TaxTMI 
TaxTMI 
TaxTMI 
2025 (10) TMI 30
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....s. 143(3B) r.w.s.263 of the Act. 2. Since, the issues involved in all the appeals of Revenue and Assessee are common and identical; therefore, these appeals have been heard together and are being disposed of by this consolidated order. For the sake of convenience, the grounds as well as the facts narrated in ITA No. 260/Rjt/2024 for Assessment Year 2010-11, have been taken into consideration for deciding the above appeals en masse. 3. Although, these appeals filed by the Revenue and Assessee contain multiple ground of appeals. However, at the time of hearing we have carefully perused all the grounds raised by the Revenue as well as raised by the Assessee. Most of the grounds raised by the Revenue as well as Assessee, are either academic in nature or contentious in nature. However, to meet the end of justice, we confine ourselves to the core of the controversy and main grievances of Revenue and the Assessee as well. With this background, we summarize and concise the grounds raised by the Revenue as well as Assessee, as follows: (1) The Ld. CIT(Appeals), NFAC, Delhi has erred in law and on facts in directing to allow deduction claimed by the assessee u/s 80IC of the I.T. Act amou....
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....gainst the profit of unit-1, Rudrapur. [This is ground No.5 in Revenue's appeal in ITA No.247/RJT/2024 for A.Y.2012-13] 4. The Revenue has raised additional grounds of appeal in ITA No.260/RJT/2024, which is reproduced below: "The CIT(A)'s order for AY 2010-11 is based on the ITAT's decision for AY 2011-12, which erroneously relied on the non-existent assessment order for AY 2010-11 (assessment order for AY 2010-11 was overturned by the order of Ld. CIT-2, Rajkot vide their order u/s 263 passed on 19.01.2015). Since the ITAT's order itself is flawed, the validity of the CIT(A)'s order for AY 2010-11 is also in question, necessitating appropriate rectification." 5. Summarised and concise grounds of appeal in assessee's appeals are as follows: (1)The ld. CIT(A) erred on facts as also in law, in confirming action of assessing officer in restricting disallowance of deduction under section 80IC of Rs. 1,18,45,693/-, on protective basis, on the alleged ground of inflated profit of Rudrapur unit, being sale by Rajkot unit, in respect of item code 235F and 236F to Rudrapur unit-1. The disallowance made by the assessing officer and retained by CIT(A), is totally unj....
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....r section 80IC has not been fulfilled in as much as the Rudrapur Unit neither produces nor manufactures any items and that there is no increase in the investment in Plant and Machinery by at least 50% of the book value as on the first day of the previous year. [This is Ground No.2 of Revenue's appeal in ITA No.260/RJT/2024 for A.Y.2010-11, Ground No.2 in ITA No.247/RJT/2024 for A.Y.2012-13, Ground No.2 in ITA No.248/RJT/2024 for A.Y.2013-14, Ground No.2 in ITA No.249/RJT/2024 for A.Y.2017-18, Ground No.2 in ITA No.250/RJT/2024 for A.Y.2018-19] The Revenue has raised additional grounds of appeal in ITA No.260/RJT/2024, which is reproduced below: "The CIT(A)'s order for AY 2010-11 is based on the ITAT's decision for AY 2011-12, which erroneously relied on the non-existent assessment order for AY 2010-11 (assessment order for AY 2010-11 was overturned by the order of Ld. CIT-2, Rajkot vide their order u/s 263 passed on 19.01.2015). Since the ITAT's order itself is flawed, the validity of the CIT(A)'s order for AY 2010-11 is also in question, necessitating appropriate rectification." Summarised and concise grounds of appeal in assessee's appeals are as follow....
