AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (1) TMI 323
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....n to and are connected with the above grievance raised by the revenue, are as follows: 2. Learned CIT(A) erred in law and on facts in confirming the view taken by the AO that profit margin of 10% charged on transfer of intermediates by the general unit to EOU unit was to claim excess deduction under section 10B of the Act. Learned CIT(A) ought to have accepted 10% profit margin that was charged as per Central Excise Valuation in absence of any comparable rather than holding it to be a presumptive taxation rate for levy of excise duty. 3. Learned CIT(A) further erred in law and on facts in recomputing the profits of both the units on estimate basis by distributing the profits of both the units. Learned CIT(A), despite admitting that market value of WIP was not determinable, directed AO to compute deduction under section 10 B of the Act on the basis of 50% distribution of profits in both the units. The direction of learned CIT(A) is perverse, erroneous and against accountancy principles, and that deserves to be quashed. 5. Learned CIT(A) erred in law and on facts in directing AO to exclude net profit attributable to sale of 2 products namely Benzarone Pure and BFX-P from book....
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....ent units or the E.O.U is on paper only. c. The total export sales of the Ankleshwar E.O.U. is shown at Rs. 25,22,87369/- and it is averred by the assessee that the said Ankleshwar E.O.U. enjoyed G.P. Margin of 28.34%. Thus it can be said that the cost of goods sold by the so-called Ankleshwar E.O.U; is Rs. 19,65,773487-. Out of the total sale of 14,66,72,339 by the General Unit of Ankleshwar, sale of WIP[Work In Progress] of Rs. 8,35,84,056/-is shown to have been made to the Ankleshwar EOU. Here it is worthwhile to mention that work-inprogress is nothing but semifinished goods. Under the circumstances, it cannot be believed that whatever is shown to have been exported by the Ankleshwar EOU was manufactured by the Ankleshwar EOU. The plain reading of section 10B makes it very clear that for any assessee who is in the likes of the assessee company and who claims a deduction u/s 10B of the Act should manufacture or produce articles or things itself. But in the case of the assessee it is seen that the lion's chunk of assessee's EOU's export turnover was manufactured or produced in its General Unit, Ankleshwar as the same is bought by the EOU, Ankleshwar showing it as th....
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....he Board. Despite having been given ample opportunity to justify its claim of deduction of Rs. 1,54,60,676 made u/s 10B of the Act, the assessee did not furnish any certificate from the Board. 4.2 On the basis of the above discussion and findings which make it abundantly clear that the assessee has not fulfilled all the mandatory conditions as prescribed under the provisions of section 10B, the claim of the assessee company as regards the deducts of Rs. 1,54,60,676 made u/s 10B of the Act is not allowable and is, therefore, rejected. Penalty proceedings u/s 271(1)(c) are also initiated." 6. Aggrieved by the stand so taken by the Assessing Officer, assessee carried the matter in appeal before the CIT(A). Learned CIT(A) gave partial relief to the assessee by observing as follows: "6.2 I have considered the appellant's submission. The appellant is relying upon the rules of Central Excise valuation to claim that the profit margin of 10% charged by the general unit to EOU are correct and the WIP has been transferred at market rate. But these rules are only for ascertaining the amount of excise duty to be levied on excisable goods which are not sold by the assessee but are ....
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....ually between the general unit and the EOU, This is because the WIPs being transferred by the general unit to the EOU are at different stages as already mentioned above. Hence, it is not possible to exactly determine the ratio in which GP attributable to such WIP can be distributed between these units. 6.4 Accordingly, the profits of both the units will be recomputed as given in the following table:- TONIRA PHARMA LTD., A.Y. 2007-08 All amounts are in Rs. ANKLESHWAR GENERAL UNIT ANKLESHWAR EOU UNIT Total GP attributable to WIP Total Sales 1466722339 Total Purchases 174748437 Sales of WIP to EOU Unit 83584056 Purchase of WIP 83584056 Gross Profit 29731466 Gross Profit 83916548 GP attributable to WIP 16943048 GP attributable to WIP 40138187 57081235 50% of Total GP attributable to WIP 28540618 50% of total GP attributable to WIP 2854....
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....he grievance of the revenue. As regards the grievances of the assessee, there are two parts of these grievances. The first one is against denial of 10B exemption in respect of Benzarone Pure and BFX-P i.e. De Acid, on the ground that "the process involved is only purification of product into final product" and that it involves only removal of some impurities. In effect thus it was held that since the process did not lead to manufacture of a new product, it did not amount to manufacture of new article or thing. As for this issue, we find that the controversy is by now well settled inasmuch as Hon'ble Supreme Court has held, in the case of ITO Vs Arihant Tiles & Marbles Pvt Ltd [(2010) 320 ITR 79 (SC)], that even conversion of marble blocks by sawing them into slabs and tiles and polishing amounts to 'manufacture or production of article or thing'. In the present case, the products as inputs and as outputs were different for all practical purposes of their use and application. On the similar lines is earlier judgment of Hon'ble Supreme Court in the case of India Cine Agencies Vs CIT [(2008) 308 ITR 98 (SC)] wherein conversion of jumbo rolls of photographic films into small flats and ....