M/s Amar Wheels Private Limited, Ludhiana V. ACIT, Ludhiana

ITA 2/CHANDI/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5140 (ITAT-CHANDIGARH)
• Duration Of Justice: 4 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2013-2014
• Appeal Filed On: 02-01-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CHANDRA KANTA
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO.2/CHD/2017 (ASSESSMENT YEAR : 2013-14) M/S AMAR WHEELS PRIVATE LTD., VS. THE A.C.I.T., C-194, PHASE-VII, FOCAL POINT, CIRCLE-I, LUDHIANA. LUDHIANA. PAN: AABCA4449H (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUDHIR SEHGAL RESPONDENT BY : MS.CHANDRA KANTA, ADDL.CIT, DR DATE OF HEARING : 23.05.2017 DATE OF PRONOUNCEMENT : 31.05.2017 O R D E R PER ANNAPURNA GUPTA, A.M . : THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINS T THE ORDER OF CIT(APPEALS)-1, LUDHIANA DATED 29.11.2 016 RELATING TO ASSESSMENT YEAR 2013-14. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THAT THE WORTHY COMMISSIONER OF INCOME TAX (APPE ALS) HAS ERRED IN CONFIRMING THE ADDITION OF RS.7,53,224/- MADE BY THE ASSESSING OFFICER BY APPORTIONING AUDITORS REMUNERATION AND DIRECTORS REMUNERATION AMOUNTING TO RS.7,53,224/- TO EXEMPT UNIT U/S 80 1C OF THE INCOME TAX ACT AND, THUS, REDUCING THE DEDUCTION U/S 80IC OF THE ACT OF RS.16,55,716/- AS AGAINST RS.24,08,940/- CLAIMED BY THE ASSESSEE AS PER PARA 2.2 OF HIS ORDER. 2. THAT THE ADDITION OF RS.7,53,224/- AS PER PARA 1, BY ALLOWING LESSER DEDUCTION U/S 80 IC HAS BEEN MADE B Y THE ASSESSING OFFICER AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THAT THE DETAILED SUBMISSIONS FILED BY THE ASSESSE E DURING THE COURSE OF HEARING AS PER PARA 2.1 TO 2.1 7 OF 2 THE ORDER HAS NOT BEEN CONSIDERED BY THE WORTHY CIT (A) PROPERTY. 4. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND TH E GROUNDS OF APPEAL BEFORE THE APPEAL IS FINALLY HEARD O R DISPOSED OFF. 3. ALL THE GROUNDS RAISED BY THE ASSESSEE PERTAIN TO THE ISSUE OF DISALLOWANCE OF DEDUCTION CLAIMED UNDE R SECTION 80IC OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) AMOUNTING BY RS.7,53,223/-, ON ACCOUNT OF ALLOCATION/APPORTIONMENT OF EXPENSES RELATING TO AU DITORS REMUNERATION AND DIRECTORS REMUNERATION TO THE ELIG IBLE UNIT THEREBY REDUCING ITS ELIGIBLE PROFITS TO THAT EXTENT. 