Pragati Paper Industries Ltd., New Delhi V. DCIT, New Delhi

ITA 4512/DEL/2013

• Counselvise Citation: 451220114 RSA 2013
• Duration Of Justice: 2 year(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-08-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 02-06-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 30-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIKRAM SAHAY
• Keywords: Additional evidence
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F NEW DELHI) BEFORE SHRI I.C. SUDHIR AND SHRI T.S. KAPOOR ITA NOS. 4512/DEL/2013 ASSESSMENT YEAR: 2007-08 PRAGATI PAPER INDUSTRIES LTD., VS. ADDL. CIT, 10/5, EAST PATEL NAGAR, RANGE-14, NEW DELHI. NEW DELHI. (PAN: AABCP7684H) (APPELLANT) (RESPONDENT) ITA NOS. 6232/DEL/2012 ASSESSMENT YEAR: 2008-09 PRAGATI PAPER INDUSTRIES LTD., VS. ADDL. CIT, 10/5, EAST PATEL NAGAR, RANGE-14, NEW DELHI. NEW DELHI. (PAN: AABCP7684H) (APPELLANT) (RESPONDENT) ITA NOS. 5152/DEL/2013 ASSESSMENT YEAR: 2009-10 PRAGATI PAPER INDUSTRIES LTD., VS. ADDL. CIT, 10/5, EAST PATEL NAGAR, RANGE-14, NEW DELHI. NEW DELHI. (PAN: AABCP7684H) (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI K. SAMPA TH, ADV. RESPONDENT BY: SHRI VIKRAM SAHA Y, SR.DR DATE OF HEARING : 04 .06.2015 DATE OF PRONOUNCEMENT: 20 :08.2015 ORDER PER I.C. SUDHIR: JUDICIAL MEMBER IN ALL THE THREE APPEALS, THE ASSESSEE HAS QUESTION ED FIRST APPELLATE ORDER ON THE COMMON GROUND INVOLVING THE ISSUE AS T O WHETHER THE LEARNED 2 CIT(APPEALS) WAS JUSTIFIED IN ALLOCATING THE REMUNE RATION TO DIRECTORS, AUDIT FEE AND TRAVELLING EXPENSES TOWARDS INCOME OF UNIT EXEMPT UNDER SEC. 80IA AND 80IC OF THE ACT AND THEREBY REDUCING THE EXEMPT ION AVAILABLE UNDER THESE SECTIONS? 2. HEARD AND CONSIDERED THE ARGUMENTS ADVANCED BY T HE PARTIES IN VIEW OF ORDERS OF THE AUTHORITIES BELOW, MATERIAL AVAILA BLE ON RECORD AND THE DECISIONS RELIED UPON. 3. THE FACTS IN BRIEF ARE THAT THE ASSESSEE COMPANY IS A PAPER MANUFACTURER WITH UNITS IN PUNJAB AND AT KALA AMB ( HIMACHAL PRADESH). THE ASSESSEE HAS ALSO A CAPTIVE POWER GENERATING PL ANT AT PUNJAB UNIT AND THE POWER GENERATED BY THIS PLANT WAS EXCLUSIVELY USED BY THE ASSESSEE ON PAPER UNIT IN PUNJAB. THE ASSESSEE HAS CLAIMED DEDUCTION UNDER SEC. 80IA FOR THIS POWER UNIT AT PUNJAB AND ALSO CLAIMED DEDUCTION UND ER SEC. 80IC FOR PAPER UNIT AT KALA AMB. IN THE ASSESSMENT YEAR 2007-08, THE RETURN OF INCOME WAS FILED AT A TOTAL INCOME OF RS.15,86,54,540 AND THE ASSESSMENT WAS COMPLETED UNDER SEC. 143(3) AFTER DISALLOWING RS.85,76,544 UN DER SEC. 80IA AND RS.18,36,000 UNDER SEC. 80IC OF THE ACT. LEARNED CI T(APPEALS) HAD CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OF FICER. HOWEVER, THE