DCIT, Kanpur v. M/s. Kothari Products Limited, Kanpur

ITA 695/LKW/2010 | 2006-2007
Pronouncement Date: 05-01-2011 | Result: Dismissed

Appeal Details

RSA Number 69523714 RSA 2010
Assessee PAN AAACK5571F
Bench Lucknow
Appeal Number ITA 695/LKW/2010
Duration Of Justice 1 month(s) 9 day(s)
Appellant DCIT, Kanpur
Respondent M/s. Kothari Products Limited, Kanpur
Appeal Type Income Tax Appeal
Pronouncement Date 05-01-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 05-01-2011
Date Of Final Hearing 04-01-2011
Next Hearing Date 04-01-2011
Assessment Year 2006-2007
Appeal Filed On 26-11-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL B - BENCH LUCKNOW. BEFORE SHRI H.L.KARWA HON'BLE VICE PRESIDENT AND SHRI N.K.SAINI ACCOUNTANT MEMBER I.T.A.NO.695(LKW.)/2010 A.Y. : 2006-07 THE DY.CIT C.C.I VS. M/S. KOTHARI PRODUCTS LTD. KANPUR. 24/19 THE MALL KANPUR. PAN AAACK5571F (APPELLANT) (RESPONDENT) I.T.A.NO.678(LKW.)/2010) A.Y. : 2006-07 M/S. KOTHARI PRODUCTS LTD. VS. THE DY.CIT C.C.I KANPUR. KANPUR. PAN AAACK5571F (APPELLANT) (RESPONDENT) DEPARTMENT BY : SHRI VIVEK MISHRA D.R. ASSESSEE BY : SHRI AMIT SHUKLA ADVOCATE O R D E R PER H.L.KARWA VICE PRESIDENT THESE CROSS APPEALS BY THE REVENUE AND THE ASSESSE E ARE DIRECTED AGAINST THE ORDER OF THE LD.CIT(A)-I KANPUR DATED 14.9.2010 RELATING TO THE ASSESSMENT YEAR 2006-07. 2. IN I.T.A.NO.695(LKW.)/2010 GROUNDS NO.1 TO 4 RAI SED BY THE REVENUE READ AS UNDER : 1. THE CIT(A) ERRED IN RELYING THE ORDER OF THE T RIBUNAL FOR THE A.Y. 2004-05 IN THE SAME CASE ON THE SAME ISSUE AS THE FACTS OF 2 THE CASE ARE DIFFERENT IN THE YEAR UNDER CONSIDERAT ION. 2. THE CIT (A) HAS ERRED IN IGNORING THE FINDING TH AT THE AMOUNT DEBITED UNDER VARIOUS HEADS WAS A COMPOSITE LEDGER ACCOUNT FOR BOTH THE EXEMPTED AND UNEXEMPTED INCOME AND SEGREGA TING THE RELATED EXPENSES UNDER VARIOUS HEADS FOR EXEMPTED I NCOME CANNOT BE CALCULATED DIRECTLY . 3. IN DOING SO THE CIT(A) ALSO IGNORED THE FINDING OF THE AO WHICH IS BASED ON CORRECT APPRECIATION OF FACTS. 4. THAT THE ORDER OF THE LD. CIT (APPEALS) BEING ER RONEOUS IN LAW AND ON FACTS BE VACATED AND THE ORDER OF THE A.O. B E RESTORED. 3. IN I.T.A.NO.678(LKW)/2010 GROUNDS NO.1 TO 4 RAI SED BY THE ASSESSEE READ AS UNDER : 1. BECAUSE THE AUTHORITIES BELOW HAVE ERRED IN LA W AND ON FACTS IN HOLDING THAT THE PROFITS OF JORHAT UNIT SHOWN AT RS.24 46 79 751/- (BY THE ASSESSEE) WERE LIABLE TO BE REDUCED BY A SUM OF RS.99 80 254/- BY WAY OF ADJUSTMENT/ALLOC ATION OF THE HEAD OFFICE EXPENSES OVER AND ABOVE THE ALLOCATION THAT HAD ALREADY BEEN MADE BY THE APPELLANT ITSELF. 