AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (4) TMI 1126
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....ct of unit- wise receipt and expenditure, which were not filed before the AO.?' (c) "Whether under the facts and in the circumstances of the case, was the action of Ld. CIT(A) justified in allowing relief when the AO had rejected the books of the assessee u/s. 145(3) of the Act, quoting valid reasons for the same"? (d)"Whether under the facts and in the circumstances of the case, was the action of Ld. CIT(A) justified in allowing relief in respect of commission paid to a company, when under the rules of Indian Railways, orders were issued through open tender"? (e) Any other point to be raised at the time of hearing." Md. Usman, Ld. Departmental Representative appeared on behalf of Revenue and Shri Miraj D Shah Ld. Authorized Representative appeared on behalf of assessee. 2. Ground No. (a) to (c) are inter-related and therefore being taken up together for the purpose of adjudication. The issue raised is that Ld. CIT(A) erred in allowing relief @ 100% by way of deduction u/s.80IC of the Act. 3. Briefly stated facts are that assessee is limited company and engaged in manufacturing business of rubber products. The assessee has four manufacturing unit....
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....sessee for different AYs are pending before the different Appellate Forum in connection with the deduction claimed by it under section 80IC of the Act and as such, there is no information available with regard to deduction clamed u/s 80IC of the Act by the order of any higher Forums. v) The assessee has shown turnover of Dehradhun Unit for Rs. 40,47,36,097/- and declared net profit of Rs. 11,67,62,013/- only. The assessee in its consolidated profit and loss account has shown total turnover of Rs. 84,52,80,211/- and net profit of Rs. 14,19,93,868/- only. This information reveals that the assessee has earned net profit of Rs. 2,52,31,855.00 from non-eligible unit against the turnover of Rs. 44,05,44,114.00 from non-eligible units. This act of the assessee reveals that amount of expenses incurred in connection with eligible unit have been diverted to non-eligible units in order to reduce the profit. In view of the above, AO came to the conclusion that assessee has diverted expenses pertaining to Dehradun unit being eligible unit to other manufacturing units not eligible for deduction u/s 80IC of the Act with a view to minimizing the tax liability. Accordingly, AO disallowe....
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....s not equipped with the latest production facilities. The operations at Haridwar and Chennai are very minuscule in comparison to the other factories. Therefore no adverse inference can be drawn against the assessee. The Ld. CIT(A) after considering the submissions of assessee granted partly relief to assessee by observing as under:- "4.3 I have carefully gone through the assessment order and the detailed submissions made by the AO. It is a true that devices adopted to reduce/inflate the profits of non eligible business/ eligible business has to be checked. However there must be a finding that some expenses which were incurred in respect of 80lC units have been debited in the accounts of non 80lC units, to show higher profit of 80lC unit. Here in present case though the appellant submitted separate profit & loss account of 80lC unit, the AO without bothering to verify the P&L account of eligible unit chose to reject books of accounts u/s 145(3). The act of Rejection of books of accounts has been dealt in detail in para 3 of this order. The AO went ahead to allow 50% of the profit earned from eligible undertaking on estimate basis. 4.4 It is not disputed by the A....
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....of the auditor , assessee was enjoying tax exemption from Central Excise duty for eligible unit which had led to the higher rate of profit for this unit, the higher rate of profit was also on account of exemption from payment of excise duty & differentiation in the product, the unit located at Jalandhar, Noda and Murthalwere old units which were having old machinery in comparison to the newly established units at Parwanoo which has also given higher rate of profitability and the revenue had not brought any positive material on record to show that there was over or inflated billing for enhancing the profit for which 80lC Deduction was allowed. 4.10 From the above facts and reasons, including the judicial precedent and following the order (in the case of the appellant) of the CIT(A) for the assessment year 2008-09, I hold that the AO erred in allowing only 50% of the net profit without having found any evidence of increase in expenses of non 80IC units suggesting shifting of expenses of 80lC unit to non 80IC units to claim higher deduction. Therefore such ad-hoc reduction in claim is not upheld. However from details of income it is seen that appellant has claimed deduction i....
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....al, the assessee applied for transfer of assessment to Kolkata next assessment year. It was brought to the knowledge of the Ld. CIT(A) that Form 10CCB was obtained in time, however, it could not be submitted before the AO during the hearing stage. It was brought to the notice of the Ld. CIT(A) that in the earlier AY 2008-09 the AO gave proportionate deduction which order was challenged by the assessee before the Ld. CIT(A)-V, Chennai who by his order dated 31.03.2011 allowed the assessee's full claim for deduction u/s. 80IC of the Act. First of all, we note that the main grievance of the Revenue is that there is a violation of Rule 46A of the Rules while passing the impugned order. In this context firstly, we note that while passing the impugned order, the Ld. CIT(A) has sought the remand report from the AO and the remand report obtained from AO has been reproduced by ld CIT(A) at pages 5, 6, 7 and 8 of the order, so the ground of challenge of revenue is per-se weak. However, we would like to discuss the brief facts of the case. We note that the assessee is in the business of manufacturing tailor-made rubber molded and metal bonded items. The assessee supplies to Indian Railways an....
