D.C.I.T Cir - 12,kolkata, Kolkata V. M/s Berger Paints India Ltd, Kolkata

ITA 2112/KOL/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4252 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2016
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 01-11-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 12-07-2013
• Court: TRIBUNAL
• Department Lawyers: RAJAT SUBHRA BISWAS
• Section: 143(3); 80IB; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH A KOL KATA [BEFORE HONBLE SHRI S.S.VISWANETHRA RAVI, JM & D R.ARJUN LAL SAINI, AM ] ITA NO.2112/KOL/2013 ASSESSMENT YEAR : 2006-07 D.C.I.T., CIRCLE-12, -VERSUS- M/S. BERGER PAINTS INDIA LTD. KOLKATA KOLKATA [PAN: AABCB 0976E] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI RAJAT SUBHRA BISWAS, CIT(D R) FOR THE RESPONDENT : SHRI ALOK GOENKA, ACA/SHRI SUB HASIS DE, FCA DATE OF HEA RING : 01.11.2016 DATE OF PRONOUNCEMENT : 23.11.2016 ORDER PER DR.ARJUN LAL SAINI, AM THE CAPTIONED APPEAL FILED BY THE REVENUE PERTAINING TO A.Y.2006-07, IS DIRECTED AGAINST THE ORDER PASSED BY THE COMMISSION ER OF INCOME TAX (APPEALS) XII, KOLKATA, IN APPEAL NO.919/XII/12/09-10, DATED 12.03.2013, WHICH IN TURN ARISES OUT OF AN ORDER PASSED BY THE LD. ASSESSING OFFICE R U/S 143(3) OF INCOME TAX ACT, 1961 (IN SHORT, THE ACT), DATED 30.12.2009. 2. THE FACTS OF THE CASE QUA THE ASSESSEE ARE T HAT THE ASSESSEE FILED RETURN OF INCOME ON 30.11.2006 SHOWING TOTAL INCOME OF RS.56,98,30,6 54/-. THE RETURN WAS DULY PROCESSED U/S 143(1) OF THE ACT ON 05.11.2007. LATE R ON, THE CASE WAS SELECTED FOR SCRUTINY U/S 143(3) OF THE ACT, AND THE AO HAS COMP LETED THE ASSESSMENT FOR MAKING THE ADDITION U/S 40(A)(IA) OF THE ACT. THE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF PAINTS, ENAMELS AND VARNISH ES ETC. AND RESIN FOR CAPTIVE CONSUMPTION. DURING THE RELEVANT PREVIOUS YEAR THE COMPANY HAD MANUFACTURING UNITS AT HOWRAH, PODICHERRY, GOA, SIKANDERABAD AND JAMMU. THE COMPANY HAS ALSO ITS PRODUCTS PROCESSED OUTSIDE. THE ASSESSEE COMPANY IS CLAIMING DEDUCTION U/S 80IB OF THE ACT AND IN RESPECT OF FIVE UNITS WHICH ARE LOCA TED AT PONDICHERRY, GOA AND JAMMU WATER BASED, JAMMU-SOLVENT BASED AND JAMMU-RAJDOOT . ALL THESE UNITS BECAME ITA NO.21 12/KOL/2013 M/S. BERGER PAINTS INDIA LTD. A..Y.2006-07 2 OPERATIONAL DURING DIFFERENT PERIODS. IN THE COMPUT ATION OF PROFITS DERIVED FROM RESPECTIVE UNITS THE ASSESSEE HAD REDUCED COMMON SE LLING AND ADMINISTRATIVE OVERHEADS AND COMMON ADMINISTRATIVE EXPENSES FOR AR RIVING AT THE PROFITS AND GAINS DERIVED FROM THE RESPECTIVE UNITS WHICH ARE ELIGIBL E FOR DEDUCTION U/S 80-IB OF THE ACT. THE ASSESSEE REDUCED SELLING AND ADMINISTRATIVE EXP ENSES AND COMMON ADMINISTRATIVE EXPENSES FROM THE PROFIT DERIVED FROM THE RESPECTIV E UNITS AS EXPLAINED ABOVE. DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE FURNISHED A NOTE ON THE BASIS OF APPORTIONMENT OF THE COMMON EXPENSES. THE ASSESSEE CLAIMED DEDUCTION U/S 80-IB OF THE ACT AT RS.33,81,19, 725/- WHEREAS THE AO COMPUT ED THE DEDUCTION U/S 80-IB OF THE ACT AT RS.30,21,88,063/-. THERE IS A DIFFERENCE BET WEEN THE AMOUNT CLAIMED BY THE ASSESSEE U/S 80-IB OF THE ACT AND THE DEDUCTION ALL OWED BY