JAI CORP LTD, MUMBAI V. DCIT CEN CIR 39, MUMBAI

ITA 4837/MUM/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3339 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2016
• Appeal Filed By: Assessee
• Bench Allotted: J
• Assessment Year: 2010-2011
• Appeal Filed On: 21-07-2014
• Court: TRIBUNAL
• Department Lawyers: K MOHANDA S
• Section: 143(3); 14A; 80IB; 10B; 6

Judgement Text

, , J, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES J, MUMBAI , , , BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER, AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NO.4837/MUM/2014 ASSESSMENT YEAR: 2010-11 M/S. JAI CORP LTD. 11-B MITTAL TOWER, B-WING, NARIMAN POINT, MUMBAI- 400021 / VS. DCIT, CENTRAL CIRCLE - 39, R.NO. 32(1), GR. FL. AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020 (ASSESS EE ) (REVENUE) P.A. NO. AAACJ2591A ITA NO.4737/MUM/2014 ASSESSMENT YEAR: 2010-11 DCIT, CENTRAL CIRCLE - 39, R.NO. 32(1), GR. FL. AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020 / VS. M/S. JAI CORP LTD. 11-B MITTAL TOWER, B- WING, NARIMAN POINT, MUMBAI- 400021 (REVENUE ) (ASSESSEE) P.A. NO. AAACJ2591A / ASSESSEE BY SHRI VIJAY MEHTA (AR) / REVENUE BY SHRI K. MOHANDAS, (DR) ! ' / DATE OF HEARING : 17/02/2016 ! ' / DATE OF ORDER: 16/03 /2016 JAI CORP LTD. 2 / O R D E R PER ASHWANI TANEJA (ACCOUNTANT MEMBER): THESE CROSS APPEALS HAVE BEEN FILED BY THE ASSESSEE AND REVENUE AGAINST THE ORDER OF LD. COMMISSIONER OF IN COME TAX (APPEALS), MUMBAI-41 {(IN SHORT CIT(A)}, DATED 28 .03.2014 PASSED AGAINST ASSESSMENT ORDER U/S 143(3) OF INCOM E TAX ACT 1961, DATED 19.02.2013 FOR THE ASSESSMENT YEAR 2010 -11. FIRST WE TAKE UP ASSESSEES APPEAL IN ITA NO. 4837/MUM/2014 2 . THE ASSESSEE HAS FILED ON THE FOLLOWING GROUNDS: 1.THE HON'BLE CIT(A) ERRED IN THE FACTS AND CIRCUMSTANCES OF THE CASE IN CONFIRMING ACTION OF THE ASSESSING OFFICER TO ALLOCATE HEAD OFFICE EXPENSES TO 801B AND 10B UNITS AND REWORKING TOTAL DISALLOWANCE AT RS.79.92 LAKHS. THE APPELLANT PRAYS THAT THE SAID ADDITION IS UNJUSTIFIED AND REQUIRES TO BE DELETED. 2.THE HON'BLE CIT(A) ERRED LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE CASE IN CONFIRMING DISALLOWANC E OF RS,20.00 LAKHS ON ADHOC BASIS IN RESPECT OF OTHE R INCOME OF 801B/10B UNITS. THE HON'BLE CIT(A) FAILED TO APPRECIATE THAT THE SA ID INCOMES WERE EARNED IN THE NORMAL COURSE OF ITS MANUFACTURING BUSINESS AND ACCORDINGLY THE APPELLANT IS ENTITLED TO THE RELIEF U/S. 801B/10B I N RESPECT OF THE SAME 3.THE HON'BLE CIT(A) ERRED IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE CASE IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN INVOKING PROVISIONS OF SECTION 14A(2) READ WITH RULE 8D. 4. THE HON'BLE CIT(A) ERRED IN THE FACTS AND CIRCUMSTANCES OF THE CASE IN COMPUTING DISALLOWANCE ULS.14A AT RS.154.30 LACS AS AGAINST JAI CORP LTD. 3 THE DISALLOWANCE OF RS.56.17 LACS COMPUTED BY THE APPELLANT. 