Full Text
ITA 540/2015
COMMISSIONER OFINCOME TAX-7 Appellant
Through: Mr.N.P.Sahni,Senior standing counsel with Mr.Nitin Gulati,Junior standing counsel.
Through:Mr.Ved Jain with Mr.Pranjal Srivastava,Advocates.
COMMISSIONER OFINCOME TAX-7 Appellant
Through: Mr.N.P.Sahni,Senior standing counsel with Mr.Nitin Gulati,Junior standing counsel.
Through:Mr.Ved Jain with Mr.Pranjal Srivastava,Advocates.
20.10.2015 Dr.S.Muralidhar,J.
ORDER
1. These two appeals by the Revenue under Section 260A ofthe Income Tax Act, 1961 ('Act') are directed against the common order dated 12 February ITA Nos.540/2015& 628/2015 Page[1] of[4] 2015:DHC:11743-DB 2015 in ITA Nos. 236/Del/2013 and 883/Del/2013 for the Assessment Year ('AY')2009-10.
2. The brief facts leading to the filing of the present appeals are that the Assessee is a manufacturer of auto parts and accessories having an unit in Haridwar which,for the purposes ofSection 80-IC ofthe Act,was eligible for deduction from its income. The Assessee filed its annual return ofincome for the AY in question showing a gross total income ofRs.2,69,85,125 on a total turnover of Rs.l[1].13crore. A sum of Rs. 2,69,25,260 was claimed as deduction under Section 80-IC of the Acct, leaving a sum of Rs.59,864 as taxable income.
3. The case was picked up for scrutiny and notice under Section 143(2)ofthe Act was issued by the Assessing Officer ('AO'). An assessment order was passed on 30^^ November 2011 under Section 143(3)ofthe Act.In the said order, the AO held that (i) 20% of the sale value of the products was attributable to the'brand'and hence,was not eligible for deduction;(ii)profit to the extent of5% ofthe total turnover ofthe Assessee was attributed to the past experience, expertise and knowledge, etc. ofthe related and connected persons and not to the eligible unit; and (iii) only 12% of the remaining income, after making adjustments, was to be considered as eligible for deduction under Section 80-IC ofthe Act.Accordingly,the AO computed the deduction at Rs 4,06,637 as against Rs.2,69,25,260 claimed by the Assessee under Section 80-IC ofthe Act.
4. In the appeal filed by the Assessee, the Commissioner of Income Tax (Appeals)['CIT(A)']by an order dated 9*''November 2012(i)restricted the reduction ofdeduction to 10% from 20% as far as issue(i)was concerned;(ii) set aside the order ofthe AO to the extent that 5% ofthe sale value was held not to form part ofthe eligible profit and (iii) set aside the restriction ofthe deduction to 12% ofthe remaining profit. ITA Nos.540/2015& 628/2015 Page2of[4]
5. As a result ofthe above order,the Assessee and the Revenue Assessee filed their respective appeals,ITA Nos. 236 and 883/Del/2013, before the ITAT. The ITAT, in the impugned order, noted that as regards issue (i) for the preceding AY 2008-09 also the reduction attributable to the brand had been restricted to 10% by the AO and had been deleted by the ITAT. In the absence of any distinguishing feature having been brought out by the Revenue,the ITAT held that no deduction could be made from the eligible profits on account ofthe'brand'.
6. As regards issue (ii), the ITAT approved the view ofthe CIT(A)on the basis of what was decided for AY 2008-09. As regards issue (hi), the ITAT negatived the contention of the Revenue that the Assessee had also earned income from its branch offices and Head Office and was, therefore, not eligible for any deduction under Section 80-IC ofthe Act. The ITAT noted that the DR was unable to show any clinching evidence that any income producing activity was carried outfrom any place other than the eligible unit. The ITAT held that the entire income producing activity stemmed only from the Hardwar unit and no other place.
7. The Revenue has filed the present two appeals against the common order ofthe ITAT in ITA Nos. 236/Del/2013 and 883/Del/2013. This Court issued notice in ITA No. 540 of 2015 limited to the issue whether the Respondent/Assessee can include the name of its branches and head office (i.e.,otherthan the Haridwar Unit)for the purpose ofdeduction under Section 80-IC. The Court also issued notice in the companion ITA No.628 of2015 and directed it to be listed along withITA 540 of2015.
8. This Court has heard the submissions of learned counsel for the parties. Learned counsel for the Assessee placed before the Court the profit and loss accountforthe Assessee as a whole for the years ending 31st March 2008 and ITA Nos.540/2015& 628/2015 Page3of[4] 31st March 2009. He has also placed the details of the schedule of fixed assets ofthe head office and the works at Haridwar as well as statement of expenses and salaries and wages statement ofthe branches.As far as the head office is concerned,the net block as on 31'^ March 2008 was Rs. 13,22,101.14 whereas the net block for the works at Haridwar was Rs. 1,26,80,393.35.The corresponding figures for the year ending 31s March 2009 were Rs. 43,62,243.40 and Rs. 1,20,87,372.35. As regards the branch offices at Bangalore, Mumbai and Kolkatta, the total expenditure figures for the year ending 31st March 2009 were Rs. 2,86,690; Rs. 5,98,981 and Rs. 5,12,949 respectively which even inthe aggregate wasinsignificantin comparison with the expenses ofthe entire company which was Rs.9,08,34,838.18for the same period. Likewise the expenses towards salaries and wages of the branches constitutes a small percentage ofthe total expenditure ofthe Assessee on that head. These figures bear out the contention ofthe Assessee that the income generating activity was only at the works units at Haridwar and not at the head office or branch offices. Therefore, on facts the Court is unable to fmd any perversity vitiating the impugned order oftheITAT.
9. No substantial question oflaw arises for determination.
10. The appeals are accordingly dismissed.
OCTOBER 20,2015 Rk S.MURALIDHAR,J VIBHU BAKHRU,J