Sintex Industries Ltd., Ahmedabad V. The Dy.CIT.,Range-8, Ahmedabad

ITA 4352/AHD/2007

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 56991 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 1 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 20-12-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 07-12-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KARTARSINGH CI
• Assessee Lawyers: S R SHAH
• Keywords: Earning of tax free income; Rule 8D
• Section: 14A; 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, A BENCH, AHMEDABAD BEFORE SHRI G. C. GUPTA, HONBLE VICE PRESIDENT AND SHRI A. K. GARODIA, ACCOUNTANT MEMBER I.T.A. NO.4352 / AHD/2007 (ASSESSMENT YEAR 2005-06) SINTEX INDUSTRIES LIMITED, 701-2, ABHIJEET-I, MITHAKALI SIX ROADS, ELLISBRIDGE, AHMEDABAD VS. DCIT, RANGE 8, AHMEDABAD I.T.A.NO. 4357/AHD/2007 (ASSESSMENT YEAR 2005-06) DCIT, RANGE 8, VS. SINTEX INDUSTRIES LIMITED, AHMEDABAD 701-2, ABHIJEET-I, MITHAKALI SIX ROADS, ELLISBRIDGE, AHMEDABAD PAN/GIR NO. : AADCS0858E (APPELLANT) .. (RESPONDENT) ASSESSEE BY: SHRI S R SHAH, AR DEPARTMENT BY: SHRI KARTARSINGH, CI DR DATE OF HEARING: 20.12.2011 DATE OF PRONOUNCEMENT: 19.01.2012 O R D E R PER SHRI A. K. GARODIA, AM:- THESE ARE CROSS APPEALS PREFERRED BY THE ASSESSEE AND THE REVENUE WHICH ARE DIRECTED AGAINST THE ORDER OF LD. CIT (A) XIV, AHMEDABAD DATED 20.09.2007 FOR THE ASSESSMENT YEAR 2005-06. BOTH THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY TH IS COMMON ORDER FOR THE SAKE OF CONVENIENCE. I.T.A.NO.4352,4357 /AHD/2007 2 2. FIRST, WE TAKE UP THE APPEAL OF THE ASSESSEE IN I.T.A.NO. 4352/AHD/2007:- 3. THE GROUND NO.1 IS GENERAL. 4. GROUND NO.2 IS AS UNDER: 2 THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING ALLOCATION OF DIRECTOR'S REMUNERATION , DIRECTORS' TRAVELING EXPENSES, AUDIT FEES, COMPUTER EXPENSE AN D SECURITY CHARGES FOR CALCULATING PROFIT ELIGIBLE FOR DEDUCTI ON U/S. 80-IA. IN THE FACTS AND CIRCUMSTANCES, NO COMMON HEAD QUARTER EXPENSES WERE REQUIRED TO BE ALLOCATED TO CAPTIVE POWER PLAN T FOR CALCULATING PROFIT ELIGIBLE FOR DEDUCTION U/S. 80-I A. IT IS SUBMITTED THAT IT BE SO HELD NOW. 5. IT WAS FAIRLY CONCEDED BY THE LD. A.R. THAT THIS ISSUE IS COVERED AGAINST THE ASSESSEE BY THE TRIBUNAL ORDER IN ASSES SEES OWN CASE FOR THE ASSESSMENT YEAR 2004-05 AND ALSO BY THE TRIBUNAL OR DER IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2006-07 IN I.T.A.NO. 4 091/AHD/2008 AND 213/AHD/2009 DATED 25.11.2011. HE SUBMITTED A COPY OF THIS TRIBUNAL ORDER. HE HAS SUBMITTED THAT AS PER PARA 6 OF THIS TRIBUNAL ORDER IN ASSESSMENT YEAR 2006-07, SIMILAR ISSUE WAS DECIDED AGAINST THE ASSESSEE BY FOLLOWING TRIBUNAL ORDER IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2004-05 BUT STILL HE PLACED RELIANCE ON THE TR IBUNAL ORDER RENDERED IN THE CASE OF CIT VS DCW LTD. 132 TTJ 442 (MUM.). 