Sintex Industries Ltd., Ahmedabad V. The ACIT.,OD Range-8, Ahmedabad

ITA 4092/AHD/2008

• Counselvise Citation: 409220514 RSA 2008
• Duration Of Justice: 3 year(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 10-01-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 19-12-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K GUPTA
• Keywords: Opportunity of being heard; Earning of tax free income; Set aside
• Section: 143(3); 14A; 80IB; 80IA; 6

Judgement Text

-1- IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'C' BEFORE SHRI D K TYAGI - JM AND SHRI A MOHAN ALANKAMONY - AM ITA NO.4092/AHD/2008 (ASSESSMENT YEAR:-2007-08) SINTEX INDUSTRIES LIMITED, 701-2, ABHIJEET-1, MITHAKHALI SIX ROADS, ELLIS-BRIDGE, AHMEDABAD V/S THE ASST. COMMISSIONER OF INCOME-TAX (OSD), RANGE-8, AHMEDABAD PAN: AADCS 0858 E [APPELLANT] [RESPONDENT] ITA NO.115/AHD/2009 WITH C O NO.39/AHD/2009 (ASSESSMENT YEAR:-2007-08) THE ASST. COMMISSIONER OF INCOME-TAX (OSD), RANGE-8, AHMEDABAD V/S SINTEX INDUSTRIES LIMITED, 701-2, ABHIJEET-1, MITHAKHALI SIX ROADS, ELLIS-BRIDGE, AHMEDABAD [APPELLANT] [RESPONDENT] ASSESSEE BY :- SHRI SANJAY R SHAH, AR REVENUE BY:- SHRI S K GUPTA, CIT DR DATE OF HEARING:- 10-01-2012 DATE OF PRONOUNCEMENT:- 13-01-2012 O R D E R PER D K TYAGI (JM) :- THESE CROSS APPEALS AND CROSS OBJECTION ARE ARISING OUT OF ORDER DATED 03-10-2008 PASSED BY THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-XIV, AHMEDABAD [THE 2 LEARNED CIT(A)] FOR ASSESSMENT YEAR 2007-08. FOR THE SAKE OF CONVENIENCE, THESE APPEALS ARE BEING DISPOSED OF BY THIS COMMON ORDER. 2 AT THE OUTSET, THE LEARNED COUNSEL OF THE ASSESSE E DID NOT PRESS THE CROSS OBJECTION FILED BY THE ASSESSEE AND , THEREFORE, THE SAME IS DISMISSED, AS NOT PRESSED. ITA NO.4092/AHD/2008 [ASSESSEES APPEAL] :- 3 GROUND NO.1 IN THIS ASSESSEES APPEAL IS GENERAL IN NATURE AND DOES NOT REQUIRE ANY ADJUDICATION. 4 E-RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATI ON WAS FILED BY THE ASSESSEE COMPANY ON 29-10-2007 DECLARI NG TOTAL INCOME OF RS.57,22,41,874/-. 5 GROUND NO.2 IN THE ASSESSEES APPEAL AND GROUND N O.2 IN THE REVENUES APPEAL I.E. ITA NO.115/AHD/2009, RELA TE TO DEDUCTION U/S 80IA OF THE INCOME-TAX ACT, 1961 [HER EINAFTER REFERRED TO AS THE ACT] I.E. ALLOCATION OF DIRECT ORS REMUNERATION, DIRECTORS TRAVELING EXPENSES, AUDIT FEES, COMPUTER EXPENSES AND SECURITY CHARGES FOR CALCULATING PROFI T ELIGIBLE FOR DEDUCTION U/S 80IA OF THE ACT. THE BRIEF FACTS OF T HE CASE ARE THAT THE ASSESSEE COMPANY IS A PUBLIC LIMITED COMPANY EN GAGED THE BUSINESS OF MANUFACTURING OF THERMOPLASTIC MOULDING S, PREFAB STRUCTURES, ETC. IN ITS PLASTIC DIVISION AND MANUF ACTURING OF BLENDED & COTTON FABRICS AND YARNS IN ITS TEXTILE D IVISION. MAJOR 3 BUSINESS (OF APPROXIMATELY 72 %) IS UNDERTAKEN IN I TS PLASTIC DIVISION, UNDER WHICH THE ASSESSEE COMPANY IS MANUF ACTURING AND MARKETING ITS VARIOUS PRODUCTS MENTIONED ABOVE UNDE R THE BRAND NAME SINTEX. THE ASSESSEE COMPANY HAS -WE UNITS LOC ATED AT BADDI IN HIMACHAL PRADESH AND DAMAN (U.T.). DURING THE YEAR THE ASSESSEE COMPANY HAS CLAIMED DEDUCTION U/S.80IB ON THE INCOME DERIVED FROM DAMAN UNIT OF SINTEX INDUSTRIAL LIMITED AND DEDUCTION U/S 80IC ON THE INCOME DERIVE D FROM BADDI UNIT OF SINTEX INDUSTRIAL LIMITED. IN ADDITIO N TO THE ABOVE, ASSESSEE COMPANY HAS CLAIMED DEDUCTION U /S. 80IA OF THE I. T. ACT ON INDEPENDENT CAPTIVE POWER PLANTS ( CPPS.) WHICH ARE INSTALLED AT ITS MAIN MANUFACTURING SITE, LOCAT ED AT KALOL. 