Reckitt Benckiser (India) Ltd., Kolkata V. DCIT, CIR-12, KOLKATA, Kolkata

ITA 760/KOL/2014

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 0492 (ITAT-KOLKATA)
• Duration Of Justice: 4 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 25-04-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MD USMAN CIT DR ITA NOS
• Assessee Lawyers: J P KHAITAN
• Keywords: Business income; Depreciation; Earning of tax free income
• Section: 143(3); 14A; 80IB; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : KOLKATA [BEFORE HONBLE SHRI S.S. GODARA, JM & SHRI M.BAL AGANESH, AM ] I.T.A NO. 2113/KOL/20 13 ASSESSMENT YEAR : 2006-0 7 DCIT, CIRCLE-12, KOLKATA -VS- M/S REC KITT BENCKISER (INDIA) LTD. [PAN: AABCR 2655 Q] (APPELLANT) (RESPOND ENT) I.T.A NO. 2150/KOL/2013 ASSESSMENT YEAR : 2006-0 7 M/S RECKITT BENCKISER (INDIA) LTD. -VS- DCIT, CIRCLE-12, KOLKATA [PAN: AABCR 2655 Q] (APPELLANT) (RESPOND ENT) I.T.A NO. 2114/KOL/20 13 ASSESSMENT YEAR : 2008-0 9 DCIT, CIRCLE-12, KOLKATA -VS- M/S REC KITT BENCKISER (INDIA) LTD. [PAN: AABCR 2655 Q] (APPELLANT) (RESPOND ENT) I.T.A NO. 2151/KOL/2013 ASSESSMENT YEAR : 2008-0 9 M/S RECKITT BENCKISER (INDIA) LTD. -VS- DCIT, CIRCLE-12, KOLKATA [PAN: AABCR 2655 Q] (APPELLANT) (RESPOND ENT) I.T.A NO. 760/KOL/2014 ASSESSMENT YEAR : 2009-1 0 M/S RECKITT BENCKISER (INDIA) LTD. -VS- DCIT, CIRCLE-12, KOLKATA [PAN: AABCR 2655 Q] (APPELLANT) (RESPOND ENT) I.T.A NO. 762/KOL/2014 ASSESSMENT YEAR : 2009-1 0 DCIT, CIRCLE-12, KOLKATA -VS- M/S REC KITT BENCKISER (INDIA) LTD. [PAN: AABCR 2655 Q] (APPELLANT) (RESPOND ENT) FOR THE APPELLANT : SHRI J.P. KHAITAN, SR. ADVOCATE FOR THE RESPONDENT : SHRI MD. USMAN, CIT DR 2 ITA NOS.2113,2114,2150&2151/KOL/2013 ITA NOS.760&762/KOL/2014 M/S RECKITT BENCKISER (INDIA) LTD. A.YRS. 2006-07, 2008-09 & 2009-10 2 DATE OF HEARING : 27.06.2018 DATE OF PRONOUNCEMENT : 14.09.2018 ORDER PER S.S. GODARA, JM 1.THE REVENUE AND ASSESSEE FILED THEIR INSTANT THRE E CROSS APPEALS EACH FOR ASSESSMENT YEARS 2006-07, 2008-09 AND 2009-10 AGAINST THE CIT (A)-XII, KOLKATA, SEPARATE ORDERS DATED 11.03.2013, 14.03.2013, 16.01.2014 IN CASE NO S. 924/XII/12/09-10, 390/XII/12/11-12, 38/XII/CIR-12/13-14, (ASSESSMENT YEAR WISE); RESPECTIVELY INVOLVING PROCEEDINGS U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). WE PROCEED ASSESSMENT YEAR WISE FOR THE SAKE OF C ONVENIENCE AND BREVITY. ASSESSMENT YEAR 2006-07 REVENUES APPEAL I.T.A. NO. 2113/KOL/2013 AND ASSES SEES CROSS APPEAL I.T.A. NO. 2150/KOL/2013 WE COME TO REVENUES APPEAL. ITS SOLE GRIEVANCE R EADS THAT THE CIT(A) HAS ERRED IN LAW AND AS FACTS IN ALLOWING ARREARS SECTION 80IB A ND 80IC DEDUCTION CLAIMS TOTALING TO RS. 1,39,48,12,000/- THEREBY REVERSING ASSESSING OF FICERS ACTION NOT TAKING ANY COGNIZANCE THEREOF SOLELY FOR THE REASON THAT THE T AXPAYER HAD NOT SUBMITTED ITS FORM 10CCB AUDITORS REPORT IN RESPECT OF THE CORRES PONDING REVISED CLAIM. 2. IT EMERGES AT THE OUTSET THAT THE CIT(A) ORDER U NDER CHALLENGE HAS MERELY DIRECTED THE ASSESSING OFFICER TO CONSIDER THE IMPUGNED DEDU CTION CLAIM IN LIGHT OF HIS FINDINGS ON THE VERY ISSUE IN PRECEDING ASSESSMENT YEAR 2005 -06. BOTH THE LEARNED REPRESENTATIVES ARE VERY FAIR IN TAKING AS TO THIS TRIBUNAL CO-ORDINATE BENCH ORDER DATED 06.01.2017 UPHOLDING IDENTICAL LOWER APPELLATE FIND ING IN THE VERY ISSUE IN REVENUES 3 ITA NOS.2113,2114,2150&2151/KOL/2013 ITA NOS.760&762/KOL/2014 M/S RECKITT BENCKISER (INDIA) LTD. A.YRS. 2006-07, 2008-09 & 2009-10 3 APPEAL IN I.T.A. NO. 33/KOL/2010. HONOURABLE APEX COURTS DECISION IN CIT VS. G. M KNITTING INDUSTRIES PVT. LTD. AND ANOTHER [2015] 12 5 DTR 38 (SC) HAS ALREADY SETTLED THE LAW THAT AN ASSESSEE IS ENTITLED FOR SECTION 80 IB DEDUCTION EVEN IF IT FILES ITS FORM 10CCB AUDIT REPORT NOT WITH THE RETURN BUT BEFORE C OMPLETION OF ASSESSMENT. THIS IS NOT THE REVENUES CASE THAT THE ASSESSEES AUDIT REPORT HAS ESCAPED THE ASSESSING OFFICER CONSIDERATION DURING ASSESSMENT . THERE IS NO DISTI NCTION ON FACTS OR LAW INVOLVEMENT IN THE TWO ASSESSMENT YEARS. WE THUS DECLINE THE REVEN UES INSTANT SUBSTANTIVE GROUND AS WELL AS MAIN APPEAL IN I.T.A. NO. 2113/KOL/2013. 3. ASSESSEES CROSS APPEAL IN I.T.A. NO. 2150/KOL/2013 THE ASSESSEES FIRST SUBSTANTIVE GROUND CHALLENGES CORRECTNESS OF BOTH THE LOWER AUTHORITIES ACTION DECLINING SECTION 80IB/ 80IC DED UCTION CLAIMED OF RS. 4,77,40,000/- IN RELATIONS TO INTEREST INCOME FOR THE REASON THAT THE SAME HAS NOT BEEN DERIVED FROM THE ELIGIBLE BUSINESS AS PER HONOURABLE APEX COURTS DE CISION IN CIT VS. STERLING PRODUCTS 237 ITR 579 (SC). THEY HOLD THAT THE CRUCIAL EXPRES SION DERIVED FROM USED IN THE IMPUGNED DEDUCTION PROVISION MEANS THE RELEVANT INC OME TO BE HAVING A DIRECT NEXUS WITH THE BUSINESS ACTIVITY OR PROFITS AND GAINS DE RIVED THERE FROM. LEARNED SENIOR COUNSEL FAIRLY CONCEDES THAT THE HONOURABLE JURISDI CTIONAL HIGH COURT DECISION IN ASSESSEES OWN CASE REPORTED AS 231 TAXMAN 585 (CAL ) HAS ALREADY UPHELD REVENUES VERY STAND. WE CONFIRM THE IMPUGNED SECTION 80IB/8 0IC DEDUCTION DISALLOWANCE OF RS. 4,77,40,000/- ON THIS COURT ALONE. 