TaxTMI 
TaxTMI 
2019 (4) TMI 1382
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....sing following grounds of appeals 1 (i) That on facts and circumstances of case, Ld. CIT(A) has erred in upholding validity of issue of notice u/s 153A of I.T. The Act, 1961 and consequential assessment even though it is not based on any incriminating material seized during course of search. (ii) That on similar facts, reassessment proceedings u/s 147 for AY 2004-05 were quashed by Hon'ble ITAT vide its order dated 8th January 2016 on ground that there was no tangible/incriminating material and as such on parity of reasoning and principle laid down, there is no legal basis for assuming jurisdiction u/s 153 A of I.T. Act, 1961. (iii) That scope of proceedings u/s 147 being wider than 153A, in absence of any incriminating material, proceedings u/s 153A are illegal and invalid. (iv) That in absence of pending assessment proceedings and existence of tangible material, there is no case of abatement of completed proceedings and assumption of jurisdiction u/s 153 A of I.T. Act, 1961. (v) That reference to special auditor u/s 142(2A) is illegal and uncalled for and report of special auditor cannot be a basis for any addition and disallowance as ....
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....rovisions of section 14A(2) of The Act. (ii) That appellant has not incurred any expenditure for earning of exempt income and as such provisions of section 14A are not applicable to facts of case. 7(i). That on facts and circumstances of case, Ld. CIT(A) was not justified in confirming disallowance of Rs. 17,58,546/- on account of excess claim of deduction u/s 80IB/IC on alleged ground that appellant had violated provisions of section 80IA(5) in as much as business losses pertaining to financial year 2001-02 and 2002-03 had not been taken into account while computing deduction under section 80IB/IC of The Act. (ii) That action of lower authorities is illegal, arbitrary and without jurisdiction as same is not in conformity with provisions of section 153 A of The Act. 8(i). That on facts and circumstances of case, Ld. CIT(A) was not justified in upholding disallowance of deduction u/s 80IB/80IC on ground that fair market value of goods transferred from Noida division to eligible units is higher in terms provisions of section 80IA(8) read with 80IB( 13) and 80IC(7) of The Act as follows : a. In respect of unprocessed goods, by restricting p....
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.... and consequential claim of deduction u/s 80IB/80IC is illegal, arbitrary and based on conjectures and surmises. (iv) That action of lower authorities is illegal, arbitrary and without jurisdiction as same is not in conformity with provisions of section 153 A of The Act. 11(i). That on facts and circumstances of case, Ld. CIT(A) was not justified in restricting disallowance of deduction under section 80IB/IC by applying provisions of section 80IA(8) read with 80IB(13) and 80IC(7) of The Act, on account of re-computation of profits of eligible undertaking, by increasing value of common costs incurred at corporate office, depots, branches, etc. and allocated to such units in an appropriate ratio, with profit margin of 10% as against 26.14% applied by AO. (ii) That Ld. CIT(A) was not justified in holding that various corporate services rendered by corporate office, depots, branches, etc. to eligible undertakings, should have been allocated to eligible units at fair market price/cost plus appropriate mark-up for purposes of computing deduction under section 80IB/IC read with section 80IA(8) of The Act. (iii) That Ld. CIT(A) has failed to appreciate that no se....
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....out allowing cross-examination and/ or confronting same to appellant, in gross violation of principles of natural justice. (v) That Ld. CIT(A) erred on facts and in law in endorsing allegation of assessing officer that appellant obtained bogus bills towards purchase of sandalwood oil in order to reduce taxable income. 14(i). That on facts and circumstances of case, LD. CIT(A) was not justified in confirming transfer pricing adjustment of Rs. 5,95,51,686/- to arm's length price of interest received from loan advanced to associated enterprise by relying on TPO's order. (ii) That CIT(A), assessing officer and TPO has erred on facts and in law in applying interest rate of 16.31% p.a. on basis of SBI prime lending rate + 400bps on loan advanced by appellant to its wholly owned subsidiary, namely, DS Business AG as against interest at rate of 3% p.a. charged by appellant. (iii) That CIT(A), assessing officer and TPO has erred on facts and in law in considering average Prime Lending Rate of SBI as arms length rate of interest without appreciating that such rate is applicable on loans availed in India in domestic currency. (iv) That loan was adv....