6. AS PER ITS RETURN OF INCOME FOR THE A Y. 2007-08 THE ASSESSEE COMPANY HAS CLAIMED DEDUCTION U/S.80IA OF THE ACT AMOUNTING TO RS.15,47,18,850/- ON ACCOUNT OF INCOME DERIVED FROM CPP UNIT. THE ASSESSEE COMPANY HAD SET UP THRE E INDEPENDENT POWER GENERATING PLANTS I.E. CPP-I, CPP -II & CPP- III, WHICH WERE COMMISSIONED DURING THE F.Y. 1997-9 8, 1998-99 & 2004-05 I.E. CORRESPONDING TO THE AY 1998-99,1999 -2000 & 2005-06. THE ASSESSEE COMPANY WAS ALLOWED THIS DEDU CTION IN THE ASSESSMENTS FOR AYS 2003-04, 2004-05, 2005-06 A ND 2006- 07. THIS BEING THE FIFTH YEAR OF THIS CLAIM THE DED UCTION CLAIMED WAS ALLOWED ON MERITS, SUBJECT TO THE FOLLOWING ADJ USTMENTS. 7 THE ASSESSEE COMPANY FILED DETAILED WORKING OF IT S INCOME OUT OF CAPTIVE POWER PLANT (CPP). IT ALSO FILED A S EPARATE P & L ACCOUNT, BALANCE SHEET AND AUDITOR'S REPORT FOR THI S PURPOSE. THE 4 CLAIM OF THE ASSESSEE COMPANY WAS FOUND TO BE TENAB LE AND ACCORDINGLY THE SAME WAS ALLOWED BEING AN UNDERTAKI NG ELIGIBLE U/S.80IA (4)(IV) OF THE ACT. DURING THE COURSE OF T HE ASSESSMENT PROCEEDINGS, THE ASSESSEE COMPANY WAS ASKED TO EXPL AIN THE BASIS FOR CLAIMING VARIOUS DIRECT AND INDIRECT EXPENSES D EBITED THEREIN. ON PERUSAL THEREOF IT WAS NOTICED THAT THE ASSESSEE COMPANY ALLOCATED SOME DIRECT AND INDIRECT EXPENSES PERTAIN ING TO THE CPP UNIT ON THE BASIS OF THE TURNOVER RATIO ETC. EXCEPT CERTAIN COMMON HEAD QUARTER EXPENSES NAMELY DIRECTORS' RE MUNERATION, DIRECTORS' FEES AND TRAVELING, AUDIT FEES, COMPUTER MAINTENANCE EXPENSES, SECURITY CHARGES ETC. IN THE ASSESSMENT F OR AY 2005-06 IN THE ORDER U/S 143(3) PRO RATA ALLOCATION OF THES E COMMON HEAD QUARTER EXPENSES WAS MADE TO THE CPP ON THE BASIS O F THE TURNOVER OF THE DIFFERENT UNITS. THIS ALLOCATION WA S CHALLENGED BY THE ASSESSEE COMPANY BEFORE THE LD. CIT (A). THE LD . CIT(A) IN HIS ORDER DATED 20/09/2007 SUSTAINED THE ALLOCATION OF THE COMMON HEAD QUARTER EXPENSES. THE AO OBSERVED THAT IN VIEW OF THE SAME FOR THE A.Y. 2007-08 ALSO THE CROWING COMM ON HEAD QUARTER EXPENSES ARE ALLOCATED TO THE CPP PRO-RATA ON THE BASIS OF TURNOVER OF CPP UNIT. THE TURNOVER OF THE CPP UNIT AS PER THE FORM 10CCB RESORT SUBMITTED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDING THE SAME IS RS.4138.26 LAC S AS AGAINST THIS THE TURNOVER OF THE ASSESSEE COMPANY AS PER TH E AUDITED ACCOUNTS IS RS.111776.26/- LACS. THUS THE TURNOVER OF CPP WORKS OUT TO BE 3.70% OF THE AUDITED TURNOVER. THE COMMON HEAD QUARTER EXPENSES DEBITED IN ME P & L ACCOUNT WHICH ARE HELD TO BE ATTRIBUTABLE TO THE CPP ALSO ARE AS UNDER: 5 S.NO. PARTICULARS AMOUNT (RS.IN LAKHS) 1 DIRECTORS' REMUNERATION 476.93 2 DIRECTORS' TRAVELING 24.40 4 AUDIT FEES 17.95 5 COMPUTER MAINTENANCE EXPENSES 82.74 6 SECURITY CHARGES 34.06 7 GENERAL CHARGES OF CORPORATE OFFICE 318.11 8 MISCELLANEOUS EXPENDITURE 128.25 TOTAL 1082.44 THE AO ACCORDINGLY HELD THAT, THEREFORE, ON ACCOUNT OF THE ABOVE, 3.70% OF RS.1082.44 LACS WORK OUT TO RS.40.0 5 LACS AND THE SAME IS REDUCED FROM THE ASSESSEE COMPANY'S CLA IM OF TOTAL DEDUCTION OF RS.15,47,18,850/- ON ACCOUNT OF THE RE ASONS, AS MENTIONED ABOVE. 