TaxTMI 
TaxTMI 
TaxTMI 
2020 (5) TMI 22
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....allowance of interest on deposits of Rs. 4,03,200/-. (5) That the ld. CIT(A) has erred in law and on facts in deleting the disallowance of bad debts of Rs. 54,148/-. (6) That the ld. CIT(A) has erred in law and on facts in deleting the disallowance of penalty of Rs. 89,419/-. (7) That the ld. CIT(A) has erred in law and on facts in deleting the addition u/s 40A(2)(b) of Rs. 3,17,941/-." 3. The assessee has also filed Cross Objection to the appeal filed by the Revenue and the grounds of cross objection taken by the assessee are as under: "1. The learned CIT(A) has erred, both in law and on the facts of case, in confirming the action of the Assessing Officer in disallowing employee's contribution towards PF and ESIC of Rs.I5.62.36i/- u/s 36(1)(va) r.w.s.2(24)(x)of thc Act. (2) Alternatively and without prejudice, the lower authorities have erred in law and on the facts of the case in making disallowance of payments made within the grace period. (3) Alternatively and without prejudice, matter should be remanded the AO to verify whether the sum was deposited within 21 days from the end of month of payment of salary as contemplated under the provisions of Employee....
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....y agreed that the issue of disallowance of PF & ESIC was in fact against the assessee, therefore, same may be decided accordingly. 6. Learned DR as regards the Revenue's appeal submitted that assessee was having two units; one in SEZ and one in non SEZ and had claimed excessive expenditure in the non SEZ unit as compared to SEZ unit and therefore, had suppressed its profits in non SEZ unit and in this respect, our attention was invited to assessment order where the AO had observed various ratio of various expenses in SEZ unit vis-àvis non SEZ unit. It was further submitted that assessee did not give the quantitative details of opening and closing stock along with their valuation. He submitted that cost of accessories i.e. zipper, elastic labels, buttons, threads etc. was 55.91% to the cost of cloth and assessee was not able to support its claim and therefore, AO rightly rejected the books of accounts and rightly reduced cost of accessories in non SEZ unit to 23.7% thus resulting into an addition of Rs. 1,22,62,031/-. He submitted that learned CIT(A) has wrongly allowed relief to the assessee by relying on the additional evidence which were not produced before the AO. 7. Ar....
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....he requirements of customers. Further, consumption of accessories differs from product to product. It was further submitted that detailed submissions regarding cost of manufacture per unit was provided to learned CIT(A) which were forwarded to AO and from the explanations filed before the learned CIT(A). It was demonstrated that per unit cost in both the units was primarily same and therefore, learned CIT(A) had rightly deleted the additions. 14. Regarding ground no.2, the learned AR submitted that AO had disallowed certain expenses as in his opinion the same related to SEZ unit only whereas the assessee had apportioned the same between two units. It was submitted that the reason for disallowing the same was that AO held that exports were made only from SEZ unit which is factually incorrect as the exports were being made from SEZ as well as non SEZ unit and which was evident from the annual audited accounts. Similarly, it was submitted that the bad debts disallowed by the AO were also not justified as the invoice to the said party was issued by non SEZ unit and in this respect our attention was invited to paper book page no.78 where the copy of bill was placed. The AR heavily plac....
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....ifically related to SEZ unit which the assessee had wrongly allocated to both the units. Before the learned CIT(A), the assessee filed detailed explanations and also filed additional evidences and also filed detailed calculations of cost per unit in SEZ unit as well as in non SEZ unit. From the submissions made before the learned CIT(A), we have observed that cost per unit in both units were almost same and therefore, he rightly deleted the addition by holding as under: "I have considered the facts of the case and the submissions of the appellant. I have also gone through the assessment order and remand report submitted by the AO and rejoinder filed by the appellant. AO during the course of assessment proceedings rejected the books of accounts of the appellant after holding that:- > The Appellant failed to furnish any quantitative details of opening and closing stock along with its Valuation which was asked by AO vide questionnaire dated 10/01/2014. > The Appellant failed to furnish purchases as sought vide questionnaire dated 10/01/2014. > The Appellant in its letter dated 01/10/2014 addressed to AO admitted that it did not maintain Stock Register. AO then observed that th....
