TaxTMI 
TaxTMI 
2019 (5) TMI 101
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.... Ground no. 1 above, the ld. CIT(A) erred in directing the A.O. to enhance the deduction u/s 80IC by the amount of disallowance so made and in view of the facts and in the circumstances it may kindly be held accordingly. 3. For that your petitioner craves the right to put additional grounds and/ or to alter / amend/ modify the present grounds at the time of hearing. Additional grounds: 1. For that in view of the facts and in the circumstances and without prejudice the ld. CIT(A) erred in directing A.O to verify the reduction of interest of Rs. 62,91,275/- from the amount of deduction u/s 80IC and also allow relief if no deduction has been claimed without appreciating the fact that interest so allocated should have been reduced from such interest earned and hence only the net interest be considered for purpose of 80IC and it may be held accordingly. 2. Without prejudice to ground no. 2 & Additional Ground no. 1, the ld. CIT(A) erred in not granting deduction u/s 80IC on disallowance of finance charges so confirmed by it and it may be held accordingly. 3. For that in view of the facts and in the circumstances the ld. CIT(A) was wholly unjustified in not adjudicating the Addi....
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.... unsecured loans throughout the year. The loan fund has been utilized towards investment in fixed assets, inventories, sundry debtor and cash and bank balances. Therefore, AO noticed that the assessee company has inflated profit of Rudrapur Unit for the purpose of higher deduction u/s. 80IC of the Act. The actual profit of Rudrapur Unit can be determined after allocating finance charges and head office expenses to this unit. The average value of fixed assets and current assets including loans and advances for all three units are shown in crores as under: The ratio of the average value of Fixed Assets. Current Assets & Advances is expressed as under: 4701 :5953:3128. The total finance charge excluding hire charges & bill discount is Rs. 2,65,79.000/-. The sum ratio (4705+5953+3128) is 13,786. The finance charge of Rudrapur Unit was allocated in the above ratio as under: 3,128 x 2,65,79,000 13.786 = 60,30,690 Accordingly, finance charge of Rs. 60,30,690 /- was allocated to Rudrapur Unit by AO. Considering the turnover of those three units a sum of Rs. 3 lakhs was also disallowed on estimate basis towards allocation to Rudrapur Unit to arrive at the correct profit of this Unit....
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.... a) Interest received at Bank Account (of eligible unit) - Rs. 62,91,275/- b) Interest allocated by A.O - Rs. 60,30,690/- c) Further allocation of expenses by A.O. - Rs. 3,00,000/- Rs.1.26,22,966/- As regards the interest of Rs. 62,91,275/- at Faridabad Bank Account of eligible unit, the same has already been reduced in the computation of deduction u/s 80IC by assessee [Paper Book - Page 76] and as such the reduction of the said amount again by the A.O has amounted to double reduction, hence the Ld. CIT(A) directed for verification of the same instead of deletion of such sum. The appellant prays that although even interest has been offered by assesse itself however the net interest only Rs. 62,91,275 - Rs. 51,058/- = Rs. 62,40,277/- be only considered [even though mater has been set aside to AO by CIT(A)]. As regards the allocation of Rs. 60,30,690/-, the A.O has allocated such expenses on the premise that the Rudrapur unit ("eligible unit") has made transaction with Faridabad unit ("non-eligible unit") and hence the interest so debited at the non-eligible unit needs to be apportioned to eligible unit to the tune of Rs. 60,80,690/- and hence reduction of claim of deductio....
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....9,501/- only. iv) Even otherwise, the interest at Faridabad unit (Non-eligible unit) after netting of the interest received is net receipt figure [31,59,501 - 1,82,69,565 = (-) 1,51,10,064 ] and as such the question of allocation of interest cannot arise. In such respect, reliance is placed on the following judgments: - a) Metrochem Industries Ltd. 389 ITR 181(Guj) b) ACG Associated Capsules Ltd. 18 taxmann.com 137 (SC) c) B.M.W. Industries Ltd. (ITA No.2115/K/2007) III. As regards the allocation of expenses of further Rs. 3,00,000/- to eligible unit by the AO, the AO has made such disallowance to determine the correct profit of the eligible unit. It has to be appreciated that the AO has done it on arbitrary basis and without any verification. The fact is that, expenses of other units with which eligible unit had transaction has duly transferred the expenses and the same has been debited at the eligible unit and as such the AO's action in such respect is bad and CIT(A) wrongly affirmed it. For the perusal of the Hon'ble Bench the expense so debited is as follows: Expenses transferred from Faridabad to eligible unit - P/B page 117 and 92 Rs. 18,91,776/- Expense....
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....f eligible unit, the same has already been reduced in the computation of deduction u/s 80IC by assessee [Paper Book - Page 76] and as such the reduction of the said amount again by the A.O has amounted to double reduction." After hearing both the parties, we are of the view that this issue needs to be examined by the assessing officer therefore the A.O. is directed to verify whether the assessee has reduced Rs. 62,91,275/- from deduction u/s 80IC and then give deduction on this amount. Regarding the finance charges of Rudrapur unit of Rs. 60,30,690/-, we note that the A.O. allocated Rs. 60,30,690/- as finance charges of Rudrapur unit without taking into account facts submitted by the assessee. The ld Counsel submitted before us explanation which has not been considered by the AO, the relevant portion of the submission is reproduced below for ready reference: "As regards the allocation of Rs. 60,30,690/-, the A.O has allocated such expenses on the premise that the Rudrapur unit ("eligible unit") has made transaction with Faridabad unit ("non-eligible unit") and hence the interest so debited at the non-eligible unit needs to be apportioned to eligible unit to the tune of Rs. 60,80....