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....from the material on record, are as follows. The return of income showing total income of Rs. 16,13,21,007/- was filed by assessee on 25-09-2010. The return of income was processed u/s. 143(1) of the I.T. Act, 1961. The case was selected for scrutiny and assessment finalized u/s 143(3) vide order dated 25-03-2013 at the income of Rs. 16,15,40,460/-. 11. Later on, the assessee's case was reviewed by CIT-2, Rajkot, u/s 263 of the Income Tax Act 1961, and order u/s 263 was passed on 19/01/2015. The CIT-II Rajkot after considering the facts on records, set aside the original order u/s 143(3) of the Act, being erroneous and prejudicial to the interest of revenue on the following grounds and observations: "As seen from the records the assessee has claimed a deduction u/s. 80IC of the I.T. Act. in respect of its Rudrapur unit in Uttarakhand. The unit was started in April 2008, however, the deduction has been claimed for the first time during the A.Y. 2010-11. As mentioned above, the AO did not raise any question about the eligibility of this unit for claiming deduction u/s. 80IC of the I.T. Act.As discussed above, the order is both erroneous and prejudicial to the interest of revenue, ....
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.... the provisions of section 80IC of the Act. During the assessment proceedings, the assessing officer asked the assessee, to submit the justification of the deduction claimed 80IC of the Act, to the tune of Rs. 2,88,50,633/-. 15. In response to the notice of the assessing officer, the assessee submitted its reply before the assessing officer, with documentary evidences. The assessee submitted that profit for the year was of Rs. 3,32,56,106/- and after reducing loss of Rs. 43,69,773/- for A.Y.2010-11, the assessee has claimed deduction u/s 80IC of the Act at Rs. 2,88,50,633/-. The assessee submitted that it is manufacturing auto parts for Tata Motors Ltd and other vehicle manufacturing industries, at Rajkot, as well as Rudrapur at Tata Vendor Park, which is duly approved, vide notification No. 283/2006. At Rudrapur undertaking of the assessee is also manufacturing transmission parts and Gear Box, components etc, and supply to O.E.M.s, Tata Motors Ltd. As regard forging work it was clarified that for auto parts manufacturing at Rajkot also no forging work is carried out by assessee's undertaking. It is carried out by outside parties at Rajkot also. Precision processes are carried....
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....ess to the new undertaking, which takes place when there is reconstruction of the old business. The assessee submitted that for the purpose of section 80I, the industrial units set-up must be new in the sense that new plant and machinery are erected for producing either the same commodities or some distinct commodities. In order to deny the benefit of section 80I, the new undertaking must be formed by reconstruction of the old business. In the present case, there is no formation of any industrial undertaking out of the existing business since that can take place only when the assets of the old business are transfer substantially to the new undertaking. Just because the new undertaking is dependent to a certain extent on the existing undertaking should not deprive the new undertaking of the status of integrated unit by itself wherein articles are produced and at least a minimum of 10 persons with the aid of the power and a minimum of 20 persons without the aid of the power have been employed. The aspect has been well-explained by the Supreme Court in Textile Machinery Corporation, laying down the requisite tests for an undertaking to be entitled to the Benefit under section 15C of t....
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....roduction and Profit of the New industrial Undertaking is ascertainable. (xi). The undertaking is managed by independent managerial personnel. Hence, the assessee submitted, before the assessing officer that an interpretation to the words 'New Industrial Undertaking` in Section 15C of the Income-tax Act, so that in all bona fide cases, the concession would be admissible. The question is largely one of facts of each particular case. The broad principle which will, however, be borne in mind in this connection that which are calculated to make a substantial addition to the existing output. Minor extensions of the existing undertaking and replacements of the existing installed capacity would be of course, not be eligible for the concession. In support of the above submissions, the assessee placed reliance on the following decisions. (1). Textile Machinery Corporation Ltd. Vs. CIT (1977) 107 ITR 195 (SC); (2). CIT v. Indian Aluminium Co. Ltd. (1977) 108 ITR 367 (SC); (3). CIT v. Shree Digvijay Cement Co. Ltd. (1983) 144 ITR 532 (Guj); (4). CIT v. Shri Digvijay Cement Co. Ltd. (1986) 159 ITR 253 (Guj); (5). Saurashtra Cement and Chemical Industries Ltd. v. CIT (1980) 123....
