The DCIT, Circle-1, Ahmedabad V. M/s. Astral Poly Technik Pvt.Ltd., Ahmedabad

ITA 1591/AHD/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1017 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 20-07-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 29-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P M MEHTA; V R CHOKSI

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH (BEFORE SHRI S.K. YADAV, JUDICIAL MEMBER & SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER) ITA. NO: 1591 & C.O. NO. 188/AHD/2013 (ASSESSMENT YEAR: 2008-09) DCIT, CIRCLE-1, AHMEDABAD M/S. ASTRAL POLY TECHNIK LTD. 207/1, ASTRAL HOUSE, B/H RAJPATH CLUB, S.G. HIGHWAY,AHMEDABAD- 380059 V/S V/S M/S. ASTRAL POLY TECHNIK LTD. 207/1, ASTRAL HOUSE, B/H RAJPATH CLUB, S.G. HIGHWAY,AHMEDABAD- 380059 DCIT, CIRCLE-1, AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AABCA2951N APPELLANT BY : SHRI JAMES KURIAN, SR. D.R . RESPONDENT BY : SHRI V.R. CHOKSI & P.M. MEHTA, A. R. ( )/ ORDER DATE OF HEARING : 20 -07-201 6 DATE OF PRONOUNCEMENT : 22 -07-2016 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: ITA NO. 1591 & C.O. 188/AHD/2013 . A.Y. 2008-09 2 1. ITA NO. 1591/AHD/2-13 & C.O. NO. 188/AHD/2013 ARE A PPEAL BY THE REVENUE AND CROSS OBJECTION BY THE ASSESSEE DIRECTE D AGAINST THE VERY SAME ORDER OF THE LD. CIT(A)-VI, AHMEDABAD DAT ED 26.03.2013 PERTAINING TO A.Y. 2008-09. 2. THE SOLE GRIEVANCE OF THE REVENUE IS THAT THE LD. C IT(A) ERRED IN DELETING THE ADDITION OF EXCESS INTEREST EXPENSES O F RS. 71.28 LACS DEBITED BY THE ASSESSEE IN THE ACCOUNTS OF GUJARAT UNIT AND THEREBY CLAIMING MORE DEDUCTION U/S. 80IC FOR THE BADDI UNI T. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE A SSESSEE IS IN THE BUSINESS OF MANUFACTURING AND TRADING OF CPVC, PVC PIPES AND FITTINGS. THE ASSESSEE COMPANY HAS TWO UNITS ONE AT AHMEDABAD AND THE ANOTHER AT HIMACHAL PRADESH. THE UNIT AT HIMACHAL P RADESH IS ELIGIBLE FOR EXEMPTION U/S. 80IC OF THE ACT. 4. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDING S AND TAKING A LEAF OUT OF THE SURVEY OPERATION CONDUCTED U/S. 133 A OF THE ACT, THE A.O. WAS OF THE OPINION THAT THE ASSESSEE HAS NOT A LLOCATED INTEREST EXPENSES PROPERLY BETWEEN THE GUJARAT UNIT AND THE HIMACHAL PRADESH. THE A.O. WAS OF THE FIRM BELIEF THAT BY NO T ALLOCATING THE INTEREST EXPENSES, THE ASSESSEE HAS INFLATED THE PR OFITS OF H.P. UNIT WHICH IS ELIGIBLE FOR EXEMPTION U/S. 80IC OF THE AC T THEREBY REDUCING ITS TAX LIABILITY. THE A.O PROCEEDED BY ALLOCATING THE INTEREST EXPENSES BETWEEN THE TWO UNITS IN THE RATIO OF CAPITAL EMPLO YED AND COMPUTED THE DISALLOWANCE AT RS. 71,28,000/-. ITA NO. 1591 & C.O. 188/AHD/2013 . A.Y. 2008-09 3 5. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) A ND STRONGLY CONTENDED THAT IT HAS BEEN FOLLOWING THE ACCOUNTING POLICY OF ALLOCATING INTEREST EXPENDITURE @ 9% PER ANNUM ON THE BASIS OF THE DAILY PRODUCT. IT WAS BROUGHT TO THE NOTICE OF THE LD. CI T(A) THAT THE HIMACHAL PRADESH UNIT WAS SELF SUFFICIENT TO MEET I TS LIABILITY AND NO FUND HAS BEEN TRANSFERRED FROM GUJARAT UNIT TO HIMA CHAL PRADESH UNIT. THEREFORE, THERE IS NO REASON WHY INTEREST SHOULD B E ALLOCATED TO THE