ITAT VIDE ITS ORDER DATED 07.1.2011 HAD SET ASIDE B OTH THE DISALLOWANCES TO 3 THE FILE OF THE ASSESSING OFFICER FOR FRESH CONSIDE RATION BASED ON THE ADDITIONAL EVIDENCE FILED BEFORE THE ITAT. IN THE A SSESSMENT FRAMED UNDER SEC. 143(3)/254 OF THE INCOME-TAX ACT, 1961 DATED 3 0.11.2011, THE ASSESSING OFFICER HAD RESTORED THE SAME DISALLOWANC ES OF RS.85,76,544 (CONSISTING OF RS.71,27,544 ON ACCOUNT OF VALUATION OF POWER @ RS.4.68 PER UNIT + RS.14,49,000 ON ACCOUNT OF ALLOCATION OF EXP ENDITURE RELATABLE TO POWER UNIT) UNDER SEC. 80IA AND RS.18,36,000 UNDER SEC. 80IC OF THE INCOME-TAX ACT, 1961. THE LEARNED CIT(APPEALS) HAS DELETED RS.71,27,544 I.E. THE ADDITION MADE ON ACCOUNT OF VALUATION OF P OWER UNIT AT THE RATE OF RS.4.68 PER UNIT UPHELD THE REMAINING DISALLOWANCE S. 4. SIMILAR ARE THE FACTS WITH DIFFERENT AMOUNTS IN THE REMAINING ASSESSMENT YEARS INVOLVING THE SAME ISSUE I.E. REAL LOCATION OF EXPENSES FOR THE ELIGIBLE UNITS UNDER SEC. 80IA FOR POWER UNIT A ND UNDER SEC. 80IC FOR PAPER UNIT AT KALA AMB. 5. IN SUPPORT OF THE GROUND, THE LEARNED AR REITERA TED SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW. THE ASSESSING OFFICER HAD APPORTIONED THE EXPENSES INCURRED ON DIRECTORS REMUNERATION, TRAVE LLING AND CONVEYANCE OF DIRECTORS AND AUDIT FEES TOWARDS PAPER MANUFACTURIN G UNIT IN PUNJAB AND THE 4 POWER UNIT IN PUNJAB AS WELL AS PAPER UNIT IN KALA AMB IN RESPECT OF WHICH DEDUCTION UNDER SEC. 80IA AND 80IC OF THE ACT WERE CLAIMED. HE SUBMITTED THAT THE ASSESSEE HAD SEPARATE DIRECTORS FOR THE PO WER UNIT IN PUNJAB AND PAPER UNIT AT KALA AMB. THERE WAS ALSO SEPARATE DIR ECTOR AT THE HEADQUARTER. SALARY AND TRAVELLING EXPENSES ETC. OF THE SEPARATE DIRECTORS AND OTHER STAFF WERE DEBITED IN THE ACCOUNTS OF THE RESPECTIVE UNIT . THE ASSESSING OFFICER WHILE RESTORING THE DISALLOWANCES MADE IN THE ORIGI NAL ASSESSMENT ORDER HAS NOT POINTED OUT ANY DEFECT OR ANY SPECIFIC MATERIAL IN THE ACCOUNTS WHICH WOULD CALL FOR THE ALLOCATION OF EXPENSES AS MADE B Y HIM IN THE IMPUGNED ASSESSMENT ORDER. THE LEARNED AR SUBMITTED FURTHER THAT OBSERVATIONS OF THE ASSESSING OFFICER THAT NO REMUNERATION, TRAVELLING EXPENSES OF DIRECTORS/MANAGERS WERE DEBITED IN THE ACCOUNTS DE VOID OF FACTS AND LOGICS. ON THE OTHER HAND, ALL THE EXPENSES OF THE DIRECTOR S/MANAGERS OF THE RESPECTIVE UNITS WERE DEBITED IN THE ACCOUNTS OF TH E RESPECTIVE UNITS. HE SUBMITTED THAT COPIES OF ACCOUNTS OF THE SAID UNITS SHOWING DIRECTORS REMUNERATION, TRAVELING EXPENSES, ETC. SEPARATELY D EBITED IN THE ACCOUNTS OF THE POWER UNIT AND MANUFACTURING UNIT AT KALA AMB A RE PLACED IN THE PAPER BOOK. HE SUBMITTED THAT ACCOUNTS ARE AUDITED AND SE PARATE