TaxTMI 
TaxTMI 
2014 (10) TMI 826
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....rm, is a manufacturer of multi-function transducer, current transducer and other related products. During the assessment year under dispute, the assessee had started its manufacturing operation and, accordingly, claimed exemption under section 80-IC of the Act on the premise that the location of its unit falls in the notified area in Himachal Pradesh. However, the Assessing Officer took a stand that as there was no manufacturing activity, on the traded items purchased from M/s. SML which were directly sold to M/s. ABB Ltd., the assessee was dis entitled to deduction under section 80-IC of the Act. However, the Assessing Officer had restricted the deduction under section 80-IC of the Act to 50 per cent., on ad hoc estimation, for the following reasoning : "4.7. As seen in the earlier paras that the assessee has purchased his machinery only in the second half of the year and it is presumed that in the first 6 months of the year, he has done trading only. More than 50 per cent. sales were done in the first 6 months. The head of the income is being changed from manufacturing to trading in the case of purchases made from SML.....
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....s. The sequence of events does not support the Assessing Officer's opinion that the business was set up hurriedly. Nor can the appellant be faulted for setting up the business with relatively less capital compared to the loans or for establishing the unit in as rented premise. (5) The Assessing Officer has also found it doubtful that the appellant's turnover has increased from Rs. 6.28 lakhs in the earlier year to Rs. 7.57 crores in the current year and that the bulk of sales have been made to one party, M/s. ABB Ltd. The Assessing Officer has suspected that the unit was set up by M/s. SML in the name of the appellant only to claim deduction under section 80-IC. However, the Assessing Officer has not found any evidence to show that the partners' capital or the unsecured loans have originated from M/s. SML. The Assessing Officer's contention that the products have been purchased from M/s. SML and sold to M/s. ABB Ltd. without any value addition is also not borne out by the record. Out of the total raw material consumption of Rs. 505.5 lakhs, Rs. 218.56 lakhs was the value of imported components and a....
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....pect of the bills of purchase from M/s. Laxmi Designers, Bangalore and M/s. Premanui Tools, Thane, it is seen that the invoices are in the name of the appellant. It was explained by the appellant in the submission before the Assessing Officer dated December 31, 2010 that the manufacturers of the machinery were introduced to the appellant by M/s. Secure Meters Ltd. whose employee Mr. E. V. R. Murthy was authorised to issue the order of purchase. As the appellant had no previous commercial relation with the supplier and as Barotiwala was a distant location, the manufacturers chose to deliver the equipment to M/s. Secure Meters Ltd. at Udaipur from where the machineries were carried by an employee to the premises of the appellant. I also find that the invoice of M/s. Laxmi Designers of Rs. 25,92,757 is dated March 4, 2008 and not July 3, 2008 as stated by the Assessing Officer. In respect of purchase from M/s. Premauni Tools, the machinery is seen to be received at the premises of the appellant on March 27, 2008. Merely because the machinery was first received at Udaipur and then transported to Barotiwala does not establish that the machinery was used by M/s. Secure Meters Ltd. or tha....
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....d a certificate of allocation of registration number for small scale enterprise for manufacturing of transducers, meters etc., showing date of commencement of commercial production on April 11, 2007. (paragraph 4 of the Commissioner of Income-tax (Appeals)'s order). Ostensibly, the finding of the Commissioner of Income-tax (Appeals) has not been dispelled by the Revenue by placing any document or material on record. Similarly, the reasoning of the Assessing Officer as mentioned at paragraphs 4.5.(b) and (c) of the assessment order has also been effectively controverted by the Commissioner of Income-tax (Appeals). For ready reference, the relevant portions of the findings of the Commissioner of Income-tax (Appeals) are illustrated as under : (b) The items purchased from SML was sold to M/s. ABB Ltd. without doing any manufacturing activity and without value addition in physical terms and (c) There are very few manufacturing expenses : "5. The Assessing Officer's contention that the products have been purchased from M/s. SML and sold to M/s. ABB Ltd. without any value addition is also not b....