2. BECAUSE THERE BEING NEITHER ANY 'BUSINESS ARRAN GEMENT' BETWEEN JORHAT UNIT AND KANPUR UNIT NOR THE KANPUR UNIT IS 'ANY OTHER PERSON' AS SPECIFIED AND UNDERSTOOD IN S UB-SECTION (10) OF SECTION 801A THE CIT(A) HAS ERRED IN LAW A ND ON FACTS IN UPHOLDING IN PRINCIPLE FURTHER ALLOCATION OF E XPENSES (OVER AND ABOVE THE ALLOCATION ALREADY MADE BY THE APPELL ANT) AND IN DIRECTING THE ASSESSING OFFICER AS UNDER:- 'UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AND FOR THE REASON THAT THE ISSUE HAS BEEN CONSIDERED BY TH E HON'BLE TRIBUNAL AND THAT APPELLANT HAS ALSO ACCEPT ED THE CRITERIA APPLIED BY THE DEPARTMENT FOR ASSESSMENT Y EAR 2004-05 THE AO IS DIRECTED TO WORK OUT THE REALLOC ATION OF EXPENSES TO THE JORHAT UNIT IN THE SIMILAR MANNE R AND ON THE SAME CRITERIA FOR EACH HEAD/SUB-HEAD OF 3 EXPENDITURE AS DONE BY AO FOR ASSESSMENT YEAR 2004- 05 IN HIS ORDER DATED 31.12.2008 AS DISCUSSED ABOVE.' 3. BECAUSE IN ANY CASE THE CIT(A) ON A DUE CONSI DERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE PARTICULA RLY THAT- (A) FOR JORHAT UNIT THE APPELLANT HAD MAINTAINED SEPARATE BOOKS OF ACCOUNT; (B) JORHAT UNIT WAS A 'SELF SUSTAINING UNIT' WHERE IN ALL THE 'INCOMING' AND 'OUTGOING' AS PERTAINING TO IT HAD DULY BEEN A CCOUNTED FOR; (C) OUT OF 'COMMON POOL' THE EXPENSES REFERABLE T O JORHAT UNIT HAD ALREADY BEEN ALLOCATED TO THE SAID UNIT. (D) EXPENSES THAT STOOD FINALLY DEBITED IN THE HE AD OFFICE ACCOUNT OVER AND ABOVE THE ALLOCATION MADE EARLIER WERE NOT REFERABLE TO THE JORHAT UNIT SHOULD HAVE HELD THAT NO ALLOCATION FROM HEAD OFFICE WAS CALLED FOR EITHER ON FACTS O R IN LAW. 4. BECAUSE IN ANY CASE AND WITHOUT PREJUDICE TO THE CONTENTIONS RAISED IN THE FOREGOING GROUNDS THE BASIS OF ADDITI ONAL ALLOCATION OF EXPENSES IS WHOLLY ERRONEOUS AS BEING INCONSISTENT WITH THE OVERALL BUSINESS PATTERN OF DIFFERENT UNITS. 4. THE ABOVE GROUNDS RELATE TO ONLY ONE ISSUE AND T HEREFORE THEY ARE BEING DISPOSED OF IN THE FOLLOWING MANNER. 5. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE IS A PUBLIC LIMITED COMPANY HAVING ITS PRINCIPAL PLACE OF BUSIN ESS AT KANPUR AND MANUFACTURING UNITS AT KANPUR JORHAT NOIDA NADIA D BARODA AND AHMEDABAD. FOR THE BUSINESS SO CARRIED ON BY THE AS SESSEE IT HAD MAINTAINED UNIT WISE ACCOUNTS SEPARATELY AS IF EAC H UNIT IS AN INDEPENDENT ASSESSEE. IN SUCH UNIT WISE ACCOUNTS MANUFACTURING / TRADING RESULTS AND PROFIT THEREFROM WERE FULLY REFLECTED AND THE SAME WERE PLACED ON RECORD 4 BEFORE THE ASSESSING OFFICER. BESIDES CONSOLIDATED 'VERSION' OF PROFIT OF ALL THE UNITS TAKEN TOGETHER WAS ALSO PREPARED AND SUBM ITTED ALONGWITH THE RETURN ITSELF FILED UNDER SECTION 139(1) OF THE INC OME-TAX ACT 1961 (IN SHORT THE ACT). SUBSEQUENTLY A REVISED RETURN WAS ALSO FILED SO AS TO CORRECT CERTAIN ERRORS IN THE COMPUTATION OF INCOME UNDER T HE HEAD CAPITAL GAIN. ALTHOUGH UNIT WISE ACCOUNTS HAVE BEEN KEPT BY TREA TING EACH UNIT AS AN INDEPENDENT ASSESSEE THERE WERE SOME COMMON EXPENS ES ALSO INCURRED AT KANPUR FOR THE REASON THAT HEAD OFFICE OF THE ASSE SSEE WAS SITUATED THERE. WHEREVER CALLED FOR DUE ALLOCATION OF THE EXPENSES INCURRED AT THE HEAD OFFICE WAS DULY MADE AMONGST EACH UNIT AND CHARGED TO THEIR RESPECTIVE PROFIT & LOSS ACCOUNT. ON THE BASIS OF SUCH WORKIN G/ ALLOCATION DEDUCTION UNDER SECTION 80IB OF THE ACT WAS CLAIMED IN RESPE CT OF NET PROFIT OF JORHAT UNIT AT RS.24 46 79 751. SUCH A CLAIM HAD BEEN MADE IN CONTINUATION TO THE SIMILAR CLAIM MADE IN EARLIER YEARS ALTHOUGH WITH VARIED FIGURES DEPENDING UPON THE PROFITS OF EACH YEAR. DURING THE COURSE O F REGULAR ASSESSMENT PROCEEDINGS THE AO TOOK A VIEW THAT THE APPELLAN T HAD CLAIMED LESSER EXPENSES IN THE JORHAT UNIT PROFIT OF WHICH IS EXE MPT UNDER SECTION 80IB AS COMPARED TO THE KANPUR UNIT WHICH IS ANOTHER MAJOR UNIT AND WHERE ENTIRE PROFIT IS TAXABLE'. ON THIS PRESUMPTION THE AO INV OKED THE PROVISIONS OF SUB-SECTION (10) OF SECTION 80LA (APPLICABLE TO 80I B ALSO) AND BY TAKING THE TURNOVER OF THE TWO UNITS AS 'BASE' HE PROCEEDED T O MAKE ADDITIONAL ALLOCATION OF EXPENSES UNDER DIFFERENT HEADS AGGRE GATING RS.99 80 254 AND REDUCED THE PROFIT OF JORHAT UNIT BY THE SAID SUM. IN CONSEQUENCE THE ASSESSEES CLAIM FOR DEDUCTION UNDER SECTION 80IB I N RELATION TO JORHAT UNIT GOT REDUCED FROM RS.24 46 79 751 TO RS.23 46 99 497 . 5.1 FINALLY AFTER CONSIDERING THE REPLY OF THE ASS ESSEE THE AO HAD 5 CONCLUDED AND COMPUTED THE INCOME OF THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION IN THE FOLLOWING MANNER: 'FURTHER EVEN AMONGST THESE EXPENSES IN MANY CASE S NOT THE ENTIRE EXPENSES BUT ONLY THE PART OF IT HAS BEEN ALLOCATE D (E.G. ONLY 50% OF DEPRECIATION ON COMPUTER SALARY OF ONLY THOSE WHO HAVE CONTROL OVER BOTH UNITS ETC.). EVEN THE ENTIRE SALARY HAS NOT BE EN ALLOCATED. SALARY OF ONLY THOSE EMPLOYEES WHICH ARE LIKELY TO PROVID E THEIR SERVICE TO BOTH UNITS HAS BEEN APPORTIONED. THUS ALL THE SUBM ISSIONS OF THE ASSESSEE HAVE BEEN JUDICIOUSLY CONSIDERED.' 