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.... allowed. 19. Further, assessee has also submitted the reason for higher Gross profit (GP), net profit (NP) ratio of Rudrapur Unit as compared to Rajkot Unit, stating that assessee has started Rudrapur unit-1 for Tata Motors Limited. In Rudrapur Tata Motors limited have their plant for manufacturing of various types of vehicles, that is, mainly TATA ACE Mini Truck i.e. popularly known as Chhota Hathi. Tata Motors limited is enjoying various fiscal benefits/incentives by the government of India i.e. no excise duty, VAT and many other government benefit thereto. Hence, they are saving about 25-30% at Rudrapur. They have invited their parts supplier like assessee and many others to manufacture their parts there and supply to them, but there are huge investments in land, factory building and plant and machinery, at such remote places, no body ready to invest there. Hence, they offered to share their above tax benefits between supplier of parts and themselves, that is, offering attractive pricing of its parts and it resulting in more profit about 10 to 15% by parts suppliers. With these intention to optimize assessee's profitability, the assessee had planned to set up dedicated unit-1,....
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....o Motors Ltd., Rudrapur. Hence, there is more G.P. margin that is, of 41.96%, as compare to Rajkot unit of 35.71% and accordingly assessee claimed deduction u/s. 80IC for Rudrapur unit-1. Further in there are other benefits offered by the state government as well as central government i.e. in cheap power tariff rate etc. 21. In addition to that the assessee was asked in the notice of AO dated 14.12.2015 to give item-wise and consignment wise details of transfer of goods from one unit/ premises to another unit/premises in the tabular format. Similar details regarding components transferred to Rudrapur Unit is being asked in the above notice. In response to that the assessee has submitted the following details. (a) The item-wise details of all the components which are transferred from Rajkot unit to Rudrapur Unit. The detail contains list of items there manufacturing cost to the Rajkot unit and the price at which it is transferred to the Rudrapur unit. (b) Item-wise list of all the finished components which are finally sold to TATA Motors by the Rudrapur Unit. (c) Item-wise details of the products which are transferred from Rajkot Unit to Sanand Unit. And similarly, the list c....
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....'ble ITAT's order in assessee's own case, which was passed by the ITAT, on merit, wherein facts and law position is similar for this assessment year, under consideration. The ld.CIT(A) held that AO was not justified in denying deduction u/s 80IC of the Act and directed the assessing officer to delete the addition. 25. Aggrieved by the order of the Ld.CIT(A), the Revenue is in appeal before us and assessee has also filed cross appeals, in respect of protective addition and various disallowances made by the assessing officer, which are connected with the deduction under section 80IC of the Act. 26. Learned CIT-DR for the Revenue and Ld. Sr. D.R. for the Revenue, both have argued that assessee's appeal for Assessment Year 2011-12, was allowed by the ld.CIT(A) holding that Tribunal has allowed the appeal of the assessee in Assessment Year 2010-11 on same facts and law. However, Assessment Year 2010-11, was subjected to revision proceedings u/s. 263 of the Act, that is, later on, the revision proceedings were started in respect of Assessment Year 201011 by the ld.PCIT under section 263 of the Act. Therefore, the findings of the Tribunal, in assessee's own case should be re....
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....ption purposes. The definition of "manufacture" under Section 2(29BA)(a) is exclusive and requires a cumulative change in name, character, and use. Legal precedents support the interpretation that all three elements must undergo transformation for an activity to qualify as manufacturing. In the given scenario, since the goods retain the same name, character, and use, the process does not constitute manufacturing under the Income Tax Act. 30. The Ld. CIT-DR for the Revenue also submitted that protective addition made by the assessing officer to the tune of Rs. 1,18,45,693/-, for which the assessee is in appeal before this Tribunal, should be sustained. The said addition of Rs. 1,18,45,693/-, was made by the assessing officer, on account of transfer of products from non-eligible unit Rajkot to eligible unit Rudrapur. The learned CIT(A) in fact, has confirmed the action of the assessing officer so far this addition is concerned. 31. On the other hand, the ld. Counsel for the assessee, argued that during the course of assessment proceedings, the assessee -firm submitted that Rudrapur unit is totally new and independent unit having separate registration numbers and licenses required u....