5. THE HON'BLE CIT(A) ERRED IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE CASE IN CONFIRMING ACTION OF THE ASSESSING OFFICER IN CHARGING INTEREST UNDER SECTION 234A OF THE INCOME TAX ACT, 1961 EVEN THOUGH THERE WAS NO DELAY IN FILING THE RETURN OF INCOME. 6. EACH ONE OF THE ABOVE GROUNDS OF APPEAL IS INDEP ENDENT AND WITHOUT PREJUDICE TO EACH OTHER. 7. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER OR T O AMEND ANY OF THE GROUNDS OF APPEAL MENTIONED HEREIN ABOVE . 3. DURING THE COURSE OF HEARING, ARGUMENTS WERE MADE B Y SHRI VIJAY MEHTA, AUTHORISED REPRESENTATIVE (AR) ON BEHALF OF THE ASSESSEE AND BY SHRI K. MOHANDAS, DEPARTMENTAL REPRESENTATIVE (DR) ON BEHALF OF THE REVENUE. 4. IN THIS GROUND THE ASSESSEE HAS CHALLENGED THE ACT ION OF LOWER AUTHORITIES IN ALLOCATING HEAD OFFICE EXPENSE S TO UNITS ELIGIBLE FOR DEDUCTION U/S 80IB AND 10B, AND THEREB Y REWORKING TOTAL DISALLOWANCE AT RS.79.92 LAKHS. 4.1. THE BRIEF FACTS ARE THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE WAS IN THE BUSINESS OF MANUFACTURING COLD ROLLED COILS, GALVANIZED COILS, GALVANIZED CORRUGATED SHEETS, WOVEN SACKS, FABRICS, JUMBO BAGS AND PARTIALLY ORIENTED YARN. THREE UNITS OF THE ASSESSE E ARE CLAIMING DEDUCTION U/S. 80IB AND 10B. TWO UNITS SHO ULD CLAIM DEDUCTION U/S 80IB AND ONE UNIT U/S 10B. 4.2. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTED THAT NO PART OF EXPENDITURE OF HEAD OFFICE/CO RPORATE OFFICE AND INDIRECT EXPENSES WERE ALLOCATED TO ANY OF THE JAI CORP LTD. 4 AFORESAID UNITS IN RESPECT OF WHICH DEDUCTIONS U/S 80IB AND 10B HAD BEEN CLAIMED BY THE ASSESSEE (HEREIN AFTER CALLED AS TAX EXEMPT UNITS). THE AO HELD THAT PART OF THE HEA D OFFICE/ CORPORATE OFFICE EXPENSES AND OTHER INDIRECT EXPENS ES WAS DEFINITELY ATTRIBUTABLE TO THE OPERATION OF TAX EXE MPT UNITS. IN REPLY THE ASSESSEE SUBMITTED THAT THE ASSESSEE WAS MAINTAINING SEPARATE BOOKS OF ACCOUNT FOR ALL THE MANUFACTURING UNITS AS WELL AS CORPORATE OFFICE AND THE EXPENSES DEBITED IN THE BOOKS OF ACCOUNTS FOR CORPO RATE OFFICE PERTAIN TO HEAD OFFICE ONLY AND NO PART THEREBY COU LD BE ATTRIBUTED TO ANY OF THE UNITS. THE AO DID NOT ACCE PT THE SUBMISSIONS OF THE ASSESSEE AND HE WORKED OUT A SUM OF RS.96,87,500/- BEING HEAD OFFICE EXPENDITURE RELATE D TO THE AFORESAID UNITS BY MAKING AND AD HOC ADDITION OF 25 % IN THE ALLOCATION SHEET, WHICH WAS SUBMITTED BY THE ASSESS EE ON THE INSTRUCTIONS OF THE AO, ON NO PREJUDICE BASIS. 4.3. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFO RE THE LD. CIT(A) WHEREIN SUBMISSIONS MADE BEFORE AO WERE REITERATED AND IT WAS FURTHER SUBMITTED THAT CORPOR ATE OFFICE PLAYS A VERY NEGLIGIBLE ROLE IN THE AFFAIRS OF THE MANUFACTURING UNITS. THE MANUFACTURING PROCESS WAS A TECHNICAL PR OCESS WHICH WAS HANDLED BY THE TECHNICAL STAFF AVAILABLE IN THE UNITS AND PURCHASES/ SALES AND OTHER OPERATIONS WERE ALSO HANDLED BY THE SPECIALIZED STAFF DEPUTED AT THE RESPECTIVE UNITS. IT