8 AGGRIEVED BY THIS ORDER, THE ASSESSEE WENT IN APP EAL BEFORE THE LEARNED CIT(A). THE LEARNED CIT(A) HAS GRANTED RELIEF IN RESPECT OF THE GENERAL CHARGES OF THE CORPORATE OFF ICE AND MISCELLANEOUS EXPENSES AMOUNTING TO RS.16.52 LAKHS (I.E. 3.70% OF 446.36 LACS) BY CONSIDERING THAT THE EXPENSES AR E NOT DIRECTLY RELATED TO THE CPP UNIT. 6 9 AGGRIEVED BY THIS ORDER, THE ASSESSEE AND REVENUE ARE NOW IN APPEALS BEFORE US. BOTH THE PARTIES AGREED THAT THIS ISSUE IS COVERED BY THE DECISION OF THE TRIBUNAL IN THE ASSE SSEES OWN CASE FOR AY 2004-05 IN ITA NO.691/AHD/2007 & C.O. NO.99/AHD/2007, ORDER DATED 30-06-2011, COPY OF WHI CH IS AVAILABLE AT PAGES 162 TO 176 OF THE PAPER BOOK. TH E LEARNED DR MADE THE SAME SUBMISSIONS. 10 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORDS. WE HAVE ALSO GONE THROUGH THE ORDERS OF THE AUTHORITIE S BELOW AND THE DECISION OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR AY 2004-05 IN ITA NO.691/AHD/2007 & C.O. NO.99/AHD/200 7, ORDER DATED 30-06-2011. WE FIND THAT AS PER PARA 16 OF IT S ORDER, THIS ISSUE HAS BEEN DECIDED BY THE TRIBUNAL AGAINST THE ASSESSEE. FOR THE SAKE OF CONVENIENCE, WE REPRODUCE PARA 16 FROM THE TRIBUNALS ORDER IN ASSESSEES OWN CASE FOR AY 2004 -05, WHICH READS AS UNDER:- 16 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND P ERUSED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. AFTER CONSIDERING THE NATURE OF EXPENSES COM PRISED IN COMMON HEAD-QUARTER EXPENSES OF RS.461.79 LAKHS, WE FEEL T HAT THE SAME WERE RIGHTLY ALLOCATED BY THE AO TO CPP UNIT BECAUSE DIR ECTORS AND HEAD QUARTER ALSO HAVE IMPORTANT ROLE IN THE WORKING OF CPP UNIT AND HENCE THESE EXPENSES ARE TO BE APPORTIONED TO CPP UNIT AL SO AND HENCE, WE DECLINE TO INTERFERE IN THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND ACCORDINGLY THIS PART OF GROUND NO.1 AND 1.1 OF C.O . ARE REJECTED. THE REMAINING PART OF THIS ISSUE IS RAISED BY THE ASSES SEE IN GROUND NO.1.2. SINCE, BOTH THE SIDES AGREED THAT THIS ISSUE IS COV ERED AGAINST THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN ASSESSE ES OWN CASE 7 FOR THE AY 2004-05, WE DECIDE THIS ISSUE AGAINST TH E ASSESSEE BY RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL . 11 GROUND NOS.3 & 3.1 OF THE ASSESSEES APPEAL RELA TE TO ALLOCATION OF ADMINISTRATIVE AND GENERAL EXPENSES A MOUNTING TO RS.3.86 LACS AND RS.438.79 LACS FOR DAMAN & BADDI U NIT RESPECTIVELY. 12 THE LEARNED CIT(A) HAS DEALT WITH THE ISSUE AS U NDER:- 7. THE SIXTH GROUND OF APPEAL RELATES TO ALLOCATI ON OF ADMINISTRATIVE EXPENSES AND GENERAL EXPENSES AMOUNT ING TO RS.3.86 LAKHS AND RS.438.79 LAKHS TOWARDS DAMAN & BADDI UNI TS ON THE BASIS OF SALES RATIO FOR DAMAN & BADDI UNITS WHICH ARE EL IGIBLE FOR DEDUCTION U/S 80IB/80IC OF THE ACT. SIMILAR ISSUE A ROSE IN AYS 2003- 04, 2004-05,2005-06 & 2006-07, WHEREIN THE ISSUE WA S DECIDED AGAINST THE APPELLANT. FOLLOWING THE ORDER OF CIT(A ) IN EARLIER YEARS, THE ISSUE IS DECIDED AGAINST THE APPELLANT FOR THIS YEAR ALSO AND IT IS HELD THAT THE AO HAS CORRECTLY WORKED OUT THE DEDUC TION U/S 80IB IN RESPECT OF THIS UNIT. 13 BEFORE US, BOTH THE PARTIES AGREED THAT THE ISSU E IS COVERED AGAINST THE ASSESSEE BY THE DECISION OF THE TRIBUNA L IN ASSESSEES OWN CASE FOR AY 2004-05 IN ITA NO.691/AHD/2007 & C. O. NO.99/AHD/2007, ORDER DATED 30-06-2011. 