THE AO. THE REASON OF THE SAID DIFFERENCE IS THE DIFFERENT METHOD OF APPORTIO NMENT OF EXPENDITURE FOLLOWED BY THE ASSESSING OFFICER. THAT IS, THE METHOD ADOPTED BY THE ASSESSING OFFICER FOR APPORTIONMENT OF SELLING & ADMINISTRATIVE AND COMM ON ADMINISTRATIVE EXPENDITURE WAS DIFFERENT. THE ASSESSING OFFICER, ADMITTEDLY, D ID NOT DISPUTE THE ELIGIBILITY OF THE ASSESSEE TO CLAIM DEDUCTION U/S 80-IB. THE ADDITION MADE BY THE ASSESSING OFFICER WAS ON ACCOUNT OF METHOD FOR APPORTIONMENT OF EXPEN DITURE FOR ALL THE ELIGIBLE UNITS. THE ASSESSING OFFICER HELD IN HIS ASSESSMENT ORDER IN RESPECT OF METHOD TO BE FOLLOWED FOR APPORTIONMENT OF EXPENDITURE FOR ALL E LIGIBLE UNITS: THUS THE CORRECT PROPORTION WILL BE THE ONE WHI CH BEARS THE SAME PROPORTION AS THE TURNOVER OF THE 80-IB UNIT BEARS TO THE INCREASE IN THE TOTAL TURNOVER OF THE ASSESSEE-COMPANY. SO, THE CORRECT F ORMULA FOR CALCULATING HEAD OFFICE EXPENSES IN RESPECT TO PONDICHERRY UN IT SHOULD BE AS UNDER:- TURNOVER OF PON DICHERRY UNIT DIFFERENCE IN TOTAL TURNOVER I N F.Y.2005-06 & F. Y. 1996-97 IN OTHER WORDS, INSTEAD OF TAKING TOTAL TURNOVER I N DENOMINATOR, DIFFERENCE OF TOTAL TURNOVER IN F.Y. 2005-06 AND F.Y.1996-97 SHO ULD BE TAKEN. MOREOVER, THE TOTAL TURNOVER OF F.Y.1996-97 SHOULD BE BROUGHT TO THE LEVEL OF F.Y. 2005-06 BY APPLYING INFLATION FACTOR SINCE THE ASSESSEE IS APP LYING THE INFLATION FACTOR TO THE HEAD OFFICE EXPENSES:INCURRED IN FINANCIAL YEAR 19 96-97, IN ORDER TO BRING IT TO THE LEVEL OF FINANCIAL YEAR 2005-06. (A) THE ABOVE MENTIONED METHOD APPLIES FOR EXPENDITURE UNDER THE HEAD COMMON SELLING EXPENSES TOO AND ALSO FOR ALL THE UNITS FOR WHICH DEDUCTION U/S 80-IB OF THE ACT HAS BEEN CLAIMED BY THE ASSESSEE. THIS WAY, THE ASSESSING OFFICER MADE THE ADDITION O F RS.3,59,31,662/- ON ACCOUNT OF METHOD FOR APPORTIONMENT OF EXPENDITURE FOR ALL THE ELIGIBLE UNITS. ITA NO.21 12/KOL/2013 M/S. BERGER PAINTS INDIA LTD. A..Y.2006-07 3 3. AGGRIEVED FROM THE ORDER OF THE LD. ASSESSIN G OFFICER, THE ASSESSEE FILED APPEAL BEFORE CIT(A), WHO HAS DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. THE ASSESSEE, BEFORE THE LD CIT(A), APART FROM THE DOCU MENTS AND EXPLANATIONS SUBMITTED BEFORE THE ASSESSING OFFICER, SUBMITTED THE JUDGMEN TS OF THE HON`BLE ITAT KOLKATA AND REASONS FOR ALLOCATION OF COMMON EXPENSES. THE SUBMISSION MADE BY THE ASSESSEE BEFORE THE LD.CIT(A) ARE GIVEN BELOW: IT IS SUBMITTED THAT IN THE EARLIER YEARS, THE BAS IS FOR ALLOCATION OF COMMON SELLING & HEAD OFFICE EXPENSES ADOPTED BY THE APPELLANT HAS BEEN ACCEPTED BY THE HONBLE KOLKATA TRIBUNAL (A.YS.2000-01, A.YS.2001-02 AND A. YS.2002-03). THE HONBLE KOLKATA TRIBUNAL IN ITS CONSOLIDATED ORDER DATED 17 TH OCTOBER, 2006 PASSED FOR THE A.YS.2000-01 AND 2001-02 HAS HELD THE FOLLOWING : ' ... ON GOING THROUGH THE BASIS OF ALLOCATION OF T HE SAID COMMON HEAD OFFICE AND SELLING EXPENSES ADOPTED BY THE ASSESSEE FOR AL LOCATION OF COMMON EXPENSES IS A REASONABLE AND SCIENTIFIC BASIS AND DOES NOT C ALL FOR ANY MODIFICATION ... ' [REFERENCE IS DRAWN TO ANNEXURE - VIII, PAGE - 127 TO 136 OF THE PAPER BOOK, RELEVANT PAGE - 133, PARA - 5.5]. FURTHER, THE HON'BLE KOLKATA TRIBUNAL IN A.Y 2002-0 