4. BRIEF FACTS RELEVANT TO THE ISSUE ARE THAT DURI NG THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER N OTICED THAT THE ASSESSEE HAD TWO UNITS, ONE LOCATED IN LUD HIANA AND THE OTHER IN SIDCUL, PANT NAGAR, UTTRAKHAND.THE PANT NAGAR UNIT WAS ELIGIBLE TO CLAIM DEDUCTION UNDER SE CTION 80IC OF THE ACT. THE ASSESSING OFFICER FURTHER NOT ICED THAT THE ASSESSEE HAD CLAIMED DEDUCTION ON ACCOUNT OF AU DITORS REMUNERATION AMOUNTING TO RS.2,60,000/- AND DIRECTO RS REMUNERATION AMOUNTING TO RS.30 LACS IN THE LUDHIAN A UNIT ONLY. THE ASSESSEE WAS ASKED AS TO WHY THE SAID C LAIM MAY NOT BE APPORTIONED TO THE ELIGIBLE UNIT AND DEDUCT ION UNDER SECTION 80IC OF THE ACT BE DISALLOWED PROPORTIONATE LY. THE ASSESSEE SUBMITTED ITS REPLY. THE ASSESSING OFFICE R WAS NOT SATISFIED WITH THE SAME AND, THEREFORE, APPORTIONED AUDITORS REMUNERATION AND DIRECTORS REMUNERATION AMOUNTING T O RS.7,53,223/-TO THE ELIGIBLE UNIT AT UTTRAKHAND THE REBY REDUCING ITS PROFITS AND IN TURN REDUCING ITS CLAIM TO 3 DEDUCTION UNDER SECTION 80IC TO THE SAID EXTENT. T HE MATTER WAS CARRIED IN APPEAL BEFORE THE CIT (APPEAL S) WHERE THE ASSESSEE VEHEMENTLY CONTESTED THE DISALLOWANCE MADE MAKING DETAILED SUBMISSIONS REPRODUCED AT PARA 2.1 OF CIT (APPEALS)S ORDER. 5. BRIEFLY STATED, THE ASSESSEE CONTENDED BEFORE T HE LEARNED CIT (APPEALS) THAT IT HAD MAINTAINED SEPARA TE BOOKS OF ACCOUNT IN RESPECT OF BOTH THE UNITS AND HAD PRE PARED SEPARATE BALANCE SHEET AND PROFIT AND LOSS ACCOUNT FOR BOTH THE UNITS, WHICH HAS BEEN VERIFIED AND ACCEPTED BY THE ASSESSING OFFICER WITHOUT RAISING ANY DOUBTS ABOUT THE SAID RECORDS MAINTAINED BY IT. THE ASSESSEE ALSO CONTEN DED THAT WERE NO INTER-UNIT TRANSACTIONS BETWEEN THE TWO UNI TS AND THEY WERE MANAGED AS SEPARATE PROFIT CENTRES. THE ASSESSEE FURTHER CONTENDED THAT THERE WAS NOMINAL INCREASE I N THE AUDITORS REMUNERATION PAID AS COMPARED TO THE PRECE DING YEAR WHICH COULD NOT BE ATTRIBUTED TO THE SETTING U P OF THE NEW UNIT IN PANT NAGAR. SIMILARLY FOR DIRECTORS REMUNERATION THE ASSESSEE CONTENDED THAT THERE WAS AGAIN A NOMINAL INCREASE WHICH WAS PRIMARILY ATTRIBUTED T O THE INDUCTION OF A NEW DIRECTOR WHO HAD NO RESPONSIBILI TIES VIS- -VIS THE EXEMPT UNIT. THE ASSESSEE, THEREFORE, CO NTENDED THAT NO PORTION, EITHER OF DIRECTORS REMUNERATION O R AUDITORS REMUNERATION, WAS ATTRIBUTABLE TO THE ELIGIBLE UNIT AT PANT NAGAR AND, THEREFORE, NO QUESTION AROSE FOR ALLOCAT ION OF THE SAME TO THE ELIGIBLE UNIT. THE ASSESSEE FURTHER C ONTENDED THAT ITS BONAFIDES IN APPORTIONING EXPENDITURE BETW EEN THE 4 TWO UNITS IS FURTHER PROVED BY THE FACT THAT CERTAI N ADMINISTRATIVE EXPENSES RELATING TO