rough castings which activity is absent in Rudrapur plant. There are power backup DGs sets at Vijayawada unit that were in use during the F. Y. 2011-12 which costs heavy and also in the cost of power consumption. 10. From the above, it is apparent that during the assessment proceedings, the Assessing Officer has examined the claim of the assessee wit....