3 HAS HELD THE FOLLOWING- 'RESPECTFULLY FOLLOWING THE DECISION OF THE ITAT DA TED 17TH OCTOBER, 2006 (SUPRA) IN THE CASE OF THE ASSESSEE, WE ARE OF CONS IDERED OPINION THAT THE DEPARTMENT SHOULD HAVE ACCEPTED THE ALLOCATION MADE BY THE ASSESSEE .... '. [REFERENCE IS DRAWN TO ANNEXURE - IV, PAGE - 1 00 T O 117 OF THE PAPER BOOK, RELEVANT PAGE - 114, PARA - 9.2]. THUS, THIS GROUND OF THE APPELLANT IS SQUARELY COVE RED BY THE AFORESAID ORDERS OF THE HON'BLE KOLKATA TRIBUNAL. 3. AT THE OUTSET, IT MAY BE SUBMITTED TO THE LD. CI T(A) THAT IN THE ASSESSMENT YEAR 2002-03, THE ASSESSING OFFICER, IN THE ORDER DATED 14TH MARCH, 2005 PASSED UNDER SECTION 143(3) OF THE ACT (ENCLOSED HEREWITH IN ANN EXURE - II, PAGE - 86 TO 93 OF THE PAPER BOOK), DID NOT ACCEPT THE ASSESSEE'S BASI S OF ALLOCATION OF COMMON SELLING EXPENSES AND HEAD OFFICE EXPENSES AND ADOPT ED A BASIS DIFFERENT THAN THAT APPLIED BY THE ASSESSEE WHICH IS EXACTLY IDENTICAL TO WHAT HAS BEEN APPLIED BY THE ASSESSING OFFICER IN THE ORDER UNDER APPEAL BEFORE THE LD. CIT(A). 4. THE APPELLANT, AGAINST THE SAID ORDER UNDER SECT ION 143(3) FOR THE ASSESSMENT YEAR 2002- 03 FILED AN APPEAL BEFORE THE THEN LD. C IT(A) WHO BY HIS ORDER DATED 28TH FEBRUARY, 2006 (ENCLOSED HEREWITH IN ANNEXURE - III, PAGE - 94 TO 99 OF THE PAPER BOOK) EXPRESSED HIS INABILITY TO ADJUDICATE O N THE ISSUE OF DEDUCTION CLAIMED BY THE ASSESSEE UNDER SECTION 80LB OF THE A CT SINCE THE THEN LD. CIT, KOLKATA-IV, VIDE HIS ORDER DATED 4TH JANUARY, 2006 PASSED UNDER SECTION 263 OF THE ACT HELD THE ASSESSMENT ORDER FOR THE SAID YEAR AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AND DIRECTED THE THEN A SSESSING OFFICER TO FURTHER DECREASE THE DEDUCTION CLAIMED BY THE ASSESSEE UNDE R SECTION 80IB OF THE ACT, AGAINST WHICH THE APPELLANT WAS IN APPEAL BEFORE TH E HON'BLE TRIBUNAL. HOWEVER, THE APPELLANT FILED AN APPEAL BEFORE THE HON'BLE TR IBUNAL AGAINST THE ORDER PASSED BY THE LD. CIT (A). ITA NO.21 12/KOL/2013 M/S. BERGER PAINTS INDIA LTD. A..Y.2006-07 4 5. THE HON' BLE TRIBUNAL PASSED A CONSOLIDATED ORDE R DATED 13TH AUGUST, 2007 (ENCLOSED HEREWITH IN ANNEXURE - IV, PAGE 100 TO 117 OF THE PAPER BOOK) AGAINST BOTH THE AFORESAID ORDERS (ORDER ARISING OU T OF SECTION 263 & CIT(A)'S ORDER). IN THE SAID ORDER, AFTER EXAMINING THE ISSU E AT LENGTH, IT WAS HELD BY THE HON 'BLE BENCH THAT- 'RESPECTFULLY FOLLOWING THE DECISION OF THE ITAT DA TED 17TH OCTOBER, 2006 (SUPRA) IN THE CASE OF THE ASSESSEE, WE ARE OF CONSIDERED O PINION THAT THE DEPARTMENT SHOULD HAVE ACCEPTED THE ALLOCATION MADE BY THE ASS ESSEE .... '. [REFERENCE IS DRAWN TO ANNEXURE - IV, PAGE - 100 TO 117, RELEVANT PAGE - 114 OF THE PAPER BOOK, PARA - 9.2]. FURTHER THE HON'BLE TRIBUNAL DIRECTED THE THEN LD. CIT(A) TO DECIDE THE ISSUE IN FAVOUR OF THE APPELLANT FOLLOWING THE DECISION OF T HE HON'BLE ITAT IN APPELLANT'S OWN CASE FOR THE ASSESSMENT YEARS 2000-01 AND 2001- 02 AS PER ITS ORDER DATED 17TH OCTOBER, 2006. [REFERENCE IS DRAWN TO ANNEXURE - IV, PAGE - 100 TO 117, RELEVANT PAGE - 114 OF THE PAPER BOOK, PARA - 12]. 6. IT IS SUBMITTED THAT THE THEN LD. CIT (A), FOLLO WING THE AFORESAID ORDER OF THE HON'BLE TRIBUNAL, VIDE HIS ORDER DATED 28TH APRIL. 