6. LD. D.R. OF THE REVENUE SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSE D THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. SINCE, ADMITTEDLY, THIS ISSUE IS COVERED AGAINST THE ASSES SEE BY THE TRIBUNAL ORDER IN ASSESSEES OWN CASE FOR THE EARLIER AND LATER YE ARS, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD. BY TAKING A CONTRARY VIEW. OTHER TRIBUNAL ORDER CITED HAS NO RELEVANCE SINCE THE MAT TER IS COVERED BY I.T.A.NO.4352,4357 /AHD/2007 3 TRIBUNAL ORDER IN ASSESSEES OWN CASE. THIS GROUND OF THE ASSESSEE IS REJECTED. 8. GROUND NO.3 OF THE ASSESSEES APPEALS IS AS UNDE R: 3 THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING ALLOCATION OF INTEREST EXPENSES TO DAMAN UNIT & BADDI UNIT IN THE RATIO OF INVESTMENT FOR CALCULATING PRO FIT ELIGIBLE FOR DEDUCTION U/S. 80-IB. IN THE FACTS AND CIRCUMSTANCE S, NO INTEREST EXPENDITURE IS REQUIRED TO BE ALLOCATED TO DAMAN & BADDI UNITS FOR CALCULATING PROFIT ELIGIBLE FOR DEDUCTION U/S. 80-I B. IT IS SUBMITTED THAT IT BE SO HELD NOW. 9. REGARDING THIS ISSUE, IT WAS SUBMITTED BY THE LD . A.R. THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE S AME TRIBUNAL ORDER IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2004-05 . HE DRAWN OUR ATTENTION TO PARA 7 ON PAGE 4 OF THIS TRIBUNAL ORDE R. 10. LD. D.R. OF THE REVENUE SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUS ED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW AND THE TRIBUNAL DECISION IN ASSESSEES OWN CASE FOR THE AS SESSMENT YEAR 2006-07. WE FIND THAT IN THAT YEAR, IT WAS HELD BY THE TRIBU NAL THAT BY FOLLOWING EARLIER TRIBUNAL ORDER IN ASSESSMENT YEAR 2004-05 A ND 2003-04, THE INTEREST EXPENDITURE HAS TO BE ALLOCATED ON THE BAS IS OF INVESTMENT IN THE RESPECTIVE UNITS AND NOT IN THE RATIO OF THE TURNOV ER. LD. CIT (A) HAD DECIDED THIS ISSUE ON THIS BASIS THAT THE INTEREST EXPENDITURE HAS TO BE ALLOCATED IN THE RATIO OF INVESTMENT. HENCE, WE FI ND THAT RELIEF AS PER THE TRIBUNAL ORDER HAS ALREADY BEEN ALLOWED BY LD. CIT (A) AND HENCE, THERE IS NO MERIT IN THIS GROUND NO.3 RAISED BY THE ASSES SEE. THIS GROUND IS ALSO REJECTED. 12. GROUND NO.4 IS AS UNDER: 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED IN CONFIRMING ADDITION ON ACCOUNT OF ALLOCATI ON OF SALARY I.T.A.NO.4352,4357 /AHD/2007 4 EXPENSES AMOUNTING TO RS.132.42 LACS & 49.49 LACS F OR DAMAN & BADDI UNIT RESPECTIVELY. IN THE FACTS AND CIRCUMSTA NCES, THE ALLOCATION MADE BY THE APPELLANT WAS REASONABLE AND JUSTIFIABLE AND DO NOT CALL ANY ADDITIONAL ALLOCATION THERETO. IT I S SUBMITTED THAT IT BE SO HELD NOW. 4.1 THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE ADDITION BASED ON TOTAL SALARY EXPEN DITURE OF THE COMPANY INSTEAD OF CONSIDERING ONLY SALARIES OF COM MON PERSONNEL STATIONED AT HEADQUARTERS IN KALOL. IN VIEW OF THE FACT THAT THE APPELLANT HAD ALREADY APPORTIONED SUCH COMMON SALAR IES WHILE CALCULATING DEDUCTION U/S. 80IB IN THE RATIO OF SAL ES, NO ADDITION OUGHT TO HAVE BEEN MADE. 