H.P. UNIT. AFTER CONSIDERING THE FACTS AND THE SUB MISSIONS, THE LD. CIT(A) OBSERVED AS UNDER:- 4.4 THE CONTENTIONS OF THE ID. A.R. ARE TENABLE. TH E ALLOCATION OF INTEREST EXPENDITURE BETWEEN THE H.P. UNIT AND GUJARAT UNIT WAS BEING DONE CONSISTENTLY ON DAILY PRODUCT BASIS. IN THE IMMEDIATELY PRECEDIN G YEAR, INTEREST EXPENDITURE OF RS.22.83 LAKHS WAS ALLOCATED TO THE H.P. UNIT. IN T HE YEAR UNDER CONSIDERATION SINCE NO BORROWED FUNDS WERE UTILIZED BY THE H.P. U NIT, INTEREST EXPENDITURE WAS NOT ALLOCATED TO IT. THE CONTENTION THAT THE H.P. U NIT WAS GENERATING ENOUGH PROFITS/CASH SURPLUS AND WAS IN A POSITION TO ADVAN CE SURPLUS MONEY TO THE HEAD OFFICE (INSTEAD OF UTILIZING THE FUNDS BORROWED BY THE HEAD OFFICE) WAS NOT CONTROVERTED BY THE A.O. AS REGARDS THE FOREIGN EXC HANGE GAIN/LOSS, IN THE REASONS RECORDED FOR RE-OPENING, THIS ISSUE WAS FIG URING THEREIN. HOWEVER, IN THE YEAR UNDER CONSIDERATION, A.O. DID NOT ALLOCATE THE FOREIGN EXCHANGE GAIN TO H.P. UNIT, WHEREAS IN THE SUBSEQUENT A.Y. 2009-10 THE FO REIGN EXCHANGE LOSS WAS ALLOCATED BETWEEN THE TWO UNITS. IN THE PRECEDING A .Y. 2007-08 THE INTEREST EXPENDITURE ALLOCATED BY THE APPELLANT TO THE H.P. UNIT OF RS.22.83 LAKHS WAS NOT DISTURBED BY THE A.O. THUS, THE AO'S APPROACH IN AL LOCATING INTEREST EXPENDITURE AND FOREIGN EXCHANGE GAIN/LOSS BETWEEN THE TWO UNIT S HAS BEEN INCONSISTENT. IT IS VARYING MERELY ON THE BASIS OF THE ASSESSABILITY OF HIGHER OR LOWER INCOME. TAKING INTO ACCOUNT THE TOTALITY OF THE FACTS, I DO NOT FI ND ANY REASON TO DISTURB THE ALLOCATION AS BEING DONE BY THE APPELLANT CONSISTEN TLY OVER THE YEARS. I AM OF THE VIEW THAT IMPUGNED DISALLOWANCE IS NOT SUSTAINABLE. IT IS DELETED. ACCORDINGLY, GROUND NO.3,4 & 5 ARE ALLOWED. GROUND NO.6 IS AN AL TERNATE CLAIM AND HAS BECOME INFRUCTUOUS IN VIEW OF MY FINDING ABOVE. ACC ORDINGLY, IT IS DISMISSED. ITA NO. 1591 & C.O. 188/AHD/2013 . A.Y. 2008-09 4 6. AGGRIEVED BY THIS, THE REVENUE IS BEFORE US. 7. THE LD. D.R. STRONGLY SUPPORTED THE FINDINGS OF THE A.O. PER CONTRA, THE LD. COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BE EN STATED BEFORE THE LOWER AUTHORITIES. 8. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTHORI TIES BELOW AND HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE FACTS IN ISSUE. THE UNDISPUTED FACT IS THAT THE H.P. UNIT HAD SUFFICIEN T RESERVES AND SURPLUS TO MEET ITS LIABILITY. IN FACT, THE FIRST APPELLATE AUTHORITY HAS NOT ONLY CONFIRMED THIS BUT HAS ALSO OBSERVED THAT THE H.P. UNIT HAD ADVANCED SURPLUS MONEY TO THE GUJARAT UNIT. A PERUS AL OF THE FINDINGS OF THE FIRST APPELLATE AUTHORITY WOULD SHOW THAT HE HAS CONSIDERED THE ENTIRE FACTUAL MATRIX QUA THE ISSUE. 9. CONSIDERING THE FACTS IN TOTALITY, WE DO NOT FIND ANY REASONS TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). APPE AL FILED BY THE REVENUE IS ACCORDINGLY DISMISSED. 10. INSOFAR AS THE CROSS OBJECTION OF THE ASSESSEE IS C ONCERNED, THE LD. COUNSEL STATED THAT HE IS NOT PRESSING THE CROS S OBJECTION, THE SAME IS ACCORDINGLY DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 22 - 07 - 2016. SD/- SD/- (S.K. YADAV) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: TRUE COPY