DCIT-CENTRAL CIRCLE-1(4), MUMBAI, MUMBAI V. NAVKAR CORPORATION LIMITED, NAVI MUMBAI

ITA 1846/MUM/2025

AI Insights

The case revolves around the dispute concerning the deduction claimed by Navkar Corporation Limited under Section 80-IA(4)(i) of the Income Tax Act, 1961, for the Assessment Year 2018-19. The Revenue challenged the CIT(A)'s decision which allowed the deduction, arguing that the assessee did not maintain separate books of accounts for eligible and ineligible businesses and improperly apportioned expenses. The Tribunal examined the submissions, the audit reports, and the financial statements, ultimately agreeing with the CIT(A) that the assessee had maintained separate, auditable books and correctly apportioned expenses. Furthermore, the Tribunal found that the addition made by the AO regarding profit on sale of depreciable assets was incorrect as the block of assets had not ceased to exist, and thus no profit should be taxed under Section 50.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 717234 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2018-2019
• Appeal Filed On: 19-03-2025
• Other Referred Cases: CIT vs Accel Transmatic systems Itd, CIT vs Maharashtra Hybrid Seeds Co Ltd
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATYAPRAKASH R.SINGH
• Assessee Lawyers: VIJAY MEHTA
• Keywords: Business income; Depreciation; Cost of acquisition; Rule of consistency; TDS; Tangible material; CHAPTER IV
• Section: 143(3); 32; 115JB

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL, ‘B’ BENCH MUMBAI BEFORE: SHRI AMIT SHUKLA, JUDICIAL MEMBER & SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No.1846/Mum/2025 (Assessment Year :2018-19) DCIT-Central Circle- 1(4) Mumbai Vs. Navkar Corporation Limited 205-206, J.K. Chambers, Sector-17, Vashi, Navi Mumbai – 400 705 PAN/GIR No.AACCN8633K (Appellant) .. (Respondent) Assessee by Shri Vijay Mehta, CA & Shri Tarang Mehta Revenue by Shri Satyaprakash R. Singh, CIT DR Date of Hearing 07/08/2025 Date of Pronouncement 12/08/2025 आदेश / O R D E R PER AMIT SHUKLA (J.M): The aforesaid appeal has been filed by the Revenue against order dated 24/12/2024 passed by ld. CIT(A)-46, Mumbai for the quantum of assessment passed u/s.143(3) for A.Y. 2018-19. 2. In the grounds of appeal, the Revenue has raised following grounds:- Printed from counselvise.com ITA No.1846/Mum/2025 Navkar Corporation Limited 2 1. \"Whether, on the facts and circumstances of the case and in law, the CIT(A) erred in fully allowing the deduction under Section 801A(4)(i) without verifying whether the assessee had maintained separate books of accounts, as mandated by Section 801A(5), and whether the accounts were retrospectively prepared only during assessment proceedings?\" 2. \"Whether, on the facts and circumstances of the case and in law, the CIT(A) erred in granting full deduction under Section 801A without appreciating that the assessee failed to distinguish between receipts attributable to eligible and ineligible businesses, thereby inflating profits eligible for deduction?\" 3. \"Whether, on the facts and circumstances of the case and in law, the CIT(A) was justified in accepting the assessee's apportionment of common expenses (such as finance charges, employee costs, and other overheads) on a turnover basis, despite the AO finding the method arbitrary and inconsistent with actual business operations?\" 4. \"Whether, on the facts and circumstances of the case and in law, the CIT(A) erred in rejecting the AQ's computation of eligible profits, which was based on an objective 65.88:34. 11 allocation ratio (used by the assessee itself for expenses), and instead adopting an inflated computation without sufficient justification? 5. \"Whether, on the facts and circumstances of the case and in law, the CIT(A) erred in ignoring the AO's finding that the assessee had not provided any evidence of how loans and financial liabilities were allocated between eligible and ineligible units, thereby affecting the accuracy of expense allocation and profit computation?\" 6. \"Whether, on the facts and circumstances of the case and in law, the CIT(A) erred in disregarding the AO's reliance on Section 801A(8) proviso, which allows the AO to compute profits on a reason reasonable basis in cases where true profits cannot be determined due to lack of proper accounts? 7. \"Whether, on the facts and circumstances of the case and in law, the CIT(A) erred in allowing the claim of loss on sale of Printed from counselvise.com ITA No.1846/Mum/2025 Navkar Corporation Limited 3 fixed assets without verifying the depreciation details and Written Down Value (WDV) of assets as computed by the AO?\" 8. \"Whether, on the facts and circumstances of the case and in law, the CITTA) erred in allowing the claim without calling for a remand report, thereby failing to give the AO an opportunity to verify new evidence submitted during appellate proceedings?\" 9. \"Whether, on the facts and circumstances of the case and in law, the CIT(A) erred in disregarding the AO's findings that the block of assets resulted in a net profit of 233,34,380/-instead of a loss, and therefore, no loss deduction was allowable under Section 32 of the Income Tax Act, 1961?