DCIT, New Delhi V. M/s. Radiant Polymers Pvt. Ltd., New Delhi

ITA 3919/DEL/2011

• Counselvise Citation: 391920114 RSA 2011
• Duration Of Justice: 3 year(s) 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 05-01-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 25-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIKRAM SAHAY
• Assessee Lawyers: Y R JAGIA
• Keywords: Unexplained cash credit; Depreciation; Business expenditure; Opportunity of being heard; Rule of consistency
• Section: 6; 12

Judgement Text

1 ITA 3913/DEL/11 & 1478/D/13 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F NEW DELHI BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER AND SHRI H.S. SIDHU: JUDICIAL MEMBER ITA NO. 3919/DEL/2011 A.Y. 2008-09 DCIT, CIRCLE 15(1), VS. RADIANT POLYMERS PVT. LTD. , NEW DELHI. 17, VIJAYA BUILDING, BARAKHAMBA ROAD, NEW DELHI. PAN: AAACR 3788 B AND ITA NO. 1478/DEL/2013 A.Y. 2009-10 RADIANT POLYMERS PVT. LTD., VS. DCIT, CIRCLE 15(1), 17, VIJAYA BUILDING, NEW DELHI. BARAKHAMBA ROAD, NEW DELHI. ( APPELLANT ) ( RESPONDENT ) DEPARTMENT BY : SHRI VIKRAM SAHAY SR. DR RESPONDENT BY : SHRI Y.R. JAGIA ADV. DATE OF HEARING : 05-01-2015 DATE OF ORDER : _______-02-2015. O R D E R PER S.V. MEHROTRA, A.M:- THE DEPARTMENT HAS PREFERRED APPEAL AGAINST CIT(A) S CIT(A)S ORDER DATED 20-05-2011, RELATING TO A.Y. 2008-09 AND TH E ASSESSEE IS IN APPEAL AGAINST CIT(A)S ORDER DATED 03-12-2012, RELATING TO A.Y. 2009-10. BOTH THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DIS POSED OF BY THIS CONSOLIDATED ORDER, FOR THE SAKE OF CONVENIENCE. 2 ITA 3913/DEL/11 & 1478/D/13 DEPARTMENTS APPEAL (ITA NO. 3919/DEL/2011) : 2. BRIEF FACTS ARE THAT THE ASSESSEE IN THE RELEVAN T ASSESSMENT YEAR WAS IN THE BUSINESS OF MANUFACTURING OF MOULDED PLASTIC CO MPONENTS AND DIES. ITS UNIT LOCATED AT RUDRAPUR, SPECIALIZED IN INJECTION MOLDING OF ENGINEERING PLASTIC COMPONENTS FOR- (I) AUTOMOTIVE APPLICATION 2 & 4 WHEELERS; (II) ELECTRICAL & LIGHTING APPLICATION. (III) INDUSTRIAL & MISCELLANEOUS APPLICATION. 2.1. IT HAD FILED ITS RETURN OF INCOME, DECLARING I NCOME OF RS. 17,46,659/- AFTER CLAIMING DEDUCTION U/S 80IC IN RESPECT OF PRO FITS OF THE UNIT AT RUDRAPUR. THE AO SHOW CAUSED THE ASSESSEE AS TO WHY DEDUCTION U/S 80IC OF THE I.T. ACT BE ALLOWED AS THE ARTICLES MANUFACT URED BY ASSESSEE WERE CLASSIFIABLE AS PLASTIC AND ARTICLES THEREOF, AS MENTIONED AT SL. NO. 20 OF SCHEDULE XIII, BEING LIST OF ARTICLE OR THING NOT E LIGIBLE FOR DEDUCTION U/S 80IC AND, THUS, ASSESSEE DID NOT FULFILL THE ELIGI BILITY CONDITION FOR AVAILING DEDUCTION U/S 80IC. THE ASSESSEE STATED AS UNDER: THAT THE ARTICLES MANUFACTURED BY THE ASSESSEE DO TO FALL UNDER THE EXCISE CLASSIFICATION 39-09 TO 39.15. THAT THE ASSESSEE IS ELIGIBLE FOR EXCISE EXEMPTION VIDE NOTIFICATION NO. 49/03-CE DATED 10-06-2003 AND ALL HIS INVOICES FOR SALE MENTIONING THE EXCISE CLASSIFICATION IS AP PROVED BY THE EXCISE INSPECTOR. HE HAS STATED THAT THE PROVISION OF CENTRAL EXCISE AND INCOME TAX ACT ARE THE SAME VIS A VIS ELIGIBILITY CONDITIO N FOR CLAIM OF EXEMPTION. 