WAS FURTHER CONTENDED THAT THE EMPLOYEES OF CORPORATE O FFICE LOOK AFTER THE BROADER POLICIES OF THE COMPANY AND DEAL WITH THE MATTERS RELATING TO THE AFFAIRS OF THE COMPANY WITH STATE/ CENTRAL GOVERNMENT. IT WAS THUS SUBMITTED IN NUTSHE LL THAT NO JAI CORP LTD. 5 EXPENDITURE OF THE CORPORATE OFFICE/HO SHOULD BE AL LOCATED AND ENTIRE ADDITION MADE BY THE AO FOR RS.96,87,500 /- SHOULD BE DELETED. THE LD. CIT(A) CONSIDERED THE SUBMISSIO NS OF THE ASSESSEE BUT HELD THAT COMMON EXPENSES AND HEAD OFF ICE EXPENSES HAVE TO BE APPORTIONED AMONGST THE VARIOUS UNITS OR UNDERTAKINGS OF THE ASSESSEE BECAUSE THE HO/CORPORA TE OFFICE INCURS EXPENDITURE FOR PROVIDING FACILITIES AND SER VICES WHICH ARE COMMON TO ALL THE UNITS. HE FURTHER HELD THAT A PPELLANT HAD A NUMBER OF UNITS WHICH WERE INDEPENDENT OF EAC H OTHER. THUS, IN CASE COMMON EXPENSES OF HEAD OFFICE ARE NO T ALLOCATED TO TAX EXEMPT UNITS, IT WILL LEAD TO INFL ATION OF PROFITS OF SUCH UNITS. LD. CIT(A) RELIED UPON THE JUDGMENT OF MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF ACIT V. ASEA B ROWN BOVERI LTD. 110 TTJ (MUM) 502, IN SUPPORT OF HIS VI EW THAT THE APPROACH OF THE ASSESSEE DEFEATS BASIC PRINCIPLE OF TAXATION WHEREBY ONLY NET INCOME I.E. GROSS INCOME LESS EXPENDITURE IS REQUIRED TO BE TAXED. HE ALSO RELIED UPON ANOTHER J UDGMENT OF DELHI BENCH OF ITAT IN CASE OF DCIT VS. EASTERN MED IKIT LTD. 100 TTJ 382 (DEL) FOR UPHOLDING THE ACTION OF THE A O IN ALLOCATING THE ACTUAL EXPENDITURE TO ALL THE UNITS, UNLESS THERE WERE VALID REASONS TO EXCLUDE A PARTICULAR UNIT. 4.4. BUT, WITH RESPECT TO QUANTIFICATION OF HEAD OFFICE EXPENSES ALLOCABLE TO TAX EXEMPT UNITS, LD. CIT(A) DID NOT F ULLY ACCEPT STAND OF THE AO AND SUGGESTED ANOTHER WORKING ON TH E BASIS OF HIS OWN ANALYSIS. WE FIND IT APPROPRIATE THAT IS OB SERVATIONS OF LD. CIT(A) SHOULD BE REPRODUCED HEREUNDER: COMING NOW TO THE QUANTUM OF HO EXPENSES ALLOCABLE TO THE THREE UNITS ELIGIBLE FOR DEDUCTION JAI CORP LTD. 6 U/S.10B/80-IB, IT IS SEEN THAT THE A.O. DID NOT ACCEPT THE ALLOCATION OF RS.77.50 LAKHS CARRIED OUT BY THE APPELLANT ON THE GROUND THAT THE APPELLANT HAD NOT FURNISHED PROPER WORKING AS WELL AS BASIS FOR THE SAID ALLOCATION. HOWEVER, IT IS FOUND THAT INSTEAD OF UNDERTAKING THAT EXERCISE AFTER IDENTIFICATION OF ACTUAL EXPENSES INCURRED AT THE CORPORATE OFFICE, THE A.O. ALSO ADOPTED AN AD HOC APPROACH AND CALCULATED A SUM OF RS.96,87,500/- AFTER INCREASING THE APPELLANT'S ALLOCATION BY 25%. UNDER THE CIRCUMSTANCES, IT IS HELD THAT THE ALLOCA TION MADE BY THE A.O. ALSO LACKED A SOUND OR SCIENTIFIC BASIS AND CANNOT BE SUSTAINED AS SUCH. IN THE COURSE OF APPELLATE PROCEEDINGS, THE APPELLANT HAS FURNISHED A 'WITHOUT PREJUDICE WORKING CONTAINING BREAK UP OF TOTAL HO EXPENSES WHICH ARE 'NOT RELATED TO INVESTMENT ACTIVITY' FOR THE PURPOSE OF DISALLOWANCE U/S.14A SUCH AS REMUNERATION OF MD, DIRECTOR (WORKS), VP (HR), COMPANY SECRETARY, MANAGER