\" 3. The brief facts qua the issue involved are that the assessee company is mainly engaged in providing composite infrastructure facility by providing Container Freight Stations (CFS) within the notified Custom Zone, extended Inland Port facility for import and export of goods. The assessee owns and operates three CFS located in state of Maharashtra and one CFS located in state of Gujrat. The return of income was e- filed on 28-09-2018 for the year under reference declaring total income of Rs.35,20,50,000/- The said income was declared after claiming deduction under Chapter VIA under section 801A(4)(i) of the Act amounting to Rs.266,13,62,345/- The tax on Book Profit being higher than the tax payable on the total income, tax u/s 115JB was paid for taxation amounting to Rs. 128,54,71,778/-. 4. In so far as the disallowance of deduction u/s.80IA(4)(i) which has been raised by the Revenue in Ground Nos.1-6, succinctly put. The facts are that assessee has invested in infrastructure facility (extended Inland Port) being Container Printed from counselvise.com ITA No.1846/Mum/2025 Navkar Corporation Limited 4 Freight Station (for short 'CFS) as per the Government Notification herein after referred to as Eligible Unit. The said infrastructure facility had commenced operation from 28-09- 2008 The assessee commenced claiming deduction u/s 80- IA(4)(i) of the Act from the AY 2010-11 for 10 consecutive years. The assessee has been maintaining separate books of account for Eligible Unit. The said books of account maintained for Eligible Unit has been audited and audit report in Form 10CCB dated 01-09-2018 has been issued and uploaded on 28/09/2018 Based on the audit report in Form 10CCB the assessee has claimed deduction u/s 80-IA(4)(i) of the Act. 5. The returns of income filed for the assessment years mentioned herein below were subject to scrutiny assessment u/s 143(3) of the Act and based on the submission and explanation the deduction u/s 80-IA(4)(i) of the Act claimed as per Form 10CCB in respect of Eligible Unit has been accepted and allowed. 6. There has been no dispute in respect of the same in any of the assessment years beginning AY 2010-11 to 2019-20, except for the AY 2018-19 i.e. present year under consideration. The details of scrutiny assessments are as under:- Assessment Year Date of order passed u/s 143(3) 2012-13 21-01-2015 2013-14 27-02-2016 2014-15 22-12-2016 2016-17 09-05-2018 2017-18 08-05-2019 Printed from counselvise.com ITA No.1846/Mum/2025 Navkar Corporation Limited 5 6. The ld. AO noted that assessee is engaged in the business of providing cargo handling services and also maintaining warehousing services and there is nothing on record which could distinguish the receipts attributable to Cargo handling charges and warehousing services. The following total gross receipts from the business has been reflected at Rs.428,17,36,000/-. Head of receipts Amount Auction sales 2,64,20,000/- Cargo Handling Services 382,70,34,000/- Transportation 36,45,93,000/- EDI Income 36,02,000/- MND receipts 6,00,87,000/- Total 428,17,36,000/ 7. Thereafter, ld.AO has observed that assessee has not maintained separate books of accounts in respect of eligible business activities and whereas consolidated accounts maintained by the assessee for both eligible and illegible units. In response to the show-cause notice, assessee has duly submitted vide reply dated 11/02/2021 and had clarified that it had maintained separate books of accounts for eligible unit and also filed copies of balance sheet as well as profit and loss account of the eligible unit which was appended with the reply. However, ld. AO still maintained that no separate account details have been made and it was only when ld. AO issued a show-cause notice assessee had Printed from counselvise.com ITA No.1846/Mum/2025 Navkar Corporation Limited 6 filed separate balance sheet and profit and loss account. After referring the proviso to sub-section 8 to Section 80IA and after incorporating the balance sheet and profit and loss account, ld. AO noted that the expenses apportioned between eligible and non-eligible unit is @65.88% and 34.11% respectively in the following manner:- Total expenses claimed as per the consolidated P&L account on record lac(100%) Rs.30,274.26 Expenses apportioned to the eligible unit (65.88%) Rs.19,946.41 lac Expenses apportioned to the ineligible unit (34 11%) Rs.10,327.86 lac 8. Thus, he held that income eligible for computing deduction u/s.80IA(4) has to be computed in ratio of expenses in absence of any evidence brought on record. After a detailed finding, he has worked out the computation of deduction u/s.80IA after observing and holding as under:- Keeping in view the facts & circumstances of the case, non- maintenance of separate books of accounts and consolidated balance-sheets/P&L account on record/no details being there on record as to what are the activities attributable to the eligible business and what are the activities attributable to the ineligible unit, deduction u/s 801A(4)(i) has to be computed on the basis of