2008 (ENCLOSED HEREWITH IN ANNEXURE - V, PAGE-118 TO 119, RELEVANT PAGE - 119) DIRECTED THE ASSESSING OFFICER TO CONSIDER THE BASIS OF ALLOCATION ADOPTED BY THE APPELLANT IN EARLIER YEARS FOR ALLOCATION OF VARIOUS EXPENSES WHICH HAD BEEN UPHEL D BY THE ORDERS OF THE HON'BLE ITAT. THE LD. CIT (A) FURTHER DIRECTED THE ASSESSIN G OFFICER TO RE-COMPUTE THE DEDUCTION UNDER SECTION 80IB OF THE ACT IN LIGHT OF THE DIRECTION ISSUED BY THE HON'BLE ITAT VIDE ITS ORDER DATED 13TH AUGUST, 2007 . MOREOVER, THE LD. CIT (A), FOLLOWING THE AFORESAID ORDER OF THE HON'BLE TRIBUN AL, VIDE HIS ORDER DATED 29TH APRIL, 2008 (ENCLOSED HEREWITH IN ANNEXURE - VI, PA GE - 120 TO 122, RELEVANT PAGE - 121) QUASHED THE REVISION ORDER PASSED THE ASSESS ING OFFICER UNDER SECTION 143(3)/263 OF THE ACT. 7. FURTHER, THE DEPARTMENT AGAIN FILED AN APPEAL BE FORE THE HON'BLE TRIBUNAL AGAINST THE AFORESAID ORDER OF THE LD. CIT (A) DATE D 28TH APRIL, 2008. THE HON'BLE TRIBUNAL VIDE ITS ORDER DATED 20TH MARCH, 2009 (ENC LOSED HEREWITH IN ANNEXURE - VII, PAGE - 123 TO 126, RELEVANT PAGE - 125 AND 126 , PARAS 5 AND 6) SUMMARILY DISMISSED THE APPEAL OF THE DEPARTMENT AND UPHELD I TS PREVIOUS ORDERS WHEREIN THE METHOD ADOPTED BY THE APPELLANT FOR THE ALLOCATION OF HEAD OFFICE & SELLING EXPENSES WERE CONSIDERED TO BE CORRECT. IN VIEW OF THE ABOVE, IT IS SUBMITTED THAT SINCE TH E ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDERS PASSED BY THE HON'BLE TRIBUNAL OF JURISDICTION FOR THE ASSESSMENT YEAR 2000-01, 2001-02 AS ALSO IN ASSESSMENT YEAR 2002-03 IN THIS CONTEXT, THE LEARNED CIT (APPEALS) IS KINDLY R EQUESTED TO DIRECT THE ASSESSING 'OFFICER TO ACCEPT THE BASIS OF ALLOCATION OF COMMO N HEAD OFFICE AND SELLING EXPENSES ADOPTED BY THE ASSESSEE FOR THE SUBJECT YE AR IN ARRIVING AT THE PROFITS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB OF THE AC T AND CONSEQUENTLY TO ALLOW DEDUCTION UNDER SECTION 80IB AT THE AGGREGATE AMOUN T OF RS.33,81,19,725 AS HAS BEEN CLAIMED IN ITS RETURN FOR THE YEAR BY THE ASSE SSEE. ITA NO.21 12/KOL/2013 M/S. BERGER PAINTS INDIA LTD. A..Y.2006-07 5 BASED ON THE ABOVE CITED SUBMISSIONS OF THE ASSESSE E AND MERITS OF THE CASE, THE LD CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE STATING T HAT ISSUE OF ALLOCATION OF EXPENDITURE IS COVERED IN ASSESSEE`S FAVOUR IN ASSE SSEE`S OWN CASE IN ITA ORDER NO. 290/KOL/2006 AND 1166/KOL/2006 FOR A.Y. 2002-03 DAT ED 13.08.2007, WHICH IS PLACED AT PAGE NO.100 OF THE PAPER BOOK. 4. NOT BEING SATISFIED WITH THE ORDER OF THE LD. CIT(A), THE REVENUE IS IN FURTHER APPEAL BEFORE US, AND HAS TAKEN THE FOLLOWING GROUN DS OF APPEAL :- 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTQANCES OF THE CASE, LD. CIT(A) ERRED IN ALLOWING RELIEF OF RS.,30,21,88,063/- U/S 80IB. 4.1. THE LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR THE REVENUE HAS PRIMARILY REITERATED THE STAND TAKEN BY THE ASSESSING OFFICER , WHICH WE HAVE ALREADY NOTED IN OUR EARLIER PARA, AND IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. 