TaxTMI 
TaxTMI 
2013 (6) TMI 71
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....al undertaking owned by the assessee, which are eligible for deduction under section 80-IA or 80-IB of the Act as the case may be and thus, all the appeals have been heard together. 3. The assessee is engaged in the business of publication and printing of newspapers and periodicals. The assessee company was established in 1973 and carried on its publication business. Subsequently, the assessee established two other undertakings at Sahibabad (Uttar Pradesh), namely Unit Nos. 2 & 3. Unit Nos. 2 & 3 were involved exclusively in printing. In the year 1994, the assessee established another undertaking at Faridabad, namely Unit no. 4. Unit no. 4 was established by importing plant and machinery from United States of America and Germany and the ancillary equipment was procured in India. The plant, machinery and equipment used for setting up Unit no. 4 were new and were not used for any other purpose prior to their use in unit no. 4. No part of the machinery or equipment of Unit No. 4 was acquired by transfer from any of the other units of the assessee. 4. During the previous year, relevant to the assessment year 1997-98, the assessee carried on printing work on job work basis for Unit no....
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....Unit no. 1 was accepted. The assessee had claimed profit of Rs. 5,00,57,879 as profits eligible for deduction under Section 80-IA of the Act in its return and the deduction available under Section 80-IA of the Act was calculated @ 30% of the eligible profits at Rs. 1,50,17,363/-. Against the deduction of Rs. 1,50,17,363/- as claimed by the assessee, the Assessing Officer calculated the deduction available under Section 80-IA of the Act at Rs.49,93,661/-. 6. The assessee preferred an appeal before the CIT (Appeals) against the assessment order dated 15.03.2000. It was contended by the assessee that in the facts of the case, there was no occasion for the Assessing Officer to apply the provisions of Section 80-IA(8) of the Act. Section 80-IA(8) of the Act would be applicable only where goods were transferred from an eligible business to any other business of the assessee and the consideration recorded was not at market values. In the present case, admittedly Unit no. 4 was charging higher rate for printing from third parties than what was being charged from Unit no. 1. In these circumstances, there would be no plausible reason to further reduce the profit margin. The reduction in the....
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....d by Unit no. 4 as such expenses were not incurred by Unit no. 4. The Assessing Officer rejected this contention by holding that in the event Unit no. 4 was treated as carrying on job work then the benefit of Section 80-IA of the Act was not available to the unit and if the benefit of Section 80-IA of the Act was to be allowed then the same could only be on recomputed profits after taking into account expenses incurred by Unit No. 4. The Assessing Officer re-computed the profits derived from Unit no. 4 by reallocating the expenditure incurred by the assessee. The Assessing Officer computed the eligible profits from unit no. 4 at Rs. 4,61,15,101/- and allowed a deduction @ 30% on the said profits which was computed at Rs. 1,38,34,530/- and passed the assessment order dated 28.02.2001. 10. The assessee challenged the assessment order dated 28.02.2001 before the CIT (Appeals). The CIT (Appeals) allowed the appeal of the assessee vide its order dated 23.08.2001. The CIT (Appeals) held that the issues raised were similar to those that were considered in his order dated 13.01.2001 in respect of the earlier assessment year-A.Y. 1997-98 and following the earlier decision, CIT (Appeals) al....
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....shown huge profits. The Assessing Officer thus reallocated the expenses and re-computed the profits of Unit no. 4 which were eligible for deduction under Section 80-IB of the Act. The assessee had claimed a deduction of Rs. 1,70,95,714/- under section 80-IB of the Act. The Assessing Officer held that no deduction under section 80-IB of the Act would be available to the assessee, as there would be no profits in Unit No. 4, if the cost of paper and packaging and forwarding charges were also included in the costs incurred by Unit no. 4. The Assessing Officer relied on the provision of section 80-IB(5), 80-IB(8) and 80-IB(10) of the Act to hold that the accounts relating to Unit no. 4 were required to be drawn up as if the income from the eligible business was the only business and thus expenses incurred by the assessee in packaging and forwarding as well as for purchase of paper were required to be allocated to Unit No. 4. 14. The assessee preferred an appeal before the CIT (Appeals) which was allowed by CIT (Appeals) vide its order dated 27.06.2006. The Department preferred an appeal before the Tribunal, inter alia, challenging the order of the CIT (Appeals) in directing the Assessi....
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....in law and on facts in holding that the assessee was entitled under Section 80-IB of the Act of the Income Tax Act relying on the order of earlier years? 2. Whether the order of the Income Tax Appellate Tribunal, which is a final fact finding authority, is not vitiated in law as it has not gone through the facts properly and just reproduced and relied upon the order of the CIT(A) without appreciating the material on record for making additions? 19. Before proceeding to address the controversy raised in the present appeals, it would be necessary to examine the manner in which the assessee has structured its business. The assessee was established in 1973 and is engaged in the business of printing and publishing various magazines, namely, Alive, Women's Era, Sarita, Greh Shobha, Champak etc. The assessee has its office situated at New Delhi which is engaged exclusively in publishing business. This undertaking has been referred to as Unit no.1. Unit no.1 is a publishing house where blue prints and the content of various magazines in the portfolio of the assessee are prepared or arranged. Unit no.1 is described as a publishing house as it is engaged in the business of publishing. The ....
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....heet from Unit No.1 for the job work carried on in Unit No.4. 22. The controversy that has been raised in the present appeals is regarding the expenses that are required to be allocated to Unit No.4 for the purposes of determining the profits of Unit No.4 which are eligible for deduction under Section 80-IA or 80-IB of the Act as the case may be. During the assessment years 1997-1998, 1998-1999 and 1999-2000, the assessee claimed deduction under Section 80-IA of the Act. The Assessing Officer relying on Section 80- IA(8) of the Act, 80-IA(9) of the Act and 80-IA(10) of the Act held that the profits of the assessee from Unit No.4 were required to be recomputed. The relevant extracts from Section 80-IA of the Act are quoted below:- "Section 80-IA. - Deduction in respect of profits and gains from industrial undertakings, etc., in certain cases.- (1) Where the gross total income of an assessee includes any profits and gains derived from any business of an industrial undertaking or a hotel or operation of a ship or developing, maintaining and operating any infrastructure facility............. to which this section applies, there shall, in accordance with an subject to the provisions o....
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....arranged that the business transacted between them produces to the assessee more than the ordinary profits which might be expected to arise in such eligible business, the Assessing Officer shall, in computing the profits and gains of such eligible business for the purposes of the deduction under this section, take the amount of profits as may be reasonably deemed to have been derived therefrom." xxxxx xxxxx xxxxx xxxxx 23. Section 80-IA was substituted by section 80-IA and section 80-IB by Finance Act, 1999 w.e.f. 01.04.2000. The assessee has claimed deduction under Section 80-IB of the Act for the period relevant to the assessment year 2003-2004 and 2004-2005. 24. It is not in dispute that the assessee has maintained separate books of accounts for Unit No.4 and the only issued to be addressed is whether the expenses allocated to Unit No.1 are to be taken into account for determining the eligible profits from Unit No.1. The Assessing Officer relied on the provisions of Section 80-IA(9) of the Act and Section 80-IA(10) of the Act to come to a conclusion that the profits attributable to Unit No.4 were liable to be recomputed. The Assessing Officer held that the expenses relating t....