3 ITA 3913/DEL/11 & 1478/D/13 2.2. AS REGARDS THE AOS QUERY WITH REFERENCE TO CL ASSIFICATION OF THE PRODUCTS MANUFACTURED BY ASSESSEE, AS PER CIRCULAR NO. 6/86-CX 4, DATED 25- 9-1986 OF CENTRAL EXCISE ACT, THE ASSESSEE POINTED OUT THAT T HE SAID CIRCULAR MERELY LAID DOWN BROAD GUIDELINES AND WAS NOT BASED ON TECHNICAL DETAILS. THE ASSESSEE HAD RELIED ON CIRCULAR NO. 335/69/97-C X DATED 12/11/97. 2.3. THE AO, AFTER CONSIDERING THE ASSESSEES SUBMI SSIONS, HELD THAT SINCE THE ASSESSEE MANUFACTURED PLASTIC COMPONENTS FROM DANA, THEREFORE, IT COMES WITHIN THE AMBIT OF ENTRY NO. 20 OF PART B O F SCHEDULE XIII. THE ASSESSEES CONTENTION THAT IT IS NOT CLASSIFIABLE UNDER CHAPTER 39 OF THE CENTRAL EXCISE TARIFF ACT, IS NOT ACCEPTABLE. HE, A CCORDINGLY, DENIED THE DEDUCTION CLAIMED BY THE ASSESSEE U/S 80IC. 2.4. LD. CIT(A) ALLOWED THE ASSESSEES APPEAL ON TH IS COUNT, INTER ALIA, OBSERVING THAT CENTRAL EXCISE AUTHORITIES, WHO ARE EXPERT IN IMPLEMENTATION AND ADJUDICATION OF PROVISIONS OF CENTRAL EXCISE AC T, HAVE ACCEPTED THE CLASSIFICATION OF THE GOODS MANUFACTURED UNDER THE CHAPTERS OTHER THAN CHAPTER 39. AGGRIEVED, THE REVENUE IS IN APPEAL BE FORE THE TRIBUNAL. 3. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT CHAP TER 39 OF THE CENTRAL EXCISE TARIFF ACT STIPULATES PROVISION FOR PLASTICS AND ARTICLES THEREOF. AS PER NOTE 1 TO CHAPTER 39 OF THIS ACT, THE EXPRESSIO N PLASTIC MEANS THOSE MATERIALS OF HEADING NO. 39.01 TO 39.14 WHICH ARE O R HAVE BEEN CAPABLE EITHER AT THE MOMENT OF POLYMERIZATION OR AT SOME S UBSEQUENT STAGE OF BEING FORMED UNDER EXTERNAL INFLUENCE (USUALLY HEAT AND P RESSURE, IF NECESSARY WITH A SOLVENT OR PLASTICIZER) BY MOLDING, CASTING, EXTR UDING, ROLLING OR OTHER PROCESS INTO SHAPES WHICH ARE RETAINED ON THE REMOV AL OF THE EXTERNAL 4 ITA 3913/DEL/11 & 1478/D/13 INFLUENCE. WITH REFERENCE TO THIS NOTE LD. COUNSEL SUBMITTED THAT CHAPTER 39 PRIMARILY DEALS WITH RAW-MATERIAL OF PLASTIC GOODS. LD. COUNSEL FURTHER REFERRED TO NOTE 2 TO CHAPTER 39 AND POINTED OUT TH AT THIS CHAPTER, INTER ALIA, DOES NOT COVER (O) ARTICLES OF SECTION XVI (MACHINES AND MECHANICA L OR ELECTRICAL APPLIANCES); AND (P) PARTS OF AIRCRAFTS OR VEHICLES (SECTION XVII). 3.1. LD. COUNSEL FURTHER REFERRED TO PAGE 70 & 71 OF THE PB, WHEREIN SECTIONS XVI AND XVII OF THE CENTRAL EXCISE TARIFF ACT IS REPRODUCED, ENTRY NO. 85 AND 87 THEREOF ARE REPRODUCED HEREUNDER: 85. ELECTRICAL MACHINERY AND EQUIPMENT AND PART S THEREOF; SOUND RECORDERS AND REPRODUCERS, TELEVISION IMAGE A ND SOUND RECORDERS AND REPRODUCERS, AND PARTS AND ACCESSORIE S OF SUCH ARTICLES . 