REPORT OF THE CHARTERED ACCOUNTANT IN THE PRESCRIBED FORM NO. 10C CB WAS ALSO FILED WITH THE RETURN. NO DEFECT IN THE SAID AUDIT REPORT WAS POINTED OUT BY THE 5 ASSESSING OFFICER. THE LEARNED AR CONTENDED THAT TH E ASSESSEE HAD FULLY COMPLIED WITH THE PROVISIONS OF SEC. 80IA(7) OF THE ACT. THUS, ALLOCATION MADE BY THE ASSESSING OFFICER WAS ARBITRARY AND UNJ USTIFIED. HE SUBMITTED THAT WHEN THE SERVICES OF DIRECTORS ARE IDENTIFIABL E QUA RESPECTIVE UNIT AND THAT REMUNERATION, TRAVELLING EXPENSES WERE DEBITED IN THE BOOKS OF ACCOUNT OF RESPECTIVE UNIT, THERE IS NO JUSTIFICATION TO AL LOCATE DIRECTORS REMUNERATION, TRAVELLING EXPENSES OF MANUFACTURING UNIT IN PUNJAB TO THE OTHER UNITS ON PRESUMPTION. HE SUBMITTED THAT THE MANAGING DIRECTORS REMUNERATION IS BOOKED AT HEAD OFFICE BECAUSE HE IS NOT DIRECTLY MANAGING THE UNITS AND PERSONS EMPLOYED THERE ARE MANAGING T HE AFFAIRS. THEREFORE, THIS EXPENSE IS NOT REQUIRED TO BE ALLOCATED TO THE UNITS. 6. REGARDING THE AUDIT FEE, THE LEARNED AR SUBMITTE D THAT IT IS DEBITED IN THE HEAD OFFICE AS PER ACCOUNTING PRINCIPLES AND PR ACTICE. THE ASSESSEE MAINTAINED UNIT-WISE BOOKS OF ACCOUNT AND THE ACCOU NTS OF EACH OF THREE UNITS WERE DULY AUDITED AND AUTHENTICATED. NO SPECI FIC DEFECT OR DISCREPANCY WAS POINTED OUT BY THE ASSESSING OFFICER IN THE AUD IT REPORT. THUS, THE DEDUCTION OF THE CLAIM UNDER SEC. 80IA OF THE ACT F OR THE POWER UNIT IN PUNJAB AND UNDER SEC. 80IC FOR THE PAPER UNIT IN KA LA AMB MADE BY THE ASSESSING OFFICER IN THE CLAIM OF ELIGIBLE PROFIT O F THE POWER UNIT IN PUNJAB 6 AND THE PAPER UNIT IN KALA AMB. SHOULD BE HELD TO B E UNJUSTIFIED. THE LEARNED CIT(APPEALS) WAS THUS NOT JUSTIFIED IN UPHO LDING THE ASSESSMENT ORDER. THE LEARNED AR REFERRED PAGE NO. 1 TO 14 OF THE PAPER BOOK I.E. COPY OF PUNJAB UNIT BALANCE SHEET, PROFIT AND LOSS ACCOU NT AND SCHEDULE OF DIRECTORS, MANAGERS REMUNERATION, TRAVELLING EXPE NSE ETC. 7. WITHOUT PREJUDICE TO THE ABOVE SUBMISSIONS AND I N ALTERNATIVE PLEA, THE LEARNED AR SUBMITTED THAT THE REDUCTION OF THE ELIGIBLE PROFIT UNDER SEC. 80IA AND 80IC OF THE ACT BY ALLOCATING DIRECTORS R EMUNERATION, TRAVELLING EXPENSES, ETC. MERELY ON ESTIMATE AND NOT ON CONCRE TE MATERIAL ON RECORD IS UNJUSTIFIED AND WRONG ON FACTS AND IN LAW. HE CONTE NDED THAT THE ALLOCATION MADE BY THE ASSESSING OFFICER IS EXCESSIVE AND DISP ROPORTIONATE IN AS MUCH AS THE ALLOCATION OF DIRECTORS REMUNERATION, TRAVE LLING EXPENSES ETC. TO THE PUNJAB PAPER UNIT AMOUNTED TO DOUBLE DIRECTORS REM UNERATION, TRAVELLING EXPENSES, ETC. FOR KALA AMB UNIT. HE POINTED OUT TH AT DIRECTORS REMUNERATION HAS ALREADY BEEN DEBITED IN THE ACCOUN TS OF THE KALA AMB PAPER