4.2 THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING ADDITION OF ALLOCATION OF SALARY EXPENSE , WHICH IS DIRECTLY ATTRIBUTABLE TO UNITS OTHER THAN DAMAN & B ADDI. THE AMOUNT ALLOCATED BY THE ASSESSING OFFICER REPRESENT S SALARY EXPENSES, DIRECTLY ATTRIBUTABLE TO UNITS OTHER THAN DAMAN & BADDI AND THEREFORE NO ADDITION OUGHT TO HAVE BEEN MADE. 4.3 THE LEARNED COMMISSIONER OF INCOME TAX ( APPEALS) HAS ERRED IN CONFIRMING ADDITION OF RS.132.42 LACS & 49 .49 LACS TOWARDS ALLOCATION OF SALARY EXPENSES FOR DAMAN & B ADDI UNIT RESPECTIVELY. IN THE FACTS AND CIRCUMSTANCES, THE A DDITION OUGHT TO HAVE BEEN MADE ONLY FOR THE AMOUNT IN EXCESS OF ALL OCATION ALREADY MADE BY THE ASSESSEE. IT IS SUBMITTED THAT IT BE SO HELD NOW. 13. IT IS SUBMITTED BY THE LD. A.R. THAT THE A.O. H AS ALLOCATED THE ENTIRE SALARY EXPENDITURE IN THE RATIO OF THE TURNOVER TO THE DAMAN & BADDI UNITS. HE ALSO SUBMITTED THAT BROADLY THIS ISSUE I S DECIDED AGAINST THE ASSESSEE BY THE TRIBUNAL ORDER IN THE ASSESSEES OW N CASE FOR THE ASSESSMENT YEAR 2004-05. BUT STILL HE PLACED RELIA NCE ON THE TRIBUNAL ORDER RENDERED IN THE CASE OF ADDL. CIT VS DCW LTD. AS REPORTED IN 132 TTJ 442. LD. D.R. SUPPORTED THE ORDERS OF AUTHORIT IES BELOW. 14. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND WE FIND THAT SINCE IT IS ADMITTED POSITION THAT THIS ISSUE IS COVERED AGA INST THE ASSESSEE BY THE TRIBUNAL ORDER IN THE ASSESSEES OWN CASE FOR THE A SSESSMENT YEAR 2004-05, THERE IS NO MERIT IN THESE GROUNDS OF THE ASSESSEE AND HENCE, THESE I.T.A.NO.4352,4357 /AHD/2007 5 GROUNDS ARE ALSO REJECTED. OTHER TRIBUNAL ORDER CIT ED HAS NO RELEVANCE SINCE THE MATTER IS COVERED BY TRIBUNAL ORDER IN AS SESSEES OWN CASE. 15. GROUND NO.5 IS AS UNDER: 5. THE LEARNED ASSESSING OFFICER HAS ERRED IN ALL OCATING ADMINISTRATIVE AND GENERAL EXPENSES AMOUNTING TO RS . 57. 93 LACS & RS.21.33 LACS FOR DAMAN & BADDI UNIT RESPECTIVELY FOR CALCULATING PROFIT ELIGIBLE FOR DEDUCTION U/S. 80-I B. IN THE FACTS AND CIRCUMSTANCES, NO ALLOCATION IS REQUIRED TO BE MADE FOR ADMINISTRATIVE AND GENERAL EXPENSES FOR CALCULATING PROFIT ELIGIBLE FOR DEDUCTION U/S. 80-IB. IT IS SUBMITTED THAT IT B E SO HELD NOW. 5.1 THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE ADDITION BASED ON TOTAL GENERAL CHAR GES OF THE COMPANY INSTEAD OF CONSIDERING ONLY COMMON GENERAL CHARGES INCURRED AT HEADQUARTERS IN KALOL. IN VIEW OF THE F ACT THAT THE APPELLANT HAD ALREADY APPORTIONED SUCH GENERAL CHAR GES WHILE CALCULATING DEDUCTION U/S. 80IB IN THE RATIO OF SAL ES, NO ADDITION OUGHT TO HAVE BEEN MADE. 5.2 THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING ADDITION OF ALLOCATION OF GENERAL CHARGE S, WHICH IS DIRECTLY ATTRIBUTABLE TO UNITS OTHER THAN DAMAN & B ADDI. THE AMOUNT ALLOCATED BY THE ASSESSING OFFICER REPRESENT S GENERAL CHARGES, DIRECTLY ATTRIBUTABLE TO UNITS OTHER THAN DAMAN & BADDI AND THEREFORE NO ADDITION OUGHT TO