INCOME TAX ACT, 1961

Section 80-IC

Deduction under section 80-IC - Computation - Allocation of common interest and financial charges -

Assessee claimed deduction under section 80-IC. AO noticed that assessee company had allocated interest/financial changes of Rs. 118 lakhs in the accounts of Baddi Unit and assessee was having common pools of funds as well as common bank accounts for its entire business being carried out from head office. Therefore, AO was of the view that interest expenditure required to be allocated proportionately in the ratio of sales for deduction under section 80-IC for the industrial undertaking of assessee. Accordingly, AO allocated common interest and financial charges of Rs. 89 lakhs to the Baddi Unit while calculating noticed that assessee company had debited common head expenses incurred by the company under various heads such as Audit Fees, Computer maintenance expenses, Security charges, Director Fees, Provision for doubtful debts, and Charity and Donation. Held: Sales had no direct influence on the interest expenditure. The financial charges were relevant to the investment made by assessee. Assessee had allocated expenditure on account of financial charges, keeping in view the investment in Baddi units. These were direct expenditure relatable to Baddi units. Therefore, allocation of interest/financial charges in the Baddi made on the basis of sales ratio could not be sustained.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2011-12

INCOME TAX ACT, 1961

Section 80-IC

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