THE EXEMPT UNIT ONLY HAD BEEN BOOKED IN THE ACCOUNTS OF THE SAID UNIT ON LY AND FURTHER THE ASSESSEE HAD DEBITED INTEREST IN THE BO OKS OF THE EXEMPT UNIT ON MONEY ADVANCED TO IT BY ITS HEAD OFFICE. THE ASSESSEE CONTENDED THAT HAD ITS INTENTION BEEN TO INCREASE THE PROFIT OF THE EXEMPT UNIT IT WOULD NOT HAVE DONE SO. THE ASSESSEE FURTHER PLACED RELIANCE ON A NUMBER OF DECISIONS. THE LEARNED CIT (APPEALS) AFTER CONS IDERING ASSESSEES SUBMISSIONS UPHELD THE ORDER OF THE ASSE SSING OFFICER STATING THAT THE ASSESSING OFFICER HAD DULY NOTED THAT THE DUTIES OF THE AUDITORS ARE FAR MORE FOR TH E EXEMPT UNIT BEING NEWLY SETUP AND SIMILARLY REGARDING DIRE CTORS REMUNERATION THAT THE DIRECTORS HAD TO ADMINISTER A LL UNITS OF THE COMPANY AND IT COULD NOT BE SAID THAT THEY H AD NO DUTIES VIS--VIS EXEMPT UNIT. THE LEARNED CIT (APP EALS) ALSO TOOK NOTE OF THE FACT THAT THE ASSESSEE HAD NOT FIL ED ANY EVIDENCE IN SUPPORT OF ITS CLAIM THAT NO DUTIES WER E PERFORMED BY THE DIRECTORS VIS--VIS THE EXEMPT UNI T. THE CIT (APPEALS), THEREFORE, HELD THAT THE ASSESSING O FFICER HAD GIVEN REASONABLE JUSTIFICATION FOR APPORTIONING THE SAID EXPENSES AND THEREBY UPHELD THE ORDER OF THE ASSESS ING OFFICER IN THIS REGARD. THE RELEVANT FINDINGS OF T HE CIT (APPEALS) AT PARA 2.2 OF HIS ORDER ARE AS UNDER: 2.2 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CAS E, THE BASIS OF THE DISALLOWANCE AND THE ARGUMENTS OF THE AR. THE TURNOVER OF LUDHIANA UNIT IS RS.15.90 CRORE AND THAT OF EXE MPT UNIT IS RS.4.78 CRORE WHEREAS AUDITOR NUMERATION AND D IRECTOR REMUNERATION ARE CLAIMED ONLY IN THE LUDHIANA UNIT. TH E ASSESSING OFFICER HAS APPORTIONED THE DIRECTORS REMUNERATION AND AUDITOR REMUNERATION ON THE BASIS OF TURNOVER, W HICH IS A 5 WELL ESTABLISHED BASIS. THE ASSESSING OFFICER HAS DU LY NOTED THAT THE DUTIES OF AN AUDITOR AS PER SEC 80IC ARE FAR MORE FOR THE EXEMPT UNIT SIMILARLY, REGARDING DIRECTORS REMUNER ATION, THE ASSESSING OFFICER HELD THAT THE DIRECTOR HAS TO ADMINISTER ALL UNITS OF A COMPANY AND THE APPELLANT COULD NOT PROVI DE ANY DOCUMENTARY EVIDENCE BEFORE THE ASSESSING OFFIC ER TO SUPPORT ITS CLAIM. THE ASSESSING OFFICER GAVE REASONA BLE JUSTIFICATION FOR APPORTIONING THE SAID EXPENSES. IT WAS HELD THAT DIRECTOR'S ROLE IS TO ENSURE TO PROGRESS IN PROF ITABILITY OF THE ENTIRE COMPANY. THE ASSESSING OFFICER HAS RIGHT LY HELD THAT THE DIRECTOR HAS A MULTIFARIOUS ROLE AND CANNO T BE RESTRICTED IN WATER TIGHT DEFINITIONS. THE PROFITABILITY