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.... 32. The ld. Counsel for the assessee, further stated that activity at Rudrapur Unit falls within the ambit of definition of manufacturing and Production. The ld Counsel submitted the List of machineries installed, and various process carried out by the Rudrapur Unit. The ld. Counsel also submitted that the details manufacturing expenses incurred by the assessee- firm at Rudrapur Unit. Further the details manufacturing process carried out at Rudrapur Unit, on each part was submitted by the assessee, before the assessing officer. Further, while granting the Registration under Central Excise Act, Excise department has specifically mentioned in the registration certificate that it is manufacturing Unit. Similarly in the report of Service Tax department it is also stated that Rudrapur Unit is carried out manufacturing activities. In support a copy of Excise Registration and Service tax report were submitted before the assessing officer. 33. The Ld. Counsel also submitted that the order passed by the PCIT u/s. 263 of the Act for assessment year 2010-11, is not signed by the Ld. PCIT. Therefore, order passed by the PCIT is itself wrong and it should be quashed. Besides, the Tribunal ha....
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....turing unit at Rudrapur a very remote place. As huge investments in land, factory building, and plant and machinery are required, hence no one were ready to invest there. So, Tata Motors offered to share their tax and other benefits/ incentives etc. between supplier of parts and themselves, that is, offering attractive pricing of its parts. In view of the same assessee also decided to start a separate unit at Rudrapur and Tata Motors has given a lease land from its Tata Vendor Park to the assessee. The assessee- firm has started construction on that land and has installed various machineries. The Rudrapur Unit of assessee started manufacturing from 15-04-2008. The said unit is located at TATA Vendor Park Industrial Area, which is duly approved as a notified area u/s. SOIC(2)(a)(ii) vide Notification No. 283/2006. In the first year that is, assessment year (A.Y.) 2009-10, the assessee- firm had not made any claim under section 80IC, being loss year but started to claim under section 80IC of the Act, from assessment year (AY) 2010-11 and since then assessee firm is claiming deduction u/s 80IC of the I.T. Act. The assessee- firm has maintained separate books of accounts for Rudrapur U....
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.... its own administrative staff and also having own vehicles and other equipment etc. Summary of the same is as under: Cost of investments in Fixed assets at Rudrapur Unit (Without Depreciation): WDV No Particulars FY 08-09 FY 09-10 1 Land & Development 83,19,191 83,24,991 2 Building & staff quarters 4,27,63,445 5,11,25,648 3 Plant & machinery 4,09,85,763 6,48,10,075 4 Electrical fittings 31,91,778 34,27,206 Total 9,64,13,416 13,13,79,252 Cum Dep claimed 1,78,82,307 3,30,47,414 WDV 7,85,31,109 9,83,31,838 Overall Depreciation Chart of Rudrapur Unit: No Particulars FY 08-09 FY 09-10 1 WDV 4,14,64,138 7,85,31,109 2 Addition to fixed asset 5,49,29,277 3,49,65,836 3 Total 9,64,13,416 11,34,96,945 4 Depreciation claimed 1,78,82,307 1,51,65,107 5 WDV 7,85,31,109 9,83,31,838 Manufacturing Sales, Job Work Income and Material Consumption at Rudrapur Unit: No Particulars FY 08-09 FY 09-10 1 Sales 4,79,26,914 14,46,11,771 2 Jobwork Income 0 6,59,264 Total Manufacturing/income 4,79,26,914 14,52,71,035 Direct Manufacturing Expenses at Rudrapur Unit: No Particulars FY 08-09 FY 09....