HAVE BEEN MADE. 5.3 THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING ALLOCATION OF RS. 1316.64 LACS IN SALES RATIO WHEREAS THE ASSESSING OFFICER HIMSELF HAS GIVEN A FINDING T HAT GENERAL CHARGES OF CORPORATE OFFICE IS ONLY RS. 159.22 LACS . IN ANY EVENT, ALLOCATION OF ONLY GENERAL CHARGES OF CORPORATE OFF ICE ONLY SHOULD BE MADE. IT IS SUBMITTED THAT IT BE HELD NOW. 5.4 THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS) HAS ERRED IN CONFIRMING ADDITION OF RS.57.93 LACS & RS. 21.33 LACS FOR DAMAN & BADDI UNIT RESPECTIVELY TOWARDS ALLOCATION OF SALARY EXPENSES FOR DAMAN & BADDI UNIT RESPECTIVELY. IN TH E FACTS AND CIRCUMSTANCES, THE ADDITION OUGHT TO HAVE BEEN MADE ONLY FOR THE AMOUNT IN EXCESS OF ALLOCATION ALREADY MADE BY THE ASSESSEE. IT IS SUBMITTED THAT IT BE SO HELD NOW. 16. IT WAS FAIRLY CONCEDED BY THE LD. A.R. THAT THI S ISSUE IS COVERED AGAINST THE ASSESSEE BY THE TRIBUNAL ORDER IN ASSES SEES OWN CASE FOR THE I.T.A.NO.4352,4357 /AHD/2007 6 ASSESSMENT YEAR 2006-07 AND IN THIS REGARD, HE DRAW N OUR ATTENTION TO PARA 8 ON PAGE 4 OF THE TRIBUNAL ORDER. FOR THIS G ROUND ALSO, HE PLACED RELIANCE ON THE DECISION OF THE TRIBUNAL RENDERED I N THE CASE OF DCW LTD. (SUPRA). LD. D.R. SUPPORTED THE ORDERS OF AUTHORIT IES BELOW. 17. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUS ED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW AND THE TRIBUNAL DECISION IN ASSESSEES OWN CASE OF THE ASS ESSMENT YEAR 2006-07. ADMITTEDLY, THIS ISSUE IS COVERED AGAINST THE ASSES SEE BY THE TRIBUNAL ORDER IN ASSESSMENT YEAR 2006-07 IN ASSESSEES OWN CASE A ND HENCE, THERE IS NO MERIT IN THESE GROUNDS RAISED BY THE ASSESSEE. ACC ORDINGLY, ALL THESE GROUNDS OF THE ASSESSEE ARE REJECTED. OTHER TRIBUNA L ORDER CITED HAS NO RELEVANCE SINCE THE MATTER IS COVERED BY TRIBUNAL O RDER IN ASSESSEES OWN CASE. 18. GROUND NO.6 OF THE APPEAL IS AS UNDER: 6 THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING APPORTIONMENT OF THE LOSS OF DAMAN UN IT TO OTHER UNITS FOR CALCULATING PROFIT ELIGIBLE FOR DEDUCTION U/S. 80-IA & 80- IB. IT IS SUBMITTED THAT DEDUCTION U/S. 80-IA OR 80 -IB IS REQUIRED TO BE ALLOWED ON THE BASIS OF PROFIT OF THE RESPECTIVE UNIT AND WITHOUT MAKING ANY ADJUSTMENT ON ACCOUNT OF LOSS OF OTHER U NITS. IT BE SO HELD NOW. 19. IT WAS FAIRLY CONCEDED BY THE LD. A.R. THAT THI S ISSUE IS ALSO COVERED AGAINST THE ASSESSEE BY THE SAME TRIBUNAL O RDER IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2006-07. HE DRAWN OUR ATTENTION TO PARA 13 PAGE 7 OF THIS TRIBUNAL ORDER. HE PLACED R ELIANCE ON THE DECISION OF HONBLE DELHI HIGH COURT RENDERED IN THE CASE OF CIT VS DEWAN KRAFT SYSTEM P. LTD. AS REPORTED IN 297 ITR 305. LD. D.R . SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 20. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUS ED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW AND THE I.T.A.NO.4352,4357 /AHD/2007 7 TRIBUNAL ORDER IN THE ASSESSEES OWN CASE FOR THE A SSESSMENT YEAR 2006-07 AND THE JUDGMENT OF HONBLE DELHI HIGH COURT CITED BY THE LD. A.R. WE FIND THAT IN ASSESSMENT YEAR 2006-07 ALSO, RELIANCE WAS PLACED BY THE LD. A.R. ON THIS VERY JUDGMENT OF HONBLE DELHI HIGH CO URT AND THE ISSUE WAS DECIDED AGAINST THE ASSESSEE AFTER CONSIDERING THIS JUDGMENT OF HONBLE DELHI HIGH COURT AND HENCE, IN THE PRESENT YEAR ALSO, THERE IS NO REASON TO TAKE A CONTRARY VIEW AND HENCE, THIS GROU ND OF THE ASSESSEE IS ALSO REJECTED BY RESPECTFULLY FOLLOWING THE PRECEDE NT. 21. GROUND NO.7 OF THE ASSESSEES APPEAL IS AS UNDE R: 7. THE LEARNED ASSESSING OFFICER HAS ERRED IN CON FIRMING DISALLOWANCE U/S. 14A IN RESPECT OF APPORTIONMENT O F DIRECTOR'S REMUNERATION, AS HAVING BEEN INCURRED FOR THE PURPO SE OF INCOME EXEMPT FROM TAX. IT IS SUBMITTED THAT, IN THE FACTS AND CIRCUMSTANCES, NO DISALLOWANCE U/S. 14A IS REQUIRED TO BE MADE. IT IS SUBMITTED THAT IT BE SO HELD NOW. 22. IT WAS SUBMITTED BY THE LD. A.R. THAT IN ASSESS MENT YEAR 2006-07, THIS ISSUE WAS NOT PRESSED BY THE ASSESSEE AS THE A MOUNT INVOLVED WAS SMALL. FOR THE CURRENT YEAR, RELIANCE WAS PLACED B Y HIM ON THE JUDGMENT OF HONBLE KERALA HIGH COURT RENDERED IN THE CASE O F CIT VS CATHOLIC SYRIAN BANK LTD. AS REPORTED IN 9 TAXMAN.COM 148 (K ERALA). HE ALSO PLACED RELIANCE ON THE TRIBUNAL DECISION RENDERED I N THE CASE OF ACIT VS VEPAR PVT. LTD. IN I.T.A.NO. 1374/AHD/2009 DATED 08 .07.2011. LD. D.R. SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 23. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUS ED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. IN THE PRESENT CASE, THE A.O. HAS MADE DISALLOWANCE OF RS. 3,25,868/- U/S 14A IN RESPECT OF VARIOUS INDIRECT EXPENSES INCURRED BY TH E ASSESSEE SUCH AS DIRECTORS REMUNERATION, TRAVELING EXPENSES ETC. O N THIS SIMILAR ISSUE, THE TRIBUNAL IN THE CASE OF ACIT VS VEPAR PVT. LTD. (SU PRA) HAS DECIDED THE I.T.A.NO.4352,4357 /AHD/2007 8 ISSUE IN FAVOUR OF THE ASSESSEE BY OBSERVING AS UND ER IN PARA 12 OF THIS TRIBUNAL ORDER WHICH IS REPRODUCED BELOW.:- 12. HAVING HEARD BOTH THE SIDES, WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IN THE ASSESSM ENT ORDER, THE AO DISALLOWED RS.2,38,430/-, BEING 5% OF TOTAL EXPENDI TURE OF RS.47,68,5967-. IN THE IMPUGNED ORDER, THE ID. CIT( A) RESTRICTED THIS DISALLOWANCE TO 3%. RECENTLY, THE HON'BLE BOMB AY HIGH COURT IN THE CASE OF GODREJ BOYCE & MANUFACTURING C O. -VS- DCIT REPORTED IN [2010] 310 ITR 81 (BOM.) HELD THAT RULE 8D IS NOT APPLICABLE TO THE ASSESSMENT YEAR 2006-07. APART FR OM THIS, THERE ARE VARIOUS DECISIONS, WHICH HAVE HELD THAT IF DEPA RTMENT DOES NOT FIND ANY NEXUS BETWEEN EXPENDITURE SOUGHT TO BE DIS ALLOWED AND ACTIVITY OF PRODUCING TAX EXEMPT INCOME, NO DISALLO WANCE CAN BE MADE UNDER SECTION 14A. RECENTLY, THE HON'BLE HIGH COURT OF KERALA, VIDE JUDGEMENT DATED 21.10.2010, IN I.T. AP PEAL NO.467 & ORS. OF 