14 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORDS. WE HAVE ALSO GONE THROUGH THE ORDERS OF THE AUTHORITIE S BELOW AND THE DECISION OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR AY 2004-05 IN ITA NO.691/AHD/2007 & C.O. NO.99/AHD/200 7, ORDER DATED 30-06-2011. WE FIND THAT AS PER PARA 21 OF IT S ORDER, THIS ISSUE HAS BEEN DECIDED BY THE TRIBUNAL AGAINST THE ASSESSEE. FOR THE SAKE OF CONVENIENCE, WE REPRODUCE PARA 21 FROM THE 8 TRIBUNALS ORDER IN ASSESSEES OWN CASE FOR AY 2004 -05, WHICH READS AS UNDER:- 21. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD AND GONE THROUGH THE ORDERS OF T HE AUTHORITIES BELOW. WE FIND THAT WE HAVE TO DECIDE ONLY REGARDIN G ALLOCATION OF SALARY EXPENSES AND ADMINISTRATIVE/GENERAL EXPENSES TO TWO UNITS I.E. DAMAN AND BADDI UNITS FOR THE PURPOSE OF COMPUTATIO N OF DEDUCTION U/S 80IB. THE SUBMISSION OF THE ASSESSEE IS THIS TH AT SINCE DIRECT EXPENSES HAS BEEN DIRECTLY ALLOCATED TO THESE TWO U NITS, NO PART OF COMMON EXPENSES SHOULD BE FURTHER ALLOCATED. WE DO NOT FIND ANY MERIT IN THIS CONTENTION BECAUSE ACTUAL DIRECT EXPE NSES ARE TO BE ALLOCATED DIRECTLY AND THE COMMON EXPENSES, HAS TO BE APPORTIONED ON A REASONABLE BASIS, WHICH HAS BEEN DONE BY THE AO I N THE PRESENT CASE AND HENCE, NO INTERFERENCE IS CALLED FOR. RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR AY 2004-05 (SUPRA), WE HOLD THAT IN THE PRESENT CASE ALSO, THIS ISSUE IS COVERED AGAINST TH E ASSESSEE AND THE ALLOCATION OF ADMINISTRATIVE EXPENSES AND GENER AL EXPENSES AMOUNTING TO RS.3.86 LAKHS AND RS.438.79 LAKHS TOWA RDS DAMAN & BADDI UNITS RESPECTIVELY FOR COMPUTATION OF DEDUC TION U/S 80IB IS UPHELD. 15 GROUND NO.4 IN THE ASSESSEES APPEAL AND GROUND NO.4 IN THE REVENUE I.E. ITA NO.115/AHD/2009 RELATE TO DISA LLOWANCE U/S 14A OF THE ACT IN RESPECT OF THE DIRECTORS REMUNER ATION. THE FACTS OF THE CASE AS NOTED BY THE LEARNED CIT(A) IN PARA 8.1 OF HIS ORDER ARE AS UNDER:- 8.1 THE SEVENTH GROUND OF APPEAL IS RELATING TO DI SALLOWANCE OF RS.30,88,115/- U/S 14A BEING 0.83% OF RS.3720.62 LA KHS, BEING THE DIRECTORS REMUNERATION, TRAVELING EXPENSES, MISCEL LANEOUS EXPENSES AND GENERAL EXPENSES. THE AO HAS FOUND THAT THE APP ELLANT HAS RECEIVED DIVIDEND OF RS.10,05,39,061/- FROM MUTUAL FUND WHICH IS 9 EXEMPT U/S 10(35) OF THE I.T. ACT. THE APPELLANT HA S NOT SHOWN ANY CORRESPONDING EXPENDITURE IN EARNING THIS DIVIDEND. THE A.O. HAS ALLOCATED THE EXPENSES OF RS.30,88,115/- OUT OF DIR ECTORS' REMUNERATION, TRAVELLING EXPENSES, MISCELLANEOUS EX PENSES AND GENERAL EXPENSES FOR EARNING THIS EXEMPT INCOME AND THE SAID AMOUNT HAS BEEN DISALLOWED. THE APPELLANT HAS SUBMITTED TH AT NO EXPENSES WERE INCURRED FOR EARNING DIVIDEND INCOME AND NO EX PENDITURE SHOULD BE DISALLOWED. THE A.R. RELIED ON THE DECISION OF I TAT IN THE CASE OF ACIT VS. RICHER LTD. (101 TTJ 369)(DELHI), WHEREIN IT WAS HELD THAT ONLY DIRECT EXPENSES SHOULD BE CONSIDERED FOR DISAL LOWANCE U/S. 14A AND NO INDIRECT EXPENSES SHOULD BE CONSIDERED. THE APPELLANT HAS ALSO RELIED ON THE DECISION OF DELHI TRIBUNAL IN THE CAS E OF WIMCO SEEDLINGS LTD. REPORTED IN 107 ITD 267 & ORIENTAL B ANK OF COMMERCE AS WELL AS THE MUMBAI TRIBUNAL DECISION IN THE CASE OF ACIT VS. CITICORP FINANCE (INDIA) LTD., 111 TTJ 82 (MUM). 