O F EXEMPT UNIT IS POSSIBLE WITH THE EFFORTS OF THE DIRECTOR. THE APPELLANT COULD NOT GIVE ANY PROOF TO SUPPORT HIS CONTENTION B EFORE THE ASSESSING OFFICER. THE AR HAS RELIED ON THE CASE OF THE HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS. HINDUSTAN LE VER LTD. APPEAL NO. 219 OF 2006,267,269,270,273 AND 274 OF 2008 WHICH RELATES TO DEDUCTION U/S 10B, 80HHI AND 8 01C WHICH DO NOT HELP THE APPELLANT'S CASE. IN THE SAID CASE, THERE IS FINDING OF FACT THAT THE COMMON EXPENSES WERE NO T WITH REFERENCE TO THE ELIGIBLE UNITS WHICH IS NOT THE CASE IN THE CASE UNDER CONSIDERATION. FURTHER, THE AR HAS RELIED ON THE D ECISION OF THE JODHPUR BENCH OF THE ITAT IN CIT VS. P.I. IND USTRIES 144/TTJ/353 WHERE THE MATTER RELATED TO CLAIM OF EXC ESS DEPRECIATION DUE TO A MISTAKE WHICH WHEN RECTIFIED INCREASE THE CLAIM U/S 80IA. THUS, THE FACTS ARE DISTINGUISHABL E. IN THE INSTANT CASE, THE ASSESSING OFFICER HAS GIVEN HIS J USTIFICATION FOR APPORTIONING THE SAID EXPENSES AND THE APPELLANT CO ULD NOT GIVE ANY EVIDENCE TO THE CONTRARY, IN SUPPORT OF HIS PLEA, IT HAS BEEN HELD IN THE CASE OF AMARTEX INDUSTRIES LTD. VS . ADDL.CIT BY THE HON'BLE ITAT, CHANDIGARH IN ITA NO.L056/CHD/2010 FOR A.Y 2006-07 THAT DIRECTOR'S REMUNERATION, DIRECTOR'S CONVENIENCE AND TRAVELLING ET C. IS TO BE REALLOCATED FOR THE PURPOSE OF COMPUTING DISALLOWAN CE U/S 80IC. IN VIEW OF THE SAID FACTS AND CIRCUMSTANCES, THE ASSESSING OFFICER WAS JUSTIFIED IN APPORTIONING AUDITO RS REMUNERATION AND DIRECTORS REMUNERATION TO THE EXEMPT UNIT FOR THE PURPOSE OF CALCULATING THE DISALLOWANCE U/S 80IC. THIS GROUND OF APPEAL IS DISMISSED. 6. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE CONCEDED THAT IT HAD NO CASE VIS--VIS APPORTIONMEN T OF AUDITORS EXPENSES. AS FAR THE APPORTIONMENT OF DIR ECTORS REMUNERATION OF THE EXEMPT UNIT, THE LD. COUNSEL FO R THE ASSESSEE REITERATED THE SUBMISSIONS AND CONTENTIONS MADE BEFORE THE LOWER AUTHORITIES STATING THAT THE DIRE CTORS HAD BEEN PAID REMUNERATION AMOUNTING TO RS.20,25,000/- IN THE 6 PRECEDING YEAR WHEN THE EXEMPT UNIT WAS NOT IN EXIS TENCE AND THE SAME HAD BEEN INCREASED TO RS.30 LACS IN TH E IMPUGNED YEAR. THE LD COUNSEL CONTENTED THAT OUT OF THE INCREASE OF RS.9.75 LACS, RS.3 LACS WAS ATTRIBUTABL E TO THE REMUNERATION PAID TO THE NEW DIRECTOR SHRI SAHIL AG GARWAL INDUCTED DURING THE YEAR, AND WHOSE DUTIES WAS PROD UCT DEVELOPMENT AT LUDHIANA UNIT ONLY. AS FAR THE BALA NCE INCREASE IN DIRECTORS REMUNERATION