4. THE ASSESSEES NEXT GRIEVANCE IS THAT THE LEARNE D CIT(A) HAS ERRED IN LAW AND ON FACTS IN AFFIRMING THE ASSESSING OFFICER ACTION DISALLOWI NG PROVISION OF MARKETING SERVICES AMOUNTING RS. 10,52,08,968/-. BOTH PARTIES ARE UNAN IMOUS DURING THE COURSE OF HEARING THAT THE ASSESSING OFFICER AS WELL AS THE CIT(A) H AVE GONE BY THEIR RESPECTIVE FINDINGS IN THE IMMEDIATE PRECEDING/SUBSEQUENT ASSESSMENT YE ARS WHILE MAKING THE IMPUGNED DISALLOWANCE. FOR THE REASON THAT IT IS IN THE NATU RE OF A CONTINGENT LIABILITY ONLY THAN AN 4 ITA NOS.2113,2114,2150&2151/KOL/2013 ITA NOS.760&762/KOL/2014 M/S RECKITT BENCKISER (INDIA) LTD. A.YRS. 2006-07, 2008-09 & 2009-10 4 ASCERTAINED ONE, WE NOTICE THAT THE TAXPAYERS COR RESPONDING SUBSTANTIVE GROUND ALREADY STANDS ACCEPTING IN ASSESSMENT YEARS 2003-0 4 TO 2004-05 IN I.T.A. NOS. 1671/KOL/2008 AND 1024/KOL/20109 DECIDED ON 25.05.2 016 WITH THE FOLLOWING DETAILED DISCUSSION: 10. THE ISSUE RAISED IN GROUND NO. 2 RELATES TO TH E DISALLOWANCE OF RS. 1,69,27,615/- MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(APPEALS) ON ACCOUNT OF PROVISION MADE FOR MARKETING EXPENSES. 11. AS NOTICED BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAD MADE A PROVISION OF RS.19.90 CRORE S FOR MARKETING EXPENSES. HE, THEREFORE, REQUIRED THE ASSESSEE TO FURNISH THE COM PLETE DETAILS SHOWING THE NATURE AND BASIS OF PROVISION MADE FOR MARKETING EXPENSES. IN REPLY, THE FOLLOWING SUBMISSION WAS MADE BY THE ASSESSEE IN WRITING:- DURING THE PREVIOUS YEAR RELEVANT TO THE AY 2003-0 4, RBIL HAS MADE A PROVISION OF RS.199,003,162/- IN RESPECT OF MARKETI NG EXPENSES. THE SAID PROVISION WAS REQUIRED TO BE MADE BY RBIL SINCE IT IS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING, PROVISIONS REQUIRED TO BE MAD E IN RESPECT OF ALL EXPENSES INCURRED DURING THE ACCOUNTING PERIOD IRRESPECTIVE AT THE TIME PAYMENT. SINCE RBIL IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING W HICH IS A PERMISSIBLE METHOD OF ACCOUNTING AS PER SECTION 145 OF THE ACT AND THE ACCOUNTS ARE AUDITED AND PROVISION MADE AS PER THE PRESCRIBED ACCOUNTING POLICIES SHOULD NOT BE DISALLOWED UNLESS SPECIFICALLY PROVIDED IN THE PROV ISION OF THE ACT. FURTHER, OUT OF THE PROVISION OF RS.199,033,162/-, A SUBSTANTIAL AMOUNT HAS BEEN PAID SUBSEQUENTLY AND BALANCE IS LIKELY TO BE PAID IN DU E COURSE. HENCE, NO DISALLOWANCE IS WARRANTED ON THIS ACCOUNT. WITHOUT PREJUDICE TO THE AFORESAID SUBMISSION, PLEASE NOTE THAT IN CASE OF WRITE BACK OF THE AFORESAID PROVISION, IF IT IS FOUND TO BE IN EXCESS OR FOR ANY OTHER REASONS, THE SAME WILL LIABLE TO TAX IN VIEW OF THE PROVISIONS OF SECTION 41 OF THE ACT. HE NCE, THERE WILL BE NO LOSS TO THE REVENUE ON THAT ACCOUNT ALSO. IN VIEW OF THE AFORES AID WE SUBMIT THAT NO DISALLOWANCE IS WARRANTED IN RESPECT OF THE IMPUGNE D PROVISION OF RS.199,003,162/-. 12. THE ABOVE EXPLANATION OFFERED BY THE ASSESSEE W AS NOT FOUND ACCEPTABLE BY THE ASSESSING OFFICER. ACCORDING TO HIM, THE ASSESSEE F OLLOWING MERCANTILE SYSTEM OF ACCOUNTING, WAS ENTITLED TO CREATE PROVISION ONLY A GAINST ASCERTAINED LIABILITIES. IN THIS REGARD, HE FOUND FROM THE RELEVANT DETAILS FILED BY THE ASSESSEE THAT OUT OF THE PROVISION OF RS.19.90 CRORES MADE BY THE ASSESSEE, THE ACTUAL AMOUNT SPENT WAS ONLY RS.18.20 CRORES AND THE BALANCE AMOUNT OF RS.1.69 CRORES WAS FOUND TO BE EXCESS. HE HELD THAT THIS EXCESS PROVISION WAS LIABLE TO BE DISALLOWED N OT BEING PERTINENT TO THE YEAR UNDER CONSIDERATION AND ACCORDINGLY THE DISALLOWANCE OF R S.1,69,27,615/- WAS MADE BY HIM ON ACCOUNT OF PROVISION FOR MARKETING EXPENSES. 5 ITA NOS.2113,2114,2150&2151/KOL/2013 ITA NOS.760&762/KOL/2014 M/S RECKITT BENCKISER (INDIA) LTD. A.YRS. 2006-07, 2008-09 & 2009-10 5 13. THE DISALLOWANCE MADE BY THE ASSESSING OFFICER OUT OF THE PROVISION FOR MARKETING EXPENSES WAS DISPUTED BY THE ASSESSEE IN THE APPEAL FILED BEFORE THE LD. CIT(APPEALS). BESIDES REITERATING THE SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER, IT WAS ALSO BROUGHT TO THE NOTICE OF THE LD. CIT(APPEALS) BY TH E ASSESSEE THAT THE EXCESS PROVISION OF RS.1.69 CRORES HAVING BEEN OFFERED TO TAX IN THE SU BSEQUENT YEARS UNDER SECTION 41(1) AT THE SAME RATE, THERE WAS NO LOSS TO THE REVENUE. TH E LD. CIT(APPEALS), HOWEVER, DID NOT FIND MERIT IN THE STAND OF ASSESSEE AND REJECTING T HE SAME, HE PROCEEDED TO CONFIRM THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON ACCOU NT OF EXCESS PROVISION MADE FOR MARKETING EXPENSES. 