TaxTMI 
TaxTMI 
TaxTMI 
2011 (12) TMI 534
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....amounting to Rs. 12,94,109/- and Rs. 84,687/- from the profit of Unit-1 and Unit -II respectively." 3.1 Facts of the case in brief are that the A.O. noted that the assessee has received Sales Tax incentive of Rs. 12,94,109/- in respect of Unit I and Sales Tax incentive of Rs. 84687/- in respect of Unit II on which deduction u/s 80IB has been claimed. According to the A.O. Sales Tax incentive claimed is benefit given to the asasessee by the State Government and this income also cannot be said to be derived from the business of the assessee as there is no direct nexus with the manufacturing activity of the assessee. Relying the decision of the Hon'ble Supreme Court in the case of CIT v Sterling Foods reported in [1999] 237 ITR 579 and in the case of Pandian Chemicals Ltd. v. CIT reported in [2003] 262 ITR 278, the A.O. held that Sales tax incentive is not income derived from the business for the purpose of deduction u/s 80IB. 3.2 In appeal, the ld. CIT(A) relying on the decisions in the case of Nahar Exports Ltd. v. CIT reported in [2007] 288 ITR 494 (P&H), the decision in the case of CIT v. J.V. Exports Ltd. reported in [2006] 286 ITR 603 (Del), the decision in the case of Liberty....
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....ourt in the case of Liberty India Ltd. (supra). 6. We have considered the rival arguments made by both the sides, pursued the orders of the Assessing Officer and the CIT(A) and the paper book filed on behalf of the assessee. We find the Hon'ble Gauhati High Court in the case of Meghalaya Steels Ltd. (supra) after considering the decision of Hon'ble Supreme Court in the case of Liberty India (supra) has held that Central Excise Duty has a direct nexus with the manufacturing activity and similarly the refund of the Central Excise duty also had a direct nexus with the manufacturing activity. The issue of payment of Central Excise Duty would not arise in the absence of any industrial activity. It was, accordingly, held that the refund of excise duty has to be taken into account for purposes of section 80IB. Following the ratio of the said decision, we are of the considered opinion that there is an inextricable link between the manufacturing activity, the payment of sales tax and the sales tax incentive. Therefore, in our opinion, such sales tax incentive which has been retained by the assessee from the Sales Tax collected has to be held as derived from the industrial undertaking and ....
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....er comparing the commission paid on sale to other parties, the A.O. noted that payment of commission in excess of 2.5% given to Shatul Commercial Co. Pvt. Ltd. is excessive. He therefore disallowed an amount of Rs. 11,57,549/- u/s 40A(2) of the Act. In absence of the unit-wise details of the sales effected to Unit I and Unit II, he allocated the disallowance at Rs. 6,01,686/- for Unit I and Rs. 5,55,863/- for Unit II. 7.2 Before the ld. CIT(A) the assessee reiterated the same submissions as made before the A.O. However, the ld. CIT(A) was also not convinced with the argument of the assessee and upheld the action of the A.O. While doing so, he noted that the assessee has paid commission to 5 parties. The quantum of commission was given on the basis of sales effected to them. Quantum of sales effected through M/s Shatul Commercial Co. Pvt. Ltd. at Rs. 869 lacs is comparable with the quantum of sales effected through M/s Shanti Udyog at Rs. 852 lacs. The rate of commission paid to M/s Shanti Udyog which is an un-related party was 1.5% whereas the rate of commission paid to M/s Shatul Commercial Co. Pvt. Ltd. which is a related party was 3.75% of sales. Therefore, he was of the opinio....
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.... bound to point out as to how it was excessive. He accordingly submitted that the commission disallowed by the A.O. and upheld by the ld. CIT(A) has to be deleted. 9. The ld. D.R., on the other hand, while supporting the order of the ld. CIT(A) submitted that no cogent reason has been given by the assessee for enhancing the commission rate from 2.5% to 3.75% during the current year. There is no justification whatsoever given by the assessee. There is also no increase in the rate of commission given to other parties. He accordingly supported the order of the ld. CIT(A). 10. We have considered the rival arguments made by both the sides, pursued the orders of the Assessing Officer and the CIT(A) and the paper book filed on behalf of the assessee. The only dispute in the impugned ground is regarding the allowability of the commission paid to M/s Shatul Commercial Co. Pvt. Ltd. at 3.75% of the turnover as against 2.5% in the preceding year. There is no dispute to the fact that M/s Shatul Commercial Co. Pvt. Ltd. is a related party. It is the case of the Revenue that when the rate of commission ranges from 1.5% to 3% in case of un-related parties, higher commission has been given to th....