THE LD. COUNSEL FOR THE ASSESSEE CONTENDED THAT THE SAME WAS ATTRIBUTABLE T O THE INCREASE IN TURN OVER IN THE LUDHIANA UNIT. THE LD . COUNSEL FOR THE ASSESSEE CONTENDED THAT A CHART DETAILING T HE DUTIES OF THE DIRECTORS HAD BEEN FILED TO THE LOWER AUTHOR ITIES WHICH CLEARLY SHOWED THAT ALL THE DUTIES OF THE DIR ECTORS WERE CONFINED TO THE LUDHIANA ONLY. ON BEING QUEST IONED AT BAR AS TO HOW THE EXEMPT UNIT WAS BEING RUN THE LD. COUNSEL FOR THE ASSESSEE STATED THAT THE ASSESSEE H AD APPOINTED DEDICATED STAFF I.E. PLANT HEAD AND PRODU CTION MANAGER FOR MANAGING THE OPERATIONS BEING CARRIED O UT AT PANT NAGAR AND THERE WAS NEGLIGIBLE NEED FOR MANAGI NG THE OPERATION AND THUS NO INDULGENCE OF THE TIME OR ACT IVITIES OF THE DIRECTORS WERE REQUIRED AT THE ELIGIBLE UNIT. THE LD. COUNSEL FOR ASSESSEE FURTHER RAISED SEVERAL CONTENT IONS BEFORE US IN A BRIEF SYNOPSIS FILED BEFORE US WHICH INCLUDED THAT THE DETAIL OF TOUR AND TRAVELING EXPENSES DEBI TED TO THE PROFIT & LOSS ACCOUNT CLEARLY SHOWED THAT NO VISITS WERE MADE BY THE DIRECTORS TO THE ELIGIBLE UNIT AT PANT NAGAR, THAT IT HAD BEEN PROVED BY WAY OF A CHART PLACED BE FORE THE LOWER AUTHORITIES THAT ALL NECESSARY ADMINISTRATIVE EXPENSES 7 HAD BEEN DULY CLAIMED IN THE ELIGIBLE UNIT AND NO UNSCRUPULOUS ATTEMPT HAD BEEN MADE IN RESPECT OF CL AIMING HIGHER AMOUNT OF DEDUCTION U/S 80IC OF THE ACT. IT WAS ALSO CONTENDED THAT ALL SALES IN THE ELIGIBLE UNIT IN THE IMPUGNED YEAR HAD BEEN MADE TO A SINGLE PARTY NAMEL Y M/S METALMAN MICRO TURNERS AND THE PARTS SOLD INVOLVED VERY MINIMAL VARIATION, WHEREAS THE NON ELIGIBLE UNIT H AD BEEN INVOLVED IN EXPORTS OF DIFFERENT TYPES OF COMPONENT S IN A MARKET CALLING FOR RIGID COMPLIANCE/VIGILANCE AND W ITH A HUGE NUMBER OF PARTIES/CUSTOMERS INVOLVED, THUS REQ UIRING MORE TIME AND EFFORTS ON THE PART OF THE DIRECTORS. 7. THE LEARNED D.R., ON THE OTHER HAND RELIED UPON THE ORDER OF THE CIT (APPEALS) AND CONTENDED THAT CONSIDERING THE FACT THAT THE DIRECTORS ROLE IS TO ENSURE PROGRESS OF THE ENTIRE COMPANY, IT CANNOT BE STATED THAT IN THE PRESENT CASE THE DIRECTORS DID NOT DISCHARGE AN Y FUNCTION VIS--VIS THE EXEMPT UNIT. THE LEARNED D. R. CONTENDED THAT THE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE WAS FALLACIOUS AND THE APPORTIONMENT MADE BY THE ASSESSING OFFICER WAS RIGHTLY UPHELD BY THE LEARNED CIT (APPEALS). 8. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E ORDERS OF THE AUTHORITIES BELOW AND ALSO DOCUMENTS REFERRED TO BEFORE US. THE ISSUE INVOLVED IN THE PRESENT CA SE RELATES TO APPORTIONMENT OF AUDITORS REMUNERATION AND DIREC TORS REMUNERATION BETWEEN THE NON ELIGIBLE UNIT OF THE A SSESSEE AT LUDHIANA AND THE ELIGIBLE UNIT OF THE ASSESSEE A T PANT 8 NAGAR THEREBY RESULTING IN RESTRICTION OF PROFITS E LIGIBLE FOR DEDUCTION UNDER SECTION 80IC TO RS.16,55,716/- BY APPORTIONING RS.59,800/- OF AUDIT EXPENSES AND RS.6,93,424/- OF DIRECTORS REMUNERATION TO THE SAID ELIGIBLE UNIT AS AGAINST NIL APPORTIONED BY THE ASSESSEE. T HE APPORTIONMENT OF AUDIT EXPENSES AMOUNTING TO RS.59, 800/- TO THE ELIGIBLE UNIT WAS NOT CHALLENGED BEFORE US B Y THE LD. COUNSEL FOR THE ASSESSEE AND RESTRICTION OF DEDUCTI ON UNDER SECTION 80IC OF THE ELIGIBLE UNIT ON ACCOUNT OF THE SAME IS, THEREFORE, UPHELD. AS FOR RESTRICTION OF DEDUCTION UNDER SECTION 80IC ON ACCOUNT OF APPORTIONMENT OF DIRECTO RS REMUNERATION TO THE EXTENT OF RS.6,93,424/- ON THE BASIS OF TURN OVER OF TWO UNITS, WE FIND NO MERIT IN THE CON TENTIONS RAISED BY THE LD. COUNSEL FOR THE ASSESSEE BEFORE U S THAT NO APPORTIONMENT AT ALL IS REQUIRED. WE ARE IN COMPLET E AGREEMENT WITH THE JUSTIFICATION OF THE ASSESSING O FFICER WHICH HAS BEEN UPHELD BY THE LD. CIT(A) ALSO VIS--VIS TH E APPORTIONMENT OF DIRECTORS REMUNERATION TO THE ELIG IBLE UNIT. UNDENIABLY, DIRECTORS OF COMPANY ARE REQUIRED TO AD MINISTER ALL UNITS OF A COMPANY AND IT IS THEIR DUTY TO ENSURE P ROGRESS AND PROFITABILITY OF THE ENTIRE COMPANY. THE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE DUTIES OF THE DIR ECTORS WERE RESTRICTED TO LUDHIANA UNIT ONLY HAS NOT DULY BEEN EVIDENCED EITHER BEFORE LOWER AUTHORITIES OR EVEN BEFORE US. THEREFORE, THIS ARGUMENT CANNOT BE ENTERTAINED. FOR THE SAME REASON ALSO, ALL THE ARGUMENTS AND CONTENTIONS TAKEN UP BY THE LD. COUNSEL FOR THE ASSESSEE TO PROVE THAT THE DIRECTOR S WERE LOOKING AFTER THE ACTIVITIES OF THE LUDHIANA UNIT O NLY, MERITS NO 9 CONSIDERATION. THE FACT THAT THE ASSESSEE HAS APPO INTED DEDICATED STAFF AS ITS PLANT HEAD AND PRODUCTION MA NAGER FOR MANAGING OPERATIONS CARRIED OUT AT THE ELIGIBLE UNIT AT PANT NAGAR DOES NOT TAKE AWAY THE FACT THAT DESPITE THE SAID APPOINTMENT OF THE DEDICATED STAFF, ITS DIRECTORS A RE ULTIMATELY RESPONSIBLE TO THE SHAREHOLDERS OF THE C OMPANY BY WHOM THEY HAD BEEN APPOINTED FOR THE PURPOSE OF RUNNING THE PANT NAGAR UNIT. THEREFORE, EVEN IF TH ERE IS DEDICATED STAFF WHICH IS LOOKING AFTER AND MANAGING THE OPERATION AT PANT NAGAR UNIT, THE