4.2. ON THE OTHER HAND, THE LD. AUTHORIZED REP RESENTATIVE (AR) FOR THE ASSESSEE HAS VEHEMENTLY STATED THAT THE ALLOCATION OF COMMON S ELLING AND ADMINISTRATIVE EXPENSES ADOPTED BY THE APPELLANT HAS BEEN ACCEPTED BY THE H ONBLE KOLKATA TRIBUNAL FOR A.Y.2000-01, 2001-02 AND A.Y.2002-03. THE HONBLE K OLKATA TRIBUNAL IN ITS CONSOLIDATED ORDER DATED 17.05.2006 PASSED FOR A.YS .2000-01 AND 2001-02 HAS HELD THE FOLLOWING: ON GOING THROUGH THE BASIS OF ALLOCATION OF THE S AID COMMON HEAD OFFICE AND SELLING EXPENSES ADOPTED BY THE ASSESSEE FOR ALLOCATION OF COMMON EXPENSES IS A REASONABLE AND SCIENTIFIC BASIS AND DOES NOT C ALL FOR ANY MODIFICATION THE DEDUCTION CLAIMED BY THE ASSESSEE WAS COMPUTED WITH REFERENCE TO THE PROFITS OF THE UNDERTAKING AS CERTIFIED BY THE AUDITORS OF THE ASSESSEE WHICH WAS FURTHER REDUCED BY THE AMOUNTS OF COMMON SELLING AND HEAD OFFICE EX PENSES ARRIVED AT BY THE ASSESSEE BY FOLLOWING A CONSISTENT BASIS ADOPTED BY IT SINCE THE PREVIOUS YEAR RELEVANT TO A.Y.1998-99 DURING WHICH THE UNDERTAKING LOCATED AT PONDICHERRY BECAME OPERATIONAL AND DEDUCTION U/S 80IA WAS CLAIMED WITH RESPECT TO THE PROFITS DERIVED FROM FOR THE FIRST TIME. THE ASSESSEE HAS BEEN FOLLOWING THE CON SISTENT BASIS FOR ALLOCATION OF COMMON SELLING AND HEAD OFFICE EXPENSES WHICH WERE ACCEPTED BY THE LD. CIT(A). THE LD. AR FOR THE ASSESSEE HAS ALSO POINTED OUT THAT T HE HONBLE TRIBUNAL PASSED A CONSOLIDATED ORDER DATED 13.08.2007 AGAINST THE ORD ERS (ORDER ARISING OUT OF SECTION ITA NO.21 12/KOL/2013 M/S. BERGER PAINTS INDIA LTD. A..Y.2006-07 6 263 AND CIT(A)S ORDER). IN THE SAID ORDER AFTER E XAMINING THE ISSUE AT LENGTH, IT WAS HELD BY THE HONBLE BENCH THAT RESPECTFULLY FOLLOWING THE DECISION OF THE ITAT DA TED 17 TH OCTOBER, 2006 (SUPRA) IN THE CASE OF THE ASSESSEE, WE ARE OF CONSIDERED OPINION THAT THE DEPARTMENT SHOULD HAVE ACCEPTED THE ALLOCA TION MADE BY THE ASSESSEE. THE LD. AR FOR THE ASSESSE HAS RELIED ON THE FOLLOW ING JUDGMENTS ( ASSESSEE`S OWN CASE) OF THE HONBLE ITAT KOLKATA BENCH, WHICH ARE BEFORE US AND PLACED ON RECORD AT PAGES 100 & 123 OF PAPER BOOK, RESPECTIVELY : I) ITA NOS.290 AND 1166/KOL/2006 DATED 13.08.2007 9. WE HAVE CAREFULLY CONSIDERED THE ISSUE. IT IS S EEN THAT THE LD. CIT HAS REJECTED THE CERTIFICATE GIVEN BY THE AUDITOR ON THE BASIS O F THE STATEMENT OF SHRI PRABAL KUMAR SARKAR RECORDED U/S 131(1) OF THE IT ACT. HE IS, HOWEVER, HIMSELF NOT CERTAIN WHETHER THE AMOUNT TO BE APPORTIONED SHOULD BE TAKEN AS RS.60 CRORES OR RS.156 CRORES. THE EXPENDITURE ON VARIOUS ITEMS DIS CUSSED BY HIM WAS RS. 60 CRORES. LATER ON HE HAS TAKEN THE AMOUNT OF RS.156 CRORES ON THE BASIS OF THE ENTIRE EXPENSES, BOOKED AT HEAD OFFICE. HE HAS ALSO OBSERVED THAT IT WAS NOT POSSIBLE TO CORRECTLY APPORTION THE EXPENDITURE WIT HOUT RESORTING TO THE AUDIT U/S 142 (2A) OF THE IT ACT. HE HAS HOWEVER, NOT GIVEN T HE REASON WHY HE COULD NOT SET ASIDE THE ISSUE AND RESTORE IT TO THE AO FOR CONSID ERING THE ACTION U/S 142(2A) OF THE IT ACT. ON THE OTHER HAND, THE ID. COUNSEL HAS POINTED OUT, AMONG OTHER THINGS, THAT THE ISSUE HAS BEEN DULY CONSIDERED BY THE ITAT IN THE CASE OF THE ASSESSEE FOR ASSESSMENT YEARS 2000-01 AND 2001-02 A S PER ORDER DATED 17 TH OCTOBER, 2006 (SUPRA), THE ISSUE INVOLVED WAS THE DEDUCTION U/S 80-IB IN RESPECT OF' PONDICHERRY