TaxTMI 
TaxTMI 
2014 (3) TMI 975
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....facts and circumstances of the case and in law, the CIT(A) was justified in allowing deduction u/s 80IB(5)(i) of the IT. Act, by holding that assembling of various components amounts to manufacture; without appreciating that no manufacturing activity is possible without sophisticated machinery or skilled manpower. 3. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in ignoring the significance of amendment of Sec.10A and 10B by the Finance Act, 2000 whereby definition of manufacturing, which included any process or ASSEMBLING, has been deleted w.e.f. 01/04/2001 thereby meaning that those involved in assembling and processing would not be entitled to benefits intended for manufacturing concerns. 4. Whether on the facts and circumstances of the case and in law, the CIT(A) has erred in not applying the ratio of Hon'ble Calcutta High Court in the case of CIT Vs. Babcock & Wilcox of India Ltd reported in 241 ITR 583 wherein it has been held that the activity of erecting of boiler at site by assembling of parts cannot be equated with manufacture of an article or thing. 5. Whether on the facts and circumstances of the case and in law, th....
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....deduction in respect of Chakan and Silvassa units. The deduction available at Chakan Unit was at 30% of the profit while in respect of Silvassa Unit, the deduction was available at 100% of the profit of the unit. 4.3 Thus, the assessee company has claimed deduction in respect of profits for both units. The deduction claimed in respect of Silvassa Unit was of Rs. 7,74,08,854/- for A.Y. 2007- 08. The Assessing Officer had disallowed the claim of the deduction made by the assessee in respect of Silvassa unit because the assessee was not engaged in manufacturing of article in Silvassa unit, but he was simply assembling various components of gensets. According to the Assessing Officer, the assessee itself has admitted that it was engaged in the assembling with various parts, hence deduction u/s.80IB(5)(i) was not allowable to the assessee. The Assessing Officer has relied upon the decision of Calcutta High Court in the case of CIT Vs. Babcock and Wilcox of India Ltd. reported in (2000) 241 ITR 583 in order to support his case that the deduction u/s.80IB(5)(i) was not available to a unit engaged in assembling of various parts. In appeal before CIT(A), the assessee has explained the va....
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....nt parts of the windmill and assembled the same, it could not amount to either 'manufacture' or 'production' of any article or thing, as spelt out in Section 80IB(2)(iii). Thus such contention was rejected by the Tribunal. Having heard both the parties, the High Court held that: The different parts procured by the assessee by themselves cannot be treated as windmill. Those different parts bear distinctive names and when assembled together, they get transformed into a final product, which is commercially known as a windmill. However, there can be no difficulty in holding that such an activity carried out by the assessee would amount to "manufacture" as well as "production" of a thing or article as set out in Section 80IB(2)(iii)." 4.6 The Hon'ble High Court of Delhi in the case of Jackson Engineers [(2012) 341 ITR 518(Delh)] has decided a similar issue. The relevant portion of the same is as under: "Deduction under s. 80-IA-Manufacture or production- Assembling of diesel generating sets-Assembling of various components of diesel generating sets involves coupling and aligning the engine with the alternator- Chain pulley blocks are used to lift the engine a....
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....are similar to that of issues raised in assessee's appeal which will be taken care in the assessee's appeal on the said issue. 4.8 As a result, both the revenue's appeals are dismissed." Nothing contrary has been brought to our knowledge on behalf of revenue. Facts being similar, so following the same reasoning, we are not inclined to interfere with the finding of CIT(A), who has allowed the claim of assessee u/s.80IB(5)(i) by holding that assembling of various components amounts to manufacturing. We uphold the same. 5. The next issue is with regard to artificial inflation of profit of Silvassa Unit in order to claim higher deduction. A similar issue arose in the assessee's own case in A.Y. 2007-08 in ITA No.1866 & 1867/PN/2012, wherein it was decided by us by observing as under: "6.3 After going through the rival submissions and material on record, we find that according to the Assessing Officer, the profit of Silvassa unit was eligible for 100% deduction while profit of Chakan unit was eligible for deduction at 30%. According to the Assessing Officer, the assessee has shown higher profit in Silvassa unit. The Assessing Officer stated that net profit ratio of Chakan wa....
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....Ltd. Apart from this sale, the assessee has not sold to any other third party. In this regard, the contention of the assessee is that the canopies sold to Kirloskar were of totally different features. On page 57 of the paper book, the assessee has given the points of difference in respect of the canopies sold to the Silvassa unit and those sold to Kirloskar. From the above, we find that the canopies sold to Silvassa unit were semi finished while those sold to Kirloskar were fully finished canopies. Moreover, from the explanation of assessee, it is found that the specifications were also different. The noise levels were also different. The gauge of steel used in above two was different. The assessee also gave details of the difference in the cost of the manufacturing the canopies as enclosed on pages 91 & 92 of the Paper Book. Considering the different features and specifications in the canopies sold to Kirloskar, the assessee had charged higher rate to Kirloskar as evident from the detailed working of cost difference submitted by the assessee as discussed above. Considering the various differences between the canopies sold to Kirloskar and Silvassa unit, the comparison made by the ....
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.... the market value then the Assessing Officer has the power to re-compute the price and disallow the deduction. For applying the provisions of sub section (8), the Assessing Officer can make disallowance on concrete basis and not on presumptions and surmises. The Assessing Officer has not been able to point out that the market value of the canopies sold by Chakan unit to Silvassa unit was much higher. The assessee has clarified that the canopies sold to Kirloskar were not comparable to the canopies sold to Silvassa Unit. Secondly, he has considered an indirect benefit of Rs.l0,000/- for the canopies in respect of which no comparable price has been cited. Thus, this addition is not justified and method adopted by the Assessing Officer is not correct and the addition in question is on presumptions and surmises. The lower authorities have not properly appreciated the facts. They have not properly considered the various contentions raised on behalf of assessee for higher net profit margin in Silvassa unit. The assessee has given detailed charts given basis of allocation of common expenses to both the units. In respect of common expenses, the assessee has allocated most of the expenses o....