INDIRECT TAXATION), ADMN. MANAGER, PURCHASE MANAGER & VP-REAL ESTATE, LEGAL/ PROFESSIONAL CHARGES, AUDITOR'S REMUNERATION , RATES AND TAXES, INSURANCE, POSTAGE AND TELEGRAM, SHARE DEPARTMENT EXPENSES/ SHARE TRANSFER AGENT FEE S, LISTING FEE AND PRINTING AND STATIONERY EXPENSES, TRAVELLING/ LOCAL CONVEYANCE/ VEHICLE RUNNING EXPENSES OF MARKETING AND OTHER STAFF, GUEST HOUSE EXPENSES FOR FACTORY STAFF, SOCIETY MAINTENANCE CHARGES, OTHER (MISCELLANEOUS) EXPENSES ETC. THE SA ID WORKING IS ATTACHED AS ANNEXURE-A TO THIS ORDER. A PERUSAL OF THE SAID WORKING REVEALS THAT THE EXPENS ES FALLING UNDER THIS CATEGORY ARE BROADLY THE COMMON HO EXPENSES WHICH ARE TO BE CONSIDERED FOR ALLOCATI ON AMONG 13 UNITS AS UNDER:- S. NO. PARTICULARS (RS. IN LACS) 1 SALARIES (S. NO.15) 97.53 2 PAYMENT OF AUDITORS (S.NO.14) 73.82 3 EXPENSES UNDER THE HEADS MENTIONED AT S. NOS. 4,5,6,7,8,9,10,11,12,13,17 & 18 165.70 JAI CORP LTD. 7 OF THE WORKING FURNISHED BY THE APPELLANT 4 RATES AND TAXES (OUT OF RS.24.51 LAKHS DEBITED TO P & L ACCOUNT, ONLY RS.15.22 LAKHS IS RELATABLE TO INCOME FROM HOUSE PROPERTY) 9.29 TOTAL 346.34 THE ABOVE TABLE CONTAINS THE FOLLOWING VARIATIONS F ROM THE WORKING FURNISHED BY THE APPELLANT:- ONLY 50% OF THE MANAGING DIRECTOR'S REMUNERATION (RS.13.1.$ LAKHS) HAS BEEN CONSIDERED FOR ALLOCATIO N TO THE UNITS AND THE BALANCE RS.13.17 LAKHS IS CONSIDERED ATTRIBUTABLE TO INVESTMENT ACTIVITY INVOLVING MANAGEMENT OF INVESTMENT PORTFOLIO OF OVE R RS.1800 CRORES. PAYMENT TO AUDITORS HAS BEEN APPORTIONED EQUALLY AMONG THE UNITS AS WELL AS THE CORPORATE OFFICE. INVESTMENT MANAGEMENT FEES (SR.NO.16) FOR DEBENTUR ES (RS.50.37 LAKHS) IS RELATABLE TO THE ACTIVITIES CAR RIED OUT AT THE CORPORATE OFFICE AND HAS DIRECT NEXUS WITH INTEREST INCOME EARNED BY THE CORPORATE OFFICE. AS SUCH, THIS CANNOT BE ALLOCATED AMONG THE UNITS. 5.3.3 THE A.O. IS, THEREFORE, DIRECTED TO VERIFY TH E REVISED WORKING OF ALLOCABLE/COMMON HO EXPENSES FROM THE RECORD. CONSIDERING THE AGGREGATE OF THESE SUMS FOR APPORTIONMENT EQUALLY AMONG 13 UNITS OF TH E APPELLANT IN LINE WITH PAST HISTORY OF THE CASE, TH E AMOUNT ALLOCABLE TO THE THREE UNITS ELIGIBLE FOR DEDUCTION U/SS.10B AND 801B COMES TO RS.79.92 LAKHS (346.34 X 3 / 13) OR RS.26.64 LAKHS PER UNIT. THIS TURNS OUT TO BE MORE OR LESS CLOSE TO THE AMOUNT OF RS77. 0 LAKHS INITIALLY WORKED OUT BY THE APPELLANT. THE A. O. IS, ACCORDINGLY, DIRECTED TO RECOMPUTE THE DEDUCTIONS U /S 10B AND 80-LB IN RESPECT OF THE ELIGIBLE UNITS AFTE R CONSIDERING THE REVISED ALLOCATION OF COMMON HO EXPENSES AS WORKED OUT ABOVE. WITH THESE DIRECTIONS , GROUNDS BEARING NOS.2 AND 3 OF THE PRESENT APPEAL JAI CORP LTD. 8 ARE ALLOWED TO THE EXTENT INDICATED ABOVE. 