UNIT. SIMILARLY, VEHICLE RUNNING AND MAINTENA NCE EXPENSES HAS ALSO BEEN DEBITED IN THE ACCOUNTS OF KALA AMB PAPER UNIT . IN ADDITION TO THIS DIRECTORS TRAVELLING AND CONVEYANCE EXPENSES WERE ALREADY DEBITED IN KALA AMB UNIT. THEREFORE, FURTHER ALLOCATION OF DIRECTOR S REMUNERATION, 7 TRAVELLING EXPENSES ETC. TO THIS UNIT MADE BY THE A SSESSING OFFICER IN THE IMPUGNED ASSESSMENT ORDER HAS RESULTED IN THE REDUC TION IN THE ELIGIBLE PROFIT BY FURTHER AMOUNT IS TOTALLY UNJUSTIFIED AND WRONG. 8. IN SUPPORT OF THE ABOVE ALTERNATIVE SUBMISSIONS, THE LEARNED AR FOR EXAMPLE SUBMITTED THAT IN THE ASSESSMENT YEAR 2009- 10, DIRECTORS REMUNERATION AMOUNTING TO RS.16,80,000 HAD ALREADY BEEN DEBITED IN THE ACCOUNT OF THE KALA AMB PAPER UNIT. SIMILARLY, VEHI CLE RUNNING AND MAINTENANCE EXPENSES OF RS.1,62,851 WAS DEBITED IN THE ACCOUNTS OF KALA AMB PAPER UNIT. IN ADDITION TO THIS DIRECTORS TRAV ELLING AND CONVEYANCE EXPENSES AT RS.21,750 WAS ALREADY DEBITED IN KALA A MB UNIT. THUS, DIRECTORS REMUNERATION, TRAVELLING EXPENSES, ETC. HAD ALREADY BEEN DEBITED IN THE ACCOUNT OF KALA AMB UNIT. THEREFORE, FURTHER AL LOCATION OF DIRECTORS REMUNERATION, TRAVELLING EXPENSES, ETC. TO THIS UNI T MADE BY THE ASSESSING OFFICER IN THE IMPUGNED ASSESSMENT ORDER WHICH RESU LTED IN TO THE REDUCTION IN THE ELIGIBLE PROFIT BY RS.13,68,706 IS TOTALLY U NJUSTIFIED AND WRONG. IF THIS ALTERNATIVE PLEA IS ALLOWED THEN DIRECTORS REMUNER ATION, TRAVELLING EXPENSES, ETC. BETWEEN THE TWO UNITS, NAMELY, THE POWER UNIT AND PUNJAB PAPER UNIT WILL BE REALLOCATED AS UNDER: 8 IF YOUR HONOUR DOES NOT ALLOW OUR GROUND NO.2 IN F ULL AS PRAYED IN THE GROUNDS OF APPEAL BUT ACCEPTS OUR ABOVE SUBMISS IONS THEN YOUR HONOUR WILL HAVE TO ALLOCATE THE DIRECTORS REMUNER ATION, TRAVELLING EXPENSES, ETC. BETWEEN THE TWO UNITS, NAMELY THE PO WER UNIT AND PUNJAB PAPER UNIT NO. 1. THIS REALLOCATION WILL BE AS UNDER: PUNJAB PAPER UNIT PUNJAB POWER UNIT KALA AMB PAPER UNIT TURNOVER OF UNIT 12246,36 10922.13 1324.24 DIRECTORS REMUNERATION 136.80 122.00 14.80 NIL DIRECTORS TRAVELLING EXPENSES 4.97 4.43 0.54 NIL AUDIT FEE 0.82 0.73 0.09 NIL TOTAL 142.49 127.16 15.43 DISALLOWANCE IN ELIGIBLE PROFIT AS PER A.O 13.86 13.68 DIFFERENCE AS A RESULT OF ALLOCATION TO THE 2 UNITS ONLY AS PER SUBMISSIONS. + 1.57 -13.68 RELIEF ALLOWABLE = RS.13.68 LAC (-) RS.1.57 LAC = NET RS.12.11 LAC 9. THE LEARNED SENIOR DR ON THE OTHER HAND TRIED TO JUSTIFY THE ORDERS OF THE AUTHORITIES BELOW WITH THE SUBMISSION THAT THEY HAVE MADE AND UPHELD THE CLAIMED DISALLOWANCES AFTER DISCUSSING THE ISS UE IN DETAIL IN COMPLIANCE 9 OF THE ORDER OF THE ITAT. THE ASSESSING OFFICER IN THE SECOND ROUND AGAIN AFFORDED SUFFICIENT