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....Appellant. Accordingly, looking upon the facts and circumstances of the case, the rejection of books of accounts is not justified. Accordingly, the case is now being decided on merits of the case. The Appellant further submitted quantitative details in the form of charts mentioning the average cost of raw-material including accessories consumption per unit of Finished Product produced at NON SEZ (Domestic and Export] & Non SEZ unit as additional evidences. This chart is placed at page no 98 of the Paper Book. As per this chart, the appellant produced 4,52,608 units in non-SEZ unit whereas the production of the same in SEZ unit is 2,37,783. The appellant is engaged in the business of manufacturing children garments. Therefore, the cost has to be seen vis a vis the production of no. of units. The same cannot be seen in the absolute numbers as has been done by the AO. As per this chart, the cost of raw-material including the accessories per unit comes to 78.49 in case of non-SEZ unit whereas the cost of rawmaterial including the accessories per unit cornes to 78.37 in case of SEZ unit. Therefore, from the above analysis, it is seen that there is hardly any difference between the co....
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....d that the entire export sale amounting to Rs. 7,49,27,019/- was made by the Appellant through SEZ unit and thus the expenses namely F.O.C export (Outward) expenses amounting to Rs. 3,70,155/- and foreign fluctuation loss amounting to Rs. 30,21,148/- should have been allocated to SEZ unit, however the same were booked in NON SEZ unit. AO also pointed out that the total claim of bad debt amounting to Rs. 1,63,685/- in Profit & Loss account, pertains to export sale made to Al-Bandar International House wherein the revenues were booked in SEZ unit. AO held that the above expenses were related to export sales made and therefore the same should be allocated to SEZ unit as the entire export was made through its SEZ unit. On the basis of the same AO allocated expenses to the tune of Rs. 34,49,451/- [Rs. 30,21,148/- + Rs. 3,70,155/- + 58.148/-] to SEZ unit. AO further apportioned all the expenses on the basis of turnover and thus held that the Appellant has disproportionately allocated expenses on actual basis in order to reduce the profit of taxable unit and increase the profit of the unit eligible for deduction u/s. 10AA of the Act.On the basis of the same AO concluded in allocating aggr....
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....enses on the basis of turnover. The appellant during the course of assessment proceedings, in its submission dated 28/01/2014 submitted that the appellant maintained separate books for each of its unit ie. SEZ and NON SEZ unit. The appellant further submitted that the direct expenses which were directly linked to a unit were allocated on actual basis whereas common expenses such as designing and alteration expenses were allocated on turnover basis. The objection of AO that all the expenses should have been allocated on the basis of turnover is not correct. It is a well settled rule that the expenses have to be apportioned on actual basis, however when such apportionment is not possible, then the assesse has to retort to other methods. In the present case the appellant submitted the list of expenses which were apportioned on the actual basis and the details of such expenses and the justification for accounting it on actual basis. Regarding the segregation on the actual basis of the appellant, the AO has not found any fault with the basis of allocation on actual basis. If the expenses are allocated on the actual basis, then it is the best method of allocation. If any expense canno....
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....garding deletion of penalty, we find that out of said penalties, penalty amounting to Rs. 29,092/- were towards EPF penalty and penalty on late submission of excise return which was suo motto disallowed by the assessee. This observation has been specifically made by learned CIT(A) in his order. We further find that the remaining amount of penalty related to interest on sales tax and re-connection charges of electricity board and learned CIT(A) had rightly held that interest charged by sales tax was compensatory in nature and re-connection charges charged by electricity board were also compensatory in nature and were not penal in nature and therefore had rightly allowed the relief. In view of the above, ground no.6 is also dismissed. 27. Now coming to last ground regarding deletion of addition under s.40A(2)(b) of the Act, we find that provisions of Section 40A(2)(b) of the Act are applicable on expenses claimed as deduction whereas the assessee had purchased a capital asset and therefore, learned CIT(A) had rightly allowed relief to the assessee by holding as under: "15. Ground # 10 challenges the action of AO in in making an addition of an amount of Rs. 3,17,941/- by considerin....