UNIT WHICH STARTED PRODUCTI ON DURING THE PERIOD RELEVANT TO A.YR 1998-99 . THE ITAT AS PER ORDER DATED 17TH OCTOBER, 2006 HELD THAT THE ADHOC PROFIT RATIO, COULD NOT APPLY CONSISTENTLY IN ALL THE YEARS FOR ALLOCATION OF EXPENDITURE OF HEAD OFFICE TO THE ELIGIBLE UNIT. IT WAS ALSO HELD THAT IN ADDITION TO THE AUDITED ACCOUNTS OF THE ASSESSEE COMPANY, IT WA S MAINTAINING SEPARATE ACCOUNTS FOR THE PONDICHERRY UNIT TO ASCERTAIN ITS PROFIT WHICH WAS AGAIN CERTIFIED BY THE AUDITORS AND THE SAME SHOULD HAVE BEEN ACCEP TED. IT WAS ALSO OBSERVED THAT ONCE THE DEPARTMENT HAD ACCEPTED THE DECISION ON A PARTICULAR ISSUE BY NOT CHALLENGING THE SAME IN THE EARLIER YEARS, IT WAS N OT OPEN TO THE DEPARTMENT TO CONTEST THE SAME IN THE LATER YEARS AND SINCE THE D EPARTMENT IN THIS CASE HAD ACCEPTED THE BASIS OF ALLOCATION OF COMMON .HEAD OF FICE AND SELLING EXPENSES IN THE A.YR. 1998-99 AND THERE WAS NO DISPUTE AS TO TH E EFFECT THAT THE SAME BASIS WAS ADOPTED IN THE ASSESSMENT FOR THE A.YR. 2000-01 AND THE DEPARTMENT SHOULD HAVE ACCEPTED THE ALLOCATION MADE BY THE ASSESSEE O N THE BASIS OF THE AUDITED ACCOUNTS AND CERTIFICATE OF THE AUDITORS. 9.1. THE RELEVANT PORTION OF THE ORDER OF DATE D 17 TH OCTOBER, 2006 (SUPRA) OF THE ITAT IS REPRODUCED BELOW : 'WE HAVE GIVEN A CAREFUL CONSIDERATION TO THE FACT S OF THE CASE THE POSITION IN LAW. WE HAVE ALSO CONSIDERED THE METHOD/BASIS OF ES TIMATION OF COMMON HO AND SELLING EXPENSES. WE NOTE THAT THE ASSESSEE HAS FIL ED AN AUDITED CERTIFICATE WITH THE RETURN TO SUBSTANTIATE ITS CLAIM U/S 80-IB, THE PRO FIT AND LOSS ACCOUNT OF ITA NO.21 12/KOL/2013 M/S. BERGER PAINTS INDIA LTD. A..Y.2006-07 7 PONDICHERRY UNIT HAS BEEN CERTIFIED BY THE AUDITORS TO BE TRUE AND FAIR SUBJECT TO THE AFORESAID NOTE. FROM THE AUDIT REPORT IT IS CLE AR THAT THE AUDITORS' ARRIVED AT THE PROFIT OF THE PONDICHERRY UNIT AFTER CONSIDERIN G AND APPORTIONING ALL EXPENSES RELATED TO THE UNIT EXCEPT FOR COMMON HO AND SELLIN G EXPENSES. THEREFORE THE AUDITORS CLEARLY STATED THAT THE PROFIT AND LOSS AC COUNT OF THE PONDICHERRY UNIT GIVES A TRUE & FAIR VIEW AS REGARD INCOME AND EXPEN DITURES DERIVED BY THE UNIT EXCEPT FOR COMMON HO & SELLING EXPENSES. IT WAS ONL Y RELATING TO THE COMMON HO AND SELLING EXPENSES THE AUDITORS GAVE THE SAID NOTE. THE COMPANY AS A WHOLE HAS AN AUDITED ACCOUNT & FROM THIS AUDITED ACCOUNTS COMMON HO AND SELLING EXPENSES ATTRIBUTABLE TO THE PONDICHERRY UNIT HAS N OT BEEN CONSIDERED BY THE AUDITORS. WE AGREE WITH THE A/R THAT THIS ALLOCATIO N IS AN ESTIMATION FROM AUDITED FIGURES BASED ON SOME SCIENTIFIC/REASONABLE METHOD AND NOT AUDIT (AS THE COMPANY HAS AN AUDITED ACCOUNT), THE SAME HAS BEEN COVERED BY WAY OF NOTE. THE ASSESSEE ITSELF HAS ADOPTED A BASIS FOR ALLOCATION OF COMMON HO AND SELLING EXPENSES WHICH MAY BE ATTRIBUTED TO THE OPERATIONS AT THE PONDICHERRY UNIT AS STATED IN THE FOREGOING PARAGRAPHS. THE ASSESSEE HA S TAKEN ALL RELEVANT COMMON HO & SELLING EXPENSES ATTRIBUTABLE TO PONDICHERRY U NIT, APPLIED INFLATION RATE @ 5% FROM F. Y. 1996-97 (I.E. A. Y.1997-98) & AFTER A RRIVING AT THE TOTAL COMMON HO & SELLING EXPENSES FOR THE RELEVANT ASSESSMENT Y EAR APPLIED THE TURNOVER RATIO (TURNOVER OF PONDICHERRY/TURNOVER OF THE COMPANY). FROM THE DETAILED CALCULATIONS OF ALLOCATIONS OF COMMON HEAD OFFICE E XPENSES PLACED AT PAGES 67-68 OF THE PAPER BOOK, WE NOTE THAT ALL THE COMMON EXPE NSES (VIZ. MCRE RENT - OFFICE & RESIDENCE, OFFICE AND FLAT UPKEEP, LAW CHARGES, T EA ROOM, MEDICAL, ELECTRICITY, RATES AND TAXES, TTP, BP & BE, PRINTING AND STATION ERY, BOOKS AND PERIODICAL, TRAVELING, LTA, BANK CHARGES, IN-HOUSE COMPUTER EXP ENSES, CASH COMMISSION, REPACKING EXPENSES, HRA, INCENTIVE SALESMAN, OTHER EXPENSES, CANTEEN, STAFF WELFARE, DONATION AND SUBSCRIPTION, DIRECTORS FEES, GRATUITY, MACHINE ACCOUNTING, SEC. OFF EXPENSES, INSURANCE , TRAINING & DEVELOPME NT, PROFESSIONAL FEES, BROKERAGE & COMMISSION, IN-HOUSE .XEROX, ESI, SHIFT ING EXPENSES, ARB INTERNAL. AUDIT EXPENSES ETC.) INCLUDING EXPENSES ON SALARIES , ADVERTISEMENT AND SALES PROMOTION ETC HAVE BEEN DULY CONSIDERED BY THE ASSE SSEE FOR ALLOCATION TO THE UNIT ELIGIBLE FOR DEDUCTION U/S 80-IB AND THUS THERE CAN NOT BE ANY QUESTION OF INFLATED PROFITS AS RAISED BY THE DEPARTMENT IN GROUND NO. ( IV) ON GOING THROUGH THE BASIS OF ALLOCATION OF THE SAID COMMON HEAD OFFICE AND SELLING EXPENSES ADOPTED BY THE ASSESSEE CONSISTENTLY FROM THE A. Y. 1998-99 , WE ARE OF THE CONSIDERED VIEW THAT THE SAID BASIS ADOPTED BY THE ASSESSEE FOR ALL OCATION OF COMMON EXPENSES IS A REASONABLE AND SCIENTIFIC BASIS AND DOES NOT CALL F OR ANY MODIFICATION. THE BASIS ACCEPTED BY THE AO IS ARBITRARY AS HE HAS NOT STATE D THE REASON FOR REJECTION OF THE ASSESSEE'S METHOD, HE HAS NOT STATED HOW HE ARRIVED AT 20% FOR ALLOCATING COMMON HO EXPENDITURE WHICH SHOWS HE HAS TAKEN AN A DHOC FIGURE AND WE ACCEPT THAT PROFIT RATIO CANNOT BE APPLIED CONSISTE NTLY IN ALL YEARS. MOREOVER, IN ADDITION TO THE AUDITED ACCOUNTS OF THE COMPANY, TH E ASSESSEE MAINTAINS SEPARATE ACCOUNTS FOR THE PONDICHERRY UNIT TO ASCERTAIN ITS PROFIT AND WHICH AGAIN IS CERTIFIED BY THE AUDITORS. THE SAME SHOULD BE ACCEP TED. WE ARE IN AGREEMENT WITH THE CONTENTION OF THE ID. AR WHICH IS SUPPORTED BY THE DECISIONS OF THE HONBLE SUPREME COURT AS STATED ABOVE THAT ONCE THE DEPARTM ENT HAS ACCEPTED A DECISION ON A PARTICULAR ISSUE BY NOT CHALLENGING THE SAME B EFORE ANY HIGHER FORUM IT IS NOT OPEN FOR IT TO CONTEND IN THE CONTRARY ON THE SAME ISSUE IN A LATER YEAR. WE WOULD REITERATE THAT IN THE PRESENT CASE THE DEPARTMENT H AS ACCEPTED THE BASIS OF ALLOCATION OF COMMON HEAD OFFICE AND SELLING EXPENS ES IN THE AY 98-99 AND THERE ITA NO.21 12/KOL/2013 M/S. BERGER PAINTS INDIA LTD. A..Y.2006-07 8 IS NO DISPUTE AS TO THE FACT THAT THE SAME BASIS HA S BEEN ADOPTED BY THE ASSESSEE IN AY 2000-01 WHICH ARE BEFORE US. FOLLOWING THE RATIO LAID DOWN IN THE DECISIONS RENDERED BY THE HON 'BLE SUPREME COURT, WE UPHOLD THE DECISION OF THE CIT(A) ON THIS ISSUE AND THUS DISMISS GROUND NOS. (III) AND ( IV) RAISED BY THE DEPARTMENT ... 