5.2 THE AO HAS GIVEN A CHART WHERE HE HAD WORKED OUT PERCENTAGE OF THE TURNOVER OF THE JORHAT UNIT AND KANPUR UNIT T O THE TOTAL TURNOVER OF THE ASSESSEE DURING THE YEAR WHICH HAS BEEN WORKED OUT 50.93% AND 48.31% RESPECTIVELY. BASED ON THE ABOVE EXPENDITURE HAS B EEN ALLOCATED TO THOSE UNITS IN THE SAME PROPORTION. THIS RESULTED IN ALL OCATION OF EXPENDITURE OF RS.99 80 254 TO THE JORHAT UNIT. THUS THE AO REDUC ED THE AMOUNT OF RS.99 80 254 FOR THE PURPOSE OF DEDUCTION UNDER SE CTION 80IB OF THE ACT. 6. AGGRIEVED BY THE ORDER OF THE AO THE ASSESSEE C ARRIED THE MATTER IN APPEAL BEFORE THE LD.CIT(A) AND THE LD.CIT(A) HELD AS UNDER : 10. I HAVE CONSIDERED THE FACTS AND CIRCUSMTANCES OF THE CASE SUBMISSIONS AND ARGUMENTS OF THE LD. AR WHICH HAS B EEN BRIEFLY SUMMARISED ABOVE. THE ISSUE OF ALLOCATION OF THE EX PENSES WAS SUBJECT MATTER OF APPEAL IN EARLIER YEARS ALSO AND THE HON' BLE TRIBUNAL IN ITA NO.1003/LUC/2006 VIDE ITS ORDER DATED 28.9.2007 HAS DECIDED THIS ISSUE IN THE FOLLOWING MANNER :- 'WE NOTE THAT TRIBUNAL IN THE CASE ASSESSEE FOR THE ASSESSMENT YEAR 2001-2003 IN ITA NO.385 REFERRED TO ABOVE HAS HELD IN PARA 29 AND ELSEWHERE IN THAT ORDER THAT DISTRIBUTI ON OF PRO RATA EXPENSES OF JORHAT UNITS WOULD BE UNFAIR. WE THEREFORE RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFF ICER FOR GIVING AN OPPORTUNITY OF HEARING TO THE ASSESSEE TO FIND O UT A SUITABLE METHOD FOR ALLOCATION OF EXPENSES INCURRED BY HEAD OFFICE AND 6 WHICH ARE AFFECTING THE PROFITS OF JORHAT UNIT. AS A RESULT. THIS GROUND OF THE ASSESSEE IS ALLOWED BUT FOR STATISTIC AL PURPOSES AND ASSESSING OFFICER WILL DECIDE THE ISSUE IN THE LIGHT OF THE DISCUSSION MADE HEREIN ABOVE AND OFFER AN OPPORTUNI TY OF BEING HEARD TO THE ASSESSEE'. 