the proportionate expenses claimed at the rates of 65.88% and 34.11% respectively, as mentioned above. Following is the re-computation of the deduction u/s 801A(4)(i) of the IT. Act. 1961- Calculation of profit for the eligible unit: Particulars Amount (in Rs.) Printed from counselvise.com ITA No.1846/Mum/2025 Navkar Corporation Limited 7 Business Income Net profit before tax as per profit & Loss A/c Rs. 66,37,35,347/- (+) Ind As impact Rs. 3,53,24,858/- Rs. 69,90,60,205/- Add: Adjustment for inadmissible expenses or disallowance Donation = 99,17,855 Gratuity (excluding OCI) = 65,36,891 Leave encashment = 8,66,501 Depreciation as per books (Companies Act) = 17,79,09,691 CSR expenses = 1,81,49,838 Profit) Loss on sale of fixed assets = (43,23,322) Interest for late payment of MSME Creditors = 2,53,475 Penalty for late filing of statutory Returns = 19,831 Interest on lat payment of statutory dues 20,96,21,986- TDS = 2,91,225 Less: Allowable as deduction Depreciation as per income tax act, 1961 = 30,56,35,346 Earlier year ICDS Impact 31,53,68,212 = 97,32,866 Less: Income under other hands Interest Income = 95,41,171 Printed from counselvise.com ITA No.1846/Mum/2025 Navkar Corporation Limited 8 Total Profit attributable to eligible unit 58,37,72,808 Less: Income which is not eligible for 801A deduction 1. EDI Service Income = 22,38,639 2. Income of maintenance & repairing = 6,00,86,714 6,23,25,353 of containers Eligible profit for 801A = 52,14,47,455 9. Accordingly, ld.AO has computed the deduction u/s.80IA of Rs.52,14,47,455/- as against Rs66,13,62,345/- and amount of Rs.13,99,14,890/- was disallowed. 10. Apart from that ld. AO has also noted that assessee has claimed amount of Rs.55,71,649/- on account of loss of sale of fixed assets in respect of certain trolleys and trucks etc., which have purchased in different years beginning from the year 2008-2017 and depreciation has been claimed there against opening WDV as on 01/04/2017 and same has been computed at Rs.4,13,86,407/- and depreciation claimed till date was at Rs.3,69,28,155/- and the sale consideration mentioned of Rs.4,47,20,787/-. The assessee has computed the deduction in the following manner:- Cost of acquisition : Rs.7,60,77,293/- Less: Depreciation claimed till date: Rs.3,69,28,155/- Balance Rs.3,91,49,138/- Deduction claimed: Sale consideration : Rs.4,47,20,787/- Less : Rs.3,91,49,138/- Balance deduction : Rs.55,71,649/- Printed from counselvise.com ITA No.1846/Mum/2025 Navkar Corporation Limited 9 11. However, the ld. AO has added back the amount of Rs.55,79,000/- after observing as under:- “Issue has been examined at this end. It is seen that the WDV of the assets as on 01.04.2017 has been mentioned at Rs 4,13,86,407/- and no details have been placed on record as to the details of depreciation claimed during the Financial Year 2017-10 and the said WDV might be further reduced as on 31.03.2018. There are no details of the sales effected during the year regarding the assets and similar amount of Rs.9,90,000/- has been mentioned as sale consideration in respect of most of the assets. Otherwise, it has been provided under the provisions of section 32 of the I.T. Act, 1961 that loss incurred, if any, has to be adjusted against the relevant block of assets for any particular period. In case the plea of assessee is accepted, it is seen that against the WDV of Rs.4,13,86,407/-, the sale consideration has been mentioned at Rs.4,47,20,787/- which results in profit of Rs.33,34,380/-, Thus, the loss so claimed is not allowable as per the relevant provisions and, accordingly, amount of Rs.55,71,649/- is being added back to the taxable income of the assessee. 12. The ld. CIT(A) has deleted both the additions after observing and holding as under:- 71 In this ground, the appellant has argued that the AO erred in reducing the deduction u/s 801A by an amount of Rs. 13,99,14,890/- 7.2 I have gone through the submissions made by the appellant, the assessment order and the facts of the case. The appellant is having container freight station (CFS) and is providing cargo handling services. It has four yards, three in Maharashtra and one in Gujarat. The eligible unit pertains to only one yard i.e. Yard 3 located in Maharashtra. At the outset, it is noted that the appellant has been claiming deduction u/s 80-IA(4) since AY 2010-11 and the same has been allowed since inception. It has also been informed that the appellant's case for AY 2010-11 to 2017-18, except AY 2015-16, were in scrutiny and the claim of deduction has been accepted in all the years. Further assessment order for AY 2020-21 was also passed on 25.03.2022 in which returned income was accepted. However, for A.