OPPORTUNITY TO THE ASSESSEE TO ESTABLISH GENUINENESS OF ITS CLAIM MADE UNDER SEC. 80IA AND 80IC OF THE INCOME-T AX ACT, 1961 TO WHICH THE ASSESSEE HAS THOROUGHLY FAILED TO. THE ASSESSIN G OFFICER WAS THUS HAVING NO OPTION BUT TO REALLOCATE THE EXPENSES ON PROPORT IONATE BASIS AS PROVIDED UNDER SEC. 80IA(10) OF THE ACT. 10. HAVING GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW, WE FIND THAT IN THE ORIGINAL ASSESSMENT, SIMILAR DISALLOWANCES U NDER SECS. 80IA AND 80IC OF THE ACT WERE MADE. THE SAME WERE UPHELD BY THE L EARNED CIT(APPEALS) AGAINST WHICH THE ASSESSEE WENT IN SECOND APPEAL BE FORE THE ITAT IN THE ASSESSMENT YEAR 2007-08. BEFORE THE ITAT, REGARDING DEDUCTION CLAIMED UNDER SEC. 80IC OF THE ACT AGAINST THE PAPER UNIT A T KALA AMB, THE ASSESSEE SUBMITTED THAT IT WAS HAVING SEPARATE DIRECTORS FOR POWER UNIT AT PUNJAB AND PAPER UNIT AT KALA AMB AND HEAD OFFICE AND ACCORDIN GLY, THE PROFIT AND LOSS ACCOUNT OF UNIT WAS PREPARED CLAIMING SALARY OF RES PECTIVE DIRECTORS IN DISTINGUISHED UNITS. REGARDING THE DEDUCTION CLAIME D UNDER SEC. 80IA, IN THE POWER UNIT IN PUNJAB, THE LEARNED AR SUBMITTED TH AT SALE PRICE OF POWER @ RS.4.95 PER UNIT WAS ADOPTED BY THE ASSESSEE, THE A SSESSING OFFICER, HOWEVER, APPLIED THE RATE OF RS.4.68 PER UNIT AND W ORKED OUT THE ELIGIBLE 10 PROFIT ACCORDINGLY. THE ASSESSEE CONTENDED THAT I T HAS EXPLAINED THE NATURE OF DUTIES OF THE RESPECTIVE DIRECTOR QUA THE ASSIGN ED UNIT, HOWEVER, AUTHORITIES BELOW HAVE NOT ADVERTED TO THE EXPLANAT ION OF THE ASSESSEE IN THIS BEHALF AND ON ASSUMPTION, EXPENSES HAVE BEEN ALLOCA TED. IN THE ASSESSMENT YEAR 2007-08 ON THE ISSUE OF POWER RATE AND IN THE ASSESSMENT YEARS ON THE COMMON ISSUES OF REDUCTION OF DISALLOWANCES UNDER SEC. 80IA AND 80IC OF THE ACT, THE APPEAL WAS PREFERRED BEFORE THE ITAT A ND THE ITAT SET ASIDE THE MATTER TO THE FILE OF THE ASSESSING OFFICER TO DECI DE THE ISSUES AFRESH AFTER CONSIDERING THE INFORMATION RECEIVED UNDER RTI ACT BY THE ASSESSEE REGARDING THE RATE OF POWER PER UNIT AND OTHER SUBM ISSIONS OF THE ASSESSEE JUSTIFYING THE CLAIMED DEDUCTION UNDER SEC. 80IA OF THE ACT FOR THE POWER UNIT IN PUNJAB AND 80IC FOR THE PAPER UNIT AT KALA AMB. IN COMPLIANCE, THE ASSESSING OFFICER AFTER DISCUSSING THE CASE OF THE ASSESSEE HAS RESTORED THE SIMILAR AMOUNT OF DISALLOWANCES MADE UNDER SEC. 80I A AND 80IC OF THE ACT AS MADE IN THE ORIGINAL ASSESSMENT. BEFORE THE LEAR NED CIT(APPEALS), THE ASSESSEE QUESTIONED THE ACTION OF THE ASSESSING OFF ICER AND THE LEARNED CIT(APPEALS) ALLOWED RELIEF OF RS.71,27,544 IN ASS ESSMENT YEAR 2007-08 ON THE ISSUE OF ADOPTION OF VALUE OF POWER PER UNIT @ RS.4.92 PER UNIT FOR COMPUTATION OF DEDUCTION