16 THE LEARNED CIT(A) HAS DECIDED THE ISSUE BY OBSE RVING AS UNDER:- 8.2 I HAVE CONSIDERED THE FACTS OF THE CASE AND TH E SUBMISSIONS OF THE APPELLANT. I FIND THAT NO EXPENDITURE WAS INCUR RED FOR SALARY OF ANY EMPLOYEE FOR EARNING THIS INCOME. AS PER THE DECISI ON OF ITAT CHENNAI BENCH IN THE CASE OF SOUTHERN PETRO CHEMICA LS INDUSTRIES LTD. VS. CIT, 93 TTJ 161, INVESTMENT DECISIONS ARE VERY STRATEGIC DECISIONS IN WHICH TOP MANAGEMENT IS INVOLVED. THER EFORE, PROPORTIONATE MANAGEMENT EXPENSES ARE REQUIRED TO B E DEDUCTED FOR COMPUTING DIVIDEND INCOME. FURTHER, IT WAS HELD IN THE CASE OF RHYTHM EXPORTS (PVT.) LTD., VS. ITO, 2 SOT 429 (MUM ), THAT THE EXPENDITURE INCURRED IN RELATION TO EARNING INCOME WHICH IS EXEMPT SHOULD BE TAKEN OUT AND IN CASE THE APPELLANT FAILS TO DO SO, THE A.O. HAS NO OPTION THEN TO TAKE THE SAME ON PROPORTIONAT E BASIS. AS HELD IN A.Y. 2005-06 AND A.Y. 2006-07 TRAVELLING EXPENSES, MISCELLANEOUS EXPENSES AND GENERAL EXPENSES ARE IN THE NATURE OF INDIRECT EXPENSES AND THE SAME SHOULD NOT BE APPORTIONED. HENCE, THE A.O. IS DIRECTED TO RECALCULATE THE DISALLOWANCE, AFTER ALLOCATING ONLY THE DIRECTORS' REMUNERATION AND BY EXCLUDING THE OTHER INDIRECT EX PENSES. 17 THE ASSESSEE AND REVENUE HAVE COME IN APPEALS BE FORE US AGAINST THE AFORESAID FINDINGS OF THE LEARNED CIT(A ). THE LEARNED COUNSEL OF THE ASSESSEE CONTENDED THAT NO SUCH DISA LLOWANCE 10 NEEDS TO BE MADE PRIOR TO AY 2008-09. THE LEARNED C OUNSEL RELIED ON THE DECISION OF THE HONBLE KERALA HIGH C OURT IN THE CASE OF CATHOLIC SYRIAN BANK 237 CTR 164. 18 THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE ORDER OF THE LOWER AUTHORITIES AND ALSO RELIED ON THE DECISI ON OF THE HONBE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BO YCE MFG. CO. LTD. VS. DCIT REPORTED IN (2010) 328 ITR 81 (BO M). 19 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORDS. WE HAVE ALSO GONE THROUGH THE DECISIONS REFERRED TO BY THE LEARNED REPRESENTATIVES OF BOTH THE SIDES. BOTH THE DECISIO NS CITED BY BOTH THE SIDES ARE OF NON JURISDICTIONAL HIGH COURT S AND NO DECISION OF HONBLE JURISDICTIONAL HIGH COURT OR OF HON'BLE SUPREME COURT HAS BEEN BROUGHT TO OUR NOTICE. UNDER THIS FACTUAL POSITION, WE REMIT THE MATTER BACK TO THE FILE OF T HE AO FOR FRESH DECISION AFTER CONSIDERING BOTH THE AFORESAID DECIS IONS I.E. HONBLE KERALA HIGH COURT AND HONBLE BOMBAY HIGH C OURT. THE AO SHOULD PASS NECESSARY ORDER AS PER LAW AND AS PE R THE ABOVE DISCUSSION AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THUS, THE GROUND OF APPEAL OF THE ASS ESSEE AND THE GROUND RAISED BY THE REVENUE ARE ALLOWED FOR STATIS TICAL PURPOSE. 20 GROUND NO.5 IN THE ASSESSEES APPEAL RELATING TO LEVY OF INTEREST U/S 234C AND 234D IS CONSEQUENTIAL IN NATU RE. THE AO IS DIRECTED ACCORDINGLY. ITA NO.115/AHD/2009 [REVENUES APPEAL] :- 11 21 GROUND NO.2 IN THE REVENUES APPEAL RELATES TO A LLOCATION OF INTEREST EXPENSES OF RS.518.28 LAKHS TO THE BADDI U NIT. THE FACTS AS NOTED BY THE LEARNED CIT(A) IN HIS ORDER ARE AS UNDER:- 5.1 THE FOURTH GROUND OF APPEAL IS AGAINST ALLOCAT ION OF INTEREST EXPENSES OF RS.518.28 LAKHS TO THE BADDI UNIT IN TH E RATIO OF TURNOVER AGAINST THE ALLOCATION MADE BY THE APPELLANT ON THE BASIS OF INVESTMENT WHILE CALCULATING PROFIT ELIGIBLE FOR DEDUCTION U/S .80IC OF I.T. ACT. THE A.O. OBSERVED THAT THE APPELLANT HAS INCURRED INTER EST CHARGE OF RS.4099.33 LACS AGAINST WHICH THE APPELLANT HAS ALL OCATED INTEREST EXPENSES OF RS.40.46 LAKHS TO BADDI UNIT. THE A.O. OBSERVED THAT THE APPELLANT HAS A COMMON POOL OF FUNDS AS WELL AS COM MON BANK ACCOUNTS FOR ITS ENTIRE BUSINESS BEING CARRIED OUT FROM HEADQUARTERS .THE CC ACCOUNT WITH BANKS AND FINANCIAL INSTITUTIO NS AND LOANS RAISED BY THEM HAVE BEEN UTILIZED AS PER REQUIREMENT OF RU NNING THE ENTIRE BUSINESS INCLUDING BADDI UNIT .THE A.O. THEREFORE A LLOCATED INTEREST PROPORTIONATELY TO THIS UNIT ON THE BASIS OF RATIO OF SALES OF THE UNDERTAKING WHICH COMES TO RS.518.28 LAKHS. 22 THE LEARNED CIT(A) HAS DEALT WITH THE ISSUE IN T HE FOLLOWING MANNER:- 5.2 IT WAS SUBMITTED BY THE APPELLANT THAT THE ALL OCATION MADE BY THE APPELLANT WAS REASONABLE AND OUGHT NOT TO HAVE BEEN DISPUTED BY THE A.O. THE APPELLANT HAS CLAIMED THAT SINCE NO OTHER SPECIFIC LOANS WERE TAKEN FOR ESTABLISHMENT OF THE SAID UNIT, NO INTERE ST COST SHOULD BE ALLOCATED TO THE SAID UNIT. ALTERNATIVELY, EVEN IF IT HAS TO BE APPORTIONED, IT SHOULD BE APPORTIONED ON THE BASIS OF INVESTMENT MADE IN THESE UNITS. I HAVE CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS OF THE APPELLANT. I FIND THAT SIMILAR I SSUE AROSE IN A.YS. 2003-04, 2004-05, 2005-06 & 2006-67, WHEREIN IT WAS DECIDED THAT INTEREST EXPENSES SHOULD BE ALLOCATED TO THESE UNIT S. HOWEVER, IT SHOULD BE ALLOCATED ON THE BASIS OF INVESTMENTS MAD E IN THESE UNITS. 23 THE REVENUE HAS COME IN APPEAL AGAINST THE AFORE SAID FINDINGS OF THE LEARNED CIT(A). 12 24 AT THE TIME OF HEARING, BOTH THE PARTIES AGREED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISIO N OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2003-04 IN I TA NO.1173/AHD/2006, ORDER DATED 17-07-2009 AND FOR AY 2006-07 IN ITA NO.4091/AHD/08, DATED 25-11-2011, WHEREIN TH E TRIBUNAL HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. 25 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORDS. WE HAVE ALSO GONE THROUGH THE ORDER OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR AY 2003-04 IN ITA NO.1173/AHD/2006, OR DER DATED 17-07-2009, WHEREIN THE TRIBUNAL HAS DECIDED THE IS SUE IN FAVOUR OF THE ASSESSEE AS UNDER:- 8 HAVING HEARD BOTH SIDES, WE HAVE CAREFULLY GONE THROUGH THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW. WE FIND T HAT AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AS WELL AS REMAND REPORT OF THE AO, LEARNED CIT(A) CATEGORICALLY OBSERVED TH AT THE TOTAL INVESTMENT IN BADDI UNIT AND DAMAN UNIT IS VERY LOW INASMUCH AS 0.28% AND 0.09% RESPECTIVELY, AS COMPARED TO INVEST MENT IN OTHER UNIT. THE LEARNED DR COULD NOT CONTROVERT THIS FIND ING OF THE LEARNED CIT(A). IF THIS IS SO, THE LEARNED CIT(A), IN OUR C ONSIDERED VIEW, IS PERFECTLY JUSTIFIED IN MAKING THE INTEREST ALLOCATI ON AT RS.3.60 LAKHS IN CASE OF DAMAN UNIT AND AT RS.1.16 LAKHS IN CASE OF BADDI UNIT ON THE BASIS OF RATIO OF INVESTMENT IN FIXED ASSETS AND IN DIRECTING THE AO TO MODIFY THE CALCULATION ACCORDINGLY. WE UPHELD THE S AME AND DISMISS GROUNDS NO.1,2 AND 3 OF THE REVENUE. SINCE, THE ISSUE IS COVERED IN FAVOUR OF THE ASSESS EE BY THE EARLIER DECISION OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR AY 2003- 04 IN ITA NO.1173/AHD/2006, ORDER DATED 17-07-2009, WHEREIN THE TRIBUNAL HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE, WE UPHOLD THE ORDER OF THE LEARNED CIT(A) AND DISMISS THE GROUND RAISED BY THE REVENUE. 