Υ. 2018-19, the AO has reduced the deduction Printed from counselvise.com ITA No.1846/Mum/2025 Navkar Corporation Limited 10 u/s 801A by 13,99,14,890/-. AO has raised the point that appellant has not submitted separate accounts for eligible business therefore, there is no distinction between receipts attributable to eligible business and ineligible business. Further, he recomputed the profit eligible for deduction u/s, 801A. 7.3 As per the provisions of sub section (5) of section 801A, for computing the deduction u/s 801A(2), the eligible business is to be treated as the only source of income. Sub section (5) of section 801A has been explained by the Hon'ble High court of Kerala in the case of CIT vs Accel Transmatic systems Itd 230 CTR 206 (Ker). The term business used in sub section is confined to the independent unit and cannot be merged with other businesses. Further section 801A(2) is the charging section for determining basic eligibility and there is no mention of word \"business\" Thus every unit constitutes as separate undertaking engaged in the eligible business. 7.4 Hon'ble Bombay High Court in the case of CIT vs Maharashtra Hybrid Seeds Co Ltd [2021] 133 taxmann.com 43 (Bombay) has held that deduction under section 80-1A has to be computed unit-wise and not for business as a whole, therefore, assessee-company was to be allowed deduction under section 80-1A in respect of its two eligible units even if it had claimed loss under head of its total business income. The relevant portion of this judgement is as under- \"Where the gross total income of an assessee includes any profits and gains derived from any business of an industrial undertaking, there shall be allowed, In computing the total income of the assessee, a deduction from \"such profits and gains of an amount equal to the percentage specified in sub- section (5) and for such number of assessment years specified in sub-section (6). Therefore, it provides for a deduction from \"such profits and gains from any business of an Industrial undertaking where the gross total income of an assessee includes any profits and gains derived from any business of an Industrial undertaking It is quite clear that each industry must be or each unit must be considered on its own working only when adjudging its entitlement to the deduction under section 80-1A. It cannot be allowed to suffer because it keeps company with some other industry or unit in the hands of the assessee, In the application of section 80-1A the profits and gains earned Printed from counselvise.com ITA No.1846/Mum/2025 Navkar Corporation Limited 11 by an industry mentioned in that section cannot be reduced by the loss suffered by any other industry or industries owned by the assessee. This view is confirmed by clause (i) (a) of sub- section (5) of section 80-IA\" As Before me the appellant has submitted that it was maintaining a separate account for eligible business as mandated u/s 801A (5) to be eligible for claiming deduction under the section. It was also informed that the same had been submitted before the AO too and that the AO has also made a mention of same in the sessment order in Para 4. The appellant has submitted audit report in Form 3CA long with report in Form 3CD, In clause 33 of Form 3CD, section wise details of decfuction claimed le. deduction of Rs 66,13,62,345/- claimed u/s 801A is reported. Further, audit report in Form 10CCB as required u/s 801A (7) was also submitted on e-filing portal on 28.09.2018. The audited financial statements comprising of balance sheet and profit and loss account of the eligible unit as on 31.03.2018, showing assets and liabilities and the Income and expenditure for the year concerned, was also submitted during the course of appellate proceedings. 7.6 AO has raised further contention that the appellant has not correctly apportioned the expenses between the eligible and non-eligible units. He has noted in his finding at page 8 and 9 of assessment order and thereafter he proceeded to compute the deduction as per computation adopted by him. As per the details submitted by the appellant before me the total expenses in case of eligible units amount to Rs. 199.46 cr. (check) out of which cost of direct expenses (raw material, production etc.) is Rs. 111.95 cr. while the other expenses of around Rs. 87.51 cr. like salary, finance charges etc, have been apportioned on turnover basis. The proportionate expenses have been worked out based on the turnover ratio. It has been submitted that some expenses like salary etc. are inextricably linked with each other as some of the manpower works for both the eligible as well as non-eligible units because of which the same have been proportonality divided on turnover basis. As per the AO the appellant has divided expenses in 65.88-34.11 ratio whereas the appellant has submitted that expenses are of two types, one being direct and other being common. The common expenses have been apportioned on turnover basis. The turnover for the concerned year is Rs 277.83 cr. which has also Printed from counselvise.com ITA No.1846/Mum/2025 Navkar Corporation Limited 12 been finalized in the audit report and which has not been questioned by the AO. The relevant chart to show the calculation in this regard was also submitted the figures of which also tally with the audited financials. 