1007. 87. VEHICLES OTHER THAN RAILWAY OR TRAMWAY ROLLING STOCK AND PARTS AND ACCESSORIES THEREOF . 1058. 3.2. LD. COUNSEL FURTHER POINTED OUT THAT ENTRY 39. 09 TO 39.15 ARE WITH REFERENCE UP TO THE STAGE OF PREPARATION OF DANA AN D THE ASSESSEES MANUFACTURING STARTS THEREAFTER. LD. COUNSEL FURTH ER REFERRED TO PAGE 92 ONWARDS WHEREIN INVOICES ARE CONTAINED TO DEMONSTRA TE THAT THE ASSESSEES CLASSIFICATION UNDER ENTRY NOS. 85 & 87 HAS BEEN AC CEPTED BY THE EXCISE AUTHORITIES AND, THEREFORE, ASSESSEES CASE CANNOT BE BROUGHT UNDER ENTRIES 39.01 TO 39.14. HE ALSO REFERRED TO PAGE 115 OF TH E PB, WHEREIN THE COPY OF RETURN IN FORM ER-1 IS CONTAINED TO DEMONSTRATE THA T ASSESSEES CETSH NUMBER STARTS WITH 85 AND 84. ONLY WASTE AND SCRAP OF PLASTIC WAS CLASSIFIED U/S 39.15, WHICH WAS VERY MEAGER AND THE ASSESSABLE VALUE WAS 5 ITA 3913/DEL/11 & 1478/D/13 ONLY RS. 17400 AS AGAINST THE TOTAL ASSESSABLE VALU E OF RS. 269.50 LSKHS AND THE QUANTITY MANUFACTURED WAS 2900 KG. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAV E PERUSED THE RECORD OF THE CASE. NOTE NO. 1 OF CHAPTER 39 OF THE CENTRA L EXCISE TARIFF ACT READS AS UNDER: THROUGHOUT THIS SCHEDULE, THE EXPRESSION PLASTIC M EANS THOSE MATERIAL OF HEADING NO. 39.01 TO 39.14 WHICH ARE OR HAVE BEEN CAPABLE, EITHER AT THE MOMENT OF POLYMERIZATION OR AT SOME SUBSEQUENT STAGE OF BEING FORMED UNDER EXTERNAL INF LUENCE (USUALLY HEAT AND PRESSURE, IF NECESSARY WITH A SOL VENT OR PLASTICIZER) BY MOULDING, CASTING, EXTRUDING, ROLLI NG OR OTHER PROCESS INTO SHAPES WHICH ARE RETAINED ON THE REMOV AL OF THE EXTERNAL INFLUENCE. 4.1. NOTE 2 OF CHAPTER 39 STIPULATES THE ARTICLES ON WHICH CHAPTER 39 HAS NO APPLICATION AND AS PER CLAUSE 2(P) & (Q) CHAPTER 39 OF TARIFF ACT HAS NO APPLICATION ON THE ARTICLES MENTIONED IN SECTION XV I & XVII. THERE IS NO DISPUTE THAT ASSESSEES ARTICLES HAVE BEEN CLASSI FIED UNDER ENTRY 85 OF SECTION XVI AND ENTRY 87 OF SECTION XVII AS ASSESSE E IS MANUFACTURING ELECTRIC AUTOMOBILE PARTS AND RADIATOR PARTS. THE REFORE, THE ARTICLES MANUFACTURED BY ASSESSEE COULD NOT BE CLASSIFIED UN DER ENTRY NO. 20 OF PART B OF SCHEDULE 13. THE ASSESSEES ARTICLES WERE CLEA RED UNDER THE TARIFF ENTRIES NOS. 85 & 87. LD. DR POINTED OUT THAT ASSES SEE WAS GENERATING SCRAP WHICH WAS CLASSIFIED UNDER ENTRY NO. 39.15 AS IS EV IDENT FROM THE RETURN FILED BY ASSESSEE. WE ARE IN AGREEMENT WITH THE LD. COUNS EL FOR THE ASSESSEE THAT KEEPING IN VIEW THE MEAGER AMOUNT ASSESSABLE UNDER CHAPTER 39 (ENTRY 39.15), THE ASSESSEES CLAIM FOR DEDUCTION U/S 80IC CANNOT BE DENIED. FURTHER, WE FIND SUBSTANCE IN THE SUBMISSION OF LD. COUNSEL FOR THE ASSESSEE THAT IN AY 2006-07 AND 2007-08 THE ASSESSEE HAS BEE N GRANTED DEDUCTION U/S 6 ITA 3913/DEL/11 & 1478/D/13 80IC IN SCRUTINY ASSESSMENT U/S 143(3). THEREFORE, WE CONFIRM THE ORDER OF LD. CIT(A) IN DIRECTING THE AO TO ALLOW DEDUCTION U /S 80IC OF THE ACT FOR RUDRAPUR UNIT OF THE ASSESSEE COMPANY. 