4.5. BEING AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE THE TRIBUNAL. DURING THE COURSE OF HEARING, IT HAS BEEN SUBMITTED BY LD. COUNSEL THAT LD. CIT(A) HAD ACCEPTED THAT TH E CORPORATE OFFICE HAS SEPARATE STREAM OF INCOME AND THEREFORE, TOTAL EXPENSES OF HEAD OFFICE CANNOT BE ALLOCATED TO ALL THE UNITS. IT WAS SUGGESTED BY THE LD. COUNSEL THAT 50% OF THE HE AD OFFICE EXPENSES SHOULD BE ALLOCATED TO HEAD OFFICE AND BAL ANCE EXPENDITURE CAN BE ALLOCATED TO ALL OTHER UNITS, WH ETHER TAXABLE OR TAX EXEMPT. HE SUBMITTED A CHART SHOWING A WORKING OF HEAD OFFICE EXPENSES ALLOCABLE TO 10B AN D 80IB UNITS AS WAS DONE BY THE LD. CIT(A). IN SUPPORT OF HIS ARGUMENTS, HE RELIED UPON THE JUDGMENT OF HONBLE B OMBAY HIGH COURT IN THE CASE OF ZANDU PHARMACEUTICALS WOR KS LTD. V. CIT 350 ITR 366, FOR THE PROPOSITION THAT WHILE COMPUTING PROFIT AND GAINS FOR AN UNDERTAKING, ONLY EXPENSES RELATING THERETO CAN BE DEDUCTED. 4.6. ON THE OTHER HAND, LD. DR OPPOSED THE SUBMISSIONS OF THE LD. COUNSEL AND SUBMITTED THAT ALLOCATION OF HE AD OFFICE EXPENSES AS DONE BY THE LD. CIT(A) IS IN ACCORDANCE WITH LAW AND FACTS AND NO INTERFERENCE IS REQUIRED THEREIN. 4.7. WE HAVE GONE THROUGH THE ORDERS OF THE LOWER AUTHO RITIES. LD. COUNSEL HAS RELIED UPON THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF ZANDU PHARMACEUTICALS WOR KS LTD. (SUPRA) FOR THE PROPOSITION THAT ONLY EXPENSES RELA TING TO THE CONCERNED UNDERTAKING CAN BE DEDUCTED WHILE COMPUTI NG ITS JAI CORP LTD. 9 TAXABLE INCOME. WE RESPECTFULLY ACCEPT THE PROPOSIT ION ADVANCED BY THE LD. COUNSEL ON THE BASIS OF AFORESA ID JUDGMENT. WE FIND THAT LOWER AUTHORITIES HAVE ALREA DY ACCEPTED THIS PROPOSITION AND THERE IS NO QUARREL B Y ANY ONE ON THIS WELL SETTLED PROPOSITION. BUT THE ISSUE INV OLVED HERE IS THAT THERE ARE CERTAIN COMMON EXPENSES WHICH HAVE T O BE ALLOCATED IN DIFFERENT UNITS SO THAT TRUE PROFITS O F THE UNITS COULD BE WORKED OUT. THE ASSESSEE HAS ALSO ACCEPTED THIS PROPOSITION THAT COMMON EXPENSES NEEDS TO BE WORKED OUT. THE ONLY QUARREL IS UPON THE ISSUE I.E. HOW AND HOW MUCH OF THE EXPENSES NEED TO BE ALLOCATED AMONGST DIFFERENT UNITS. THE AO HAS DONE THE ALLOCATION ON AD-HOC BASIS, LD. CIT (A) DID ACCEPT THE WORKING OF THE AO, AND ON THE BASIS OF H IS OWN ANALYSIS HE MADE AN ATTEMPT TO GIVE RELATIVELY MORE RATIONAL WORKING. THE ASSESSEE HAS ACCEPTED THE DECISION OF THE LD. CIT(A) IN PRINCIPLE, BUT CONTENDED THAT ONLY 50% OF THE HO EXPENSES COULD BE ALLOCATED AND REMAINING 50% SHOUL D BE CHARGED TO HO ONLY. THE ONLY REASONING GIVEN BY THE LD. COUNSEL OF THE ASSESSEE IS THAT THE HEAD OFFICE HAS ITS OWN STREAM OF INCOME AND THEREFORE, ONLY 50% OF THE EXP ENSES SHOULD BE ALLOCATED. 