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....ther on facts & in circumstances of case, Ld. CIT(A) has erred in law & on facts in deleting reduction of claim u/s 80IB/80IC of Rs. 22,95,045/- made by AO on account of processing charges of betel nut @3% in place of 2.5% taken by assessee, thus ignoring fact that processing-charges (2)3% which was made to sister concern taken by AO was rate approved by Regional Director. 7. Whether on facts & in circumstances of case, Ld. CIT(A) has erred in law & on facts in allowing amount of Rs.il,46,248/- on account of excise duty refund for computation of deduction u/s 801C. 8. Whether on facts & in circumstances of case, Ld. CIT(A) has erred in ^ law & on facts in deleting addition of Rs. 19,34,839/- made by AO on account of prior period expenses. 9. Whether on facts & in circumstances of case, Ld. CIT(A) has erreu in law & on facts in deleting addition of Rs. 2,63,45,007/- made on account of foreign exchange fluctuation, thus ignoring provision of AS-11. 10. Whether on facts & in circumstances of ease, Ld. CIT(A) has erred in law & on facts in deleting disallowance of Rs. 4,98,31,329/- made by AO on account section 14A of Income Tax The Act, 1961 and thu....
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....nsidering replies of assessee learned AO passed an order u/s 153A of The Act on 26/5/2014 determining total income of appellant at INR 1, 89, 55, 39, 637/- under normal computation provisions and determined book profit u/s 115JB of The Act at INR 1, 37, 77, 57, 881/- making various disallowances and additions. assessee aggrieved with order of learned AO preferred an appeal before learned CIT - A, who passed an order on 29/2/2016 for assessment year 2005 - 06 to 2011 - 12 by way of a consolidated order partly allowing appeal of assessee and partly confirming certain additions/disallowances. Therefore, AO as well as assessee aggrieved with his order, have filed these appeals before coordinate bench. 5. We come to appeal of assessee where ground number 1 of appeal challenges validity of issuance of notice u/s 153A of The Act and consequential assessments made by learned assessing officer. As per this ground, assessee says that when 147 for assessment year 2004 - 05 were quashed by coordinate benches jurisdiction u/s 153A of The Act also does not survive. It was further mentioned that in absence of any incriminating material, proceedings under section 153A are illegal and invalid , ....
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....ted that since payment is directly made to Central government undertaking, same is to be considered as legal tender. He further relied up on judicial precedents of M.R. Soap (P.) Ltd. v. IAC [1988] 32 TTJ (Delhi) 505, Kamta Prasad Mittal v. DCIT (ITAT Lucknow) (ITA No.1 45/LKW/15)(dated 21/02/18) where cash Payment made to BSNL cannot be disallowed u/s 40A(3). CIT v. Devendrappa M. Kalal [2013] 219 Taxman 122 (Kar) . Hence he submitted that this being well established principle, there is no case of any disallowance u/s 40A(3) read with rule 6DD(b) of The Act. 10. With regards to reimbursement of expenses to extent of Rs. 9,66,500/- to employees, it is submitted that such reimbursement was towards accumulated bills of tour and travels and individual bills being less than Rs. 20,000/-, there is no case of breach of provisions of section 40A(3) of The Act. In this connection, reference may be made to decision of Delhi tribunal in case of ACIT v. Nirman Associates (Del ITAT) (ITA No. 4272/D/11). In light of facts and legal position clarified above, disallowance u/s 40A(3) is not sustainable and may kindly be deleted. 11. Learned CIT DR vehemently supported order of lower authorit....
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.... various staff each expenditure does not exceed INR 20,000/- , disallowance of INR 966500/- under section 40A (3) is unwarranted. Revenue has not pointed out that any of such expenditure and payment both exceeds specified limit. In view of this, ground number 2 of appeal of assessee is partly allowed. 14. Assessee did not press ground number 3 of appeal being disallowance of INR 25,000 on ground of non-deduction of tax at source. Accordingly, it is dismissed. 15. Ground number 4 of appeal is with respect to valuation of work in progress. learned assessing officer in para number 23 - 25 of assessment order noted that special auditor reported that assessee company has not classified its inventory as per requirement of schedule VI of Companies The Act, 1956. He observed that assessee company has not included in valuation of work in progress, indirect cost like manufacturing expenses, power and fuel, direct labor etc. and fixed and variable overheads like depreciation in plant and machinery, factory building, factory management, administration costs and other indirect costs incurred for conversion of stock in trade. Therefore, learned assessing officer noted that valuation of wor....
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....sistent and not based on correct appreciation of facts of case and valuation of stock done by assessee, which is as per AS-2. Factual position to this effect is supported from assessment order for AY 2013-14 wherein no addition on this issue has been made. He submitted that even otherwise, in case any change is made to method of valuation of closing stock, corresponding effect has to be given to value of opening stock as well and as such action of assessing officer is only enhancing value of closing stock is mechanical and against principle laid down by Hon'ble Delhi High Court in case of CIT v. Mahavir Alluminium Ltd. (2008)297 ITR 77 (Del) in which it was held as under: "We are of opinion that in present case, there is no question of any double benefit being given to assessee. Paragraph 23.13 of guidance note itself makes it clear that whenever any adjustment is made in valuation of inventory, this will affect both opening as well as closing stock. It is also to be noted that if any adjustment is required to be made by a statute, (as for example Section 145A of The Act), effect to same should be given irrespective of any consequences on computation of income for tax purp....