14. THE LD. COUNSEL FOR THE ASSESSEE EXPLAINED THE NATURE OF PROVISION MADE FOR MARKETING EXPENSES AND SUBMITTED THAT SUCH PROVISIO N IS REQUIRED TO BE MADE IN THE RELEVANT YEAR ON ESTIMATED BASIS. HE SUBMITTED THAT DUE TO THE CHANGES THAT TAKE PLACE, THE ACTUAL EXPENDITURE FINALLY INCURRED ON MARKETIN G GETS CHANGED AND DEPENDING ON THE QUANTUM OF EXPENDITURE ACTUALLY INCURRED, THE EXCES S PROVISION IS WRITTEN BACK IN THE SUBSEQUENT YEARS AND OFFERED TO TAX. HE CONTENDED T HAT SINCE THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING, THE PROVISION FOR MARKETING EXPENSES IS REQUIRED TO BE MADE FOR THE RELEVANT YEAR ON ESTIMATED BASIS AND S INCE SUCH PROVISION, IF FOUND TO BE EXCESS, IS BEING OFFERED TO TAX IN THE SUBSEQUENT Y EARS AT VIRTUALLY THE SAME RATE, THE DISALLOWANCE MADE IN THE YEAR UNDER CONSIDERATION O N ACCOUNT OF SUCH EXCESS PROVISION IS NOT JUSTIFIED. 15. THE LD. D.R., ON THE OTHER HAND, SUBMITTED THAT THE PROVISION MADE BY THE ASSESSEE FOR MARKETING EXPENSES ON ESTIMATED BASIS IS ALWAYS FOUND TO BE ON THE HIGHER SIDE. HE SUBMITTED THAT IT IS NOT CLEAR AS TO WHY THERE SHOU LD BE DIFFERENCE BETWEEN PROVISION MADE AND ACTUAL AMOUNT OF EXPENSES INCURRED. HE CON TENDED THAT IN THE ABSENCE OF ANY SOUND BASIS GIVEN BY THE ASSESSEE FOR MAKING THE ES TIMATE, THE EXCESS PROVISION IS LIABLE TO BE DISALLOWED AS RIGHTLY HELD BY THE AUTHORITIES BELOW. 16. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE QUESTION THAT ARI SES FOR OUR CONSIDERATION IN THE PRESENT CONTEXT IS WHETHER THE ASSESSEE FOLLOWING M ERCANTILE SYSTEM OF ACCOUNTING IS RIGHT IN RECOGNIZING AND MAKING THE PROVISION FOR M ARKETING EXPENSES IN THE FACTS AND CIRCUMSTANCES OF THE CASE. IN THIS REGARD, A USEFUL REFERENCE MAY BE MADE TO THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF RO TORK CONTROLS INDI (PVT.) LIMITED VS.- CIT REPORTED IN 314 ITR 62 CITED BY THE LD. CO UNSEL FOR THE ASSESESE, WHEREIN IT WAS HELD BY THE HONBLE APEX COURT THAT A PROVISION CA N BE RECOGNIZED WHEN (A) AN ENTERPRISE HAS A PRESENT OBLIGATION AS A RESULT OF A PAST EVENT, (B) IT IS PROBABLE THAT AN OUTFLOW OF RESOURCES WILL BE REQUIRED TO SETTLE THE OBLIGATION, (C) A RELIABLE ESTIMATE CAN BE MADE OF THE AMOUNT OF THE OBLIGATION. IN THE PR ESENT CASE, THE PROVISION MADE BY THE ASSESSEE-COMPANY FOR MARKETING EXPENSES AMOUNTING T O RS.19.90 CRORES IS ALLOWED BY THE ASSESSING OFFICER TO THE EXTENT OF RS.18.20 CRO RES THEREBY ACCEPTING THAT THE ASSESSEE-COMPANY HAD A PRESENT OBLIGATION ON ACCOUN T OF SUCH MARKETING EXPENSES AND THERE WAS REQUIREMENT TO MAKE PROVISION TO SETTLE T HE SAME. HIS ONLY OBJECTION IS THAT THE PROVISION SO MADE WAS EXCESS GOING BY THE AMOUN T ACTUALLY REQUIRED BY THE ASSESSEE 6 ITA NOS.2113,2114,2150&2151/KOL/2013 ITA NOS.760&762/KOL/2014 M/S RECKITT BENCKISER (INDIA) LTD. A.YRS. 2006-07, 2008-09 & 2009-10 6 SUBSEQUENTLY TO SETTLE THE OBLIGATION AND ACCORDING LY A DISALLOWANCE TO THE EXTENT OF SUCH EXCESS PROVISION AMOUNTING TO RS.1.69 CRORES W AS MADE BY HIM. THE ASSESSING OFFICER THUS FINALLY OBJECTED TO THE QUANTUM OF PRO VISION MADE BY THE ASSESSEE FOR MARKETING EXPENSES ON THE GROUND THAT THE ESTIMATE MADE BY THE ASSESSEE OF THE AMOUNT OF OBLIGATION IS NOT RELIABLE. 17. AT THE TIME OF HEARING BEFORE US, THE LD. D.R. HAS ALSO REITERATED THIS STAND BY SUBMITTING THAT THE PROVISION MADE BY THE ASSESESE FOR MARKETING EXPENSES IS FOUND TO BE ALWAYS ON THE HIGHER SIDE, WHICH CLEARLY SHOWS T HAT THE ESTIMATE MADE BY THE ASSESSEE OF THIS LIABILITY IS NOT RELIABLE. WE FIND IT DIFFICULT TO ACCEPT THIS STAND OF THE REVENUE. IT IS PERTINENT TO NOTE HERE THAT OUT OF T HE TOTAL PROVISION OF RS.19.90 CRORES MADE BY THE ASSESSEE FOR MARKETING EXPENSES, A SUM OF RS.18.20 CRORES WAS REQUIRED TO SETTLE THE OBLIGATION AND ONLY THE BALANCE AMOUNT O F RS.1.69 CRORES, WHICH IS LESS THAN 10% OF THE TOTAL PROVISION MADE BY THE ASSESSEE REM AINED EXCESS. MOREOVER, SUCH EXCESS PROVISION WAS SUBSEQUENTLY REVERSED BY THE A SSESSEE AND OFFERED TO TAX AS THE SAME RATE AS SUBMITTED BY THE LD. COUNSEL FOR THE A SSESSEE RESULTING INTO NO LOSS WITH THE REVENUE. HAVING REGARD TO ALL THESE FACTS OF THE CA SE, IT CANNOT BE SAID THAT THE ESTIMATE MADE BY THE ASSESSEE OF THE PROVISIONS FOR MARKETIN G EXPENSES WAS NOT RELIABLE. IN OUR OPINION, THE PROVISION FOR MARKETING EXPENSES WAS R IGHTLY RECOGNIZED AND MADE BY THE ASSESSEE BEING ITS LIABILITY FOR THE EXPENSES OF IT S BUSINESS AND THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT( APPEALS) MERELY ON THE BASIS THAT SUCH PROVISION IS FOUND TO BE FINALLY EXCESSIVE IS NOT SUSTAINABLE. WE, ACCORDINGLY, DELETE THE DISALLOWANCE MADE ON THIS ISSUE AND ALLO W GROUND NO. 2 OF THE ASSESSEES APPEAL. 5. LEARNED CIT DR VEHEMENTLY CONTENDS AT THIS STAGE THAT THE ASSESSEE HAS FAILED TO PROVE THE THREE BASIC INGREDIENTS OF ITS IMPUGNED P ROVISIONS I.E. AN OBLIGATION ARISING AS A RESULT OF PAST EVENTS, OUTFLOW OF RESOURCES REQU IRED FOR THE VERY OBLIGATION FOLLOWED BY A RELIABLE ESTIMATION; RESPECTIVELY. THE ASSESSE E INTER ALIA TAKES US TO PAGES 138 (ASSESSMENT YEAR WISE DETAILS OF THE MARKETING SERV ICES FROM ASSESSMENT YEAR 2004-05 ONWARDS); PAGE 140 (NOTES PERTAINING TO ITS MEDIA A CTIVITY, CREATION OF MARKETING PROVISION AND REVERSAL THEREOF), PAGE 175 (SAMPLE E STIMATION), PAGES 176 TO 204 (TV ESTIMATE) AND SCHEDULE AS WELL AS OTHER SIMILAR DET AILS UP TO PAGE 235 VIS--VIS ITS ADVERTISEMENTS/MARKETING EXPENSES FOR THE IMPUGNED ASSESSMENT ORDER AMOUNTING TO RS. 156.94 CRORES. SUFFICE TO SAY, BOTH THE LOWER A UTHORITIES HAVE BEEN VERY FAIR IN NOT PINPOINTING ANY DISTINCTION ON FACTS AND LAW IN T HE INSTANT CASE IN ALL THESE ASSESSMENT YEARS. WE ADOPT THE ABOVE EXTRACTED REASONING MUTATIS MUTANDIS QUA THE IMPUGNED 7 ITA NOS.2113,2114,2150&2151/KOL/2013 ITA NOS.760&762/KOL/2014 M/S RECKITT BENCKISER (INDIA) LTD. A.YRS. 2006-07, 2008-09 & 2009-10 7 ASSESSMENT ORDER TO DELETE THE DISALLOWANCE OF MARK ETING SERVICES PROVISION. ORDERED ACCORDINGLY. 6. THE ASSESSEES NEXT SUBSTANTIVE GROUND SEEKS TO DELETION SECTION 14A DISALLOWANCE OF RS. 23,660/- MADE IN BOTH THE LOWER PROCEEDINGS. TH E SAME PERTAINS TO EXEMPT INCOME FROM TAX FREE BONDS OF RS. 23,65,767/-. THE CIT(A) HAS FOLLOWED THE FINDINGS ON THE VERY ISSUE IN EARLIER ASSESSMENT YEARS TO ESTIMATE THE IMPUGNED DISALLOWANCE @ 1% OF EXEMPT INCOME; COMING TO RS. 23,660/- MR. KHAITAN S TATES VERY FAIRLY THAT THIS TRIBUNAL HAS ALREADY AFFIRMED THE SAID ESTIMATED DISALLOWANC E @1%. WE THUS REJECT THE ASSESSEES INSTANT SUBSTANTIVE GROUND. ITS APPEAL I.T.A. NO. 2150/KOL/2013 IS PARTLY ACCEPTED IN ABOVE TERMS. ASSESSMENT YEAR 2008-09 REVENUES APPEAL IN I.T.A. NO. 2114/KOL/2013 AND AS SESSEES CROSS APPEAL IN I.T.A. NO. 2151/KOL/2013 THE REVENUE AS WELL AS ASSESSEE RAISE TWO SUBSTANT IVE GROUNDS IS IN THE INSTANT CROSS APPEALS. THE TAX PAYER TWO FOLDED GRIEVANCE IN ITS CROSS APPEAL NO. 2151/KOL/2013 IS THAT THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN D ISALLOWING INTEREST INCOME OF RS. 23,46,61,000/- IN COMPUTING SECTION 80IB/80IC DEDUC TION AS WELL AS IN INVOKING SECTION 14A READ WITH RULE 8D DISALLOWANCE OF RS. 50,000/- PERTAINING TO ITS EXEMPT INCOME. LEARNED SENIOR COUNSEL IS VERY FAIR IN POINTING OUT THAT OUR DISCUSSION ON THE TWIN IDENTICAL ISSUES IN ASSESSMENT YEAR 2006-07 HAVE AL READY UPHELD THE CIT(A) FINDINGS IN PRECEDING YEARS. WE THUS REJECT THIS TAX PAYERS APPEAL I.T.A. NO. 2151/KOL/2013. 7. COMING TO REVENUES APPEAL, WE FIND THAT ITS FOR MER SUBSTANTIVE GROUND CHALLENGES THE CIT(A)S ORDER REVERSING ASSESSING OFFICER ACT ION ALLOCATING RESIDUAL COST BETWEEN ELIGIBLE AND NON-ELIGIBLE ELEMENTS IN RATIO OF SALE S TO THE TUNE OF RS. 14,64,64,507/- U/S 80IB/80IC AS WELL AS IN TREATING SCRAP SALES OF RS. 1,11,74,500/- TO BE ELIGIBLE FOR THE 8 ITA NOS.2113,2114,2150&2151/KOL/2013 ITA NOS.760&762/KOL/2014 M/S RECKITT BENCKISER (INDIA) LTD. A.YRS. 2006-07, 2008-09 & 2009-10 8 SAID DEDUCTION RELIEF, RESPECTIVELY. LEARNED CIT DR TAKES US TO ASSESSMENT ORDER DATED 28.12.2011 AS THE FORMER ISSUE ALLOCATION OF RESIDU AL COST CONTAINING THE FOLLOWING DETAILED DISCUSSION: 2.1. THE ASSESSEE IS HAVING UNITS (FACTORIES), INC OME FROM WHICH ARE ELIGIBLE FOR DEDUCTION UNDER CHAPTER VIA OF THE INCOME TAX ACT. IT ALSO HAS UNITS (FACTORIES), INCOME FROM WHICH ARE NOT ELIGIBLE FOR DEDUCTION UN DER CHAPTER VIA OF THE INCOME TAX ACT. ASSESSEE HAS USED THE TERMINOLOGY FISCAL UNIT S FOR UNITS (FACTORIES), INCOME FROM WHICH ARE ELIGIBLE FOR DEDUCTION UNDER CHAPTER VIA OF THE INCOME TAX ACT. IT HAS USED THE TERMINOLOGY NON-FISCAL UNITS FOR UNITS (FACTO RIES), INCOME FROM WHICH ARE NOT ELIGIBLE FOR DEDUCTION UNDER CHAPTER VIA OF THE INC OME TAX ACT. THE PROFITS DERIVED FROM THESE FISCAL UNITS HAVE TO BE COMPUTED WHICH W ILL BE ELIGIBLE FOR DEDUCTION FROM THE TOTAL INCOME OF THE ASSESSEE. THE QUESTION IS HOW I S THE PROFIT AND GAINS FROM THESE UNITS TO BE COMPUTED. SECTION 80IB (13) STATES THAT THE PROVISION OF SECT ION 80IA(5) AND 80IA(7) TO 80IA(12) WILL APPLY TO THE ELIGIBLE BUSINESS. SECTION 801C(7) STATES THAT THE PROVISION OF SECTIO N 80IA(5) AND 80IA(7) TO 801A(12) WILL APPLY TO THE ELIGIBLE BUSINESS. SECTION 801A(5) STATES THAT THE PROFIT & GAINS FROM THESE UNITS TO BE COMPUTED AS IF SUCH ELIGIBLE BUSINESS WERE THE ONLY SOURCE OF INCOME OF THE ASSESSEE. THIS MEANS THAT INCOME FROM THESE UNITS SHALL BE CREDITED AND ALL T HE. COST NECESSARY TO RUN THE UNIT SHALL BE DEBITED. THESE EXPENSES WILL INCLUDE COST DIRECTLY ATTRIBUTABLE TO THESE UNITS AS WELL AS COST WHICH ARE INDIRECTLY ATTRIBUTABLE TO T HESE UNITS. EVEN ADMINISTRATIVE EXPENSE LIKE DIRECTOR FEES ETC WILL HAVE TO BE CONS IDERED BECAUSE IF THESE UNITS WERE THE ONLY SOURCE OF INCOME EVEN DIRECTOR FEES WOULD HAVE BEEN DEBITED. ASSESSEE HAS ALREADY PREPARED A SEPARATE PROFIT & L OSS ACCOUNT FOR EACH FISCAL UNIT AND CLAIMED THE PROFITS FROM THESE FISCAL UNITS AS ELIG IBLE FOR DEDUCTION UNDER CHAPTER VI-A. NOW IT REMAINS TO BE SEEN WHETHER THE PROFITS & GAI NS HAVE BEEN CORRECTLY COMPUTED AS IF THESE UNITS ARE THE ONLY SOURCE OF INCOME. THESE ARE SUBMITTED IN FORM 10CCB. TO DETERMINE THE PROFIT & GAINS FROM THESE UNITS AS SESSEE HAS CONSIDERED BOTH DIRECT COST AND INDIRECT COST WHICH IN PRINCIPLE IS CORREC T. NOW IT REMAINS TO BE SEEN WHETHER THE QUANTUM OF INDIRECT COST ATTRIBUTED TO THESE FI SCAL UNITS ARE AS IF THESE UNITS ARE THE ONLY SOURCE OF INCOME. THE ASSESSEE HAS DEBITED CERTAIN COSTS IN ITS PROFI T & LOSS ACCOUNT THE TOTAL OF WHICH IS RS. 379,933,652.301- ( AS PER ACCOUNTS) AND THE BRE AK UP IS AS BELOW: 9 ITA NOS.2113,2114,2150&2151/KOL/2013 ITA NOS.760&762/KOL/2014 M/S RECKITT BENCKISER (INDIA) LTD. A.YRS. 2006-07, 2008-09 & 2009-10 9 OTHER COSTS AS PER ACCOUNTS (RS.) FINANCE 57,077,480.4 HR 42,532,226.9 OTHERS 280,323,945.0 TOTAL 379,933,652.3 THE ASSESSEE HAS APPORTIONED A PART OF THESE COST T O ELIGIBLE FISCAL UNITS. THE METHODOLOGY OF ASSESSEE IS AS BELOW: THE ASSESSEE HAS APPORTIONED THE COST OF RS. 379,93 3,652.3/- IN THREE HEADS. ONE IS FISCAL UNITS, OTHER IS NON-FISCAL UNITS AND THE THI RD IS HEAD OFFICE. IT CONSIDERED THE EMPLOYEE DIRECTLY INVOLVED IN MANAGEMENT OF FISCAL AND NON FISCAL UNITS WHICH ARE POSTED IN HEAD OFFICE. THESE ARE 32 IN NUMBER. THEN IT CONSIDERED THE TOTAL NUMBER OF EMPLOYEES POSTED IN HEAD OFFICE. THESE ARE 115 IN N UMBER. THUS IT APPORTIONED THE EXPENSE OF RS. 379,933,652. 30/- TO HEAD OFFICE AS BELOW: [(115-32)/115]X379,933,652.30/- WHICH IS RS. 274,21 2,983.80/- FURTHER IT APPORTIONED TO THE EXPENSE TO FISCAL AND NON-FISCAL UNITS AS BELOW: [(32/115]X379,933,652.30/- WHICH IS RS. 105,720,668 .50/- IT THEN DIVIDED THE AMOUNT OF RS. 105,720,668.50/- AMONGST THE VARIOUS FISCAL UNITS ON THE BASIS OF THE SALES OF THE UNITS AS BELOW: TOTAL SALES OF THE ASSESSEE COMPANY IS RS. 13,836,2 39,000/-. THESE INCLUDES SALES FROM FISCAL AND NON-FISCAL UNITS BOTH. 10 ITA NOS.2113,2114,2150&2151/KOL/2013 ITA NOS.760&762/KOL/2014 M/S RECKITT BENCKISER (INDIA) LTD. A.YRS. 2006-07, 2008-09 & 2009-10 10 THUS, THE SAME EXPENSES FOR UNIT NOT CLAIMING DEDUC TION UNDER CHAPTER VIA IS RS. 105,720,668.50/- - RS. 60,776,484.70/- WHICH IS RS. 449.11 LACS. IT MEANS THAT THE EXPENSES WHICH WAS APPORTIONED TO HEAD OFFICE OF AN AMOUNT OF RS. 274,212,983.80/- HAS NOT BEEN APPORTIONED TO NEITHER FISCAL UNITS NO R NON-FISCAL UNITS. HOWEVER, THE SAME HAS BEEN DEBITED TO CONSOLIDATED PROFIT AND LOSS AC COUNT OF THE ASSESSEE COMPANY. THE TAX IS DETERMINED FROM PROFIT SHOWN IN CONSOLIDATE D P/L A/C LESS DEDUCTION CLAIMED WHICH IS PROFIT OF FISCAL UNITS. IT MEANS THAT ANY EXPENSE WHICH HAS NOT BEEN ALLOCATED TO EITHER FISCAL UNITS OR NON-FISCAL UNITS REDUCES THE CONSOLIDATED P/L PROFIT. IT MEANS THAT IN ESSENCE THIS REDUCES THE PROFIT OF NON-FISCAL UN ITS. THIS MEANS THAT THE HEAD OFFICE EXPENSE ARE APPORTIONED TO NON-FISCAL UNITS. THIS IS INCORRECT. THE CORRECT APPORTIONMENT WOULD BE TO DIVIDE THE EN TIRE EXPENSE AMONGST FISCAL AND NON-FISCAL UNITS. THE HEAD OFFICE DOES NOT EXIST IN ISOLATION. THE EXPENSES ALLOCATED TO HEAD OFFICE HAS TO BE ABSORBED BY BOTH FISCAL UNITS AS WELL AS NON-FISCAL UNITS. COST ACCOUNTING STANDARD 3 (CAS-3) ISSUED BY THE COUNCIL OF THE INSTITUTE OF COST AND WORKS ACCOUNTANTS OF INDIA ON OVERHEADS. THE STANDARD D EALS WITH THE METHOD OF COLLECTION, ALLOCATION, APPORTIONMENT AND ABSORPTION OF OVERHEA DS. IT STATES THAT COST SHOULD BE APPORTIONED TO VARIOUS COST CENTRE AND THEN ABSORBE D IN THE PRODUCTS. THE PROCESS ADOPTED BY THE ASSESSEE DIVIDE THE COST TO VARIOUS COST CENTRE LIKE HEAD OFFICE, FISCAL UNITS AND NON-FISCAL UNITS BUT THE EXPENSES APPORTI ONED TO HEAD OFFICE IS NOT ABSORBED BY THE FISCAL UNITS AND IS ONLY ABSORBED BY NON-FISCAL UNITS. THE HEAD OFFICE EXPENSE OF RS. 274,212,983.80/- HAS TO BE FURTHER ABSORBED AMONGST FISCAL UNITS AS BELOW: THUS THE SAME EXPENSES FOR UNIT NOT CLAIMING DEDUCT ION UNDER CHAPTER VI-A WILL BE RS. 274,212,983.80/- - RS. 157,639,007.09/-WHICH IS RS. 116573977/-. 11 ITA NOS.2113,2114,2150&2151/KOL/2013 ITA NOS.760&762/KOL/2014 M/S RECKITT BENCKISER (INDIA) LTD. A.YRS. 2006-07, 2008-09 & 2009-10 11 THUS THE EXPENSE OF AN AMOUNT RS. 157,639,007.09/- WAS NOT ABSORBED TO COST OF FISCAL UNIT AN THUS THE PROFITS OF THESE FISCAL UNITS WERE INFLATED BY AN AMOUNT RS. 157,639,007.09/-. THE DEDUCTION THUS CLAIMED WAS EX CESS BY AN AMOUNT RS. 157,639,007.09/- WHICH SHOULD BE TAXED. 2.2 ASSESSEE WAS ASKED AS TO WHY THE SAID INCOME BE NOT CONSIDERED AS INELIGIBLE FOR DEDUCTION U/S 801B/801C VIDE ORDER SHEET NOTING DAT ED 31-10-2011.ASSESSEE SUBMITTED A REPLY ON 14-11-2011 STATING THAT: 'IN THIS REGARD, WE SUBMIT THAT THE COMPANY HAS CLA IMED DEDUCTION OF RS 25,461.88 LACS UNDER SECTIONS 80-IB AND 80IC OF THE ACT IN RESPECT OF PARWANOO {SOAP}, PARWANOO {LIQUID}, JAMMU {POWDER}, JAMMU {PEST}, BADDI AND U TTARANCHAL UNITS RESPECTIVELY. IN THIS REGARD, FURTHER TO OUR EARLIER SUBMISSION D ATED 02 SEPTEMBER 2011 AND 20 SEPTEMBER 2011, WE SUBMIT THAT ALL THE COSTS HAVE B EEN PROPERLY AND PRUDENTLY ALLOCATED TO THE UNITS ELIGIBLE FOR FISCAL INCENTIV E. FURTHER, IT WAS SUBMITTED AND EXPLAINED TO YOUR GOODSELF THAT RBIL HAS ALLOCATED THE OTHER EXPENSES OF RS 3,7991AKHS {APPROX} INCURRED ON ACCOUNT OF {I} HR-RESIDUAL COS T {II} FINANCIAL RESIDUAL COST AND {III} RESIDUAL COST CENTRE - OFFICE/ LEGAL/ IA AMON G THE ELIGIBLE AND NON-ELIGIBLE FISCAL UNITS IN THE RATIO OF THE NUMBER OF EXECUTIVE AT TH E CORPORATE OFFICE WHO ARE DIRECTLY INVOLVED IN THE MANAGEMENT OF THE FACTORY OPERATION S LIKE PROCUREMENT, PRODUCTION, QUALITY, LOGISTICS ETC. TO THE NUMBER OF EMPLOYEES TO THE CORPORATE OFFICE AND THE RATIO OF SALES OF ELIGIBLE FISCAL UNITS TO TOTAL SALES. AGAINST THE SAID ALLOCATION, YOUR GOODSELF HAS ASKE D US TO SHOW CAUSE AS TO WHY THE OTHER EXPENSES OF RS 3,991AKHS (APPROX) SHOULD NOT BE ALLOCATED AMONG ELIGIBLE AND NON-ELIGIBLE UNITS IN CONNECTION WITH THE DEDUCTION CLAIMED UNDER SECTIONS 80IB AND 80IC OF THE ACT, IN THE TURNOVER RATIO. IN THIS REGARD, WE SUBMIT THAT THE RESIDUAL COSTS P ERTAIN TO THOSE COST WHICH COULD NOT BE ALLOCATED OR IDENTIFIED WITH SINGLE FUNCTION OR UNI T DUE TO THE GENERAL UTILITY TO ALL THE FUNCTIONS AND UNITS OF THE COMPANY. THE BASIS OF CO LLECTION OF THIS COST IS THE NUMBER OF EXECUTIVE. THESE COSTS INCLUDE THE RESIDUARY COSTS OF ALL THE SUPPORT FUNCTIONS WHICH HAVE NOT BEEN ALLOCATED TO THE COST OF GOODS SOLD ' COGS'). THE RESIDUAL COST BROADLY CONSISTS OF ALL THE SUPPO RT FUNCTIONS LIKE FINANCE/ HR/ IS APART FROM OFFICE ADMINISTRATION, LEGAL, INTERNAL AUDIT, ETC. AS FOLLOWS: SALARY & WAGES INCLUDING ALL BENEFITS TO EMPLOYEES TRAVELING EXPENSES TRAINING EXPENSES LEGAL AND CONSULTANCY SECURITY SERVICES OFFICE ELECTRICITY AND WATER RENT 12 ITA NOS.2113,2114,2150&2151/KOL/2013 ITA NOS.760&762/KOL/2014 M/S RECKITT BENCKISER (INDIA) LTD. A.YRS. 2006-07, 2008-09 & 2009-10 12 PRINTING AND STATIONERY POSTAGE AND COURIER TELEPHONE AND MOBILE INSURANCE DEPRECIATION THE EXPENSES UNDER THE VARIOUS HEADS MENTIONED ABOV E ARE INCURRED AT CORPORATE OFFICE ON ACCOUNT OF THE FOLLOWING FUNCTIONS: OFFICE ADMINISTRATION FINANCE MANAGING DIRECTOR OFFICE HR INFORMATION SYSTEM LEGAL R&D INTERNAL AUDIT MARKET RESEARCH FOR FY 2007-08, THE TOTAL NUMBER OF EXECUTIVE AT TH E CORPORATE OFFICE WERE 115 OUT OF WHICH 32 EMPLOYEES WERE WORKING IN SUPPLY FUNCTION WHICH ARE DIRECTLY LINKED TO THE FACTORY OPERATIONS. THIS WORKED OUT TO 27.83%. THE RATIO OF SALES OF ELIGIBLE FISCAL UNITS TO OVERALL SALES WORKED OUT TO 57.49%. THE EFFECTIV E PERCENTAGE OF RESIDUAL COST THUS WORKED OUT TO16% (27.83 X 57.49%), WHICH THE COMPA NY HAS APPLIED FOR ALLOCATING THE RESIDUAL COST TO THE ELIGIBLE FISCAL UNITS. 13 ITA NOS.2113,2114,2150&2151/KOL/2013 ITA NOS.760&762/KOL/2014 M/S RECKITT BENCKISER (INDIA) LTD. A.YRS. 2006-07, 2008-09 & 2009-10 13 14 ITA NOS.2113,2114,2150&2151/KOL/2013 ITA NOS.760&762/KOL/2014 M/S RECKITT BENCKISER (INDIA) LTD. A.YRS. 2006-07, 2008-09 & 2009-10 14 2.3. THE CONTENTION OF ASSESSEE IS NOT ACCEPTED BE CAUSE OF FOLLOWING REASONS: (I) JUST BECAUSE SOME ALLOCATION HAS BEEN FOLLOWED OVER A PERIOD OF YEARS IT CANNOT BE HELD THAT THE SAME OUGHT TO BE CONTINUED EVEN IF TH E BASIS OF ALLOCATION OF WRONG. THE REWORKING OF ALLOCATION SHOULD BE DONE IF IT IS FOU ND THAT THE METHOD OF ALLOCATION FOLLOWED IS ERRONEOUS. (II) THE FINDINGS OF AO IN A.Y. 2005-06 IS DIFFEREN T FROM THE FINDING IN THE CURRENT ASSESSMENT YEAR HENCE THE ORDER OF CIT(A) IS NOT AP PLICABLE AS THE FACTS ARE DIFFERENT. (III) IT IS NOT DISPUTED THAT THE ALLOCATION MAY BE DONE ON BASIS OF NUMBER OF EMPLOYEES. THE TOTAL INDIRECT COST IN QUESTION HAS BEEN ALLOCA TED BY THE ASSESSEE INTO THREE COST CENTRES. THEY ARE FISCAL UNITS, NON-FISCAL UNITS AN D HEAD OFFICE. THE COST ALLOCATED TO FISCAL UNITS ARE ABSORBED BY THE FISCAL UNIT AND T HE PROFIT & LOSS COMPUTED OF THE FISCAL 15 ITA NOS.2113,2114,2150&2151/KOL/2013 ITA NOS.760&762/KOL/2014 M/S RECKITT BENCKISER (INDIA) LTD. A.YRS. 2006-07, 2008-09 & 2009-10 15 UNIT CONSIDERS THE COST ALLOCATED TO THE FISCAL UNI T. THE COST ALLOCATED TO NON-FISCAL UNITS ARE ABSORBED BY THE NON-FISCAL UNIT AND THE PROFIT & LOSS COMPUTED OF THE NON-FISCAL UNIT CONSIDER THE COST ALLOCATED TO THE NON-FISCAL UNIT. HOWEVER THE COST ALLOCATED TO HEAD OFFICE IS NOT ABSORBED BY THE FISCAL UNITS. IT IS A BSORBED BY THE NON-FISCAL UNIT. THUS, THE EXPENSE ALLOCATED TO HEAD OFFICE IS CONSIDERED IN T HE PROFIT AND LOSS COMPUTED OF THE NON-FISCAL UNIT. THERE ARE TWO PROFIT CENTRE. ONE I S FISCAL UNITS AND THE OTHER IS NON- FISCAL UNITS. THE HEAD OFFICE IS NOT AN INDEPENDENT PROFIT CENTRE. ANY COST ALLOCATED TO HEAD OFFICE HAS TO BE AGAIN ABSORBED BY THE PROFIT CENTRES WHICH ARE FISCAL UNITS AND NON-FISCAL UNITS, WHEN THE COST ALLOCATED TO HEAD O FFICE IS NOT ABSORBED BETWEEN FISCAL UNITS AND NON-FISCAL UNITS IT MEANS THAT THE SAME I S CONSIDERED IN NON-FISCAL UNIT WHICH IS INCORRECT. THUS THE EXPENSE OF AN AMOUNT OF RS. 157,639,007.09 /- WAS NOT ABSORBED TO COST OF FISCAL UNIT AND THUS THE PROFITS OF THESE FISCAL UN ITS WERE INFLATED BY AN AMOUNT RS. 157,639,007.09/-. THE DEDUCTION THUS CLAIMED WAS EX CESS BY AN AMOUNT OF RS. 157,639,007.09/- WHICH SHOULD BE TAXED. REVENUES VEHEMENT CONTENTION DURING THE COURSE OF HEARING IS THAT THE CIT(A) HAD DELETED THE IMPUGNED ALLOCATION SIMPLY BY FOLLOWING HIS ORDER IN ASSESSMENT YEAR 2005- 06 DATED 09.06.2009. ITS CASE IS THAT THERE IS NO E VIDENCE WHATSOEVER ABOUT THE ASSESSEES REMAINING 83 OUT OF 115 EMPLOYEES TO HAV E BEEN ENGAGED IN TRADING AND OTHER ALLIED BUSINESS ACTIVITIES. WE FIND NO MERIT IN REVENUES INSTANT GRIEVANCE. THERE IS NO DISPUTE EVEN AS PER ASSESSMENT ORDER ABOUT T HE ASSESSEE HAVING ALLOCATED 32 OUT OF ITS 115 EMPLOYEES / EXECUTIVES TO MANUFACTURING SEG MENT. THE ASSESSEE HAS BEEN RUNNING BOTH ELIGIBLE AS WELL AS NON-ELIGIBLE UNITS . ITS ALLOCATION FORMULA WAS NUMBER OF 32 EMPLOYEES DIVIDED BY TOTAL NUMBER OF EMPLOYEES M ULTIPLIED BY ELIGIBLE UNITS SALES FURTHER DIVIDED BY TOTAL SALES; TO ALLOCATE THE IM PUGNED EXPENDITURE. THE SAME VERY FORMULA HAD BEEN APPLIED IN ASSESSMENT YEAR 2005-06 AS WELL WHEREIN THE CO-ORDINATE BENCH (SUPRA) ACCEPTED THE SAME IN ITS ORDER. WE MA KE IT VERY CLEAR THAT THE ASSESSING OFFICER HAS HIMSELF ACCEPTED THE ASSESSEE TO HAVE B EEN ENGAGED IN TRADING OF OTHER SEGMENTS. WE THEREFORE CONCLUDE IN THESE FACTS AND CIRCUMSTANCES THAT THE CIT(A) HAS RIGHTLY FOLLOWED HIS FINDINGS OF ASSESSMENT YEAR 20 05-06 AS APPLICABLE MUTATIS MUTANDIS IN THE IMPUGNED ASSESSMENT YEAR AS WELL. THE REVENUE FAILS IN ITS FORMER SUBSTANTIVE GROUND. 16 ITA NOS.2113,2114,2150&2151/KOL/2013 ITA NOS.760&762/KOL/2014 M/S RECKITT BENCKISER (INDIA) LTD. A.YRS. 2006-07, 2008-09 & 2009-10 16 8. COMING TO REVENUES LATER GRIEVANCE OF SCRAP SA LES, BOTH PARTIES ARE AD IDEM THAT THE CIT(A) HAS FOLLOWED PRECEDING ASSESSMENT ORDER FIND INGS IN TREATING THE SAME TO BE ENTITLED FOR SECTION 80IB DEDUCTION AS UPHELD IN IT S OWN CASE BY HONBLE JURISDICTIONAL HIGH COURT (SUPRA). THE REVENUE IS VERY FAIR IN NOT POINTING OUT ANY DISTINCTION AS FACTS AS LAW. THESE CROSS APPEALS IN I.T.A. NO. 2114/KOL/2013 AND 2151/KOL/2013 FAIL ACCORDINGLY. A SSESSMENT YEAR 2009-10 ASSESSEES AND REVENUES CROSS APPEALS IN I.T.A. NO 760 & 762/KOL/2014 THE ASSESSEES FIRST SUBSTANTIVE GROUND SEEKS TO RE VERSE BOTH THE LOWER AUTHORITIES ACTION DISALLOWING ITS SECTION 80IB/80IC DEDUCTION CLAIM TO THE TUNE OF RS. 16,02,07,000/- PERTAINING TO INTEREST INCOME. MR. K HAITAN CONCEDES VERY FAIRLY THAT THE ASSESSEES VERY CLAIM HAS ALREADY BEEN DECLINED BY HONBLE JURISDICTIONAL HIGH COURT (SUPRA). WE UPHOLD THE IMPUGNED DISALLOWANCE OF IN TEREST INCOME FOR THE PURPOSE OF ALLOWBILITY OF SECTION 80IB/80IC DEDUCTION. IT TRAN SPIRES FROM THE CASE FILE THAT THE ASSESSEE HAS ALSO RAISED AN ADDITIONAL GROUND AT T HIS STAGE REGARDING QUANTIFICATION OF THE IMPUGNED DISALLOWANCE. IT IS PLEADED THAT THE A BOVE INTEREST INCOME OF RS. 1,60,27,000/- IS INCLUSIVE OF RS. 3,39,26,000/- REL ATING TO ITS PARWANU UNIT IN RESPECT OF WHICH IT HAD CLAIMED SECTION 80IC DEDUCTION. IT IS CLARIFIED THAT THE SAID DEDUCTION WAS ALLOWABLE TO THE EXTENT OF 30% ONLY BEING 6 TH YEAR OF CLAIM. IT THUS SUBMITS THAT ONLY 33% OF RS. 3,39,26,000/- I.E. RS. 1,01,77,800/- FOR MED PART OF SECTION 80IC DEDUCTION IN RESPECT OF PARWANU UNIT WHEREAS THE ENTIRE INTER EST OF RS. 3,39,26,000/- STANDS DISALLOWED/ADDED IN BOTH THE LOWER PROCEEDINGS. IT PLEADS DOUBLE ADDITION OF INTEREST INCOME AMOUNTING TO RS. 2,37,48,200/- THEREFORE. LE ARNED CIT DR ON THE OTHER HAND VEHEMENTLY CONTENDS THAT THERE IS NO DISPUTE ON THE NON-ALLOWBILITY OF INTEREST INCOME FOR THE PURPOSE OF SECTION 80IB/80IC DEDUCTION. IT THEN AVERS THAT THE ASSESSEE HAS RAISED AN ADDITIONAL GROUND REGARDING QUANTIFICATION ON TH E IMPUGNED DISALLOWANCE WHICH REQUIRES VERIFICATION OF FACTS. WE FIND FORCE IN RE VENUES CONTENTION THEREFORE AND 17 ITA NOS.2113,2114,2150&2151/KOL/2013 ITA NOS.760&762/KOL/2014 M/S RECKITT BENCKISER (INDIA) LTD. A.YRS. 2006-07, 2008-09 & 2009-10 17 RESTORE THE INSTANT ADDITIONAL ISSUE RAISED AT ASS ESSEES BEHEST DATED 24.06.2018 TO THE ASSESSING OFFICER FOR NECESSARY FACTUAL VERIFICATIO N OF FACTS. THIS ADDITIONAL GROUND IS TAKEN AS ACCEPTED FOR STATISTICAL PURPOSES. 9. MR. KHAITAN DOES NOT PRESS FOR ASSESSEES NEXT S UBSTANTIVE GROUND CHALLENGING SECTION 14A READ WITH RULE 8D DISALLOWANCE OF RS. 25,500/- KEEPING IN MIND SMALLNESS OF THE AMOUNT. THE SAME IS THEREFORE REJECTED. 10. THE ASSESSEES THIRD SUBSTANTIVE GROUND PLEADS THAT THE CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS IN NOT CONSIDERING ITS WRITTEN SUB MISSION DATED 16.01.2014 SEEKING TO ALLOW EXPENDITURE CLAIM TO RS. 1,24,97,943/- DISALL OWED U/S 40A(IA) INVOLVING SUMS OF RS. 3,60,029/-, RS. 16,54,560/- AND RS. 1,04,83,354 /-PERTAINING TO FINANCIAL YEARS 2003- 04 AND 2004-05 WHOSE TDS WAS DEDUCTED AND DEPOSITED TO THE GOVERNMENT TREASURY DURING THE RELEVANT PREVIOUS YEAR. HOWEVER THE WRI TTEN SUBMISSION FILED BEFORE THE CIT(A) DATED 16.01.2014 ARE AT PAGES 180 TO 190 OF THE PAPER BOOK. WE FIND NO MERIT IN THE INSTANT PLEADINGS. THE ASSESSEES CASE AT BEST IS THAT IT HAD FILED THE IMPUGNED RELEVANT FACTS IN ITS WRITTEN SUBMISSION DATED 16.0 1.2014 BEFORE THE CIT(A) FOR THE FIRST TIME. THE LOWER APPELLATE ORDER ON THE OTHER HAND M AKES IT EVIDENT THAT THE LAST HEARING BEFORE THE CIT(A) TOOK PLACE ON 13.01.2014 FINALLY CULMINATING IN THE ORDER UNDER CHALLENGE DATED 16.01.2014. THE ASSESSEES WRITTEN SUBMISSION OF THE SAME DATE WHERE PROVE THAT THEY HAD BEEN ACTUALLY RECEIVED BEFORE P ASSING OF THE FINAL ORDER IN THE LOWER APPELLATE PROCEEDINGS. WE DO NOT SEE ANY VALID REAS ON IN ASSESSEES INSTANT THIRD AND LAST SUBSTANTIVE GROUND, ON THIS GROUND ALONE . ITS APPEAL I.T.A. NO. 760/KOL/2014 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 11. REVENUES CROSS APPEAL I.T.A. NO. 762/KOL/2014. ITS TWIN SUBSTANTIVE GROUNDS CHALLENGE THE CIT(A) O RDER REVERSING THE DISALLOWANCE/ADDITION OF RS.. 25,87,06,000/- PERTAI NING TO ALLOCATION OF RESIDUAL COSTS 18 ITA NOS.2113,2114,2150&2151/KOL/2013 ITA NOS.760&762/KOL/2014 M/S RECKITT BENCKISER (INDIA) LTD. A.YRS. 2006-07, 2008-09 & 2009-10 18 BETWEEN ELIGIBLE AND NON-ELIGIBLE UNITS AS WELL AS SCRAP SALES OF RS. 1,61,55,000/-, FOR THE PURPOSE OF SECTION 80IB/80IC DEDUCTION CLAIM CO MPUTATION. SUFFICE TO SAY, WE HAVE ALREADY UPHELD THE CIT(A) SIMILAR ACTION ON THE VER Y TWO ISSUES IN PRECEDING ASSESSMENT YEAR 2008-09 IN FOREGOING PARAGRAPHS. WE ADOPT JUDI CIAL CONSISTENCY THEREFORE TO AFFIRM THE CIT(A)S FINDINGS UNDER CHALLENGE. THE REVENUES INSTANT CROSS APPEAL IN I.T.A. NO. 762/KOL/2014 IS DECLINED ACCORDINGLY. 15. THE REVENUES ALL THREE APPEALS ARE DISMISSED A ND THE ASSESSEES APPEAL IN I.T.A. NO. 2150 /KOL/2013 IS PARTLY ALLOWED, I.T.A. NO. 21 51/KOL/2013 IS DISMISSED AND I.T.A. NO. 760/KOL/2014 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 14.09.2018 SD/- SD/- [M. BALAGANESH] [ S.S.GODARA ] ACCOUNTANT MEMBER JUDICIAL MEM BER DATED : 14.09.2018 SB, SR. PS COPY OF THE ORDER FORWARDED TO: 1. DCIT, CIRCLE-12, KOLKATA, P-7, CHOWRINGHEE SQUAR E, AAYAKAR BHAWAN, 7 TH FLOOR, KOLKATA-69. 2. M/S RECKITT BENCKISER (INDIA) LTD., DIAMOND PRES TIGE, 3 RD FLOOR, SUIT NO. 315, 41A, AJC BOSE ROAD, KOLKATA-700017. 3..C.I.T(A).- 4. C.I.T.- KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVAT E SECRETARY HEAD OF OFFICE/D.D.O., ITAT, KOLKATA BENCHE S