4.8. WE HAVE CAREFULLY GONE THROUGH THE SUBMISSIONS OF THE LD. COUNSEL AND FIND SOME FORCE THEREIN. IT IS AN A CCEPTED FACTUAL POSITION THAT HEAD OFFICE HAS ITS OWN STREA M OF INCOME. THUS, UNDER THESE CIRCUMSTANCES, IT CANNOT BE SAID THAT THE ENTIRE EXPENSES INCURRED BY THE HEAD OFFICE/CORPORA TE OFFICE WERE INCURRED AS COMMON EXPENSES. THEREFORE, UNDER THESE CIRCUMSTANCES THE TOTAL EXPENSES OF THE HEAD OFFICE CANNOT BE JAI CORP LTD. 10 SAID TO BE AVAILABLE FOR ALLOCATION IN OTHER UNITS. THUS, NEXT QUESTION ARISES IS THAT HOW MUCH PORTION OF TOTAL E XPENSES OF HEAD OFFICE/CORPORATE OFFICE CAN BE ATTRIBUTED AS C OMMON EXPENSES, AVAILABLE FOR ALLOCATION TO ALL THE UNITS . THE LD. COUNSEL HAS TRIED TO JUSTIFY THAT 50% OF THE TOTAL EXPENSES OF HEAD OFFICE/CORPORATE OFFICE, ON AN AD-HOC BASIS, S HOULD BE TAKEN AS THE EXPENSES PERTAINING TO THE INCOME EARN ED BY THE HEAD OFFICE, AND BALANCE 50% CAN BE MADE AVAILABLE FOR ALLOCATION TO ALL THE UNITS. BUT WE FIND THAT LD. C OUNSEL HAS NOT GIVEN ANY TRANSPARENT, SCIENTIFIC OR CONCRETE B ASIS OF BIFURCATION, NOR HAS HE GIVEN ANY REASONING AS TO W HY THESE EXPENSES SHOULD BE BIFURCATED ON FIFTY-FIFTY BASIS. IT IS ALSO NOTED BY US THAT EVEN LOWER AUTHORITIES HAD NOT EXA MINED THIS ASPECT FROM THIS ANGLE. THIS ISSUE IS LIKELY TO HAV E FAR REACHING IMPLICATIONS AND MAY CREATE HISTORY IN ASSESSEES H ANDS IN OTHER YEARS AS WELL. THEREFORE, PRINCIPALLY ACCEPTI NG THE STAND OF THE ASSESSEE THAT TOTAL EXPENSES INCURRED BY HO/ CO ARE NOT AVAILABLE FOR ALLOCATION, BUT FOR DETERMINING THAT HOW MUCH PORTION OF THESE EXPENSES IS AVAILABLE FOR ALLOCATI ON TO ALL THE UNITS, WE SEND THIS ISSUE BACK TO THE AO FOR REEXAM INING THIS ISSUE AND FINDING OUT SOME FAIR, RATIONAL, TRANSPAR ENT AND SCIENTIFIC BASIS OF BIFURCATION OF THESE EXPENSES A ND THEIR ALLOCATION AMONG ALL THE UNITS. THE AO SHALL DECIDE D THIS ISSUE AFRESH AFTER CONSIDERING ALL THE FACTS AND SUBMISSI ONS AND EVIDENCES AS MAY BE BROUGHT ON RECORD BY THE ASSESS EE IN SUPPORT OF ITS CONTENTIONS FOR WHICH THE AO SHALL G IVE ADEQUATE OPPORTUNITY OF HEARING. THE ASSESSEE IS FREE TO RAI SE ALL THE LEGAL AND FACTUAL ISSUES IN THIS REGARD. THUS, WITH THESE JAI CORP LTD. 11 DIRECTIONS WE SEND THIS ISSUE BACK TO THE FILE OF T HE AO. GROUND NO.1 MAY BE TREATED AS PARTLY ALLOWED FOR ST ATISTICAL PURPOSES. 5. GROUND NO.2: IN THIS GROUND THE ASSESSEE HAS CHALLENGED THE ACTION OF LOWER AUTHORITIES IN CONFIRMING THE D ISALLOWANCE OF RS.20.00 LAKHS ON AD-HOC BASIS IN RESPECT OF OTH ER INCOME OF 80IB/10B UNITS. 5.1. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO MADE AN AD-HOC DISALLOWANCE OF RS.20.00 LAKHS ON TH E GROUND THAT ASSESSEE DID NOT FURNISH UNIT WISE DETAILS AS TO HOW THE ITEMS LIKE INTEREST, MISCELLANEOUS INCOME ETC. IN R ESPECT OF TAX- EXEMPT UNITS WERE ACCOUNTED BY THESE UNITS IN THEIR BOOKS OF ACCOUNTS. 5.2. BEING AGGRIEVED, THE ASSESSEE CONTESTED THE MATTER BEFORE LD. CIT(A) AND SUBMITTED THAT THERE IS NO REASON TO MAKE DISALLOWANCE OF RS.20.00 LACS ON ESTIMATE BASIS WHI CH WAS TOTALLY WITHOUT ANY EVIDENCES. BUT LD. CIT(A) WITHO UT GIVING ANY SPECIFIC FINDINGS CONFIRMED THE STAND OF THE AO . 