11. PURSUANT TO THE SAID DECISION OF THE HON'BLE T RIBUNAL THE DEPARTMENT HAS PASSED AN ORDER U/S 143(3)/251/254 D ATED 31.12.2008 IN THE CASE OF THE APPELLANT HIMSELF FOR THE ASSESS MENT YEAR 2004-05 WHEREIN THE AO HAS EXAMINED THIS ISSUE AS PER DIREC TIONS OF THE HON'BLE TRIBUNAL AND PASSED THE ORDER BY HOLDING TH AT -- I HAVE CAREFULLY CONSIDERED THE CHART OF ALLOCATI ON SUBMITTED BY THE ASSESSEE AND ALSO DETAILED SUBMISSION WITH R EGARD TO EACH OF THE ABOVE EXPENSES IN THE LIGHT OF THE ALLO CATION MADE U/S 143 (3). THOUGH THE ASSESSEE HAS COVERED MOST O F THE EXPENSES AND A SUBSTANTIAL AMOUNT HAVE ALREADY BEEN ALLOCATED SUO MOTO BUT IT IS ALSO NOTED THAT THE ASSESSEE HAS ALLOCATED THE DIRECTOR'S COMMISSION TO JORHAT UNIT IN THE RATIO O F PROFIT OF THE UNIT I.E. RS.L 13 05 963/- LIKE OTHER EXPENSES IT IS ALSO ALLOCATED IN THE RATIO OF TURNOVER OF THE UNIT. ACCORDINGLY IT IS WORKED OUT AT RS.1 14 03 232/-. THE DIFFERENCE OF THESE TWO I.E. RS.97 269/- [11403232 11305963] IS FURTHER ALLOCA TED TO JORHAT UNIT. IT IS ALSO SEEN THAT THE AMOUNTS CLAIMED UNDER DEP RECIATION ON COMPUTER AND OFFICE EQUIPMENT' HAVE NOT BEEN ALLOCA TED THOUGH EXPENSES UNDER THESE HEADS HAVE BEEN DEBITED IN KAN PUR HEAD OFFICE BUT IT CANNOT BE RULED OUT THAT CERTAIN PORT ION OF THESE EXPENSES ARE NECESSARILY USED FOR ALL UNITS OF THE ASSESSEE. I THEREFORE HOLD THAT 25% OF EXPENSES DEBITED AS DEP RECIATION ON COMPUTER I.E. RS.83 694/- AND 25% OF DEPRECIATION O F OFFICE EQUIPMENT I.E. RS. 64 144/- ARE ATTRIBUTABLE TO JO RHAT UNIT. THE CHART SUBMITTED BY APPELLANT DURING REASSESSMEN T PROCEEDINGS AND ACCEPTED BY THE AO ON THIS ISSUE AS CONTAINED I N THE SAID ASSESSMENT ORDER SHOWS THAT THE ADVERTISEMENT EXPEN SES DIRECTORS' TRAVELLING AND DEALERS CONFERENCE OF THE HEAD OFFIC E HAVE BEEN ALLOCATED TO JORHAT UNIT IN THE RATIO OF TURNOVER. DIRECTORS REMUNERATION DIRECTORS SITTING FEES AND COMMISSION IS ALLOCATED TO 7 JORHAT UNIT IN THE RATIO OF PROFIT OF THE UNITS. SA LARY BONUS ETC. OF SALES STAFF OFFICE STAFF IS ALLOCATED 100% TO THE JORHAT UNIT. THE SAID ORDER AND THE CHART OF ALLOCATION OF EXPENSES IS AV AILABLE ON THE FILE AND SAME HAVE BEEN ACCEPTED BY THE DEPARTMENT/AO IN PURSUANCE OF THE ORDER OF THE HON'BLE TRIBUNAL REFERRED ABOVE. 12. IT CAN BE SEEN THAT AS PER SUBMISSION DATED 07 .9.2010 REPRODUCED ABOVE (H) THE APPELLANT HAS NOT CONTEST ED THE METHOD ADOPTED BY AO IN THAT ORDER I.E. ASSESSMENT YEAR 20 04-05. I HAVE ALSO LOOKED INTO THE REASONING AND BASIS IMPLIED BY AO F OR THIS PURPOSE WHILE GIVING EFFECT TO THE ORDER OF THE HON'BLE TRI BUNAL ON THIS ISSUE. IT CAN BE SEEN THAT THE CRITERIA AND BASIS ADOPTED BY AO IS AS PER LAW AND BASED ON SOUND REASONING. IT IS ALSO VALID IN R ESPECT OF REALLOCATIONS OF EXPENSES OF DIRECTORS COMMISSION A ND DEPRECIATION ON COMPUTER AND OFFICE EQUIPMENT AS NOTED ABOVE IN PA RA-11 ABOVE. THE REST OF THE EXPENDITURE ALLOCATED AND ACCEPTED BY A O AS PER CHART ON PAGE 4 OF THE SAID ORDER OF THE AO FOR ASSESSMENT Y EAR 2004-05 IS REASONABLE AND BASED ON OBJECTIVE CRITERIA IN THIS BEHALF. 