7.7 Further upon going through the assessment order I have noted that while re-computing the eligible profit, he has erroneously taken figure of profit before tax at Rs.100,74,91,420/- which is the profit before tax of whole business instead of considering the declared profit before tax of only eligible unit which is Rs. 80,25,95,555/. It is also noted that he has not disturbed the ratio of expenses claimed in proportion of turnover of eligible unit and ineligible unit that is 65.08% and 34.11% respectively. Since, he has adopted wrong figure of Profit before tax for calculating deduction u/s 801A, the base amount for calculating deduction got reduced from Rs 80,36,50,237 to Rs 66,37,35,347 i.e. reduction of Rs. 13,99,14,890 which is exactly the amount of deduction reduced by AO. Since, AO has not disturbed the total receipts and the basis of apportionment of expenses Le in turnover ratio of 65.88 & 34,11, then the outcome cannot differ from appellant's account. It is also to be taken into the account that the appellant is claiming such deduction since A.Y. 2010-11 and the same has been accepted by the department Moreover, the accounts of appellant are audited and certificate in prescribed format by CA was submitted wherein no defect has been pointed out by the AQ. The following chart shows the working as done by the appellant and as worked out by the AO: 7.8 Considering the above facts and the discussion made thereon, I am of the opinion that the claim of the appellant appears to be correct especially when separate audited financials are available on record and the expenses claimed have also been explained in details. Accordingly, the ground no. 2 of appeal is allowed. 12. On addition of Rs.55,71,649/- on account of sale of fixed assets during the year, ld. CIT(A) held that here in this case block of asset has not ceased to exist after the sale of assets Printed from counselvise.com ITA No.1846/Mum/2025 Navkar Corporation Limited 13 and other conditions of taxability of the said amount u/s.50 is not fulfilled. 13. Before us, ld. Counsel submitted that Ld. AO has erred in not appreciating the vital fact that the assessee has been maintaining separate books of account based on which audit has been carried out under sub-section 7 of section 80-IA of the Act and report in Form 10CCB has been issued by the Independent Chartered Accountant. The deduction under sub-section (1) from profits and gains derived from an undertaking shall not be admissible unless the accounts of the undertaking for the previous year relevant to the assessment year for which the deduction is claimed have been audited by an accountant, as defined in the Explanation below sub-section (2) of section 288 before the specified date referred to in section 44AB and the assessee fumishes by that date the report of such audit in the prescribed form duly signed and verified by such accountant 14. The Ld. Counsel further submitted that Ld. AO has erred in not appreciating the fact that the assessee has submitted the audited balance sheet of the Eligible Unit wherein the assets, liabilities, revenue and expenses of the Eligible Unit are recorded in respect of the said unit. The same being audited and report in Form 10CCB issued which is the conclusive evidence that separate books of account has been maintained and that the assets, liabilities, revenue and expenses of the Eligible Unit has been recorded separately in respect of the Eligible Unit. He further submitted that the Ld AO erred in concluding that separate accounts are not Printed from counselvise.com ITA No.1846/Mum/2025 Navkar Corporation Limited 14 maintained merely on the basis of consolidated balance sheet filed with the return of income. Further, the Ld. AO has also erred in observing that the expenses have not been apportioned/allocated correctly. He submitted that the allocation has been done on actual basis and in case of common expenses the same has been allocated on scientific basis like turnover, etc 15. Alternatively, ld. Counsel submitted that in any case, the Ld. AO has erred in computing the deduction u/s 80-IA(4) (i) of the Act at ₹52,14,47,455/- The Ld AO while computing the deduction has applied the ratio to the Net Taxable Income from Business which is after adjustments of additions and disallowances/deductions as per the Act. The Ld. AO after applying the ratio to the Net Business Income has again made the adjustments of additions and disallowances/deductions as per the Act as claimed by the assessee in the Computation of Income of Eligible Unit. 16. For easy reference the summary of the computation of Business Income as per return of income is given hereinbelow:- Particulars Computation of Total Income Profit as per Profit and Loss Account 128.38 Add: Other Comprehensive Income and Ind AS impact 4.70 Total Profit as per Profit and Loss 133.08 Printed from counselvise.com ITA No.1846/Mum/2025 Navkar Corporation Limited 15 Add: Donation, Gratuity, Leave Encashment, CSR Expenses, etc 27.04 Less: Depreciation, ICDS impact, Income from Other Sources 58.16 Less: Income from Other Sources 1.21 Business Income 100.75 17. Ld. Counsel submitted that the Ld. AO has grossly erred in applying the allocation ratio determined by him to the net Business Income and again making the adjustments as per Computation of Income of Eligible Unit which resulted in reduction in the deduction from Eligible Unit. Particulars