- (1.) All the above appeals were admitted for decision of this court on the following identical points as points involved therein are identical. (i) Whether the learned Tribunal misdirected itself in law and it adopted a wholly erroneous approach in interpreting the provisions of section 80-IA(5) of the Income-tax Act, 1961, to hold that the corporate expenses in the sum of Rs. 1,75,73,406 incurred by the assessee-company at its registered and head office at Calcutta, during the financial year relevant to the assessment year 2000-01 were essential expenses and had direct nexus with the running of its Silvasa unit and were, therefore, deductible in computing the profits and gains derived from the eligible business for the purpose of subsection (1) of section 80-IA of the said Act and whether the findings of the learned Tribunal to this effect were wholly unreasonable, based on irrelevant consideration, contrary to the facts and evidence on record and/or otherwise perverse? (ii) Whether on a correct interpretation of section 80-IA of the Income-tax Act, 1961, the assessee-company was rightfully entitled to enjoy deduction in the sum of Rs. 9,02,62,300 in respect of profit and gains derived from the eligible business of the Silvasa unit and in respect of the assessment year 2000-01? The short facts of the case is as follows: The appellant assessee-company is engaged in business of manufacturing and selling lubricants for vehicles under the brand names of Veedol and Mitsubishi Oil The base oil for carrying out the aforesaid manufacturing operations is mostly imported from abroad more particularly, from Singapore, UK, USA and other European countries. The assessee-company, at all material times had five manufacturing units situated at Ramkristopur, Howrah (W.B.), Deonar in Maharashtra, Faridabad in U.P., Royapuram in Chennai and Silvasa in the backward area of the Union Territory of Dadra and Nagar Haveli. For manufacturing Mitsubishi oil, the assessee-company has entered into a collaboration agreement with Mitsubishi company of Japan. The manufactured oil is sold by the assessee-company through distributors and agents appointed and functioning throughout the country. This appeal is against the judgment and order dated August 29, 2008, and relate to the financial years ending on March 31, 1998, March 31, 1999, March 31, 2000, and March 31, 2003, corresponding to the assessment years 1998-99, 1999-2000, 2000-01.
(2.) This appeal concerns with the manufacturing unit at Silvasa. The original assessment for the assessment year 1998-99 was completed on 30th March of 2001, at a total income of Rs. 3,91,62,300. The Commissioner of Income-tax in exercise of its power under section 263 of the Income-tax Act, 1961 (hereinafter referred to as "the said Act") by its order dated November 20, 2002, set aside the assessment and directed the Assessing Officer to re-examine the issues and make a fresh assessment. The assessee thereafter preferred an appeal against the said order of the Commissioner of Income-tax dated November 20, 2002, before the Income-tax Appellate Tribunal, however, the said appeal was dismissed by order dated August 12, 2003, with direction as follows: In the instant case, we have noticed that the Commissioner of Income-tax (Appeals) after discussion had come to the conclusion that the assessment made was erroneous and prejudicial to the interests of the Revenue. In view of the same we do not find any infirmity of the order of the Commissioner of Income-tax. Pursuant to the said order, the Assessing Officer made a fresh assessment at a total income of Rs. 4,50,32,240, while doing so the Assessing Officer made an addition of Rs. 1,75,73,406 on account of proportionate corporate expenses out of the profit of the Silvasa unit, and thus reduced deduction under section 80-IA of the Act to the extent as against the deduction of Rs. 9,02,62,048 allowed under section 80-IA as per the original order dated 30th March, 2001. The assessee appellant thereafter preferred an appeal before the learned Commissioner of Income-tax (Appeal) who by order dated April 9, 2007, modified the said order of assessment with a direction upon the Assessing Officer to restrict the amount of corporate expenses to be deducted from the income of the Silvasa unit to Rs. 3,40,34,620 as against the entire amount of Rs. 1,75,73,406 shown by the assessee as the head office expenses eligible to the Silvasa unit on the basis of the sale of the unit. Aggrieved by the said order dated April 9, 2007, of the Commissioner of Income-tax (Appeals) preferred an appeal before the learned Tribunal on various grounds. The learned Tribunal passed the impugned order.
(3.) Mr. N.K. Poddar, learned senior advocate appearing for the assessee in support of the appeal, contends that the assessee-company maintains separate books of account relating to the transaction effected at various branch offices under the relevant provisions of the Companies Act, 1956. The unit at Silvasa situated in the Union Territory of Dadra and Nagar Haveli of the appellant-company, has got the manufacturing activities and their expenses are also incurred by the assessee separately and such accounts are also audited separately. At the end of each financial year the audited accounts of each of the manufacturing units are brought to Calcutta for consolidation at the head office of the appellant company; and during such consolidation the receipts and expenses of the head office are also consolidated with receipt and expenses of the respective manufacturing units. Such accounts are first consolidated region-wise that is northern region, eastern region, western region, and southern region and thereafter consolidated with the accounts of the corporate head office at Calcutta. The overall consolidated accounts of each of the relevant financial years are audited by the statutory auditors under the provisions of the Companies Act. This consolidated accounts of the assessee-company as a whole are circulated and presented to the shareholders of the company in the annual general meetings held under section 166 of the Companies Act and once approved by them then printed audited account is filed with the Registrar of Companies as well as other statutory authorities including the Income-tax Department.;