5.3. SINCE WE HAVE SENT THE ISSUE RAISED IN GROUND NO.1 , BACK TO THE FILE OF THE AO, AND WE FIND THAT THE ISSUE R AISED IN GROUND NO.2 IS RELATED TO THE ISSUE RAISED IN GROUN D NO.1 THEREFORE, WE FIND IT APPROPRIATE TO SEND THIS ALSO BACK TO THE FILE OF THE AO, IN TERMS OF OUR DIRECTION AS GIVEN IN GROUND NO.1 ABOVE. THUS, GROUND NO.2 ALSO MAY BE TREATED AS ALL OWED FOR STATISTICAL PURPOSES. JAI CORP LTD. 12 6. GROUND NOS. 3 & 4: THESE GROUNDS ARE WITH REGARD TO THE ISSUE OF DISALLOWANCE MADE BY THE AO U/S 14A WHICH HAS BEEN PARTLY DELETED BY THE LD. CIT(A). THE ASSESSEE HAS FILED AN APPEAL AGAINST DISALLOWANCE SUSTAINED BY THE LD. CI T(A) AND REVENUE HAS COME IN APPEAL AGAINST THE RELIEF GIVEN BY THE LD. CIT(A). 6.1. DURING THE COURSE OF HEARING, IT HAS BEEN SUBMITTE D BY THE LD. COUNSEL THAT THESE ISSUES ARE COVERED BY TH E JUDGMENT OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 200 8-09 & 2009-10. 6.2. WE HAVE GONE THROUGH THE ORDERS OF LOWER AUTHORITI ES AND SUBMISSIONS MADE BY BOTH THE SIDES ON THIS ISSUE. IT IS NOTED THAT TOTAL DISALLOWANCE MADE U/S 14A HAS TWO COMPON ENTS I.E. INTEREST AND EXPENSES. IT IS NOTED THAT WITH REGARD TO INTEREST OF LD. CIT(A) HAS GIVEN CATEGORICAL FINDING RELYING UPON THE ORDERS OF EARLIER YEARS THAT THE ASSESSEE HAS PAID INTEREST ON SPECIFIC BORROWING USED FOR THE SPECIFIC PURPOSE OF BUSINESS ACTIVITIES SUCH AS MODERNIZATION OF STEEL DIVISION, ACQUISITION OF PLANT AND MACHINERY FOR TEXTILE DIVISION AND WORKIN G CAPITAL FOR PLASTIC DIVISION ETC.; THAT THE INTEREST EXPENDITUR E HAS BEEN INCURRED FOR THE PURPOSE OF THE BUSINESS OF THE ASS ESSEE; THE ASSESSEE HAS SUCCESSFULLY ESTABLISHED THE NEXUS BET WEEN THE BORROWED FUNDS AND THEIR USE FOR THE PURPOSE OF INV ESTMENT. THE ASSESSEE HAS ALSO SHOWN THAT NO BORROWED FUNDS WERE USED FOR THE PURPOSE OF INVESTMENT. IT HAS BEEN FUR THER BROUGHT TO OUR NOTICE THAT THERE IS NO CHANGE IN TH E FACTS IN THIS YEAR, THEREFORE, WE FIND THAT FINDINGS OF LD. CIT(A) ARE IN JAI CORP LTD. 13 ACCORDANCE WITH FACTS OF THIS YEAR AND ORDERS PASSE D IN EARLIER YEARS. THUS, WE UPHOLD THE ORDER OF LD. CIT(A) WITH REGARD TO INTEREST. 6.3. WITH REGARD TO DISALLOWANCE OF EXPENSES, LD. CIT(A ) HAS NOT ACCEPTED VOLUNTARY DISALLOWANCE MADE BY THE ASS ESSEE AGGREGATING TO RS.56,17,671/-. HE DID NOT ACCEPT TH E DISALLOWANCE MADE BY THE AO, AND RESTRICTED THE DIS ALLOWANCE TO RS.14.30 LAKHS, OVER AND ABOVE THE DISALLOWANCE MADE BY ASSESSEE VOLUNTARILY. WHILE DISCUSSING THIS ISSUE, IT HAS BEEN OBSERVED BY THE LD. CIT(A) THAT IT WAS INTERESTING TO NOTE THAT ON THE ONE HAND THE ASSESSEE CLAIMED THAT ALL ITS U NITS WERE SEPARATE AND INDEPENDENT AND CORPORATE OFFICE PLAYE D NEGLIGIBLE ROLE AND NO PART OF ACTUAL EXPENSES WAS ALLOCABLE TO THE UNITS WHEN ISSUE INVOLVED WAS WITH RESPECT TO A LLOCATION OF COMMON HO EXPENSES TO UNITS ELIGIBLE FOR DEDUCTION U/S 10B OR 80IB. BUT, ON THE CONTRARY, WHILE COMPUTING DISA LLOWANCE U/S 14A THE ASSESSEE WORKED OUT COMMON EXPENSES OF RS.4,81,82,918/-, OUT OF WHICH ONLY RS.4,18,139/- ( I.E. 8.69%) WAS ALLOCATED TO CORPORATE OFFICE AND THE BA LANCE ABOVE 91% OF