13 26 GROUND NO.3 IN THE REVENUES APPEAL RELATES TO G RANTING RELIEF OF RS.26,72,011/- BY THE LEARNED CIT(A) TO T HE EXTENT OF ALLOCATION OF THE SALARY ALREADY MADE BY THE ASSESS EE. THE FACTS AS NOTED BY THE LEARNED CIT(A) ARE AS UNDER:- 6.1 THE FIFTH GROUND OF APPEAL IS AGAINST ALLOCATI ON OF SALARY EXPENSES AMOUNTING TO RS.5.61 LAKHS & RS.636.68 LAKHS ON THE BASIS OF THE SALES RATIO ON THE DAMAN UNIT U/S. 80IB AND BADDI UNIT U/ S. 80IC OF THE ACT. THE APPELLANT HAS POINTED OUT THAT IT HAS ALREADY A LLOCATED SALARY AMOUNTING TO RS.4.28 LACS TOWARDS DAMAN UNIT AND RS .114.38 LACS TOWARDS BADDI UNIT RESPECTIVELY , WHICH THE A.O. HA S NOT REDUCED WHILE MAKING FURTHER ALLOCATION OF SALARY ON THESE UNITS. THE A.O. IS, THEREFORE, DIRECTED TO VERIFY THIS FACT AND WHILE A LLOCATING THE SALARY EXPENSES REDUCE THE EXPENSES ALREADY ALLOCATED BY T HE APPELLANT. THE APPELLANT HAS FURTHER SUBMITTED THAT THE A.O. HAS A LLOCATED THE SALARY EXPENDITURE OF ALL THE EMPLOYEES OF THE APPELLANT A ND NOT ONLY SALARIES OF EMPLOYEES MANAGING CORPORATE AFFAIRS. IT WAS FUR THER SUBMITTED THAT SALARIES OF EMPLOYEES WORKING WITH OTHER UNITS ARE IDENTIFIABLE EXPENDITURE OF THE OTHER UNITS AND THEREFORE IN NO EVENT THE SAME CAN BE ALLOCATED TO EITHER DAMAN OR BADDI UNITS. THE AP PELLANT HAS ALTERNATIVELY SUBMITTED THAT ONLY SALARY OF PLASTIC DIVISION OF RS.23.83 CRORES SHOULD BE ALLOCATED IN THE RATIO OF SALES OF DAMAN AND BADDI UNITS. 27 THE LEARNED CIT(A) HAS GRANTED RELIEF TO THE ASS ESSEE IN THE FOLLOWING MANNER:- 6.2 I FIND THAT SIMILAR ISSUE WAS INVOLVED IN EARL IER YEARS AND THE STAND OF THE A.O. WAS CONFIRMED. FOLLOWING THE STAN D TAKEN IN EARLIER YEARS, I CONFIRM THE ALLOCATION MADE BY THE A.O. HO WEVER, AS REGARDS ALTERNATIVE CONTENTION THAT TO THE EXTENT OF ALLOCA TION OF SALARY ALREADY MADE BY THE APPELLANT, THE SAME SHOULD BE REDUCED T O AVOID DOUBLE DISALLOWANCE , I AGREE WITH THE APPELLANT AND DIREC T THE A.O. TO GRANT RELIEF ACCORDINGLY. THE OTHER ALTERNATIVE CONTENTIO N THAT ONLY SALARY OF PLASTIC DIVISION SHOULD BE ALLOCATED AMONG DAMAN AN D BADDI UNITS IN THE RATIO OF SALES OF THESE UNITS IS FOUND TO BE RE ASONABLE AND THE SAME IS ACCEPTED ,THE A.O, IS DIRECTED TO GRANT RELIEF A CCORDINGLY. 14 28 BEFORE US, BOTH THE PARTIES AGREED THAT THE ISSU E IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TR IBUNAL IN THE ASSESSEES OWN CASE FOR AY 2006-07 IN ITA NO.4091/A HD/2008 AND ITA NO.213/AHD/2009, WHEREIN THE TRIBUNAL, ON S IMILAR FACTS, HAS RESTORED THE MATTER BACK TO THE FILE OF THE AO FOR THE CORRECT CALCULATION. 