UNDER SEC. 80IA OF THE ACT ON POWER UNIT. THE LEARNED CIT(APPEALS) HAS HOWEVER, UPHELD THE ACTION OF THE ASSESSING 11 OFFICER REGARDING THE DISALLOWANCE OF RS.14,49,000/ - UNDER SEC. 80IA IN RELATION TO POWER PLANT IN PUNJAB AND RS.18,36,000 UNDER SEC. 80IC WITH REGARD TO PAPER UNIT AT KALA AMB. THE ASSESSING O FFICER HAS DEALT WITH THE ISSUE IN PARA NO.3.2.2 TO 3.2.3 OF THE ASSESSMENT O RDER REPRODUCED HEREUNDER: 3.2.2 IN THE COURSE OF PRESENT PROCEEDINGS THE ASSESSEE REITERATED ITS EARLIER REPLY AND ALSO DREW ATTENTION TO PARA 3 OF ITATS ORDER WHEREIN THE CLAIM OF HAVING SEPARATE DIRECTORS FOR POWER UNIT, PAPER UNIT AT KALA AMB (HP) AND HEAD OFFICE (READ PAPER U NIT IN PUNJAB) WAS MADE. 3.2.2 THE CONTENTION OF THE ASSESSEE THAT EVERY UNIT HAD DIFFERENT DIRECTOR IS NOT VERIFIABLE FROM THE RECORD. IN THE PROFIT AND LOSS ACCOUNT OF POWER UNIT NOT A SINGLE RUPEE HAS BEEN DEBITED O N THIS ACCOUNT. THE CONTENTION THAT MDS REMUNERATION HAS BEEN BOOKED A T HEAD OFFICE ONLY BECAUSE HE IS NOT DIRECTLY MANAGING ANY UNIT I S FLAWED, CONTRADICTORY AND AGAINST ALL NORMS OF ACCOUNTING P RINCIPLES AS WELL AS GENERAL PRACTICE. FIRST OF ALL NO EVIDENCE HAS BEEN BROUGHT ON RECORD TO PROVE THAT THE MD DID NOT DO ANY THING, NOT EVEN TO OK ANY POLICY DECISION, FOR THE OTHER TWO UNITS. SECONDLY BY STAT ING THAT THE MD DID NOT MANAGE ANY UNIT DIRECTLY , THE ASSESSEE HAS AT LEAST CONCEDED THAT HE DID NOT SOMETHING INDIRECTLY FOR OTHER UNIT S. IN FACT THE ARGUMENT IS A TOTAL FIGMENT OF IMAGINATION AS FAR A S POWER UNIT IS CONCERNED BECAUSE NOT EVEN A SINGLE RUPEE HAS BEEN DEBITED TO THIS 12 UNIT ON ACCOUNT OF SALARY OF ANY EMPLOYEE ALSO. THI S MEANS THIS UNIT HAD NEITHER ANY PROFESSIONAL EMPLOYEE NOR ANY DIREC TOR TO RUN ITS AFFAIRS AND THE UNIT RAN ON ITS OWN WITH THE GUIDAN CE AND MANAGERIAL SKILLS OF LABOUR AND STILL COULD ACHIEVE A TURNOVER OF RS.14 CRORES AND NET PROFIT OF 47.80%. MOREOVER LOOKING AT THE ADDRE SSES OF THE HEAD OFFICE AND POWER UNIT, IT IS AGAINST ALL ODDS THAT MD WOULD NEVER HAVE GIVEN ANY TIME TO THE UNIT BY PERSONALLY VISITING I T SPECIALLY WHEN NO PROFESSIONAL HELP WAS ENGAGED. EVEN OTHERWISE THE G ENERAL PRACTICE IS TO ALLOCATE SUCH EXPENSES OF HEAD OFFICE TO ALL THE UNITS AS IN THE PROCESS OF DECISION MAKING THE HEAD OFFICE EXECUTIV ES SPEND TIME IN RESPECT OF EACH UNIT. IN FACT THE THEORY OF HEAD OF FICE ITSELF IS FULL OF HOLES. THE HEAD OFFICE IS NOTHING BUT PAPER UNIT AT PUNJAB WHOSE PROFITS ARE NOT ELIGIBLE FOR ANY DEDUCTION UNDER TH E ACT. THE ASSESSEE HAD THE FULL LIBERTY TO DESIGNATE ANY UNIT AS HEAD OFFICE. AND IT CONVENIENTLY MADE THE TAXABLE UNIT AS ITS HEAD OFFI CE AS THIS WAS THE MOST PROFITABLE