TaxTMI 
TaxTMI 
2019 (3) TMI 224
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Tax Act, 1961 (in short 'Act') in respect of the income earned by it from the manufacturing units as mentioned above as well as the service centres. The income from the service centres was clubbed with the income from the manufacturing unit at Pondicherry and deduction claimed for the entire sum. The Assessing Authority was of the view that the service centres constituted standalone independent units and the income therefrom would not be eligible for grant of relief as claimed. He thus restricted the relief claimed to the income derived from the manufacturing units alone and recomputed the income applying certain principles for the proper apportionment and attribution of expenditure. 4. In first appeal before the Commissioner of Income Tax (Appeals) (in short, 'CIT(A)'), the conclusion of the Assessing Officer to the effect that the income from service centres would not be eligible to deduction under Section 80- IA was confirmed. The assessee did not carry in appeal this conclusion of the CIT(A) and as such the position that the income from service centres is not eligible to deduction has attained finality, and rightly so. The CIT(A) also modified the distributi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rking capital requirements of the units. (iv) Expenses towards business promotion/development, sales commission, commission for collection of payment, packing and forwarding, conducting exhibitions and seminars and other marketing units on the basis of the 'turnover'. No such expenses were allocated to the service centres. (v) The expenditure incurred by the service centres under the head 'market expenses' by the assessee were shown under Pondicherry Manufacturing Unit. Hence, they were allocated to service centres as it relates to the same. (vi) Salaries of engineers and employees working in service centres was directly paid from the Corporate Office and debited to expenditure under Corporate/Head Office. This was shifted to the service centres. (vii) While the assessee had shown the reimbursement of expenditure at Rs. 103.38 lakhs as the income of the Unit at Pondicherry, the corresponding expenditure was apportioned in the ratio of sales turnover of the manufacturing and trading units, thus resulting in overstating of the profits of the Pondicherry Unit. Hence, the expenditure was apportioned to the units on the basis of the turnover. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ar. However, warranty is provided for two years. If we take the total number of units added in the preceding two years, they constitute 1/4th of the 'total units' for each of the initial years and 1/3rd in the later years. However, it is important to note that the UPS systems sold require only installation and minimum maintenance in the first two years. As claimed by the assessee, out of the 'total calls' for service, only 10% relate to the new units and 90% relate to the old units. Thus, out of the 'total expenses' incurred by the service centre, only 10% can be attributed to the new units installed during the latest two years apart from installation cost. As the installation charges are separately shown in the service centre expenses, they can be directly allocated to the manufacturing units. Thus, apart from 'installation charges' approximately 10% of the service centres expenses can be attributed to the manufacturing units as the assessee incurs expenditure but does not derive any deduction under Section 80IA of the Act, as per law. Hence, this ground of appeal is partly allowed.' 13. The Tribunal, after consideration of the methodology arrived at by the CIT(A), was....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t of the head office expenses in relation to the three units, one of which was exempt, applying the provisions of Section 14A of the Act which states that expenditure incurred in relation to income not includable in total turnover is not liable to be allowed in the computation of income. The Tribunal, upon consideration of the matter, had factually found that there was no bifurcation by the assessee of the common head office expenses which related to all three units. This was a concurrent finding of fact and the High Court, relying on the factual findings of the lower authorities, rejected the appeal of the assessee observing that no perversity had been made out warranting interference with the aforesaid order. 18. In this case too, we are concerned with the concurrent findings of facts by the CIT(A) and Tribunal in relation to methodology to be adopted in the allocation of expenditure. No perversity is pointed by the learned counsel for the revenue in the methodology adopted by the CIT(A) and confirmed by the Tribunal. 19. The Supreme Court, in the case of Hukam Chand Mills Ltd. Vs., Commissioner of Income Tax ([1976] 103 ITR 548) was concerned with the apportionment of prof....