TaxTMI 
TaxTMI 
2015 (6) TMI 755
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....pany which is engaged in the business of manufacturing and export of ready-made garments and also doing job works, filed its return of income for the relevant assessment year declaring 'nil' income after claiming the deduction of Rs. 51,04,29,715/- u/s 10B of the Income-tax Act, 1961 [hereinafter referred to as 'the Act' for short] as 100% Export Oriented Unit (EOU). While examining the claim of deduction u/s 10B of the Act u/s 143(3), the AO observed that there was a survey action conducted at the business premises of the assessee on 5/11/2009 and also in the business premises of M/s.Fibres and Fabrics International Pvt. Ltd. ('FFIPL' for short) and observed that both the concerns were operating from the same premis....
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....s available only after verification. ii. Assessee has not claimed deduction u/s 10B of the Act from the very same first year as it was only doing the job work for FFIPL during the initial financial year 2004-05 and therefore there was no question of claiming deduction u/s 10B of the Act and that the contention of the assessee that the eligibility of deduction u/s 10B has to be verified only initially, is only partially correct. The assessee has not claimed any deduction u/s 10B for the assessment years 2005-06 and for assessment year 2006-07 it was allowed without verification and the assessment year 2007-08 is the first time that the whole deduction claim is being verified. iii. The contention of the assessee that the old machinery f....
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....0th July 2005, it is clear that the assessee rented new premises in the beginning mainly to show itself to be eligible for 10B deduction but that it had reconstructed the business of FFIPL by taking over of the units of FFIPL and only then did the manufacturing activity start. Since the assessee did not have inbuilt infrastructure and resources for export of garments it was completely dependent on FFIPL. 2.1 Thus, the AO came to the conclusion that the although the assessee had claimed to have started with the new unit, it had to wait for obtaining the full and already established infrastructure consisting of building and plant and machinery of FFIPL and the man-power resources of FFIPL and then it started the actual manufacturing activi....
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.... assessee in the course of assessment proceeding is nothing but a deliberate attempt on the part of the assessee to mislead or misdirect the authorities since such correspondence does not concern the dealings between the assessee and SEIL. Thus holding that the assessee has failed to prove the genuineness of the expenditure claimed and that the same is not allowable, he accordingly, disallowed it u/s 69C of the Act as unexplained expenditure. 2.3 Without prejudice to the above, it was also disallowed u/s 37(1) holding it to be not expended wholly and exclusively for the business of the assessee. 2.4 Without prejudice to the above two findings, the AO further held that the services rendered by SEIL for which payments have been made are....
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....nt was disallowed u/s 69C of the Act. 3. Aggrieved by the disallowance of deduction u/s 10B as well as the expenditure claimed by the assessee, the assessee preferred an appeal before the CIT(A) by filing the relevant details before him. The CIT(A) called for a remand report from the AO and after considering the issue in detail, he allowed deduction u/s 10B of the Act by setting aside the finding of the AO that the assessee's business is re-construction of the business of FFIPL but as regards the disallowance of the expenditure, the CIT(A) held that set aside of the disallowance would only increase the profit and thereby enhance the eligible business income and accordingly deduction u/s 10B and therefore the decision on this issue wo....
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....payment. Coming to the revenue's appeal, the learned Departmental Representative supported the orders of the AO while the learned counsel for the assessee supported the order of the CIT(A). 6. Having heard the rival contentions and having considered the material on record, we find that the CIT(A) has considered the issue at length and has come to the conclusion that there was no transfer of old plant and machinery during the financial year 2004-05, 2005-06 and 2006-07 and further that the plant and machinery purchased by the assessee from FFIPL in the financial year 2007-08 also did not exceed 20% of the total plant and machinery of the assessee during the said financial year. He further observed that since there was no purchase of o....