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....he previous year and compare with this relevant assessment year under appeal; we note that in the previous assessment year i.e. AY 2008-09 the assessee's turnover was Rs. 34.82 cr. whereas in the assessment year under consideration the total turnover was Rs. 62.10 cr. The net profit of AY 2008-09 was Rs. 2.50 cr. and in this assessment year is Rs. 6.24 cr. We note that the net profit percentage was 7.18% for AY 2008-09 and net profit percentage for this year was 10.84%. The turnover of Derhadun unit for AY 2009-09 was Rs. 5.59 cr. whereas in the relevant assessment year it is Rs. 17.51 cr. Dehradun profit for AY 2008-09 was Rs. 2.52 cr. whereas in the relevant assessment year it was Rs. 4.70 cr. Thus, the Dehradun net profit percentage for AY 2008-09 was 48.04% and for the relevant AY it is only 26.84%. Thus, we note that the Dehradun units net profit percentage in the previous assessment year was 45.08% whereas in the relevant assessment year it is 26.84% which is less than the previous year and in the previous assessment year the AO himself has allowed proportionate deductions which was later given full deduction by Ld. CIT(A) on appeal by assessee. The assessee explained the rea....
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.... deduction but on proportionate basis. 7. Taking all these facts into consideration, the Ld. CIT(A) has allowed the claim of the assessee and directed the AO to allow deduction under section 80IC of the Act on the net profit of the Dehradun units as declared by the assessee after reducing the misc. income as taken in the P&L Account. We concur with the view expressed by the Ld. CIT(A) taking into consideration the fact that the AO could not point out any defects in the books of account maintained separately for the Dehradun unit and during remand proceedings when the Form 10CCB was produced before the AO, he could not point out any fault. We also note that there was no material to allege that there was shifting of expenses of eligible unit to non-eligible unit so that higher deduction can be claimed for 80IC unit at Dehradun. The Dehradun unit had new machineries and there were excise exemption also and thus, the profits generated at Dehradun unit cannot be termed as unnatural without any material to suggest the other way; and taking into consideration the results of the previous year also we do not find any infirmity in the order of the ld. CIT(A) which warrants our inter....
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....y NIL were duly explained to AO at the time of assessment proceedings which were also supported with necessary evidences. The assessee has been paying commission for the last several years but no disallowance on account of commission expense was made. The Ld. CIT(A) after considering the submission of assessee deleted the addition made by the AO by observing as under:- "... ... I however find that the assessee paid the Commission in relation to sale of goods manufactured by Dehradun Unit of the assessee whose profits were entirely eligible for deduction under Section 80IC of the Act/ from the audited accounts of Dehradun Unit, I find that the entire Commission paid to M/s Narshigh Ispat Ltd was charged to the Profit & Loss Account of Dehradun Unit. The deduction under Section 80IC at the rate of 100% of profits was claimed in respect of the sum which was arrived at after setting off the expenditure of Rs. 5 crores. In the circumstances even if the Assessing Officer's hypothesis is accepted at its face value the disallowance of commission would only result in increase in the profits of the eligible unit which would then qualify for deduction under Section 80IC. If the p....
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....nt has not disclosed such payment in its return. In absence of such evidence, once it is proved that there existed a written agreement and consequent to such agreement payment were actually made from time to time by account aye cheques, having regard to the nature of work the agent was required to perform, in our opinion, the Tribunal below was quite justified in deleting the addition.' 5.9 From the above facts and reasons, including the judicial precedent, I hold that the AO erred in not allowing the commission. Accordingly the AO is directed to delete the disallowance of Rs. 5,00,00,000/- made on account of commission. Ground No. 3 is therefore allowed." The Revenue being aggrieved by this order of Ld. CIT(A) is in appeal before us. 9. Ld. DR before us submitted that the assessee failed to justify the service rendered by NIL to the assessee and he vehemently relied on the order of AO. On the other hand, Ld. AR submitted that said expenses were incurred only connection with the business of assessee and therefore same is allowable as deduction u/s 37(1) of the Act. Ld. AR alternatively submitted that even if the expenses of commission are disallowed then also t....