OPTION. THIS HAS BEEN THE GENERAL T ENDENCY AMONGST THE TAX PAYERS AND EXPERIENCE OF THE LEGISLATURE AS WELL. THAT IS WHY THE SUB-SECTIONS (10) OF SEC. 80IA IS THERE ON THE RULE BOOK FROM THE FIRST VERY DAY. 3.2.3 FOR THE REASONS DISCUSSED ABOVE, THE ASSESSEE HAD FAILED TO ESTABLISH ITS CASE AND REBUT THE CONCLUSIONS ARRIVE D EARLIER IN THE ORIGINAL ASSESSMENT. THE DISALLOWANCES MADE OUT OF DEDUCTION ON ACCOUNT OF OVER PRICING OF POWER SUPPLY AND NON/UND ERTAKING OF DIRECTORS REMUNERATION ETC. ARE GIVEN EFFECT TO AS UNDER: ALLOCATION OF EXPENDITURE COMMON TO ALL UNITS . 13 NOMENCLATURE OF EXPENDITURE TOTAL AMOUNT (IN LAKHS) TURNOVER OF PUNJAB PAPER UNIT (IN LAKHS) TURNOVER OF PUNJAB POWER UNIT (IN LAKHS) TURNOVER OF HP (KALA) PAPER UNIT (IN LAKHS) RS.14920.57 RS.11614.76 RS.1461.15 RS.1844.66 DIRECTORS REMUNERATION RS. 136.80 RS. 106.49 RS. 13.34 RS.16.91 DIRECTORS TRAVELLING RS. 11.03 RS. 8.58 RS. 1.08 RS. 1.36 AUDIT FEE RS. 0.75 RS. 0.58 RS. 0.07 RS. 0 .09 ADDITIONAL EXPENDITURE TO BE ALLOWED RS. 14.49 RS. 18.36 ELIGIBLE UNITS 11. SIMILAR ORDERS ON THE ISSUE OF ALLOCATION OF E XPENSES IN ELIGIBLE UNITS UNDER SEC. 80IA AND 80IC HAVE BEEN PASSED BY THE AU THORITIES BELOW IN THE REMAINING ASSESSMENT YEARS 2008-09 AND 2009-10. WE DO NOT FIND REASON TO INTERFERE WITH THE ORDERS OF THE AUTHORITIES BELOW REGARDING THE MAKING OF REDUCTION IN THE DISALLOWANCES UNDER SECTIONS 80IA AND 80IC OF THE ACT ON ACCOUNT OF REALLOCATION OF DIRECTORS REMUNERATION, TRAVELLING EXPENSES ETC. ON PROPORTIONATE BASIS BY THE ASSESSING OFFICER IN ABSENCE OF THE EVIDENCE FURNISHED BY THE ASSESSEE THAT ALL THE EXPENSES WER E SEPARATELY MAINTAINED IN THE ELIGIBLE UNITS. WE, HOWEVER, FIND SUBSTANCE IN THE ALTERNATIVE ARGUMENTS OF THE LEARNED AR THAT THE ALLOCATION MADE BY THE A SSESSING OFFICER ON THE 14 PROPORTIONATE BASIS WAS EXCESSIVE AND DISPROPORTION ATE INASMUCH AS ALLOCATION OF DIRECTORS REMUNERATION, TRAVELLING E XPENSES AND AUDIT FEE ETC. TO THE PUNJAB PAPER UNIT AMOUNTED TO DOUBLE DIRECTO RS REMUNERATION, TRAVELLING EXPENSES ETC. FOR KALA AMB UNIT. WE TH US SET ASIDE THE MATTER TO THE FILE OF THE ASSESSING OFFICER TO EXAMINE THE AL TERNATIVE CONTENTION MADE BY THE LEARNED AR IN THIS REGARD AND WHILE ALLOCATI NG THE EXPENSES TO THE ELIGIBLE UNITS TAKE INTO CONSIDERATION THE EXPENSES , IF ANY, ALREADY DEBITED BY THE ASSESSEE IN THESE ELIGIBLE UNITS WHILE COMPUTIN G THE DEDUCTION CLAIMED UNDER SEC. 80IA AND 80IC OF THE INCOME-TAX ACT, 196 1 ON PROPORTIONATE BASIS TO AVOID DOUBLE ADDITION, AFTER AFFORDING OPP ORTUNITY OF BEING HEARD TO THE ASSESSEE. THE ALTERNATIVE PLEA IS THUS ALLOWED FOR STATISTICAL PURPOSES. THE GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 12. IN THE ASSESSMENT YEAR 2008-09, ONE MORE ISSUE HAS BEEN RAISED REGARDING REDUCTION OF INSURANCE CLAIM RECEIVED FRO M THE INCOME ELIGIBLE FOR EXEMPTION UNDER SEC. 80IC OF THE ACT, REDUCING THE EXEMPTION. 