Re-Computation of Deduction by Ld. AO Profit as per Profit and Loss Account (Ld. AO has considered the Business Income of 66.37 100.75, which is after making the adjustments and applied the ratio @ 65.88% thereon. Add: Ind AS impact 3.53 Total Profit as per Profit and Loss 69.91 Add: Donation, Gratuity, Leave Encashment, CSR Expenses, etc 20.96 Printed from counselvise.com ITA No.1846/Mum/2025 Navkar Corporation Limited 16 Less: Depreciation, ICDS impact, Income from Other Sources 31.54 Less: Income from Other Sources 0.95 Business Income 58.38 18. Assuming, without admitting that the allegations and inferences of the Ld. AO are correct, the calculation of eligible profit as per the method adopted by him is as under. Particulars Combined (PBP9) Eligible 65.88% Non- Eligible 34.12% Revenue Income from Operations 428.17 282.08 146.9 Other Income 2.95 194~ 1.01 431.12 284.02 147.10 Less: Expenses 302.74 199,45 103.29 Net Profit as per Profit and Loss Account 128.38 84,58 43.80 Computation of Income (Segmental) Particulars Combin ed (PBP1) Eligible 65.88% Non- Eligible 34.12% Profit as per Profit and Loss Account 128.38 84.58 43.80 Add: Items as per Computation of 4.70 3.10 160 Printed from counselvise.com ITA No.1846/Mum/2025 Navkar Corporation Limited 17 Income (Other Comprehensive Income and Ind AS adjustment) 133.08 87.67 45.41 Add: Donation, Gratuity, Leave Encashment, CSR Expenses, etc 27.04 17.81 9.23 Less: ICDS impact, Income from Other Sources 59.38 39.12 20.26 Business Income 100.74 66.37 34.37 Less: Non-eligible Receipts (PBP 50) 4.20 62.17 19. Thus, as per the above the deduction u/s 80-IA(4)(i) of the Act amounts to Rs.62.17 crores which is less by Rs.3.97 crores (Rs.66.14 – Rs.62.17) as compared to deduction claimed by the assessee. Ld.Counsel submitted that the method applied by the Ld. AO is on ad hoc basis without brining on record any cogent reason to do so especially when the separate books of account are maintained and the same are audited and report in Form 10CCB has been issued. The deduction claimed u/s 80-IA(4)(i) of the Act has been consistently accepted by the Department. 20. Regarding addition of book profit on sale of depreciation assets, ld. Counsel submitted that the assessee being Limited Printed from counselvise.com ITA No.1846/Mum/2025 Navkar Corporation Limited 18 Company has to maintain Fixed Assets on historical cost basis and the Depreciation is claimed as per rate prescribed under the Companies Act. The assessee company in its Fixed Assets Schedule has to maintain accumulated depreciation and from the historical cost, the accumulated depreciation at the year end is deducted and net block is disclosed. 21. Ld. Counsel pointed out that during the year under consideration the assessee has sold Depreciable Assets forming part of the Block of Assets for a consideration of Rs.4,47,20,787/-. As per Companies Act the historical cost of the assets sold amounting to Rs.7,60, 77,293/- has been deducted from the respective block of assets and corresponding accumulated depreciation till the date of sale of assets amounting to Rs.3,69,28,155/- has been deducted. The net book profit amounting to Rs.55,71, 649/- arising therefrom has been credited to Profit and Loss Account. The said details were submitted during the assessment proceedings before the Ld. AO as per Annexure 8 of the submission. The computation of book profit is tabulated herein below. Particulars Amount Sale Consideration - A 4,47,20,787 Cost of acquisition 7,60,77,29 Less: Accumulated Depreciation till date 3,69,28,155 Balance cost on assets after depreciation - B 3,91,49,138 Book Profit (A-B) 55,71,649 Printed from counselvise.com ITA No.1846/Mum/2025 Navkar Corporation Limited 19 22. In the Computation of Total Income, the depreciation allowed at the rates prescribed under the Income Tax Rules, 1962 is claimed as per block of assets. Further, in respect of the assets sold during the year the sale consideration is credited to the respective block of assets and net depreciation has been claimed. The block of assets is disclosed in the Tax Audit Report and the Form ITR. The block of assets in respect of sale of assets as disclosed in the ITR and TAR is reproduced herein below. Particulars Plant& Machinery 15% Furniture 10% Total Opening WDV as on 01-04- 2017 1,71,34,83,990 8,80,54,618 180,15,38,608 Additions during the year 1,73,83,82,867 4,31,67,050 178,15,49,917 Less: Sates during the year 4,42,74,894 4,45,893 4,47,20,787 Less: Depreciation 32,80,35,457 21,49,353 33,01,84,810 WDV as on 31-03-2018 3,02,55,56,506 11,98,47,550 314,54,04,056 23. Thus, in the Computation of Total Income, the assessee while adjusting the Book Profit on sale of depreciable assets has deducted the amount by putting (-) against the sum of Rs.55,71,649/-. It is submitted that the assessee has not claimed any loss on sale of depreciable assets amounting to Rs. 55,71,649/-. The Ld. AO presumed that the said negative figure is loss on sale of depreciable assets. The Ld. AO has completely misunderstood the facts. He has relied upon figure of Profit on sale of assets as per books. However, he has not noticed that the block of assets as per Income Tax is having Printed from counselvise.com ITA No.1846/Mum/2025 Navkar Corporation Limited 20 huge positive balance and the same is not exhausted. Accordingly made the addition of Rs.55,71,649/-. 