13. THE FACTS AND CIRCUMSTANCES OF THE CASE AND TH E ISSUE INVOLVED IS SAME AND SIMILAR THEREFORE THE CRITERIA IMPLIE D BY AO FOR THIS PURPOSE IN THE ASSESSMENT YEAR 2004-05 IS DIRECTED TO BE ADOPTED FOR THIS PURPOSE. 14. THE OTHER ARGUMENTS OF THE APPELLANT ENUMERATE D ABOVE (B) (C) (D) ETC. ARE IRRELEVANT BECAUSE SAME ARE NOT Q UESTIONED BY AO NEITHER THEY ARE THE BASIS OF REALLOCATION OF EXPEN SES. THE EXPENDITURE MADE BY APPELLANT OR THE BOOKS OF ACCOUNT MAINTAINE D HAVE NOT BEEN QUESTIONED AS SUCH. THE PROVISIONS OF SUB-SECTION (10) OF SECTION 80IB OF THE I.T.ACT HAVE BEEN RIGHTLY INVOKED BY TH E AO AND EVEN THE APPELLANT HAS ACCEPTED REALLOCATION OF EXPENSES TO THE JORHAT UNIT DURING THE ASSESSMENT PROCEEDINGS. IN VIEW OF THIS DISCUSSION IT IS CLEAR THAT EVEN THOUGH THE APPELLANT HAS ALLOCATED EXPENSES IN THE PROPER MANNER AND MAINTAINED ITS BOOKS OF ACCOUNT S EPARATELY FOR THE DIFFERENT UNITS REALLOCATION OF SOME EXPENSES WERE REQUIRED IN TERMS OF SUB-SECTION (10) OF SECTION 80IB OF THE I.T.ACT WHICH HAS BEEN CARRIED OUT BY AO IN THIS CASE. HOWEVER THE CRITER IA APPLIED BY AO IN THE ASSESSMENT ORDER UNDER APPEAL IS INVARIANCE TO THE CRITERIA WHICH HAS BEEN APPLIED BY AO AND ACCEPTED BY DEPARTMENT PURSUANT TO ORDER OF THE HON'BLE TRIBUNAL REFERRED ABOVE IN RES PECT OF ASSESSMENT 8 YEAR 2004-05. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AND FOR THE REASON THAT THE ISSUE HAS BEEN CONSIDERED BY HO N'BLE TRIBUNAL AND THAT APPELLANT HAS ALSO ACCEPTED THE CRITERIA APPLI ED BY THE DEPARTMENT FOR ASSESSMENT YEAR 2004-05 THE AO IS D IRECTED TO WORK OUT THE REALLOCATION OF EXPENSES TO THE JORHAT UNIT IN THE SIMILAR MANNER AND ON THE SAME CRITERIA FOR EACH HEAD/SUB-H EAD OF EXPENDITURE AS DONE BY AO FOR ASSESSMENT YEAR 2004- 05 IN HIS ORDER DATED 31.12.2008 AS DISCUSSED ABOVE. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE AL SO CAREFULLY GONE THROUGH THE MATERIALS AVAILABLE ON RECORD. IT IS RE LEVANT TO NOTE THAT THE ISSUE OF ALLOCATION OF THE EXPENSES WAS SUBJECT MATTER OF APPEAL IN ASSESSMENT YEAR 2004-05 AND THE TRIBUNAL LUCKNOW BENCH IN I.T.A.NO .1003(LUC.)/2006 VIDE ITS ORDER DATED 28.9.2007 HAS DECIDED THIS ISS UE WHICH HAS BEEN REPRODUCED BY THE LD.CIT(A) IN PARA 10 OF HIS ORDER . 7.1 WE FIND THAT PURSUANT TO THE DECISION OF THE TR IBUNAL RENDERED FOR ASSESSMENT YEAR 2004-05 DATED 28.9.2007 THE AO HAS PASSED AN ORDER UNDER SECTION 143(3)/251/254 DATED 31 ST DECEMBER 2008 IN THE CASE OF THE ASSESSEE ITSELF WHEREIN THE AO HAS EXAMINED THIS ISSUE AS PE R DIRECTIONS OF THE HON'BLE TRIBUNAL AND PASSED THE ORDER WHICH IS REP RODUCED BY THE LD.CIT(A) IN PARA 11 OF HIS ORDER. 7.2 IT IS OBSERVED THAT THE LD.CIT(A) HAS FOUND THA T THE CRITERIA APPLIED BY THE AO FOR WORKING OUT THE DEDUCTION UNDER SECTION 80IB FOR THE ASSESSMENT YEAR 2004-05 WAS CORRECT AND THEREFORE HE HAS DIRE CTED THE AO TO ADOPT THE SAME CRITERIA FOR THE YEAR UNDER CONSIDERATION WHI LE WORKING OUT DEDUCTION UNDER SECTION 80IB OF THE ACT. WE FIND THAT THE CRI TERIA APPLIED BY THE AO FOR WORKING OUT THE DEDUCTION UNDER SECTION 80IB F OR THE ASSESSMENT YEAR 9 2004-05 HAS BECOME FINAL AND THEREFORE WE DO NOT S EE ANY INFIRMITY IN THE DIRECTIONS OF THE LD.CIT(A) GIVEN TO THE AO TO WO RK OUT THE RE-ALLOCATION OF EXPENSES OF THE JORHAT UNIT IN THE SIMILAR MANNER A ND ON THE SAME CRITERIA FOR EACH HEAD/SUB-HEAD IN QUESTION AS DONE BY THE A O FOR THE ASSESSMENT YEAR 2004-05. IN VIEW OF THE ABOVE WE DISMISS GROUNDS RAISED BY THE REVENUE AS WELL AS THE ASSESSEE. 8. GROUND NO.5 RAISED BY THE REVENUE IN ITA NO.695( LKW)/2010 READS AS UNDER : 5. THAT CIT(A) HAS ERRED IN ALLOWING THE EXPENDIT URE ON ACCOUNT OF TRAVEL TO SRI LANKA EVEN THOUGH THERE HAS BEEN N O FINDING THAT EXPENDITURE HAS BEEN INCURRED WHOLLY AND EXCLUSIVE LY FOR THE PURPOSE OF BUSINESS. 9. THE AO HAS OBSERVED THAT EXPENDITURE OF RS.1 44 500 WAS INCURRED ON ACCOUNT OF TRIP TO SRI LANKA WHICH HAS BEEN UND ERTAKEN BY SHRI DEEPAK KOTHATI SHRI MITESH KOTHARI AND SHRI KAMLESH MEHTA . ACCORDING TO THE AO THERE WAS NO BUSINESS DEALING IN SRI LANKA. DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO ASKED THE ASSESSEE T O EXPLAIN AS TO WHY EXPENSES OF RS.1 44 500 INCURRED ON FOREIGN TRIP TO SRI LANKA OF SHRI DEEPAK KOTHATI SHRI MITESH KOTHARI AND SHRI KAMLES H MEHTA MAY NOT BE DISALLOWED AS THERE WAS NO EXPORT MADE TO SRI LANK A AND APPARENTLY THERE WAS NO BUSINESS DEALING IN SRI LANKA. AFTER CONSIDE RING THE ASSESSEES REPLY THE AO MADE THE ADDITION OF RS.1 44 500. 