TaxTMI 
TaxTMI 
TaxTMI 
2014 (12) TMI 1060
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....sallowing the sale if manufactured product to be treated as "trading receipt" as held by the Assessing Officer in his assessment order." 4. "Whether on the facts and in the circumstances of the cases and in law, the Ld. CIT(A) is justified in disallowing the reallocation of expenditure such as interest charges, repairs & maintenance and insurance charges between trading and manufacturing activity and subsequent determination of net profit by the Assessing Officer." 2. Regarding disallowance of claim of deduction u/s 80IB, the AO's case had been that assessee is engaged in the business of trading in plastic bags and also doing labour work on job work during the year and for the income generated out of job work activity, the assessee is not entitled for deduction u/s 80IB. The assessee's claim was that the labour charge received was on account of manufacturing activity only, as it was carrying out job work from the some machinery which was utilized by the assessee for its own manufacturing. However, the learned assessing officer relying upon the decision of Special Bench Mumbai Tribunal in the case of B.T. Patil and sons 35 SOT 171 (MUM) (SB), disallowed the claim of the assessee. ....
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.... sold for Rs. 98,08,414/- during the assessment year and hence, it cannot be said that the entire profit of the appellant arose only out of job work. The profit component of this manufactured sales is also embedded into the claim of 80IB(10). 1.7 It was the contention of the appellant that separate books of accounts were maintained for manufacturing activity and trading business. Therefore, the profit derived from manufacturing activity includes income out of labour job work also. It was also submitted that since the same P & M which is used for manufacturing is also used for job work, the income out of contract job work is derived income for the purpose of sec. 801B. The question to be answered in this case is whether the appellant is entitled for deduction u/s 80lB of the Act in respect of the job work activity undertaken. In this regard, the facts in some of the cases, which are identical to that of the appellant are discussed below." and thereafter, he analyzed the various decisions relied upon by the assesse and also other decision which were as under:- 1. CIT Vs. Sahani Computers Ltd. reported in 203 taxmann 37 2. CIT Vs. Ambuja Ginne Processing & Oil Co. Pvt. Ltd. report....
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....oses. The various courts have held that the only requirement for claim of deduction u/s 80IB is that, income should be derived from the industrial undertaking and assessee is liberty to manufacture the goods for itself or for others. The section does not make any difference for the purpose of claiming deduction u/s 80IB. If the job work has been done from the raw material supplied by the customers and assessee has manufactured the goods from those raw materials, then it amounts to manufacturing from the industrial undertaking. In all the decisions as have been referred before us, the Hon'ble High Courts have reiterated the same proposition. A finding of fact has been recorded by the Ld.CIT(A) that the plant and machinery were used for manufacturing of plastic bags and polypropylene sheets to carry out the job work for others. The only difference is that assessee instead of its own raw material, has used raw material supplied by others. Thus such an income from job work is nothing, but income derived from industrial undertaking as per the provisions of section 80IB. Thus the finding of the Ld.CIT(A) is incorporated above as affirmed and accordingly ground no. 1 and 2 raised by the r....
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....so worked out. 9. The Ld.CIT(A) noted that the assesse had shown opening stock of manufactured goods at Rs. 95,57,961/- and the sale of manufactured goods of Rs. 98,08,414/-. It was due to some misrepresentation at the assessment stage, it was stated that the said sales belong to the trading receipts. However, such a statement is not correct which is evident from the sales register of manufacturing and also the sale invoices. After perusing and examining these documents, the Ld.CIT(A) directed the AO to accept the gross profit declared by the assesse and allow the deduction u/s 80IB on labour charges. The relevant finding of the Ld.CIT(A) reads as under:- "I have perused the copies of the sample invoice and it clearly indicates that it was towards sale of BOPP films. Since the stock has been shown as opening stock out of manufacturing, no doubt, that the sale of goods is out of manufacturing activity only. The assessing officer by ignoring the actual facts gone by the submission of the earlier CA which was definitely erroneous. Since the sale out of the BOPP films has been held as out of manufacturing of goods, the profit emanated out of this would amount to a derived income from....
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....s not correct as the correct position is that, the said amount represents sales of manufactured goods and no trading receipt. On the perusal of the records, it is seen that the assesse had shown income from two kind of activities, one form job work of manufacturing and sale of manufactured goods and other on account of trading activities. Under the head manufacturing, the assesse had shown opening stock of manufactured goods as on 31.07.2007 at Rs. 95,57,961/-. The sale of manufactured goods was shown at Rs. 3,13,34,736/- which also included sale on account of job charges out of Rs. 2,15,25,722/-. The amount was finally reconciled in the accounts. Though there has been some misrepresentation of facts before the AO however, Ld.CIT(A) has duly verified the same from sales register and also copy of sale memos and has given a categorical finding that it pertains to sale of manufactured goods and not trading receipts. Thus such a finding of fact appears to be correct from the material placed on record, hence we do not find any reason to disturb such a finding of fact. Accordingly grounds raised by the revenue is dismissed. 13. In Ground No. 4, the revenue has challenged finding of the ....
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....sessing Officer has taken value of the factory building and the value of P & M as RS.61 crore for both manufacturing as well as job work activities. It was the contention of the appellant that the Assessing Officer has lost sight of trading activity which has contributed Rs. 22.28 crores out of total business of Rs. 35.36 cores and the factory/office premises have been used for the trading activity also. The Assessing Officer ignored this fact while allocating the expenditure on ad hoc basis. It was also brought to my notice that Rs. 150 crores was employed for trading activity and interest was paid exclusively for the trading activity is as under: 1. Interest paid to ICICI bank against export packing credit facility Rs. 5,21,417 2. Interest paid on cash credit loan from ICICI Rs. 8,30,637 3. Interest paid on unsecured loan Rs. 11,72,489 TOTAL Rs.25,24,543 admitted by the appellant that a sum of Rs. 13,10,131/- was incurred towards the same. The Assessing Officer in the impugned assessment order has adopted the ratio of 46:15 between the machinery and the building. Accordingly, the Assessing Officer has apportioned interest of Rs. 3,22,163/- towards the building p....