5. IN THE RESULT DEPARTMENTS APPEAL IS DISMISSED. ASSESSEES APPEAL (ITA NO. 1478/DEL/2013 AY 2009- 10): 6. IN THIS YEAR THE ASSESSEE CONTINUED TO CARRY ON THE SAME ACTIVITY AS IN AY 2008-09 CONSIDERED EARLIER. THE ASSESSEE HAD FILED ITS RETURN OF INCOME DECLARING INCOME OF RS. 91,920/- AND ASSESSMENT WAS COMPLETED AT A TOTAL INCOME OF RS. 36,55,233/-. IN REGARD TO THE ASSESSEES CLAIM U /S 80IC, THE AO DENIED THE CLAIM ON THE GROUND THAT THE ARTICLES MANUFACTURED BY ASS ESSEE WERE COVERED UNDER ENTRY NO. 20 OF PART B UNDER SCHEDULE 13. HE FURTHER POIN TED OUT THAT WITHOUT PREJUDICE TO ITS FINDING THAT THE ASSESSEE WAS NOT ENTITLED F OR DEDUCTION U/S 80IC, THE ASSESSEE WAS TO FURNISH A NOTE ON LOSSES FOR NON-80IC UNITS. THE ASSESSEE POINTED OUT THAT IN RESPECT OF SAHIBABAD UNIT (CORPORATE OFFICE) THE AS SESSEE HAD INCURRED FOLLOWING EXPENSES WHICH RESULTED INTO LOSS FOR NON-80IC UNIT S. (A) DIRECTORS REMUNERATION (B) CORPORATE STAFF SALARY (C) TRAVELLING EXPENSES (D) PROFESSIONAL EXPENSES (E) DEPRECIATION ON VEHICLES INCLUSIVE OF COMMERCIAL VE HICLES (F) RUNNING AND MAINTENANCE OF VEHICLES INCLUSIVE OF CO MMERCIAL VEHICLES (G) BUSINESS PROMOTION (H) INTEREST IN TERM LOANS (I) REPAID & MAINTENANCE (MOULD & DIES) ALSO THE EXPENSES IN REGARD TO INTEREST ON UNSECURE D TERM LOAN FROM BANK AND NBFC HAVE BEEN CONSIDERED ONLY IN SAHIBABAD UN IT. 7 ITA 3913/DEL/11 & 1478/D/13 6.1. AFTER CONSIDERING THE ASSESSEES REPLY, THE AO PROPOSED FOLLOWING ALLOCATION OF EXPENSES: TOTAL RUDRAPUR PRO P ORTIONATE DIFFE R ENCE EXPENSE ON TUR N OVER SALE 31 , 04 , 66 , 702 / - 19 , 50 , 27 , 837 / - - - DIRECTORS REMUNERATION 87 , 00,000 / - 21 , 60,000 / - 41,89,788 / - 20,29,788 / - . C ORPORATE STAFF SALAR Y 2 , 57 , 91 , 92 4 / - 1 , 70 , 05 , 126 / - 1 , 70 , 67,643 / - 62,517 / - T RA V ELLING EXPENSES 22,88 , 090 / - 1 , 00 , 104 / - 9 , 21,365 1 - 8 , 21 , 261 1 - . PROFESS I O N AL EX PEN SE S 6, 5 7 ,65 4 / - 43,000 / - 2 , 53 , 723 / - 2 , 10,723 / - D EP RECIATI O N ON V EHI C LE S IN C LU S I VE 1 2 , 06 , 27 5 / - 54 , 314 4 , 65 , 380 / - 4 , 11,066 / - OF CO MMERCIAL V EHICLES R UNN IN G AND M A INTEN A NC E OF 22 , 88 , 0 9 0 / - 11 , 9 5 , 9 9 2 882058 / - ( - ) 313934/- V E HI C LES IN C LUSIVE OF COMM E RCIAL VE HI C LES . _ - BU SI NESS PROMOTION 5 3 , 44 6 / - 8 , 388 / - 20603 / - INTER E ST IN TERM LOAN S 6 2 , 3 5 , 097 / - - 24 , 03 , 629 / - 24 , 03 , 629 / - REPAID & MAINTENANCE (M OULD & 1 , 1 6 , 73 , 7 5 7 / - - 45 , 00,233 / - 45 , 00 , 233 / - DIE S ) 6.2. THE AO AFTER CONSIDERING THE PROVISIONS OF SEC TION 80IC(7) READ WITH SECTION 8 ITA 3913/DEL/11 & 1478/D/13 80IA(5) INFERRED THAT ALL EXPENSES OF 80IA BUSINESS ARE TO BE CLAIMED AGAINST THAT BUSINESS ONLY AND THEN PROFITS ARE TO BE DETERMINED . HE OBSERVED THAT PROFITS ELIGIBLE FOR DEDUCTION U/S 80IC HAVE TO BE COMPUTED AS IF IT WAS A SEPARATE UNIT. HE OBSERVED THAT THE EXPENSES CONSIDERED ABOVE HAVE AL SO BEEN INCURRED TOWARDS EARNING THE PROFIT OF THE 80IC UNIT AND HAS TO BE D EDUCTED WHILE COMPUTING THE CORRECT PROFITS OF THE UNIT. HE, ACCORDINGLY, APPOR TIONED THE EXPENSES IN PROPORTION TO THE TURNOVER OF THESE UNITS AND APPORTIONED RS. 1,97,30,184/- OUT OF THE EXPENSES CLAIMED AS HAVING BEEN INCURRED IN THE UNIT ELIGIBL E FOR DEDUCTION U/S 80IC. THE AO FURTHER MADE ADDITION OF RS. 15,07,387/- BEING R ECEIPT ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION ON THE GROUND THAT THE SAME WA S NOT DERIVED FROM MANUFACTURING ACTIVITY AND THERE WAS NO DIRECT AND IMMEDIATE CONNECTION OF THE MANUFACTURING ACTIVITY WITH THIS INCOME. 6.3. THE AO FURTHER MADE ADDITION OF RS. 9677/- WHI CH WAS A CREDIT ENTRY IN THE BANK ACCOUNT WITH HDFC. LD. CIT(A) DISMISSED THE AS SESSEES APPEAL. 6.4. BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEF ORE US AND HAS TAKEN FOLLOWING GROUNDS OF APPEAL: 1. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE ORDER PASSED BY COMMISSIONER OF INCOME TAX (APPEAL)- XVIII, NEW DELHI, HEREINAFTER REFERRED AS CIT(A) IS AGAINST THE SETTLED PRINCIPLES AND PROVISIONS OF LAW THEREF ORE THE ADDITION MADE ARE LIABLE TO BE DELETED AND APPELLAN T COMPANY IS ENTITLED TO BE ASSESSED AT ITS RETURNED INCOME W ITH CONSEQUENTIAL RELIEF. 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN DISALLOWING THE CLAIM O F DEDUCTION UNDER SECTION 80IC OF ACT FOR THE UNIT LOCATED IN P ANTNAGAR, RUDRAPUR (UTTRANCHAL). 9 ITA 3913/DEL/11 & 1478/D/13 3. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN NOT FOLLOWING THE RULE OF CONSISTENCY THOUGH ADMITTEDLY THERE IS NO CHANGE IN FACTS OVER THE PREVIOUS YEAR. 4. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN MAKING APPORTIONMENT OF FEW OF THE EXPENSES ON THE BASIS OF SALES OF 80IC UNITS AND OT HER UNITS AND THEREBY ALLOCATING A FURTHER SUM OF RS. 1,97,30,184 /- AS EXPENSES PERTAINING TO THE UNIT ELIGIBLE FOR 80IC D EDUCTION WITHOUT ANY BASIS AND FINDING. 5. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN TREATING THE FOREIGN EX CHANGE FLUCTUATION INCOME OF 80IC UNIT AS INCOME FROM OTHE R THAN MANUFACTURING ACTIVITY OF 80IC UNITS. 6. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN TREATING BANK CREDIT OF RS. 9,677/- AS UNEXPLAINED CREDIT. 7. THE APPELLANT CRAVES LEAVE OF THIS HONBLE COURT TO AMEND, ALTER AND ADD THE GROUNDS OF APPEAL BEFORE H EARING. 7. GROUND NOS. 1 AND 7 ARE GENERAL IN NATURE AND RE QUIRE NO ADJUDICATION. 8. GROUND NOS. 2 & 3 DEAL WITH THE ISSUE RELATING T O ELIGIBILITY FOR DEDUCTION U/S 80IC, WHICH WE HAVE CONSIDERED IN EARLIER APPEAL OF ASSESSEE FOR AY 2008-09 AND, THEREFORE, THESE GROUNDS ARE ALLOWED. 9. GROUND NO. 4 DEALS WITH THE ISSUE REGARDING APPO RTIONMENT OF EXPENSES TO THE UNIT ELIGIBLE FOR DEDUCTION U/S 80IC ON THE BAS IS OF SALES INTO TWO UNIT. 9.1. LD. COUNSEL REFERRED TO THE SYNOPSIS FILED IN THIS REGARD AND SUBMITTED THAT 10 ITA 3913/DEL/11 & 1478/D/13 AO MADE DISALLOWANCE OF EXPENSES BY ALLOCATING EXPE NSES TO UNITS ENJOYING DEDUCTION U/S 80IC, FOR THE FIRST TIME, AREA BASED BENEFIT OF TAX. HE SUBMITTED THAT WHILE APPORTIONING THE EXPENSES, THE AO WRONGLY AD OPTED TURNOVER OF SAHIBABAD UNIT AS TOTAL TURNOVER AND ON BEING POINTED OUT BEF ORE CIT(A), HE IN PARA 8.1 WHILE UPHOLDING THE APPORTIONMENT OF EXPENSES, DIRECTED T HE AO TO LOOK INTO THE ERROR IN COMPUTATION OF APPORTIONMENT OF EXPENSES. HE SUBMIT TED THAT AFTER GIVING EFFECT TO CLERICAL ERROR, AS DIRECTED BY LD. CIT(A) , DISPUTE OF APPORTIONMENT OF EXPENSES IS RESTRICTED TO RS. 9,23,733/-. HE SUBMITTED THAT THE AOS FINDING THAT THE AMOUNT SHOULD HAVE BEEN DEBITED TO PANTNAGAR UNIT BASED ON APPORTIONMENT OF TOTAL EXPENSES TO THREE UNITS ON THE BASIS OF TURNOVER WI THOUT BRINGING ON RECORD ANY EVIDENCE OF HAVING INCURRED SUCH EXPENSES FOR PANT NAGAR UNIT. HE SUBMITTED THAT ASSESSEE WAS MAINTAINING SEPARATE BOOKS OF ACCOU NT. HE SUBMITTED THAT AO HAS APPORTIONED DIRECTORS REMUNERATION BASED ON TURNO VER WITHOUT APPRECIATING THE FACT THAT ASSESSEE WAS HAVING THREE WORKING DIRECTO RS AT ITS BOARD AND EACH DIRECTOR WAS RESPONSIBLE FOR EACH UNIT. THEREFORE, REMUNERAT ION PERTAINING TO DIRECTOR MANAGING PANTNAGAR UNIT HAD BEEN DEBITED TO PANTNAG AR. SIMILARLY, APPORTIONMENT OF CORPORATE STAFF SALARY WAS MADE ON TURNOVER BASI S WITHOUT APPRECIATING THAT ASSESSEE HAD BEEN MAINTAINING COMPLETE RECORDS OF EMPLOYEES AS PRESCRIBED UNDER PF AND ESIC AND LIST OF EMPLOYEES HAD BEEN PLACED O N RECORD. THE SALARY HAD BEEN ACCOUNTED FOR, ON HEAD COUNT BASIS. SIMILARLY, TRAV ELLING EXPENSES, PROFESSION EXPENSES, BUSINESS EXPENSES, DEPRECIATION OF COMMER CIAL VEHICLES AND MAINTENANCE THEREOF WAS WRONGLY APPORTIONED ON THE BASIS OF TURNOVER. 