10. ON APPEAL THE LD.CIT(A) DELETED THE ADDITION O BSERVING AS UNDER : 20. I HAVE CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE 10 RELATING TO THE VISIT OF TWO DIRECTORS TO SRI LANKA FOR WHICH AMOUNT OF RS.1 44 500/- HAS BEEN SPENT. SAME CANNOT BE HELD A S PERSONAL AND FOR NON BUSINESS PURPOSES. IT IS NOT NECESSARY THAT THE FOREIGN VISIT OF THE DIRECTORS SHOULD NECESSARILY RESULT IN SOME BUS INESS TRANSACTION FOR CLAIMING DEDUCTION U/S 37. THERE IS NO DOUBT ON THE GENUINENESS OF THE SAID EXPENDITURE. UNDER THE CIRCUMSTANCES THE AO IS DIRECTED TO ALLOW RS.L 44 500/- AS PER DECISION IN THE CASE OF CIT VS. INDIAN PRODUCTS 207 ITR WHERE IT WAS HELD THAT 'EXPENDIT URE ON FOREIGN TOUR BY HUSBAND AND WIFE BOTH DIRECTORS IS DEDUCT IBLE'. 11. WE HAVE HEARD THE RIVAL SUBMISSIONS. SHRI AMIT SHUKLA ADVOCATE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT BOTH THE DI RECTORS HAD GONE TO SRI LANKA TO SEE THE NEW DEVELOPMENTS AND FOR THE ADVA NCEMENT OF EXISTING BUSINESS. THE AO HAS NOT DOUBTED THE GENUINENESS OF THE SAID EXPENDITURE. IN OUR VIEW FOR ALLOWANCE OF ANY EXPENDITURE FOR TH E PURPOSES OF BUSINESS IT IS NOT ESSENTIAL THAT THERE SHOULD BE CERTAIN BUSIN ESS. ADMITTEDLY BOTH THE DIRECTORS HAD GONE TO SEE THE NEW DEVELOPMENTS I N SRI LANKA SO AS TO ENHANCE/IMPROVE THE EXISTING BUSINESS OF THE ASSES SEE. CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE WE DO NOT FIND NAY MERIT IN THIS GROUND OF APPEAL AND ACCORDINGLY WE REJECT THE SAME. 12. GROUND NO.5 IN I.T.A.NO.678(LKW)/2010 RAISED BY THE ASSESSEE READS AS UNDER : 5. BECAUSE THE CIT(A) HAS ERRED IN LAW AND ON F ACTS IN UPHOLDING DISALLOWANCES OF SUMS AGGREGATING RS.68 415 OUT OF FOREIGN TRAVELING EXPENSES ON THE GROUND THAT SUCH EXPENSES WERE REFERABLE TO THE TRAVELING BY THE PERSONS WHO ARE NEITHER THE DIRECTORS OF THE APPELLANT COMPANY NOR ITS EMPLOYEE S. 13. AT THE TIME OF HEARING OF THE APPEAL SHRI AMIT SHUKLA ADVOCATE LD. 11 COUNSEL FOR THE ASSESSEE KEEPING IN VIEW THE SMALL NESS OF THE AMOUNT INVOLVED DID NOT PRESS FOR THE GROUND AND ACCORDING LY WE DISMISS THE SAME AS NOT PRESSED. 14. IN THE RESULT REVENUES APPEAL AS WELL AS ASSE SSEES APPEAL ARE DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 5.1.11. SD. SD. (N.K.SAINI) (H.L.KARWA) ACCOUNTANT MEMBER VICE PRESIDENT JANUARY 5TH 2011. COPY TO THE : 1. APPELLANT 2. RESPONDENT 3. CIT(A) (4) CIT 5.DR. A.R. ITAT LUCKNOW. SRIVASTAVA.