29 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORDS. WE HAVE ALSO GONE THROUGH THE ORDER OF THE TRIBUNAL FO R AY 2006-07 IN THE ASSESSEES OWN CASE IN ITA NO.4091/AHD/2008 AND ITA NO.213/AHD/2009, WHEREIN THE TRIBUNAL, ON SIMILAR F ACTS, HAS RESTORED THE MATTER BACK TO THE FILE OF THE AO FOR THE CORRECT CALCULATION, WITH THE FOLLOWING OBSERVATIONS:- 20. THE ISSUE NO. 8 IS REGARDING RELIEF ALLOWED B Y THE LD. CIT(A) FOR THE ALREADY ALLOCATED SALARY EXPENSES. THIS ISS UE HAS BEEN RAISED BY THE REVENUE AS PER GROUND NO.3 OF THE REVENUE'S APP EAL. LD. D.R. SUPPORTED THE ASSESSMENT ORDER WHEREAS THE LD. A.R. SUPPORTED THE ORDER OF LD. CIT(A). HE ALSO SUBMITTED THAT DOUBLE DISALLOWANCE HAS TO BE ELIMINATED AND IN THIS REGARD, HE DRAWN OUR A TTENTION TO PAGES 23- 33 OF THE PAPER BOOK WHICH ARE P & L ACCOUNT OF DAM AN AND BADDI UNITS RESPECTIVELY. 21. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUS ED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHO RITIES BELOW. WE FIND THAT THIS ISSUE HAS BEEN DECIDED BY THE LD. CI T(A) A PER PARA 5.2 OF HIS ORDER WHICH IS REPRODUCED BELOW:.,, 'I FIND THAT SIMILAR ISSUE WAS INVOLVED IN EARLIER YEARS AND THE STAND OF THE A.O. WAS CONFIRMED. FOLLOWING THE STAN D TAKEN IN EARLIER YEARS, I CONFIRM THE ALLOCATION MADE BY THE A.O. HOWEVER, AS REGARDS ALTERNATIVE CONTENTION THAT TO THE EXTENT OF ALLOCATION OF SALARY ALREADY MADE BY THE APPELLANT, THE SAME SHOULD BE REDUCED TO AVOID DOUBLE DISALLOWANCE, I A GREE WITH THE APPELLANT AND DIRECT THE A.O. TO GRANT RELIEF A CCORDINGLY. THE OTHER ALTERNATIVE CONTENTION THAT ONLY SALARY OF PL ASTIC DIVISION 15 SHOULD BE ALLOCATED AMONG DAMAN AND BADDI UNITS IN THE RATIO OF SALES OF THESE UNITS IS FOUND TO BE REASONABLE A ND THE SAME IS ACCEPTED, THE A.O. IS DIRECTED TO GRANT RELIEF ACCO RDINGLY.' 22. FROM THE ABOVE PARA, WE FIND THAT THE LD. CIT(A ) HAS IN PRINCIPLE APPROVED THE STAND OF THE A.O. BUT HE HAS GIVEN DIRECTION TO THE A.O. THAT TO THE EXTENT OF ALLOCATION OF SALARY ALREADY ALLOCATED BY THE ASSESSEE, THE SAME SHOULD BE REDUCED TO AVOID D OUBLE DISALLOWANCE. HE HAS NOT GIVEN FINDING AS TO WHAT E XTENT, THERE IS DOUBLE DISALLOWANCE AND HENCE, WE FEEL THAT THIS AS PECT SHOULD BE EXAMINED BY THE A.O. WE SET ASIDE THE ORDER OF LD. CIT(A) ON THIS ISSUE AND RESTORE THE MATTER BACK TO THE FILE OF TH E A.O. THE ASSESSEE SHOULD BRING EVIDENCE ON RECORD TO SHOW AS TO HOW M UCH WAS THE TOTAL SALARY EXPENSES AND HOW MUCH WAS THE ALLOCATION BY THE ASSESSEE ITSELF AND HOW MUCH WAS THE REMAINING PORTION OUT O F WHICH PROPORTIONATE ALLOCATION HAS TO BE MADE BY THE AO A ND THEREAFTER, THE AO SHOULD DECIDE THIS ASPECT AFTER PROVIDING ADEQUA TE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THIS GROUND OF THE REV ENUE IS ALLOWED FOR STATISTICAL PURPOSE. SINCE THE ISSUE IS COVERED BY THE AFORESAID DECISIO N OF THE TRIBUNAL FOR AY 2006-07, WE ORDER ACCORDINGLY. THE GROUND RAISED BY THE REVENUE IS ALLOWED FOR STATISTICAL PU RPOSE. 30 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. THE APPEAL FILED BY THE REVEN UE IS DISMISSED. THE CROSS OBJECTION FILED BY THE ASSESSE E IS ALSO DISMISSED, AS NOT PRESSED. ORDER PRONOUNCED IN THE COURT TODAY ON 13-01-2012 SD/- SD/- (A MOHAN ALANKAMONY) ACCOUNTANT MEMBER (D K TYAGI) JUDICIAL MEMBER DATE : 13-01-2012 16 COPY OF THE ORDER FORWARDED TO: 1. SINTEX INDUSTRIES LIMITED, 701-2, ABHIJEET-1, MI THAKHALI SIX ROADS, ELLIS-BRIDGE, AHMEDABAD 2. THE ASST. COMMISSIONER OF INCOME-TAX (OSD), RANG E-8, AHMEDABAD 3. CIT CONCERNED 4. CIT(A)-XIV, AHMEDABAD 5. DR, ITAT, AHMEDABAD BENCH-C, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD