Videotex International (P) Ltd, Ludhiana V. Addl. CIT, Ludhiana

ITA 834/CHANDI/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5123 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 8 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-03-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 05-07-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Assessee Lawyers: NAVNEET SEHGAL
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS.ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO.833/CHD/2016 (ASSESSMENT YEAR : 2009-10) VIDEOTEX INTERNATIONAL (P) LTD., VS. THE J.C.I.T., LUDHIANA. RANGE III, LUDHIANA. PAN: AAACV5472C AND ITA NO.834/CHD/2016 (ASSESSMENT YEAR : 2009-10) VIDEOTEX INTERNATIONAL (P) LTD., VS. THE ADDL. CIT, LUDHIANA. RANGE III, LUDHIANA. PAN: AAACV5472C (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI NAVNEET SEHGAL, CA RESPONDENT BY : SHRI MANJIT SINGH, DR DATE OF HEARING : 21.12.2017 DATE OF PRONOUNCEMENT : 19.03.2018 ORDER PER ANNAPURNA GUPTA, A.M. : BOTH THE ABOVE APPEALS HAVE BEEN PREFERRED BY THE SAME ASSESSEE AGAINST SEPARATE ORDERS OF LD. CIT (A PPEALS)- 1, LUDHIANA DATED 24.5.2016 AND 27.5.2016 RELATING TO ASSESSMENT YEARS 2009-10 AND 2010-11 RESPECTIVELY. 2. COMMON ISSUES ARE INVOLVED IN BOTH THE APPEALS, THEREFORE, THEY WERE HEARD TOGETHER AND ARE BEING D ISPOSED OFF BY THIS COMMON ORDER. FOR THE SAKE OF CONVENIE NCE, WE SHALL BE DEALING WITH THE FACTS IN THE APPEAL OF TH E ASSESSEE IN ITA NO.833/CHD/2016 AND THE DECISION RENDERED TH EREIN 2 WOULD APPLY MUTATIS MUNDIS TO THE APPEAL IN ITA NO.834/CHD/2016. ITA NO.833/CHD/2016 : 3. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF AP PEAL: 1. THAT THE PREJUDICIAL OBSERVATIONS MADE IN THE A PPELLATE ORDER AS WELL AS IN THE ASSESSMENT ORDER ARE EITHER UNFOUNDE D OR NOT SUSCEPTIBLE OF GIVING RISE TO ANY ADVERSE CONCLUSIO N. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) HAS GROSSLY ERRED IN CONFIRMING THE APPLICATION OF SEC. 14A READ WITH RULE 8D OF THE INCOME TAX ACT ON THE BASIS OF CONJE CTURES, SURMISES AND CONFIRMING WITHOUT ANY BASIS. THE APPL ICATION OF SEC.14A READ WITH RULE 8D OF THE ACT MERITS DELETIO N. 3. THAT THE ACTION OF THE LEARNED COMMISSIONER OF I NCOME TAX (APPEALS) HAS GROSSLY ERRED IN CONFIRMING THE DISAL LOWANCE OF RS.2790/- IS UNWARRANTED, UNCALLED FOR AND ARBITRAR Y AND WITHOUT APPRECIATING THE FACTS OF THE CASE UNDER SE C.14A READ WITH RULE 8D OF THE INCOME TAX ACT. THE .DISALLOWAN CE OF RS.2790/- MERITS DELETION. 4. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) HAS GROSSLY ERRED IN CONFIRMING THE PART DISALLOWANCE O F DEDUCTION U/S 80IC OF RS. 6,69,128/- ON ACCOUNT OF APPORTIONM ENT OF CERTAIN EXPENSES OF HEAD OFFICE:- APPORTIONED DIRECTORS REMUNERATION RS.1,02,00,000/- KEYMAN INSURANCE 30,82,210/- FINANCIAL EXPENSES 25,14,832/- (INTEREST ONLY RS.6,38,997/-) AUDITORS REMUNERATION 90,000/- ------------------ TOTAL RS.1,58,87,042/- ------------------- PART DISALLOWANCE = 4,14,81,368 X 1,58,87,042 = RS.6,69,128/- 98,48,88,110 TO ELIGIBLE UNIT:- - WHEN THESE EXPENSES HAVE BEEN INCURRED WHOLLY AND E XCLUSIVELY RELATE TO HEAD OFFICE ONLY - AND THE GOODS HAVE BEEN SOLD BY OTHER UNITS TO THE ELIGIBLE UNIT AT MARKET RATES AND - ALTERNATIVELY, AND WITHOUT CONSIDERING THE APPORTIO NMENT OF INCOME AT HEAD OFFICE ON THE BASIS OF CONJECTURES, SURMISES AND WITHOUT A PPRECIATING THE FACTS OF THE CASE. THE DISALLOWANCE OF DEDUCTION MERITS ALLO WANCE. 3 5.THAT THE ACTION OF THE LD COMMISSIONER INCOME TAX (APPEALS) IN CONFIRMING THE PART DISALLOWANCE OF DEDUCTION U/S 8 0IC F RS.6,69,128/- ON ACCOUNT OF APPORTIONMENT OF FOLLOWING EXPENSES OF H EAD OFFICE:- APPORTIONED DIRECTORS REMUNERATION RS.1,02,00,000/- KEYMAN INSURANCE 30,82,210/- FINANCIAL EXPENSES 25,14,832/- (INTEREST ONLY RS.6,38,997/-) AUDITORS REMUNERATION 90,000/- ------------------ TOTAL RS.1,58,87,042/- ------------------- PART DISALLOWANCE = 4,14,81,368 X 1,58,87,042 = RS.6,69,128/- 98,48,88,110 TO ELIGIBLE UNIT:- - WHEN THESE EXPENSES HAVE BEEN INCURRED WHOLLY AND E XCLUSIVELY RELATE TO HEAD OFFICE ONLY - AND THE GOODS HAVE BEEN SOLD BY OTHER UNITS TO THE ELIGIBLE UNIT AT MARKET RATES AND - ALTERNATIVELY, AND WITHOUT CONSIDERING THE APPORTIO NMENT OF INCOME AT HEAD OFFICE IS ARBITRARY, UNWARRANTED AND UNCALLED FOR . THE DI SALLOWANCE OF DEDUCTION MERITS ALLOWANCE. 4. GROUND NO.1 RAISED BY THE ASSESSEE IS GENERAL IN NATURE AND NEEDS NO ADJUDICATION. 5. GROUND NOS.2 AND 3 WERE NOT PRESSED AND, THEREFO RE, ARE TREATED AS DISMISSED. 6. GROUND NOS. 4 AND 5 ARE THE SAME, BEING IDENTICA LLY WORDED AND RELATE TO REDUCTION OF PROFITS ELIGIBLE FOR DEDUCTION U/S 80IC OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) ON ACCOUNT OF ALLOCATION/APPORTIONMENT O F COMMON EXPENSES TO THE ELIGIBLE UNIT OF THE ASSESSE E. 7. BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE A SSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF 4 COLOUR TV SETS AND ELECTRONIC CHASSIS, WITH UNITS A T LUDHIANA, NOIDA AND HIMACHAL PRADESH. VIS A VIS THE UNIT AT HIMACHAL PRADESH THE ASSESSEE IS CLAIMING DEDUCT ION U/S 80IC OF THE ACT, WHICH AMOUNTED TO RS.46,71,374/- D URING THE IMPUGNED YEAR. DURING ASSESSMENT PROCEEDINGS FO R THE IMPUGNED YEAR THE ASSESSING OFFICER NOTICED THAT CE RTAIN EXPENSES DEBITED TO THE PROFIT & LOSS ACCOUNT OF TH E ASSESSEE COMPANY WERE NOT PROPORTIONATELY APPORTION ED AND DEBITED TO THE ELIGIBLE UNIT AT HIMACHAL PRADESH. AFTER SEEKING EXPLANATION FROM THE ASSESSEE IN THIS REGAR D THE AO ALLOCATED THE FOLLOWING COMMON EXPENSES IN THE PROP ORTION OF TURNOVER OF THE UNITS INCLUDING TRANSFER TO OTHE R UNITS: DIRECTORS REMUNERATION RS.1,02,00,000/- KEYMAN INSURANCE 30,82,210/- FINANCIAL EXPENSES 25,14,832 /- SERVICE COMPENSATION 18,30,975/- AUDITORS REMUNERATION 90,000/- RS.1,77,18,017/- 8. ACCORDINGLY EXPENSES AMOUNTING TO RS.7,37,374/- WERE ALLOCATED TO THE ELIGIBLE UNIT RESULTING IN REDUCTI ON OF ELIGIBLE PROFITS AND ADDITION TO THE TAXABLE INCOME OF THE ASSESSEE TO THIS EXTENT. 9. AGGRIEVED BY THE SAME, THE ASSESSEE FILED APPEAL BEFORE THE LD.CIT(APPEALS) WHO AFTER CONSIDERING THE ASSES SEES SUBMISSIONS UPHELD THE ALLOCATION OF EXPENSES RELAT ING TO DIRECTORS SALARY, KEYMAN INSURANCE PREMIUM AND AUDI TORS REMUNERATION SINCE NO SUBMISSIONS RELATING TO THE S AME WERE MADE BEFORE HIM. FURTHER HE HELD THE ALLOCATIO N OF SERVICE EXPENSES AS UNJUSTIFIED SINCE HE FOUND THAT THEY 5 WERE INCURRED ONLY VIS A VIS THE OTHER UNITS AND NO T THE ELIGIBLE UNIT OF THE ASSESSEE. REGARDING THE FINANC IAL EXPENSES, THE ALLOCATION OF THE SAME WAS ALSO UPHEL D, REJECTING ASSESSEES CONTENTION OF NETTING OF THE SA ME WITH INCOME EARNED. THE RELEVANT FINDINGS OF THE LD.CIT (APPEALS) AT PARA 6.2 OF HER ORDER IS AS UNDER: 6.2 I HAVE CONSIDERED THAT FACTS OF THE CASE, THE B ASIS OF THE ADDITION AND THE ARGUMENTS OF THE AR DURING THE COU RSE OF THE ASSESSMENT AS WELL AS THE APPELLATE PROCEEDINGS. TH E ASSESSING OFFICER HAS REALLOCATED THE EXPENSES PERT AINING TO ALL THE UNITS I.E. DIRECTOR'S SALARY, KEYMAN INSURANCE PREMIUM, FINANCIAL EXPENSES, SERVICE COMPENSATION AN D AUDITOR REMUNERATION. THE APPELLANT HAS NOT FILED A NY SUBMISSIONS RELATING TO THE REALLOCATION OF DIRECTOR'S SALARY, KEYMAN INSURANCE PREMIUM AND AUDITOR'S REMUNERATION EITHER BEFORE THE ASSESSING OFFICER OR DURING THE AP PELLATE PROCEEDINGS. THE SAID REALLOCATION DONE BY THE ASSESSI NG OFFICER PERTAINING TO THESE EXPENSES AND THE DISALL OWANCE OF THE SAME U/S 80IC IS UPHELD. HOWEVER, THE SERVICE COMPE NSATION IS PAID ONLY BY THE LUDHIANA AND NOIDA UNIT TO THE SER VICE AGENTS AT THE TIME OF SALES. NO SERVICE COMPENSATION IS PA ID TO ANY OUTSIDER/ AGENT BY THE HIMACHAL PRADESH UNIT AND TH EREFORE REALLOCATION OF THE SAID EXPENSE IS NOT JUSTIFIED FOR THE PURPOSE OF DEDUCTION U/S 80IC AND THE ASSESSING OFFICER IS D IRECTED TO RECALCULATE THE DEDUCTION U/S 80IC ACCORDINGLY. REGA RDING THE FINANCIAL EXPENSES, THE PLEA THAT THE INTEREST RECE IVED IS MORE THAN THE INTEREST PAID AND ALSO THAT IF THE INTEREST PAID IS CONSIDERED AS A COMMON EXPENSE, THE CREDIT FOR INTER EST RECEIVED SHOULD ALSO BE GIVEN, IS NOT ACCEPTABLE AS NO SUCH NETTING CAN BE ALLOWED FOR CALCULATING THE DEDUCTION U/S 80IC. INT EREST INCOME CANNOT BE TREATED AS PROFITS AND GAINS DERIVED AND UNDERTAKING BY AN ENTERPRISE FROM ANY BUSINESS REFER TO IN SUB SEC 2 OF SEC 80IC. THEREFORE, THIS PLEA IS NOT ACCEPTABLE AND REA LLOCATION OF FINANCIAL EXPENSES BY THE ASSESSING OFFICER IS HELD TO BE JUSTIFIED. THESE GROUNDS OF APPEAL ARE PARTLY ALLOWED. 6 10. AGGRIEVED BY THE SAME THE ASSESSEE HAS COME UP IN APPEAL BEFORE US. DURING THE COURSE OF HEARING BEF ORE US, THE LD. COUNSEL FOR ASSESSEE RAISED ONLY TWO ARGUME NTS AGAINST THE ALLOCATION OF EXPENSES SUSTAINED BY THE CIT(A); I) THAT THE GOODS WERE TRANSFERRED FROM OTHER UNIT S TO ELIGIBLE UNIT AT PROFIT AND, THEREFORE, NO EXPENSES WERE REQUIRED TO BE ALLOCATED TO THE ELIGIBLE UNIT. REL IANCE WAS PLACED ON THE DECISION OF THE I.T.A.T. AHMEDABA D BENCH IN THE CASE OF CADILA HEALTHCARE LTD. VS. ADDL.CIT REPORTED IN 21 TAXMANN.COM 483 AND DECISION OF THE ITAT CHANDIGARH BENCH IN THE CASE O F AMARTEX INDUSTRIES LTD. VS. ADDL.CIT REPORTED IN 37 TAXMANN.COM 455; II) THAT IN ANY CASE THE ENTIRE FINANCIAL EXPENSES COULD NOT BE SAID TO BE COMMON EXPENSES INCURRED ON BEHAL F OF ALL THE UNITS OF ASSESSEE SINCE IT INCLUDED INTE REST ON CAR LOAN AND LETTER OF CREDIT CHARGES WHICH WERE INCURRED SOLELY FOR THE HEAD OFFICE ONLY. IT WAS A LSO PLEADED THAT THE FINANCIAL EXPENSES ALLOCATED SHOUL D EXCLUDE INTEREST PAID SINCE THE INTEREST RECEIVED W AS MUCH MORE THAN THAT PAID. 11. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE ORDER OF THE LD.CIT(APPEALS). 12. WE HAVE HEARD BOTH THE PARTIES. THE ISSUE BEFO RE US PERTAINS TO ALLOCATION OF COMMON EXPENSES INCURRED BY THE HEAD OFFICE TO THE ELIGIBLE UNIT OF THE ASSESSEE HI MACHAL 7 PRADESH UNIT FOR THE PURPOSE CALCULATING THE QUANTU M OF DEDUCTION AVAILABLE U/S 80IC OF THE ACT. THE FACT THAT THE ASSESSEES UNIT AT HIMACHAL PRADESH IS ELIGIBLE TO CLAIM DEDUCTION U/S 80IC OF THE ACT IS UNDISPUTED. FURTH ER THE FACT THAT FOLLOWING EXPENSES HAVE NOT BEEN ALLOCATE D TO THE ELIGIBLE UNIT AT HIMACHAL PRADESH IS ALSO NOT UNDIS PUTED: 1) DIRECTORS REMUNERATION RS.1,02,00,000/- 2) KEYMAN INSURANCE 30,82,210/- 3) FINANCIAL EXPENSES 25,14,832/- 4) AUDITORS REMUNERATION 90,000/- 13. THE FIRST CONTENTION OF THE LD. COUNSEL FOR ASS ESSEE AGAINST THE ALLOCATION/APPORTIONMENT OF THE AFORESA ID EXPENSES TO THE ELIGIBLE UNIT IS THAT THE GOODS WER E TRANSFERRED TO THE ELIGIBLE UNIT FROM OTHER UNITS A T A PROFIT INCLUDING ALL COSTS THEREIN ,THEREFORE THE COMMON C OSTS STOOD AUTOMATICALLY APPORTIONED ON TRANSFER OF GOOD S. IT WAS STATED BY THE LD. COUNSEL FOR ASSESSEE THAT THE ASSESSEE COMPANY HAD THREE UNITS IN LUDHIANA, NOIDA AND KHAD EEN KAMIL, HIMACHAL PRADESH. THE LD. COUNSEL FOR ASSES SEE STATED THAT WHILE UNITS IN LUDHIANA AND NOIDA WERE ENGAGED IN THE MANUFACTURING ELECTRONIC SUB ASSEMBLY AND CO LOR TV SETS, THE UNIT IN KHADEEN KAMIL WAS ENGAGED ONLY IN THE MANUFACTURING OF COLOR TV SETS. THE LD. COUNSEL FO R ASSESSEE SUBMITTED THAT THE ELECTRONIC SUB ASSEMBLI ES REQUIRED BY THE ELIGIBLE UNIT WERE TRANSFERRED FROM THE OTHER UNITS TO ELIGIBLE UNIT AT THE SAME PRICE AS IT WAS SOLD TO OTHERS, AT COST PLUS MARGIN AS REQUIRED UNDER THE C ENTRAL EXCISE ACT. THE LD. COUNSEL FOR ASSESSEE STATED TH AT IN 8 SUCH A SITUATION THERE WAS NO QUESTION OF TRANSFER OF ADMINISTRATIVE EXPENSES TO THE ELIGIBLE UNIT. THE LD. COUNSEL FOR ASSESSEE STATED THAT THE ABOVE SUBMISSI ONS HAD BEEN MADE TO THE ASSESSING OFFICER AND DREW OUR ATT ENTION TO THE LETTER FILED BEFORE THE ASSESSING OFFICER PL ACED IN THE PAPER BOOK. THE LD.AR STATED THAT THE CENTRAL EXCI SE ACT PRESCRIBES EXCISE TO BE CHARGED AT COST PLUS ADMINI STRATIVE OVERHEADS AND OTHER CHARGES AND THE ASSESSEE HAD TRANSFERRED THE ELECTRONIC SUB ASSEMBLY AT MARKET P RICE TO ITS ELIGIBLE UNIT. THE LD. COUNSEL FOR ASSESSEE AL SO DREW OUR ATTENTION TO THE COMPARATIVE SALE BILLS OF THE ELEC TRONIC SUB ASSEMBLY TO THE ELIGIBLE UNIT AND OTHER UNITS TO PR OVE ITS POINT PLACED IN THE PAPER BOOK. 14. THE CONTENTION OF THE REVENUE, ON THE OTHER HAN D, WAS THAT THE GOODS HAD BEEN TRANSFERRED AT SALE PRICE D ID NOT AND COULD NOT RAISE A PRESUMPTION THAT ALL ADMINIST RATIVE COST HAD BEEN TRANSFERRED PROPORTIONATELY TO THE EL IGIBLE UNITS. 15. WE HAVE CONSIDERED THE ARGUMENTS OF BOTH THE PA RTIES. WE DO NOT FIND MERIT IN THIS ARGUMENT OF THE LD. CO UNSEL FOR ASSESSEE, FIRSTLY FOR THE REASON THAT THE IMPUGNED EXPENSES AS A MATTER OF RECORD ARE NOT INCURRED IN THE NON-E LIGIBLE UNITS BUT ARE COMMON EXPENSES WHICH HAVE NOT BEEN ALLOCATED TO ANY OF THE UNITS OF THE ASSESSEE WHETH ER ELIGIBLE OR NON-ELIGIBLE. THE FINDING OF FACT IN THIS REGAR D BY THE ASSESSING OFFICER AT PARA 3.2 OF HIS ORDER CATEGORI CALLY STATING THIS FACT IS AS UNDER: 9 3.2 THE FACT REMAINS THE FOLLOWING EXPENSES ARE PERTAINING TO ALL THE UNITS BUT THE SAME HAVE NOT BEEN ALLOCATED AT ALL OR EVEN IF ALLOCATED NOT PROPORTIONATELY. THE FOLLOWING EXPENSES PERTAIN TO ALL THE UNITS AND REQUIRED TO BE ALLOCATED TO ALL THE UNITS IN PROPORTION TO TOTAL TURN OVER. S.NO PARTICULARS OF EXPENSES AMOUNT RS. 1 DIRECTOR SALARY 10200000 2 KEYMAN INSURANCE PREMIUM 3082210 3 FINANCIAL EXPENSES 2514832 4 SERVICE COMPENSATION 1830975 5 AUDITOR REMUNERATION 90000 TOTAL 17718017 16. THE SAID FACT HAS NOT BEEN CONTROVERTED BY THE ASSESSEE EITHER BEFORE THE ASSESSING OFFICER, THE CIT(APPEALS) OR EVEN BEFORE US. MOREOVER THE ASSESS EE HAS ALSO NOT ESTABLISHED AS A MATTER OF FACT THAT THE C OSTING OF SUB ASSEMBLIES WORKED OUT BY THE NON-ELIGIBLE UNITS FOR THE PURPOSE OF TRANSFER TO THE ELIGIBLE UNITS INCLUDED SUCH UNALLOCATED EXPENSES. THE ASSESSEE HAS NEITHER FILE D ANY COST SHEET IN THIS REGARD BEFORE US OF THE SUB ASSE MBLIES TRANSFERRED OR THE CALCULATION OF THE COST FOR THE PURPOSE OF LEVY OF EXCISE DUTY AS CLAIMED BY THE ASSESSEE. TH EREFORE, WHEN THE FACT THAT THE SAID EXPENSES ARE INCLUDED I N THE COST OF THE SUB ASSEMBLIES TRANSFERRED TO THE ELIGI BLE UNITS BY THE NON-ELIGIBLE UNITS HAS NOT BEEN ESTABLISHED, THE CLAIM OF THE ASSESSEE THAT BY VIRTUE OF TRANSFERRIN G GOODS BY NON-ELIGIBLE UNITS TO THE ELIGIBLE UNITS AT SELLING PRICE RESULTS IN ALLOCATING COMMON EXPENSES TO THE ELIGIB LE UNIT, FALLS FLAT. EXCEPT FOR MAKING SUCH CLAIM THE ASSES SEE HAS MADE NO EFFORT FOR ESTABLISHING THE SAID FACTS BEFO RE ANY OF THE AUTHORITIES. THE CLAIM OF THE ASSESSEE IS, THER EFORE, 10 LIABLE TO BE DISMISSED FOR THIS REASON ALONE. FURT HER EVEN IF THE CONTENTION OF THE LD. COUNSEL FOR ASSESSEE THAT THE COST OF SUB ASSEMBLIES TRANSFERRED INCLUDES INDIRECT AND IMPUGNED UNALLOCATED EXPENSES, IS ACCEPTED THIS FAC T ALONE DOES NOT ESTABLISH THE ALLOCATION OF THE IMPUGNED C OMMON EXPENSES TO THE ELIGIBLE UNITS. AS PER THE ASSESSEE S CONTENTION THAT THE INDIRECT COMMON COST ARE ALLOCA TED TO THE ELIGIBLE UNITS ON TRANSFER OF SUB ASSEMBLIES, W HAT EMERGES IS THAT THE SAID COST ARE ALLOCATED TO THE EXTENT AND IN RELATION TO THE GOODS TRANSFERRED TO THE ELIGIBL E UNITS BY THE NON-ELIGIBLE UNITS. NOW, WITHOUT BRINGING ON R ECORD HE QUANTUM OF GOODS SO TRANSFERRED TO THE ELIGIBLE UNI TS, THE EXTENT OF COMMON COST/EXPENSES ALLOCATED TO THE ELI GIBLE UNITS CANNOT BE ESTABLISHED. THEREFORE, IT CANNOT B E DETERMINED WHETHER REASONABLE COMMON EXPENSES HAVE BEEN ALLOCATED TO THE ELIGIBLE UNITS BY ADOPTING THIS ME THOD OF ALLOCATION OF EXPENSES. THE CONTENTION OF THE ASSE SSEE IS, THEREFORE, DISMISSED FOR THIS REASON ALSO. WE MAY C ONCLUDE THAT IN THE ABSENCE OF ANY RELEVANT FACTUAL DATA PR OVIDED BY THE LD. COUNSEL FOR ASSESSEE, THE CONTENTION OF THE ASSESSEE THAT THE IMPUGNED COMMON COST STOOD ALLOCATED TO TH E ELIGIBLE UNITS WHEN THE SUB ASSEMBLIES WERE TRANSFE RRED TO THE ELIGIBLE UNITS BY THE NON-ELIGIBLE UNITS AT MAR KET PRICE IS DISMISSED. FOR THE SAME REASON WE ALSO HOLD THAT NO BENEFIT CAN BE DERIVED BY THE ASSESSEE BY RELYING O N ANY JUDGEMENT SINCE EACH JUDGEMENT IS RENDERED IN THE C ONTEXT OF THE PECULIAR FACTS OF THE CASE WHICH HAVE TO BE READ 11 ALONGWITH THE SAME FOR A CORRECT INTERPRETATION OF THE JUDGEMENT. 