EXPENDITURE WAS ALLOCATED AMONG ALL THE 13 U NITS. IT WAS FURTHER OBSERVED BY HIM THAT THE BASIS OF ALLOC ATION OF COMMON EXPENSES WERE ALSO PECULIAR AND UNACCEPTABLE . HE ALSO OBSERVED THAT THE ASSESSEE DID NOT APPLY ANY L OGICAL OR SCIENTIFIC BASIS FOR THE PURPOSE OF ALLOCATION OF C OMMON HO EXPENSES AND THAT THE BASIS OF ALLOCATION KEPT CHAN GING DEPENDING UPON OWN CONVENIENCE OF THE ASSESSEE, AND ACCORDINGLY HE REJECTED THE BASIS OF ALLOCATION DON E BY THE ASSESSEE. JAI CORP LTD. 14 6.4. IT IS NOTED BY US THAT WE HAVE SENT BACK TO THE FI LE OF THE AO GROUND NOS.1 & 2 WHEREIN THE ISSUE OF ALLOCATION OF HEAD OFFICE OF EXPENSES IS INVOLVED. WE FIND THAT THE FA CTUAL ANALYSIS TO BE MADE BY THE LOWER AUTHORITIES MAY HAVE BEARIN G UPON THIS ISSUE, AND THEREFORE, IN THE INTEREST OF JUSTI CE AND FAIRNESS WE FIND IT APPROPRIATE TO SEND THE ISSUE OF DISALLO WANCE OF EXPENSES (EXCLUDING INTEREST) BACK TO THE FILE OF T HE AO TO BE DECIDED AFRESH, AFTER GIVING ADEQUATE OPPORTUNITY O F HEARING TO THE ASSESSEE. THE ASSESSEE SHALL BE FREE TO RAISE A LL THE FACTUAL AND LEGAL ISSUES BEFORE THE AO. THUS, GROUND NOS. 3 & 4 ARE MAY BE TREATED AS PARTLY ALLOWED FOR STATISTICAL PU RPOSES. 7. GROUND NO.5: THIS GROUND IS WITH REGARD TO LEVY OF INTEREST AND DISMISSED AS CONSEQUENTIAL. 8. GROUND NOS. 6 & 7: THESE GROUNDS ARE GENERAL AND DO NOT NEED ANY SPECIFIC ADJUDICATION AND THEREFORE DISMIS SED. NOW, WE TAKE UP REVENUES APPEAL ITA NO.4737/MUM/2014 9. GROUND NOS. 1 TO 6: THE SOLITARY ISSUE RAISED BY THE REVENUE IN THESE GROUNDS IS WITH REGARD TO RELIEF G IVEN BY THE LD. CIT(A), OUT OF DISALLOWANCE MADE BY THE AO U/S 14A. 9.1. IN OUR ORDER WHILE DEALING WITH GROUND NOS. 3 AND 4 OF ASSESSEES APPEAL, WE HAVE ALREADY HELD THAT THE DI SALLOWANCE OF INTEREST HAS BEEN RIGHTLY DELETED BY THE LD. CIT (A). THEREFORE, REVENUES GROUND WITH REGARD TO INTEREST STANDS JAI CORP LTD. 15 DISMISSED. WITH REGARD TO GROUNDS OF THE REVENUE FO R DISALLOWANCE OF EXPENSES U/S 14A, WE HAVE SENT BACK THE GROUNDS OF THE ASSESSEE BACK TO THE FILE OF THE AO FOR RE- EXAMINATION AND RE-ADJUDICATION. THEREFORE, GROUNDS RAISED BY THE REVENUE ARE ALSO SENT BACK TO THE AO WITH OUR D IRECTIONS AS GIVEN ABOVE. THUS, THESE GROUNDS MAY BE TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 10. IN THE RESULT, BOTH ASSESSEES AND REVENUES APPEA LS MAY BE TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOS ES. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH MARCH, 2016. SD/- (SANJAY GARG ) SD/- (ASHWANI TANEJA) '# / JUDICIAL MEMBER $# / ACCOUNTANT MEMBER MUMBAI; $ DATED : 16/ 03 /2016 CTX? P.S/. .. %'&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. & '( / THE APPELLANT 2. )*'( / THE RESPONDENT. 3. + + , ( & ) / THE CIT, MUMBAI. 4. + + , / CIT(A)- , MUMBAI 5. /0 ) 1 , + &' 12 , / DR, ITAT, MUMBAI 6. 3 4 / GUARD FILE. / BY ORDER, * /& ) //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI