TaxTMI 
TaxTMI 
2013 (2) TMI 349
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....ties by purchasing dehydrated onions. During the course of assessment proceedings, the assessee described its business as under : " Our firm is manufacturing dehydrated onion from raw onion through plant and machinery in the name and style of Chhatariya Dehydrates Exports since a long time at Mahuva. We exports 100% our manufacturing goods and get the relief u/s. 10B of the Act. Our unit is 100% EOU. We use raw onion as a raw material and after manufacturing the goods it is packed in plastic bags, paper bags and corrugated boxes for exports. During the manufacturing we use ground nut husk, firewood and leagnight for fuel. The onion and Ground nut is main crop in Bhavnagar district. Raw Onion is seasonal crop." The AO stated that the assessee is claiming to be manufacturer and exporting 100% of its goods. It was seen from the details furnished that during the year the assessee purchased finished dehydrated onions amounting to Rs.11,19,19,308/-. The AO after considering the manufacturing process of dehydrated onions from raw onion, (chart given at page No.2 of the assessment order) stated that the assessee was asked to explain why not purchase and sale of dehydra....
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....63,149/- 4.3 The assessee has also produced letters from these three concerns stating that they have sold dehydrated onions to the assessee in loose packing. During the assessment proceeding, assessee was also asked to furnish explanation that the material being purchased from this group concerns are at market rates. However the assessee has not furnished any proof regarding the comparable market rates. Assessee has also attached the bills raised by these parties wherein the description of the goods sold is given as dehydrated Indian onion ¼ mm or Dehydrated onion or Dehydrated white onion kibbled or Dehydrated onion power. It is clear that the assessee is only purchasing the totally finished goods from these group concerns. Even otherwise assessee has purchased finished goods from some other parties also, albeit in smaller quantity. 4.4 As far as the method of working out profit from the trading activity is concerned, the method given by the assessee suffers from material defects. Assessee has taken 58.20% of some expenses attributable to trading and in some cases 25% of expenses to Crushing - Rs.10,17,336/-, Onion Stuffing Expenses -....
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....essment order) are to be reduced from the amount of loss shown by the assessee at Rs.59,97,840/-. The learned CIT(Appeals) has further stated that the assessee has also claimed 25% of total expenses i.e. generator expenses, machinery repairing expenses and depreciation in relation to trading activity but the same cannot be accepted as they are relating to running factory in which the assessee manufactures dehydrated onions. The learned CIT(Appeals) has stated that only 10% of the total expenses as incurred in relation to trading activity could be considered. In this way, the learned CIT(Appeals) computed the deduction u/s 10B of the Act at Rs.1,35,45,075/-. Hence this appeal by the Department. 5. During the course of hearing, the learned DR submitted that the assessee agreed with the AO that it was also doing trading activities in respect of export of onions and on which exemption u/s 10B could not be claimed. He submitted that the learned CIT(Appeals) also agreed with the AO in principle but reduced the disallowance by working out of its own the ineligible items to be considered and to be reduced from the profit of the activity on which deduction u/s 10B is allowable. The learned....
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....rties. 7. There is no dispute to the fact that the assessee is engaged in the activity of trading as well as manufacturing of export of dehydrated onions. The assessee has been granted approval of 100% EOU by the Development Commissioner, Kandla Free Trade Zone. In the assessment year under consideration, the assessee effected total sales of 4012.707 M.T. and out of it the purchase of dehydrated onions was 2535.357 M.T. The purchase and sale of dehydrated onions was of Rs.11,19,19,308/-. Out of the said total purchases of dehydrated onions of Rs.11,19,19,308/-, the assessee purchased from its group concern dehydrated onions of Rs.10,22,63,149/-. We observe that during the assessment proceedings, the AO asked the assessee to furnish explanation that the material being purchased from its group concerns was at market rates but the assessee could not furnish any proof regarding the comparable market rates. There is also no dispute to the fact that the trading activity constituted 58.20% of total sales. The assessee worked out from the said trading activity negative profit (Rs.59,97,840/-). The assessee has shown the net profit from both the activities i.e. trading and manufacturing of....