9.2. LD. DR REFERRED TO SECTION 80IC(7) AND POINTED OUT THAT PROVISIONS OF SECTION 80IA(10) ARE APPLICABLE TO SECTION 80IC. IN VIEW O F SUB-SECTION (7) HE REFERRED TO SECTION 80IA(10) AND POINTED OUT THAT THE ISSUE REL ATING TO APPORTIONMENT OF EXPENSES IS TO BE EXAMINED BY AO. HE REFERRED TO PA GE 5 OF ASSESSMENT ORDER AND 11 ITA 3913/DEL/11 & 1478/D/13 POINTED OUT THAT INTEREST ON TERM LOANS OF RS. 62,3 5,097/- AND REPAIR & MAINTENANCE OF RS. 1,16,73,757/- WAS NOT AT ALL APPORTIONED IN RUDRAPUR UNIT. HE, THEREFORE, SUBMITTED THAT T HE AO APPORTIONED RS. 24,03,629/- OUT OF INTEREST ON TERM LOANS OF RS. 45,00,233/- OUT OF REPAIR AND MAINTENANCE. 9.3. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED TH E RELEVANT MATERIAL AVAILABLE ON RECORD. WE FIND THAT AO HAS CLEARLY DEMONSTRATED THAT THE ASSESSEES MODE OF ALLOCATION OF EXPENSES SOLELY TO NON 80IC UNIT WAS NOT CORRECT. THE BASIS ADOPTED FOR ALLOCATING THE EXPENSES IS QUITE REASONABLE. WE ARE IN AGREEMENT WITH THE FOLLOWING FINDING OF LD. CIT(A): THE PERUSAL OF TRADING AND PROFIT & LOSS A/C OF RU DRAPUR UNIT VIS A VIS OTHER UNIT SHOWS THAT THE VARIOUS EXPENSE S LIKE INTEREST ON TERM LOANS, REPAIR & MAINTENANCE, DIRECTORS REM UNERATION AND OTHER EXPENSES MENTIONED BY THE ASSESSING OFFIC ER HAVE BEEN CHARGED TO THE OTHER UNITS AND T HE QUAN TUM O F C HARGE T O THE RUDR A PUR U N I T I S D I SP R OPO RTI O N A T E LY L OW E R . THUS I T CANNO T BE SA I D T HA T RUD R APU R UN IT I S A TOT A LLY IND EPE N DEN T UNIT AN D THE P R O FIT AN D GAIN EARNED BY THE UN IT IS ON LY O N ACCOU NT OF THE EXPEN S E I N C UR R ED BY THE SPEC I F IC U N IT . I N FACT THE ENTIRE BUS I N E SS O F THE APPELLANT IS A CLOSELY K NI T I N T E R- DEPENDEN T UN IT S . THE MA I N DIR EC T ORS ARE BASED AT DELH I AND DECIS I ON MAK I NG I S BEING C A RRI ED OU T F ROM TH E H EA D O F F I CE . TH E ENTIRE I NT E REST EXPENSES , AD MI NISTRAT I ON AND M A N AGEMEN T EXPENSES , BU S IN E SS P R OMOTION EXP E NSES , EXPENSES ON COMMISSION AND EV E N T HE SALA RI ES O F E MPLOYEES S UCH AS ENGINEER ETC . ARE DEBITED TO THE ACCOUNT S OF THE H E A D O F F I CE . T HE RU DR APU R UN I T F O R A T U R NOVE R OF R S . 19 . 50 CRORES IS INCURR I NG SALARY EXPE N S E S OF O N L Y RS . 1. 7 C R O R ES AS AGAI NST T O T A L SALARY EXPENSES O F RS . 4 . 42 CRORES . SIMILARLY , TH E D IR ECTO R ' S R E M UNE R A TI O N FOR R U D R APU R UNIT I S ONLY RS . 21 . 6 LACS AS AGAINST T OTAL E XPENS E S OF RS . 1 08 . 6 L A CS . SIMIL A R IS T HE C ASE I N REGARD TO DEPREC I ATION OF VEHICLES AND OTHER EXPE N SES . T HE ABOV E A N ALYS IS CL EAR L Y SHOWS TH A T THE APPELLAN T HA S GROSSL Y REDUCED THE EXP E N SES DEB I TED T O TH E R U D R AP UR U N IT T O I NFL A TE THE PROFI T FROM TH IS U NI T . THERE I S THUS NO RE AS ON T O I N T ER F ERE W ITH 12 ITA 3913/DEL/11 & 1478/D/13 THE D EC I S I O N OF T H E AO WHO HAS REALLOCATED THE EXPENSES ON THE B AS I S . OF T UR N O V E R . H O W E V E R , TH E A PPELLANT HAS POINTED OUT CERTA I N ER R OR I N COM P UT A TION WHI CH M A Y B E L OO K E D INTO BY THE ASSESSIN G OFFICER . THIS GROUND O F APPEAL I S D I SPOS E D OFF ACCO R D I NG LY . 9.4. IN VIEW OF ABOVE DISCUSSION WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A) ON THE ISSUE IN QUESTION. 10. GROUND NO. 5: THE AO TREATED THE FOREIGN EXCHAN GE FLUCTUATION INCOME OF RS. 15,07,387/- BEING NOT ELIGIBLE FOR DEDUCTION U/ S 80IC. LD. CIT(A) OBSERVED THAT AO RELYING UPON THE DECISION OF LIBERTY INDIA HELD THAT INCOME EARNED ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION COULD NOT B E SAID TO BE DERIVED FROM MANUFACTURING ACTIVITY BUT WAS INCIDENTAL INCOME WH ICH HAD NO RELATIONSHIP WITH MANUFACTURING ACTIVITY. HE CONFIRMED THE AOS ACTIO N OBSERVING AS UNDER: THE APPELLANT HAS RELIED UPON THE DECISION OF HON BLE SUPREME COURT IN WOODWARD GOVERNORS INDIA P LTD AND HAS CLAIMED THAT THE FOREIGN EXCHANGE FLUCTUATION IS PA RT OF INCOME OF PANT NAGAR UNIT AND IS ON REVENUE ACCOUNT. IT SH OULD, THEREFORE, BE TREATED AS PART OF INCOME OF PANT NAG AR UNIT. SINCE THE APPELLANT HAS ACCEPTED THAT FOREIGN EXCHA NGE FLUCTUATION ARE NOT PART OF INCOME OF RUDRAPUR UNIT , THEREFORE, THE APPELLANT IS NOT ENTITLED TO DEDUCTION UNDER SE CTION 80IC ON THIS INCOME AND THE SAME WOULD FORM PART OF INCOME OF PANT NAGAR UNIT. THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS THEREFORE, CONFIRMED. 10.1. LD. COUNSEL SUBMITTED THAT LD. CIT(A) WAS CON FUSED BETWEEN PANT NAGAR AND RUDRAPUR UNIT AND DID NOT CONSIDER THIS I SSUE AT ALL. 10.2. HAVING HEARD BOTH THE PARTIES, WE FIND THAT L D. CIT(A) HAS NOT CONSIDERED THE ISSUE IN RIGHT PERSPECTIVE AND HAS W RONGLY CONCLUDED THAT 13 ITA 3913/DEL/11 & 1478/D/13 ASESSSEE ACCEPTED THAT FOREIGN EXCHANGE FLUCTUATION WERE NOT PART OF INCOME OF RUDRAPUR UNIT. WE, ACCORDINGLY, RESTORE THIS ISS UE TO THE FILE OF LD. CIT(A) TO DECIDE THIS ISSUE DE NOVO AFTER AFFORDING REASON ABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 11. GROUND NO. 6: THIS ISSUE IS IN REGARD TO TREATM ENT OF RS. 9,677/- AS UNEXPLAINED CREDIT. THIS ADDITION WAS MADE ON THE B ASIS THAT ASSESSEE FAILED TO PROVE THE CREDIT IN ITS BANK ACCOUNT WITH HDFC. NOTHING HAS BEEN BROUGHT ON RECORD TO TAKE A CONTRARY VIEW. ACCORDIN GLY, WE SEE NO REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A) ON THE ISSUE IN QUESTION. 12. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 25-02-2015. SD/- SD/- (H.S. SIDHU ) ( S.V. MEHROTRA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 25-02-2015. MP: C OPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR 14 ITA 3913/DEL/11 & 1478/D/13 DATE INITIAL 1. DRAFT DICTATED ON 23 .02.2015 PS 2. DRAFT PLACED BEFORE AUTHOR 24 .02.2015 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.