17. THE NEXT CONTENTION RAISED WAS VIS--VIS THE FI NANCIAL EXPENSES. THE LD. COUNSEL FOR ASSESSEE DREW OUR AT TENTION TO THE DETAILS OF FINANCIAL EXPENSES PLACED AT PAPE R BOOK-12 AS UNDER: INTEREST RS.548154.08 CREDIT CHARGES 1319125.54 PROCESSING CHARGES 53346.00 INTEREST TO OTHERS 10601.22 INTEREST OF CREDIT CHARGES 503364.00 INTEREST ON CAR LOAN 80242.00 _____________ TOTAL RS. 2514832.84 --------------- 18. THE LD. COUNSEL FOR ASSESSEE THEREAFTER POINTED OUT THAT THE LETTER OF CREDIT CHARGES WERE INCURRED VIS --VIS THE IMPORTS MADE OF SUB ASSEMBLY BY THE HEAD OFFICE FR OM CHINA WHICH WAS SUBMITTED TO THE ASSESSING OFFICER ALSO DURING ASSESSMENT PROCEEDINGS. THE LD. COUNSEL FOR ASSESSEE, THEREFORE, STATED THAT THERE WAS NO REASO N TO ALLOCATE THE SAME TO THE ELIGIBLE UNIT. THE LD. CO UNSEL FOR ASSESSEE FURTHER STATED THAT THE INTEREST ON CAR LO AN ALSO PERTAINED TO CAR PURCHASED BY THE HEAD OFFICE AND H AD NOTHING TO DO WITH THE ELIGIBLE UNIT AND WAS ALSO, THEREFORE, NOT REQUIRED TO BE ALLOCATED. 19. THE LD. DR HAS NOT BEEN ABLE TO CONTROVERT THE ABOVE CONTENTION OF THE LD. COUNSEL FOR ASSESSEE AND, THE REFORE, WE AGREE WITH THESE CONTENTIONS AND DIRECT THAT THE LETTER OF CREDIT CHARGES AND INTEREST ON CAR LOAN BE EXCLUDED FOR THE 12 PURPOSE OF ALLOCATION TO THE ELIGIBLE UNIT. THE LD . COUNSEL FOR ASSESSEE STATED THAT THE INTEREST EXPENSES INCL UDED IN THE FINANCIAL EXPENSES SHOULD BE NETTED WITH THE IN TEREST RECEIVED DURING THE YEAR OR ALTERNATIVELY THE INTER EST EARNED SHOULD ALSO BE ALLOCATED TO THE ELIGIBLE UNITS. WE FIND MERIT IN THIS CONTENTION OF THE LD. COUNSEL FOR ASSESSEE. IF INTEREST EXPENSES INCURRED BENEFITING ALL THE UNITS ARE TO BE LOGICALLY ALLOCATED TO ALL THE UNITS, SIMILARLY INT EREST INCOME, COMMON TO ALL THE UNITS AND NOT PARTICULARL Y EARNED BY ANY ONE UNIT IS ALSO TO BE ALLOCATED TO ALL THE UNITS. THE BENEFIT OF NETTING IS THUS TO BE ALLOWED TO THE ASS ESSEE. WE, THEREFORE, AGREE WITH THIS CONTENTION OF THE LD. CO UNSEL FOR ASSESSEE ALSO. IN VIEW OF THE ABOVE, WE UPHOLD THE ALLOCATION OF COMMON EXPENSES BEING DIRECTORS REMUNERATION, KEYMAN INSURANCE AND AUDITORS REMUNERATION, WHILE THE FINANCIAL EXPENSES TO BE AL LOCATED ARE TO BE REDUCED BY THE LETTER OF CREDIT CHARGES A ND THE INTEREST ON CAR LOAN AND THE REMAINING INTEREST EXP ENSES ARE TO BE ALLOWED AFTER NETTING. GROUND OF APPEAL N O.4 &5 ARE THEREFORE PARTLY ALLOWED IN VIEW OF THE ABOVE, THE APPEAL OF THE ASSESSEE ST ANDS PARTLY ALLOWED. ITA NO.834/CHD/2016 : 20. IT IS RELEVANT TO OBSERVE HERE THAT THE FACTS A ND CIRCUMSTANCES OF THIS APPEAL ARE SIMILAR TO THE FAC TS AND CIRCUMSTANCES IN ITA NO.833/CHD/2016 AND THE FINDIN GS GIVEN IN ITA NO.833/CHD/2016 SHALL APPLY TO THIS AP PEAL 13 ALSO WITH EQUAL FORCE. THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 21. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (SANJAY GARG) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 19 TH MARCH, 2018 *RATI* COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE DR ASSISTANT REGISTRAR, ITAT, CHANDIGARH