24. The Ld. CIT(A) observing the above-mentioned facts has rightly deleted the addition made by the Ld. AO. 25. On the other hand, ld. DR strongly relied upon the order of the ld. AO and referred to various submissions made in the impugned assessment order and submitted that once assessee is not showing any book of accounts, AO is justified in computing the deduction u/s.80IA(4) in accordance with the proportionate expenses. 26. We have carefully considered the rival submissions and perused the assessment order, the appellate order, the statutory audit report in Form 10CCB, the audited segmental financials of the eligible unit, the consolidated financial statements, and the working papers placed in the paper-book, including the computation tables reproduced in the record. The controversy has two limbs: (i) restriction of deduction under section 80-IA(4)(i), premised on alleged absence of separate books and alleged arbitrariness in apportionment; and (ii) addition of Rs.55,71,649/- on account of “profit on sale of depreciable assets” credited in books but reduced in the tax computation. 27. At the threshold, eligibility of the assessee’s Container Freight Station (CFS) undertaking under section 80-IA(4)(i) stands admitted in the assessment order itself (para 2) and has been consistently accepted in scrutiny assessments for earlier years, viz., 2012-13 (order dated 21.01.2015), 2013-14 (27.02.2016), 2014-15 (22.12.2016), 2016-17 (09.05.2018) Printed from counselvise.com ITA No.1846/Mum/2025 Navkar Corporation Limited 21 and 2017-18 (08.05.2019). The Ld. CIT(A) has, in terms, recorded that the Department has been accepting the claim since A.Y. 2010-11 and that no defect was ever pointed out in the statutorily prescribed certificate. While the doctrine of res judicata does not strictly apply to income-tax proceedings, judicial discipline and the principle of consistency demand that a view accepted for years on the same facts should not be disturbed without cogent reasons, none have been shown. 28. The Assessing Officer’s primary objection is that separate books were not maintained for the eligible unit. The record, however, shows the exact converse. The assessee has placed on file: (i) the Form 10CCB issued by an independent Chartered Accountant under section 80-IA(7); (ii) the audited balance sheet of the eligible unit showing its distinct assets, liabilities, revenue and expenses; (iii) a tabular break-up of total expenses between the eligible and non-eligible units (Annexure 6). Section 80-IA(7) stipulates that deduction “shall not be admissible unless the accounts of the undertaking … have been audited … and the assessee furnishes … the report of such audit in the prescribed form.” The assessee has complied in letter and spirit. Once such audited segmental accounts are produced, the onus shifts to the Revenue to demonstrate, with tangible material, why those accounts are unreliable. No instance of inflation of income, suppression of expenditure, or any inconsistency in ledgers has been identified. The AO has relied only on the existence of a consolidated balance sheet accompanying the return; that Printed from counselvise.com ITA No.1846/Mum/2025 Navkar Corporation Limited 22 does not negate the presence of separate segmental books indeed, corporate accounting ordinarily requires both. 29. The AO next alleges that common expenses were apportioned without basis and, since expenses were distributed in the ratio 65.88 : 34.11 (eligible : non-eligible), the revenue also ought to be allocated in the same proportion; on that foundation and purporting to invoke section 80-IA(8), he recomputed deduction at Rs.52,14,47,455/-. This approach suffers from multiple defects:-  Firstly, the assessee has demonstrated that direct costs were booked on actuals to the respective units; only unavoidable common costs (finance charges, employee costs, and overheads of a shared nature) were apportioned on a scientific basis, principally turnover, and supported by working papers. The Ld. CIT(A) has accepted this factual position after verification. In the absence of a specific defect, the AO could not discard an audited methodology merely because he preferred a different allocator.  Secondly, section 80-IA(8) is triggered in cases of inter-unit transfers of goods or services at a price other than the market value. The AO’s order does not identify any concrete inter-unit transaction whose pricing distorted eligible profits. A bare assertion that “revenue should also follow the expense ratio” is not a substitute for the statutory pre-conditions of section 80- IA(8). No exercise has been made to ascertain market value, nor to show that any intra-entity transfer price depressed or inflated the eligible profits. Printed from counselvise.com ITA No.1846/Mum/2025 Navkar Corporation Limited 23  Thirdly, even on the AO’s chosen allocator, his computational mechanics are flawed. He has applied the 65.88% ratio to the net Business Income of Rs.100.75 crores (arrived at after adding/deducting Ind-AS adjustments, donations/CSR, ICDS impacts and other heads), thereby deriving Rs.66.37 crores as the eligible component, only to again pass those very adjustments through the eligible segment leading to a double counting and artificial deflation of the deduction. The assessee has placed a clean segmental computation showing: o Profit as per P&L: ₹128.38 crores (eligible segment ₹84.58 crores). o After Ind-AS and OCI: total ₹133.08 crores (eligible ₹87.67 crores). o After adding donations/gratuity/leave encashment/CSR: total ₹160.12 crores (eligible ₹105.48 crores). o After reducing ICDS impacts and income from other sources: Business Income ₹100.74 crores, where the eligible leg, on AO’s own allocator, is ₹66.37 crores. o After excluding non-eligible receipts of ₹4.20 crores (PBP-50), the eligible income remains ₹62.17 crores.  Thus, even if one were to momentarily adopt the AO’s allocator arguendo, the eligible profit would stand at ₹62.17 crores, not ₹52.14 crores as assessed. This numerical Printed from counselvise.com ITA No.1846/Mum/2025 Navkar Corporation Limited 24 incongruity underscores the intrinsic error in the AO’s recomputation.  Fourthly, the AO’s premise that revenue must mirror expense ratios is conceptually unsound. The statute contemplates computation of actual profits of the eligible business as per Chapter IV-D, subject to the specific fictions in sub-sections (5) to (10). Profits are a function of both price and cost behaviour; they need not track the pattern of overhead absorption. In a service infrastructure undertaking like a CFS, throughput, service mix, and tariff structures can legitimately yield segmental margins not arithmetically proportional to expense allocators. Absent a concrete defect in the assessee’s books, substituting audited figures with a proportionality rule is impermissible.  Lastly, the AO has not confronted the assessee with any instance-based variance analysis no sample invoice, no ledger trail, no mismatch of head-count or asset-use studies nothing beyond a broad-brush allocator. The statutory audit under section 80-IA(7) and the acceptance in multiple scrutiny years provide strong corroboration of the assessee’s methodology. On these facts, the restriction of deduction was rightly reversed by the Ld. CIT(A). 30. We therefore hold, on facts and in law, that the assessee maintained separate, auditable books for the eligible undertaking; that its apportionment of common costs rests on a reasonable and consistently applied scientific basis; that there is no factual predicate for invoking section 80-IA(8); and that the AO’s double-adjustment vitiates the computation. Printed from counselvise.com ITA No.1846/Mum/2025 Navkar Corporation Limited 25 The assessee’s claim of Rs.66,13,62,345/- under section 80- IA(4)(i) merits full allowance. 31. We now turn to the second limb addition of Rs.55,71,649/- on account of profit on sale of depreciable assets. The facts are undisputed. During the year, assets forming part of the block of assets were sold for Rs.4,47,20,787/-. In the Companies Act books, the historical cost Rs.7,60,77,293/- less accumulated depreciation Rs.3,69,28,155/- yielded a book surplus of Rs.55,71,649/-, which was credited to the Profit & Loss Account. For tax purposes, however, the assessee credited the sale consideration to the block and claimed depreciation on the resultant WDV. The closing WDV remained substantially positive at Rs.314,54,04,056/- (Plant & Machinery and Furniture combined), as evidenced by the ITR and Tax Audit Report tables reproduced on record. 32. Under the block of assets regime of section 32 read with section 43(6), no separate capital gain or business profit arises on sale of an individual asset unless the block ceases to exist or the full value of consideration exceeds the block, resulting in a section 50 adjustment. Neither eventuality has occurred. The figure of Rs.55.71 lakh is a book presentation under financial reporting; it was rightly neutralised in the tax computation because the Act does not tax that line item when the block continues. The AO’s assumption that the negative adjustment represented a claim of loss is factually incorrect and contrary to the block-concept. The Ld. CIT(A) has, therefore, rightly deleted the addition. Printed from counselvise.com ITA No.1846/Mum/2025 Navkar Corporation Limited 26 33. In the result, we affirm the order of the Ld. CIT(A) in toto: the full deduction under section 80-IA(4)(i) is allowed as claimed, and the addition of Rs.55,71,649/- on account of alleged book profit on sale of depreciable assets stands deleted. The appeal of the Revenue fails on all grounds. 34. In the result, appeal of the Revenue is dismissed. Order pronounced on 12th August, 2025. Sd/- (GIRISH AGRAWAL) Sd/- (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 12/08/2025 KARUNA, sr.ps Copy of the Order forwarded to : BY ORDER, (Asstt. Registrar) ITAT, Mumbai 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// Printed from counselvise.com "