13. CONSIDERED THE ARGUMENT ADVANCED BY THE PARTIES ON THE ISSUE. 14. THE ASSESSING OFFICER OBSERVED IN THE WORKING O F THE PROFIT OF KALA AMB UNIT THAT THESE APPEARED INSURANCE RECEIPT OF R S.5,56,165 AND INTEREST OF RS.5,534 UNDER THE HEAD OTHER INCOME. THERE A LSO APPEARED LOSS OF 15 RS.2,00,921 ON ACCOUNT OF FALL OF FACTORY WALL. THE ASSESSEE HAD TAKEN THE LOSS ON ACCOUNT OF FACTORY WALL. THE ASSESSEE HAD T AKEN THE LOSS ON ACCOUNT OF FACTORY WALL INTO CONSIDERATION IN COMPUTING THE PROFIT OF THE UNDERTAKING BUT IT HAD NOT REDUCED THE INSURANCE CLAIM AND INTE REST FROM PROFIT FOR CLAIMING DEDUCTION UNDER SEC. 80IC OF THE ACT. IN ABSENCE OF SATISFACTORY EXPLANATION BY THE ASSESSEE, THE ASSESSING OFFICER FOLLOWING THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF LIBERTY INDIA 317 ITR 218 (S.C) HELD THAT THERE IS NO FIRST DEGREE NEXUS BETWEEN TH E INSURANCE/INTEREST RECEIPT AND BUSINESS UNDERTAKING HENCE, IT DOES NOT FORM PA RT OF NET PROFIT OF ELIGIBLE INDUSTRIAL UNDERTAKING AND THE SAME CANNOT BE TREAT ED AS INCOME DERIVED FROM INDUSTRIAL UNDERTAKING. THE LEARNED CIT(APPEAL S) HAS UPHELD THE SAME WITH THIS NOTING THAT THE ASSESSEE DID NOT FURNISH EVIDENCE TO SUBSTANTIATE THAT THE CLAIM THAT THESE WERE ONLY REPAIR EXPENSES AND NOT CAPITAL EXPENSES. HE NOTED FURTHER THAT RS.2,00,921 ON ACCOUNT OF FALL O F FACTORY WALL WAS ALREADY TAKEN INTO CONSIDERATION BY THE ASSESSEE. 15. SINCE THE ASSESSEE HAS FAILED TO IMPROVE ITS C ASE BEFORE US ON THE ISSUE, WE DO NOT FIND REASON TO INTERFERE WITH THE FIRST APPELLATE ORDER IN THIS REGARD. SAME IS UPHELD. THE ISSUE IS THUS DECIDED A GAINST THE ASSESSEE. 16 16. IN RESULT, THE APPEALS FOR THE ASSESSMENT YEARS 2007-08 AND 2009-10 ARE ALLOWED FOR STATISTICAL PURPOSES AND APPEAL FO R ASSESSMENT YEAR 2008-09 IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 .08.2015 SD/- SD/- ( T.S. KAPOOR ) ( I.C. SUDHIR ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 20 /08/2015 MOHAN LAL COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEALS) 5) DR:ITAT ASSISTANT REGISTRAR DATE DRAFT DICTATED ON COMPUTER 10.08.2015 DRAFT PLACED BEFORE AUTHOR 10.08.2015 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. APPROVED DRAFT COMES TO THE SR.PS/PS 21.08.2015 KEPT FOR PRONOUNCEMENT ON 20.08.2015 FILE SENT TO THE BENCH CLERK 21.08.2015 DATE ON WHICH FILE GOES TO THE AR DATE ON WHICH FILE GOES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER.