TaxTMI 
TaxTMI 
TaxTMI 
2019 (3) TMI 626
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....aw and as facts in allowing arrears Section 80IB and 80IC deduction claims totaling to Rs. 1,39,48,12,000/- thereby reversing Assessing Officer's action not taking any cognizance thereof solely for the reason that the taxpayer had not submitted its form 10CCB auditor's report in respect of the corresponding revised claim. 2. It emerges at the outset that the CIT(A) order under challenge has merely directed the Assessing Officer to consider the impugned deduction claim in light of his findings on the very issue in preceding assessment year 2005-06. Both the learned representatives are very fair in taking as to this tribunal co-ordinate bench order dated 06.01.2017 upholding identical lower appellate finding in the very issue in Revenue's appeal in I.T.A. No. 33/Kol/2010. Honourable apex court's decision in CIT vs. G. M Knitting Industries Pvt. Ltd. and Another [2015] 125 DTR 38 (SC) has already settled the law that an assessee is entitled for Section 80IB deduction even if it files its form 10CCB audit report not with the return but before completion of assessment. This is not the Revenue's case that the assessee's audit report has escaped the Assessing Officer consideration during....
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....sion made for marketing expenses. In reply, the following submission was made by the assessee in writing:- "During the previous year relevant to the AY 2003-04, RBIL has made a provision of Rs. 199,003,162/- in respect of marketing expenses. The said provision was required to be made by RBIL since it is following the mercantile system of accounting, provisions required to be made in respect of all expenses incurred during the accounting period irrespective at the time payment. Since RBIL is following mercantile system of accounting which is a permissible method of accounting as per section 145 of the Act and the accounts are audited and provision made as per the prescribed accounting policies should not be disallowed unless specifically provided in the provision of the Act. Further, out of the provision of Rs. 199,033,162/-, a substantial amount has been paid subsequently and balance is likely to be paid in due course. Hence, no disallowance is warranted on this account. Without prejudice to the aforesaid submission, please note that in case of write back of the aforesaid provision, if it is found to be in excess or for any other reasons, the same will liable to tax in view of th....
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....ed to tax in the subsequent years at virtually the same rate, the disallowance made in the year under consideration on account of such excess provision is not justified. 15. The ld. D.R., on the other hand, submitted that the provision made by the assessee for marketing expenses on estimated basis is always found to be on the higher side. He submitted that it is not clear as to why there should be difference between provision made and actual amount of expenses incurred. He contended that in the absence of any sound basis given by the assessee for making the estimate, the excess provision is liable to be disallowed as rightly held by the authorities below. 16. We have heard the arguments of both the sides and also perused the relevant material available on record. The question that arises for our consideration in the present context is whether the assessee following mercantile system of accounting is right in recognizing and making the provision for marketing expenses in the facts and circumstances of the case. In this regard, a useful reference may be made to the decision of Hon'ble Supreme Court in the case of Rotork Controls Indi (Pvt.) Limited - vs.- CIT reported in 314 ITR ....
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....nd the disallowance made by the Assessing Officer and confirmed by the ld. CIT(Appeals) merely on the basis that such provision is found to be finally excessive is not sustainable. We, accordingly, delete the disallowance made on this issue and allow Ground No. 2 of the assessee's appeal." 5. Learned CIT DR vehemently contends at this stage that the assessee has failed to prove the three basic ingredients of its impugned provisions i.e. an obligation arising as a result of past events, outflow of resources required for the very obligation followed by a reliable estimation; respectively. The assessee inter alia takes us to pages 138 (assessment year wise details of the marketing services from assessment year 2004-05 onwards); page 140 (notes pertaining to its media activity, creation of marketing provision and reversal thereof), page 175 (sample estimation), pages 176 to 204 (TV estimate) and schedule as well as other similar details up to page 235 vis-à-vis its advertisements/marketing expenses for the impugned assessment order amounting to Rs. 156.94 crores. Suffice to say, both the lower authorities have been very fair in not pinpointing any distinction on facts and law i....
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....deduction under chapter VIA of the Income Tax Act. Assessee has used the terminology 'fiscal units' for units (Factories), income from which are eligible for deduction under chapter VIA of the Income Tax Act. It has used the terminology 'non-fiscal units' for units (Factories), income from which are not eligible for deduction under chapter VIA of the Income Tax Act. The profits derived from these fiscal units have to be computed which will be eligible for deduction from the total income of the assessee. The question is how is the profit and gains from these units to be computed. Section 80IB (13) states that the provision of section 80IA(5) and 80IA(7) to 80IA(12) will apply to the eligible business. Section 801C(7) states that the provision of section 80IA(5) and 80IA(7) to 801A(12) will apply to the eligible business. Section 801A(5) states that the profit & gains from these units to be computed as if such eligible business were the only source of income of the assessee. This means that income from these units shall be credited and all the. cost necessary to run the unit shall be debited. These expenses will include cost directly attributable to these units as well as cost ....
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....oned to Head Office of an amount of Rs. 274,212,983.80/- has not been apportioned to neither fiscal units nor non-fiscal units. However, the same has been debited to consolidated profit and loss account of the assessee company. The tax is determined from Profit shown in consolidated P/L a/c less deduction claimed which is profit of fiscal units. It means that any expense which has not been allocated to either fiscal units or non-fiscal units reduces the consolidated P/L profit. It means that in essence this reduces the profit of non-fiscal units. This means that the head office expense are apportioned to non-fiscal units. This is incorrect. The correct apportionment would be to divide the entire expense amongst fiscal and non-fiscal units. The head office does not exist in isolation. The expenses allocated to Head office has to be absorbed by both fiscal units as well as non-fiscal units. Cost Accounting Standard 3 (CAS-3) issued by the Council of the Institute of Cost and Works Accountants of India on 'Overheads'. The standard deals with the method of collection, allocation, apportionment and absorption of overheads. It states that cost should be apportioned to various cost cent....
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....n this regard, we submit that the residual costs pertain to those cost which could not be allocated or identified with single function or unit due to the general utility to all the functions and units of the company. The basis of collection of this cost is the number of executive. These costs include the residuary costs of all the support functions which have not been allocated to the Cost of Goods Sold 'COGS'). The residual cost broadly consists of all the support functions like finance/ HR/ IS apart from office administration, legal, internal audit, etc. as follows: Salary & Wages including all benefits to employees Traveling Expenses Training Expenses Legal and Consultancy Security Services Office Electricity and water Rent Printing and Stationery Postage and Courier Telephone and Mobile Insurance Depreciation The expenses under the various heads mentioned above are incurred at Corporate Office on account of the following functions: Office Administration Finance Managing Director Office HR Information System Legal R&D Internal Audit Market Research For FY 2007-08, the total number of executive at the corporate office were 1....
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....hus claimed was excess by an amount of Rs. 157,639,007.09/- which should be taxed." Revenue's vehement contention during the course of hearing is that the CIT(A) had deleted the impugned allocation simply by following his order in assessment year 2005- 06 dated 09.06.2009. Its case is that there is no evidence whatsoever about the assessee's remaining 83 out of 115 employees to have been engaged in trading and other allied business activities. We find no merit in Revenue's instant grievance. There is no dispute even as per assessment order about the assessee having allocated 32 out of its 115 employees / executives to manufacturing segment. The assessee has been running both eligible as well as non-eligible units. Its allocation formula was number of 32 employees divided by total number of employees multiplied by eligible units sales further divided by total sales; to allocate the impugned expenditure. The same very formula had been applied in assessment year 2005-06 as well wherein the co-ordinate bench (supra) accepted the same in its order. We make it very clear that the Assessing Officer has himself accepted the assessee to have been engaged in trading of other segments. We th....
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....herefore and restore the instant additional issue raised at assessee's behest dated 24.06.2018 to the Assessing Officer for necessary factual verification of facts. This additional ground is taken as accepted for statistical purposes. 9. Mr. Khaitan does not press for assessee's next substantive ground challenging section 14A read with Rule 8D disallowance of Rs. 25,500/- keeping in mind smallness of the amount. The same is therefore rejected. 10. The assessee's third substantive ground pleads that the CIT(A) has erred in law as well as on facts in not considering its written submission dated 16.01.2014 seeking to allow expenditure claim to Rs. 1,24,97,943/- disallowed u/s 40a(ia) involving sums of Rs. 3,60,029/-, Rs. 16,54,560/- and Rs. 1,04,83,354/-pertaining to financial years 2003- 04 and 2004-05 whose TDS was deducted and deposited to the government treasury during the relevant previous year. However the written submission filed before the CIT(A) dated 16.01.2014 are at pages 180 to 190 of the paper book. We find no merit in the instant pleadings. The assessee's case at best is that it had filed the impugned relevant facts in its written submission dated 16.01.2014 before t....