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....fference between Rajkot Unit charged for raw material and Rudrapur Unit Charged for finished goods. We note that after getting the raw material from Rajkot unit, further substantial process is required to be carried out at Rudrapur Unit before selling the same to Tata Motors. Hence, it falls in the definition of manufacture. 41. We note that while granting the Registration under Central Excise Act, Excise department has specifically mentioned in the registration certificate that it is manufacturing Unit. Similarly in the report of Service Tax department it is also stated that Rudrapur Unit is carried out manufacturing activities. We note that similar addition was made in assessment year (AY) 2011-12. In that case also the AO has raised all the above contentions. However, the CIT(A) as well as the Hon'ble ITAT have dealt with all these contentions of the AO and held that there is no expenditure of Rudrapur Unit is accounted for in the books of account Rajkot Unit. Relevant para of ITAT order in assessee's own case in ITA No.108/RJT/2016 for assessment year 2011-12, order dated 03.10.2022, is reproduced hereunder: "17. We have heard the rival contentions of both the parties an....
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....l the above details were available but the same was not doubted by the AO during the assessment proceedings. Furthermore, we find that the AO was supplied with the audited financial statements of the eligible units pertaining to different financial years which are placed on pages 50 to 80 of the paper book for the purpose of the comparison of the gross profit ratio but there was no adverse comment by the AO. Meaning thereby, the revenue has accepted the profit of the eligible unit in the earlier years. Therefore, the same cannot be disturbed in the year under consideration keeping in view of the principles of consistency. 17.4 We also note that the AO was supplied with the computation of cost per unit with respect to the products manufactured at eligible unit which are placed on pages 159 to 160 of the paper book. But no defect was pointed out by the AO during the assessment proceedings. 17.5 With respect to the remuneration to the partners, we find that as per the deed of partnership, the partners were entitled for the remuneration only with respect to the profit of non-eligible unit subject to the maximum of 6 crores. The available profit of the non-eligible unit was 26.79 ....
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....disallowance made by the assessing officer, deserve to be deleted. On a careful reading of the Ld.CIT(A) order and the findings thereon, we do not find any valid reason to interfere with the decision and findings of the Ld.CIT(A) in holding that the assessee is entitled for deduction under section 80IC of the Act. Hence we sustain the order of the Ld.CIT(A) and reject the summarised and concise grounds Nos. 1, and 2 and additional ground raised by the Revenue. 43. Now coming to the assessee's summarised and concise ground No.1 of appeal, which relate to restricting the disallowance of deduction under section 80IC of Rs. 1,18,45,693/-, on protective basis, on the alleged ground of inflated profit of Rudrapur unit, being sale by Rajkot unit, in respect of item code 235F and 236F to Rudrapur unit-1. We have already recorded the arguments of learned Counsel for the assessee and learned DR for the revenue, in respect of this ground. We note that Assessing Officer has disallowed the deduction claimed by the assessee u/s 80IC of the Act, to the tune of Rs. 2,88,50,633/-, solely on the reason that Rajkot unit sold the raw goods to Rudrapur unit, therefore, Rudrapur unit is not an independ....
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....wance of Rs. 2,88,50,633/-, then separate disallowance of Rs. 1,18,45,693/-, which is very much connected with 80IC deduction, will go, and gets deleted automatically. 45. As we have pointed out that the addition made by the Assessing Officer to the tune of Rs. 1,18,45,693/- is on account of transfer of raw-products/articles from non-eligible unit Rajkot to eligible unit Rudrapur- unit and because of this reason, we find that Assessing Officer was of the view that Rudrapur unit does not fall in the definition of "manufacture" as the goods are transferred from non-eligible unit Rajkot to eligible Rudrapur- unit. Therefore, Assessing Officer was of the view that Rudrapur unit is not an independent unit and it does not do any manufacturing activities. Therefore, Assessing Officer disallowed the deduction claimed by assessee to the tune of Rs. 2,88,50,633/- and simultaneously also made the addition on account of transfer of raw-products from non-eligible unit Rajkot to eligible unit Rudrapur to the tune of Rs. 1,18,45,693/-. We find that since the Ld.CIT(A) has deleted the main addition or disallowance of deduction u/s 80IC of the Act, which was claimed by the assessee to the tune of ....