9.2. IN OUR CONSIDERED OPINION THE CLAIM U/S 80-IB FOR PONDICHERRY UNIT HAS ALREADY BEEN CONSIDERED AND THE FACTS OF THE CLAIM OF DEDUCTION U/S 80-IB FOR GOA UNIT ARE ALSO SIMILAR TO THAT OF PONDICHERRY UNIT. RESPECTFULLY FOLLOWING THE DECISION OF THE ITAT DATED 17 TH OCTOBER, 2006 (SUPRA) IN THE CASE OF THE ASSESSEE , WE ARC OF THE CONSIDERED OPINION THAT THE DEPARTMEN T SHOULD HAVE ACCEPTED THE ALLOCATION MADE BY THE ASSESSEE AND THE ORDER OF TH E AO, IN ANY CASE, COULD NOT BE CONSIDERED ERRONEOUS IN SO FAR AS IT WAS PREJUDICIA L TO THE INTEREST OF THE REVENUE. THE ORDER U/S 263 CANNOT, THEREFORE, BE SUSTAINED. THE APPEAL OF THE ASSESSEE IS, THEREFORE, ALLOWED. II) ITA NOS.1332&1333/KOL/2008 ORDER DATED 20.03.20 09. 5. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CARE FUL PERUSAL OF THE MATERIALS AVAILABLE ON RECORD, WE ARE UNABLE TO ACCEPT THE CO NTENTION OF THE LD. DR, KEEPING IN VIEW OF THE FACT THAT IF ANY GRIEVANCE I S CAUSED TO THE REVENUE AGAINST THE ORDERS OF THE ITAT, THE SAME CAN BE QUESTIONED AT THE HIGHER FORUMS AND AS LONG AS THE ITAT ORDERS ARE NOT REVERSED BY THE HIG HER AUTHORITIES, JUDICIAL PROPRIETARY REQUIRES THAT THE COORDINATE BENCH OF T HE TRIBUNAL SHOULD FOLLOW THE ORDERS OF THE ANOTHER BENCH. SINCE THE LD. CIT(A) H AS SIMPLY FOLLOWED THE ORDERS OF THE ITAT IN ASSESSEES OWN CASE FOR THE EARLIER TWO YEARS AND THE LD. DR COULD NOT BRING ANY MATERIALS CONTRARY TO THE FINDINGS OF THE LD. CIT(A), WE FIND NO INFIRMITY IN THE ORDERS OF THE LD. CIT(A) TO BE INT ERFERED WITH. ACCORDINGLY, WE CONFIRM THE ORDER OF THE LD. CIT(A) AND DISMISS THE APPEAL OF THE REVENUE. 4.3. HAVING HEARD THE RIVAL SUBMISSIONS, PERUSE D THE MATERIAL AVAILABLE ON RECORD, WE ARE OF THE VIEW THAT THERE IS MERIT IN THE SUBMI SSIONS OF THE ASSESSEE, AS THE PROPOSITION CANVASSED BY THE LD. AR FOR THE ASSESSE E ARE SUPPORTED BY JUDGMENTS CITED ABOVE AND THE FACTS NARRATED BY HIM ABOVE. THE LD., AR HAS POINTED OUT THAT SINCE THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDERS PASSED BY THE KOLKATA BENCH OF THE TRIBUNAL AS CITED ABOVE. THE LD. AR HA S ALSO POINTED OUT THAT THE ASSESSEE HAS BEEN FOLLOWING THE METHOD FOR ALLOCATION OF COM MON SELLING AND OFFICE EXPENSES SINCE LONG. THEREFORE THE ASSESSEE UNDER CONSIDERAT ION HAS BEEN FOLLOWING CONSISTENT BASIS FOR ALLOCATION OF COMMON SELLING EXPENSES AND HEAD OFFICE EXPENSES. THE METHOD ADOPTED BY THE ASSESSEE HAS BEEN CONFIRMED B Y THE LD. CIT(A) AND ALSO CONFIRMED BY THE JURISDICTIONAL ITAT KOLKATA (SUPRA ). THE AO WHILE MAKING THE ASSESSMENT DID NOT ACCEPT THE BASIS FOR ALLOCATION OF COMMON SELLING AND HEAD OFFICE EXPENSES ADOPTED CONSISTENTLY BY THE ASSESSEE AND H E HAS NOT ACCEPTED THE ORDERS OF ITA NO.21 12/KOL/2013 M/S. BERGER PAINTS INDIA LTD. A..Y.2006-07 9 THE KOLKATA BENCH OF TRIBUNAL. SINCE THE ISSUE IS S QUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDERS PASSED BY THE KOLKATA BENCH OF THE TRIBUNAL IN THE PRECEDING PREVIOUS YEARS, THEREFORE WE DO NOT HESITATE TO CON FIRM THE ORDER PASSED BY THE LD. CIT(A). 4.4. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 23/11/2016 SD/- SD/- [S.S.VISWANETHRA RAVI] [DR.ARJUN LAL SAINI] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 23/11/2016 COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, KOLKATA 1. THE APPELLANT-DCIT, CIRCLE-12, KOLKATA 2. THE RESPONDENT.-M/S BERGER PAINTS INDIA LTD. 3. THE CIT(A), KOLKATA. 4. CIT 5. DR, ITAT, KOLKATA 6. GUARD FILE. //TRUE COPY//