2010 IN THE CASE OF CIT : VS CATHOLIC SYRIAN BANK LTD., TRISSUR, HELD AS UNDER: '6. SO FAR AS THE DISALLOWANCE OF ADMINISTRATIVE EX PENDITURE IS CONCERNED, WE FEEL CONSIDERING THE FACT THAT THE RE IS NO PRECISE FORMULA FOR PROPORTIONATE DISALLOWANCE, NO DISALLOWANCE IS CALLED FOR, FOR PROPORTIONATE ADMIN ISTRATIVE COST ATTRIBUTABLE TO EARNING OF LAX FREE INCOME UNT IL RULE 8D CAME INTO FORCE. WE, THEREFORE, DISPOSE OF THE APPE ALS BY SETTING ASIDE THE ORDERS OF THE TRIBUNAL AND THAT O F THE FIRST APPELLATE AUTHORITY ON THIS ISSUE AND REMAND ALL TH E ASSESSMENTS BACK TO THE ASSESSING OFFICER FOR REWOR KING DISALLOWANCE UNDER SECTION 14A IN THE CASE OF EACH ASSESSEE FOR EACH ASSESSMENT YEAR. THE PROPORTIONATE DISALLO WANCE UNDER SECTION 14A SHOULD BE LIMITED TO ONLY INTERES T LIABILITY AND NOT OVERHEADS OR ADMINISTRATIVE EXPENDITURE; WH ICH SHOULD BE CONSIDERED FOR DISALLOWANCE UNDER RULE 8D FROM 2007-2008 ONWARDS.' THE ASSESSMENT YEAR INVOLVED IN THE PRESENT APPEAL IS 2006-07. WE, THEREFORE, FOLLOWING THE DECISION OF THE HON'BL E KERALA HIGH COURT, HOLD THAT NO DISALLOWANCE CAN BE MADE PRIOR TO 2007-08. HENCE, THE DISALLOWANCE OF RS. 2,38,430/-MADE BY TH E AO IS DELETED. 24. IN THE PRESENT CASE ALSO, FACTS ARE SIMILAR AND THE ASSESSMENT YEAR INVOLVED IS PREVIOUS TO ASSESSMENT YEAR 2007-08 BEI NG ASSESSMENT YEAR I.T.A.NO.4352,4357 /AHD/2007 9 2005-06, AND HENCE, IN THE PRESENT CASE ALSO, AS PE R THIS TRIBUNAL DECISION, DISALLOWANCE MADE BY THE A.O. IS NOT JUSTIFIED AND HENCE, WE DELETE THE SAME BY RESPECTFULLY FOLLOWING THIS TRIBUNAL ORDER. THIS GROUND OF THE ASSESSEE IS ALLOWED. 25. GROUND NO.8 IS REGARDING INTEREST WHICH IS A CO NSEQUENTIAL ISSUE. 26. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 27. NOW, WE TAKE UP THE REVENUES APPEAL IN I.T.A.N O. 4357/AHD/2007: 28. GROUND NO.1 IS AS UNDER:- THE ID, COMMISSIONER OF INCOME-TAX(A)-XIV, AHMEDAB AD HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT THE EXPEN SES TOWARDS REPAIRS AS ALSO STAFF SALARY OF CORPORATE OFFICE, G ENERAL CHARGES OF CORPORATE OFFICE AND MISCELLANEOUS EXPENSES WHICH A RE INCURRED NOT FOR THIS CPP UNIT AND HENCE THE SAME CANNOT BE APPORTIONED THEREBY THE ASSESSEE GOT RELIEF OF RS.22.81 LACS. 29. LD. D.R. SUPPORTED THE ASSESSMENT ORDER WHEREAS IT IS SUBMITTED BY THE LD. A.R. THAT HIS ISSUE IS RELATED TO GROUND NO .2 OF THE ASSESSEES APPEAL AND THE MATTER INVOLVED IS COVERED AGAINST T HE ASSESSEE BY THE TRIBUNAL ORDER IN ASSESSEES OWN CASE FOR THE ASSES SMENT YEAR 2006-07. ACCORDINGLY, THIS GROUND OF THE REVENUE IS ALLOWED. ORDER OF LD CIT (A) ON THIS ISSUE IS REVERSED AND THAT OF THE A.O. IS R ESTORED. 30. GROUND NO.2 IS A UNDER: THE ID. COMMISSIONER OF INCOME-TAX(A)-XIV, AHMEDAB AD HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE ASSESSIN G OFFICER TO RESTRICT THE INTEREST EXPENSES ATTRIBUTABLE TO BADD I UNIT TO RS.10.14 LACS AS AGAINST RS.40.26 LACS AND FOR DAMAN UNIT TO RS.20.91 LACS AS AGAINST RS.110.47 LACS ADOPTED BY THE ASSESSING OFFICER AND TO RECALCULATE THE DEDUCTION UNDER SECTION 80IB OF THE ACT ACCORDINGLY. 