DIRECTORS ARE STI LL INVOLVED IN TAKING CRUCIAL AND STRATEGIC DECISION RELATING T O THE ELIGIBLE UNIT. FURTHER THE CONTENTION THAT NO TOUR AND TRAVEL EXPENSES RELATING TO VISITS MADE BY THE DIRE CTORS TO PANT NAGAR HAD BEEN DEBITED ALSO DOES NOT ESTABLISH THAT THE DIRECTORS PERFORMED NO ACTIVITIES VIS--VIS THE ELIGIBLE UNIT. IT IS NOT NECESSARY FOR THE DIRECTORS TO TRA VEL TO PANT NAGAR UNIT FOR DEVOTING TIME AND EFFORTS FOR MANAGI NG THE AFFAIRS OF PANT NAGAR UNIT. THE SAME CAN BE CARRIE D OUT EVEN BY BEING STATIONED AT THE HEAD OFFICE ALSO. WE FIND THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE MANUFACTURING OPERATION INVOLVED IN THE ELIGIBLE UN IT DID NOT REQUIRE TOO MUCH TIME AND EFFORT OF THE DIRECTO RS SINCE THE PARTS SOLD INVOLVED MINIMAL VARIATIONS AND SALE WAS MADE TO A SINGLE PARTY, ALSO MERITS NO CONSIDERATIO N SINCE THE DIRECTORS ARE NOT NECESSARILY REQUIRED TO BE IN VOLVED IN THE DAY-TO-DAY OPERATIONS BUT HAVE TO BE INVOLVED I N STRATEGIC DECISION MAKING, WHICH AT NO STAGE, HAS B EEN DENIED BY THE LD. COUNSEL FOR THE ASSESSEE. THEREFO RE WE 10 HAVE NO HESITATION IN REJECTING THE ARGUMENT OF THE LD.COUNSEL FOR THE ASSESSEE THAT NO PORTION OF DIRE CTORS REMUNERATION WAS REQUIRED TO BE APPORTIONED TO THE ELIGIBLE UNIT AT PANT NAGAR. 9. THE LD COUNSEL FOR THE ASSESSE HAD ALSO CHALLENGED THE BASIS OF ALLOCATION OF THE SAID EXPE NSES, BEING TURNOVER BASED. THE LD. COUNSEL FOR THE ASSES SEE HAS STATED THAT THE TURN OVER COULD NOT BE A GOOD BASIS FOR APPORTIONING THE SAID EXPENSES. THE LD. COUNSEL FO R THE ASSESSEE HAS POINTED OUT THAT AS COMPARED TO THE REMUNERATION PAID IN THE PRECEDING YEAR OF RS.20.2 5 LACS, THE REMUNERATION PAID TO THE DIRECTORS IN THE IMPUG NED YEAR IS RS.30 LACS REFLECTING AN INCREASE OF RS.9.75 LAC S. THE LD. COUNSEL FOR THE ASSESSEE HAS POINTED OUT THAT IN TH E PRECEDING YEAR, THE ELIGIBLE UNIT WAS NOT FUNCTIONI NG. THEREFORE, TO THE EXTENT OF RS.20.25 LACS THE ENTIR E REMUNERATION PAID IN THE PRECEDING YEAR CAN BE ATTR IBUTED TO THE LUDHIANA UNIT ONLY. THE ALLOCATION, IF ANY, CAN BE MADE OF ONLY THE INCREASE IN THE REMUNERATION IN TH E CURRENT YEAR AS COMPARED TO THE PRECEDING YEAR I.E. RS.9.75 LACS. THE LD. COUNSEL FOR THE ASSESSEE POINTED OUT THAT APPORTIONING DIRECTORS REMUNERATION TO THE EXTENT O F RS.6,93,424/- OUT THE SAID INCREASE IS NOT JUSTIFIE D. THE LD. COUNSEL FOR THE ASSESSEE POINTED OUT THAT THE NON- ELIGIBLE UNIT HAD ALSO SHOWED AN INCREASE IN TURN O VER AS COMPARED TO THE PREVIOUS YEAR WHICH WAS ON ACCOUNT OF THE EFFORTS OF THE DIRECTORS OF THE COMPANY. FURTHER T HE LD. 11 COUNSEL FOR THE ASSESSEE POINTED OUT THAT IN THE IM PUGNED YEAR A NEW DIRECTOR WAS APPOINTED WHO WAS PAID RS.3 LACS AS REMUNERATION. IN VIEW OF THE SAME, THE LD. COUN SEL FOR THE ASSESSEE POINTED OUT THAT OUT OF THE INCREASE O F RS.9.75 LACS APPORTIONING RS.6.93 LACS TO THE ELIGIBLE UNIT WAS UNFAIR AND UNJUSTIFIED. 10. WE ARE IN AGREEMENT WITH THIS CONTENTION OF TH E LD. COUNSEL FOR THE ASSESSEE. THE FACTS AS POINTED OUT BY THE LD. COUNSEL FOR THE ASSESSEE HAVE NOT BEEN DISP UTED BY THE LEARNED D.R. THEREFORE, IT IS UNDISPUTED THAT THE REMUNERATION PAID IN THE PRECEDING YEAR AMOUNTING T O RS.20.25 LACS, WHEN THE ELIGIBLE UNIT OF THE ASSESS EE WAS NOT FUNCTIONING, WAS TO BE ATTRIBUTED ENTIRELY TO T HE NON ELIGIBLE UNIT AT LUDHIANA. IT IS ONLY INCREASE IN THE REMUNERATION IN THE IMPUGNED YEAR VIS--VIS THAT IN THE PRECEDING YEAR, WHICH CAN BE APPORTIONED BETWEEN TH E TWO UNITS. THE SAME AMOUNTING TO RS.9.75 LACS, APPORTIO NMENT OF RS.6.94 LACS TO THE ELIGIBLE UNIT IN PANT NAGAR IS UNJUSTIFIED CONSIDERING THE FACT THAT WHILE APPORTI ONING THE INCREASE IN REMUNERATION, EFFORTS OF THE DIRECTORS OF THE COMPANY IN INCREASING TURN OVER OF THE NON ELIGIBLE UNIT SHOULD BE TAKEN INTO CONSIDERATION AND ALSO TO THE CONTRIBUTION OF THE NEW DIRECTOR APPOINTED IN THE C OMPANY TO THE ACTIVITIES OF THE NON ELIGIBLE UNIT. CONSIDE RING THE SAME, WE ARE OF THE VIEW THAT APPORTIONMENT OF DIRE CTORS REMUNERATION TO THE EXTENT OF RS.3 LACS TO THE ELIG IBLE UNIT IS JUST AND REASONABLE, CONSIDERING THE FACT THAT 12 CONSIDERABLE AMOUNT OF EFFORTS MUST HAVE BEEN GIVEN BY THE DIRECTORS FOR SETTING UP OF THE NEW UNIT IN PANT NA GAR. 11. IN VIEW OF THE ABOVE WE UPHOLD THE APPORTIONME NT TO THE ELIGIBLE UNIT, OF AUDITORS REMUNERATION TO T HE EXTENT OF RS. 59,800/- AND THE DIRECTORS REMUNERATION TO T HE EXTENT OF RS. 3 LACS. THE DISALLOWANCE OF DEDUCTION CLAIMED U/S 80IC BY THE ELIGIBLE UNIT TO THE SAID EXTENT OF RS.3,59,800/- IS, AS A CONSEQUENCE, ALSO UPHELD. I N VIEW OF THE SAME, THE GROUNDS OF APPEAL OF THE ASSESSEE AR E PARTLY ALLOWED. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS P ARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (SANJAY GARG) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 31 ST MAY, 2017 *RATI* COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE DR ASSISTANT REGISTRAR, ITAT, CHANDIGARH