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....ge price comes to Rs. 192.91 per piece and Rajkot 236F SHIFTER SLLEVE (3RS/4 TH SPEED), which is also finished product and rate of said item average price comes to Rs. 154.88 and supplied to Tata Motors Limted- Puna, copy of no. of items supplied and average rate, total amount of items sold etc., copy of list as well as copy of relevant bills of both the products, were submitted before the assessing officer. The assessee also submitted before the assessing officer that that 236F SHIFTER SLLEVE (3RS/4 TH SPEED), there is price difference of Rs. 38.03 at Rudrapur unit-1, as compare to Rajkot unit, that is, 24.55% higher than Rajkot unit. In the same manner, 235C REVGEAR SHIFTER SLEEVE part which is supplied semi- finished and remaining some operation to be carried out by Tata Motors -Puna, at Rs. 152.42 and if assessee add 50% other overhead charges incurred by Tata Motors Ltd, that is, 50% of Rs. 152.42, which is Rs. 76.21 it comes to Rs. 228.63 (Rs. 152.42 + Rs. 76.21). Hence there price difference of Rs. 70.41, that is, 30.80%. The total sales turnover of these two items are of Rs. 694.89 lacs (414.72 + 280.17) and total turnover of Rudrapur unit-1 are of Rs. 1453.28 lacs. Hence t....
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.... (iii)Ground No.2 in assessee's appeal in ITA No.256/RJT/2024, for assessment year 2013-14. 49. Summarised and concise ground No.2, raised by the assessee, in ITA No. 256/RJT/ 2024, for assessment year 2013-14, reads as follows. "(2) (i) The ld. CIT(A) erred in upholding the addition of Rs. 59,241/- made by the assessing officer on account of late payment of PF and ESI. (ii). The ld. CIT(A) erred in not directing the assessing officer to allow the claim of deduction under section 80IC of the Act for and amount of Rs. 59,241/-, after sustaining the disallowance of said amount made by the assessing officer on account of late payment of PF and ESI. The assessing officer may be directed to allow deduction under section 80IC of the Act for the amount of addition sustained. [This is ground Nos. 3 and 4 of assessee appeal in ITA No. 256/RJT/ 2024, for assessment year 2013-14]" 50. We have heard both the parties. We note that learned Counsel for the assessee fairly agreed that the above grounds raised by the assessee are squarely covered, against the assessee, by the judgement of the Hon'ble Supreme Court in the case of CHECKMATE SERVICES P. LTD, CIVIL APPEAL NO. 2833 OF 2016, t....
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....nd Farm Site at Lamba, Tal. Kalyanpur, Dist. Jamnagar Amt. Rs. 1,02,46,156/- Our above named assessee has not claimed above deduction i.e. 80IA of Rs. 1,02,46,156/-, while filing the return of income. Hence, you are requested to grant above deduction i.e 80IA of Rs. 1,02,46,156/- from total taxable income and reduce tax liability accordingly, considering facts and legal judgments and opinion of learned advocate and oblige." 54. However, the assessing officer rejected the above contention/claim of the assessee and noticed that the assessee has not claimed deduction u/s 80IA of the Act, in the return of the income but the claim is made by way of submitting letter during the assessment proceeding. This claim has been made on apprehension that the assessee's claim u/s 80IC would be disallowed. The alternate claim u/s 80IA of the Act is not tenable because as discussed in earlier paras of this order, the assessee is neither manufacture or produces things or articles at Rudrapur unit. The same is held by the Apex court in the case of GOETZE (INDIA) LTD. Vs. CIT 284 ITR 323 (S.C) that if any deduction is required to be claimed after filing of the return, it can be claimed throu....