31. LD. D.R. SUPPORTED THE ASSESSMENT ORDER WHEREAS LD. A.R. SUPPORTED THE ORDER OF LD. CIT (A). HE FURTHER SUB MITTED THAT THIS ISSUE IS I.T.A.NO.4352,4357 /AHD/2007 10 COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL O RDER IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2006-07 AND THE RELEVA NT PARA IS PARA 19 PAGE 8 OF THIS TRIBUNAL ORDER. WE FIND THAT IN THAT YEAR, IT WAS HELD BY THE TRIBUNAL THAT INTEREST EXPENDITURE TO BADDI AND DAM AN UNITS SHOULD BE ALLOCATED IN THE RATIO OF INVESTMENT INSTEAD OF TUR NOVER FOR ALLOWING DEDUCTION U/S 80-IB OF THE INCOME TAX ACT, 1961. S INCE THE ORDER OF LD. CIT(A) IS IN LINE WITH THIS TRIBUNAL ORDER, WE CONF IRM THE SAME. THIS GROUND OF THE REVENUE IS REJECTED. 32. GROUND NO.3 IS AS UNDER: THE ID. COMMISSIONER OF INCOME-TAX(A)-X!V, AHMEDAB AD HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE ASSESSIN G OFFICER NOT TO TAKE INTO ACCOUNT THE TRAVELING EXPENSES, MISCELLAN EOUS EXPENSES AND GENERAL EXPENSES ARE IN THE NATURE OF INDIRECT EXPENSES AND IT SHOULD NOT BE APPORTIONED TO CALCULATE DISALLOWANCE UNDER SECTION 14A OF THE ACT THERE BY THE ASSESSEE GOT RELIEF OF RS.2,85,436/-. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ID. COMMISSIONER OF INCOME-TAX (A)-XIV, AHMEDABAD OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. IT IS THEREFORE, PRAYED THAT THE ORDER OF THE ID. C OMMISSIONER OF INCOME-TAX(A)-XIV, AHMEDABAD MAY BE SET-ASIDE AND T HAT OF THE ASSESSING OFFICER BE RESTORED. 33. LD. D.R. SUPPORTED THE ASSESSMENT ORDER WHEREAS THE LD. A.R. SUBMITTED THAT THIS GROUND IS RELATED TO GROUND NO. 7 OF THE ASSESSEES APPEAL. SINCE, WE HAVE DELETED THE DISALLOWANCE CO NFIRMED BY THE LD. CIT(A), NO INTERFERENCE IS CALLED FOR IN THE ORDER OF LD. CIT(A) ON THIS PART ALSO AS PER WHICH HE HAS DELETED THE PART DISA LLOWANCE. THIS GROUND OF THE REVENUE IS ALSO REJECTED. 34. GROUNDS NO. 4 & 5 OF THE REVENUES APPEAL ARE G ENERAL GROUNDS AND NO SEPARATE ADJUDICATION IS CALLED FOR. 35. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED. I.T.A.NO.4352,4357 /AHD/2007 11 36. IN THE COMBINED RESULT, THE APPEAL OF THE ASSES SEE AND THE REVENUE ARE PARTLY ALLOWED. 37. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED HEREINABOVE. SD//- SD./- (G. C. GUPTA) (A. K. GARODIA) VICE PRESIDENT ACCOUNTANT MEMBER SP COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD BY ORDER 6. THE GUARD FILE AR,ITAT,AHMEDABAD 1. DATE OF DICTATION 12/1 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 13/1.OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 19/1 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.23/1 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 23/1/2012 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER. .