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....ced below for ready reference: (4) The Ld. CIT(Appeals), NFAC, Delhi has erred in law and on facts in deleting to disallowance of deduction u/s 80IC of the I.T. Act of Rs. 28,21,215/-, made by the AO after apportion of various expenses of Rajkot Unit between Rajkot unit and Rudrapur Unit. [This is Ground No.4 of Revenue's appeal in ITA No.260/RJT/2024 for A.Y.2010-11, Ground No.4 in ITA No.247/RJT/2024 for A.Y.2012-13, Ground No.4 in ITA No.248/RJT/2024 for A.Y.2013-14 ] 60. Succinct facts qua the above issue are that during the assessment proceedings, the assessee was asked, regarding expenses, which are related to Rudrapur Unit but not debited in the Profit and Loss account of the Rudrapur unit on proportionate basis thereby, boosting its profits, as compared to the Rajkot Unit, thus inflating the deduction claimed by the assessee u/s 80IC of the Act. 61. In response to this, the assessee replied, vide assessee's letter dated 16/01/2016, in which assessee has given the following reasoning in support of the claim of the assessee that these expense should not be apportioned between the two units. "As regard your point for allocation of proportionate various expenses etc. o....
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....ioned under the various heads of income in the same manner in which the income or loss of the firm has been determined under each head of income. (c) Section 80A(3) (3) Where, in computing the total income of firm, association of persons or body of individuals, any deduction is admissible under section 80G or section 80GGA or section 80HH or section 80HHA or section 80HHC or section 80HHD or section 80I or section 80JJ, no deduction under the same section shall be made in computing the total income of a Partner of the firm or, as the case may be, of a member of the association of persons or body of individuals in relation to the share of such partner in the income of the firm or the share of such member in the income of the association of persons or body of individuals. Thus as per section 40(b) mentioned above interest/remuneration etc. paid to partner has been added to the total income of the firm and as per section 80A(3) no further deduction u/s. 80G, 80GGA, 80HH, 80HHA or section 80I or section 80I or 80JJA were allowable in case of the partner. (b) After 01.04.93: As per Finance Act 1992 w.e.f. 01.04.93, the whole scheme of assessing firm has been changed and as p....
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..... Whereas after 01.04.93 there is only a single taxation of income i.e. in case of the firm interest/remuneration in accordance with the provision of section 40(b) has been deducted from the income of firm and on balance income of the firm deduction under chapter VI-A is to be allowed and balance income is taxed in case of the firm where as share of profit in hands of the partners are exempt as per section 10(2A) of the Act, Whereas interest/remuneration paid to partners etc. allowed as deduction as per provision of section 40(b) of the Act are taxable in case of the partner as per newly introduce/inserted section 28(v) of the Act under the head business and profession of the Act. But at the same time there is a further amendment in section 80A(3) of the Act and restriction Chapter VI-A in case of the partner has been removed, means after 01.04.93 these deduction are allowable in case of the partners also out of business income of the partners i.e interest/remuneration etc taxed u/s. 28(v) of the Act and only after allowing those deduction on a balance total income the partners are liable to pay taxes. (iv) Following example will further clear the provisions prior to 01.04.93 an....
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.... the above case the partnership firm was deriving income from considered as partly agricultural and partly non- agricultural. And on the above fact it has been further held that the salary paid to a partner by the firm was exempt from tax under rule 24 of the Indian IT Rules, 1922 to the extent of 60% thereof representing agricultural income and was liable to tax only to the extent of 40%. Thus, it is clear that the character of salary paid to the partner has the same character of the income of the firm. (ii) CIT Vs. Ramniklal Kothari (1969) 74 ITR 57 (SC) In the above matter the supreme court has held that business carried on by a firm is business carried on by the partners and profit of the firm are profits earned by all the partners in carrying on the business. Their lordship also has clearly held that the share of the partners is business income in their hands and being business income expenditure necessary for the purpose if earning that income and appropriate allowances were deductible there from in determining the taxable income of the partner. (iii) Motichand Rawat Vs. ACIT (1993) 46TTJ (JP)452 In the above matter the Assessment year is 1989-90 i.e. prior to ame....
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....t of liaison expenses is required. Copy of account of Liasion expenses and copy of various bills are attached as per Annexure 5. Travelling Expenses As regard Travelling Expenses, total local travelling expenses are of Rs. 27,20,238/- out of which of Rajkot unit are of Rs. 25,67,631/-, Rudrapur unit of Rs. 1,52,607/- and foreign travelling expenses are of Rs. 11,42,099/- incurred by Rajkot unit for their export turnover of Rs. 17,76,24,987/-. As all travelling expenses of respective units borne by itself, there is no requirement of apportionment of travelling expenses. Copy of accounts as well as various bills are attached as per Annexure 5. Technical Consultancy As regard technical consultancy expenses of Rs. 20,30,300/- at Rajkot and Rs. 5,40,385/- at Rudrapur unit, it is included in legal and professional fees. It is clarified that all expenses are incurred by Rajkot unit for advisory services and technical services provided for metallurgy, heat treatment, NOC for pollution control board, software engineering etc. As all technical consultancy expenses of respective units borne by itself, there is no requirement of apportionment of travelling expenses. Copy of account....
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.... 38,06,691 Nil Refer working note 1 Below Travelling Expenses (Foreign) 11,42,099 Nil Only for Export Business Travelling Expenses(inland) 25,67,631 1,52,607 - Technical Consultancy 20,30,300 5,40,385 Refer note in the letter Advertisement 2,06,870 Nil - Depreciation of Cars 11,97,617 1,04,546 - Working Note1: Total Liasioning expenses incurred at Rajkot unit for Rs. 38,06,691/- for F.Y. 2009-10 comprised of the following concerns: Sr. no. Particulars Liasioning work by Liasioning for the customers 1 Foreign liaison Foreign person For export business only 2 -- do -- Kedar Mate Force Motor, Pune 3 -- do -- G.Bonjour TATA Motors Ltd, Jamshedpur 4 -- do -- Anant Enterprise TATA Motors Ltd, Pune 5 -- do -- Anilkumar Mishra Maruti Udhyog Ltd, Gurgaon 62. However, the assessing officer rejected the above contention of the assessee and observed that the unit of Rudrapur is managed, controlled and financed by the same, Management i.e. Bhavani Industries, therefore, these expenses under the following head were apportioned on the basis of the turnover of the Rajkot Unit and Rudrapur Unit by the assessing officer: Turnover of Rudrapur-I Uni....
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....erence by us. We, approve and confirm the order of the CIT(A) and dismiss the ground raised by the revenue. 67. In the result, summarised and concise ground No.4, raised by the revenue, is dismissed, and year -wise, following appeals of the revenue, are dismissed: (i) Ground No.4 in ITA No.260/RJT/2024 for A.Y.2010-11, (ii) Ground No.4 in ITA No.247/RJT/2024 for A.Y.2012-13, (iii) Ground No.4 in ITA No.248/RJT/2024 for A.Y.2013-14. 68. Summarised and concise ground No.5, raised by the revenue, is reproduced below for ready reference: (5) The Ld. CIT(Appeals), NFAC, Delhi has erred in law and on facts in deleting to disallowance of deduction u/s 80IC of the I.T. Act of Rs. 40,17,063/- made by the AO after set off the loss of Rs. 40,17,063/-, of Rudrapur unit-11, against the profit of unit-1, Rudrapur. [This is ground No.5 in Revenue's appeal in ITA No.247/RJT/2024 for A.Y.2012-13] 69. Succinct facts qua the above issue are that during the assessment proceedings, assessing officer has held that the appellant has two units at Rudrapur on which the deduction u/s 80IC is claimed. For the relevant year the turnover GP and NP of the units is as tabulated below: Turn....