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....d of valuation as well as cost component included for inventory valuation of inventory, addition made by learned assessing officer in current year cannot be sustained. In view of this, ground number 4 of appeal is allowed. 20. Ground number 5 of appeal of assessee is with respect to disallowance of interest paid on borrowed funds to extent of INR 2 0214239/- u/s 36 (1) (iii) of The Act. Special auditor has pointed out that though Assessee Company has claimed interest paid on borrowed funds at higher rate of interest as business expenditure. Assessee Company has given loans and advances to its group companies out of borrowed funds without charging adequate interest in some cases. Therefore, as interest charged from group companies are lower than rate of interest paid by it on funds borrowed. Therefore, special auditor noted that business expediency to borrow funds at higher rate of interest paid to its other group concerns on funds borrowed from them is not demonstrated. Hence it was reported that total interest claimed by assessee company as business expenditure of INR 20214239/- is not allowable. Reason being difference between higher interest rate borrowing of funds by applyin....
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....[2015] 379 ITR 347 (SC) , CIT Vs. S.A. Builders Ltd. 288 ITR 1 (SC). He further submitted that in any case, assessee has substantial amount of own funds in form of share capital and reserves out of which these advances were paid. This is corroborated from balance sheet as well as statement of cash credit account. It may be submitted that even CIT (A) has accepted fact that funds have been given out of cash credit account after receiving sale proceeds from customers and as such, there is no nexus between borrowed funds and advances made to sister concerns. As per comparative chart and bank statement placed at Page 2-21 of Supplementary Paper book - 2, he submitted that it is self evident that appellant has substantial noninterest bearing funds and it has to be presumed that business advances to sister concerns amounting to Rs. 43 Cr was out of own funds. Details of non-interest bearing funds submitted were as under : Share Capital Rs. 21,51,43,090/- Reserves and Surplus Rs. 571,60,32,751/- Total Rs. 593,11,75,841/- 22. He therefore submitted that position has to be examined in totality and it is not open to consider entries in bank account in a distorted and iso....
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....ee was that though cheques have been issued from cash credit account, but whenever advances have been given to sister concerns, there were positive balances available with assessee and not negative cash credit loan account. Therefore, it is apparent that assessee has not given advances out of borrowed funds, which is cash credit limit available to assessee. Bank accounts statements filed in paper book were not controverted by learned departmental representative. Further fact remains that on date of giving loan to sister concern, cash credit account did have balance due to assessee from banks. It shows that borrowed funds have not been used by assessee for giving advances to sister concern. Therefore merely giving cheques from cash credit account does not show that assessee has utilized borrowed funds. Even otherwise assessee has huge excess funds available which are non-interestbearing in form of share capital and reserves and surplus compared to advances given to sister concern at lower rate of interest or without charging interest, honourable Supreme Court in 410 ITR 466 in para number 33 has held as under:- "33. We do not see how when Assessing Officer's views are t....
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.... during year, which have also been used for making investment. He further noted that Assessee Company has not apportioned any interest, which has been incurred to earning exempt income. Therefore auditor has worked out disallowance applying rule 8D of income tax rules 1962 amounting to INR 5 0268833/-. So, learned AO asked assessee to explain why disallowance of INR 5 0268833/- should not be made. Assessee stated that assessee has offered disallowance of INR 437504/- u/s 14 A of The Act at time of filing of return of income as per tax audit report. It was further stated that Assessee Company has earned only INR 1596000/- as dividend income and borrowed funds were not at all utilized for investment in shares hence disallowance cannot be made. Learned AO rejected explanation of assessee and stated that substantial expenditure has been incurred by assessee for earning exempt income and therefore provisions of section 14 A are clearly attracted, hence, disallowance of INR 50268833/- was made applying provisions of section 14 A read with rule 8D of The Income Tax Rules. Ld CIT(A) has allowed substantial relief to assessee and has directed assessing officer to exclude growth oriented inv....
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....to note that appellant assessee has earned total exempt income of Rs. 15,96,000/- only from four investments amounting to Rs. 4,54,16,313/-, details of which are as under : Particulars Dividend Income Opening value Closing value as on 01.04.09 as on 31.03.10 Uflex Industries Ltd. 15,20,000 3,72,76,848 3,60,64,297 Godrej industries Ltd. 12,500 43,50,000 42,04,824 Indswift Ltd. 26,000 53,16,647 51,47,192 Dhampur Sugar 37,500 50,76,226 Nil Total 15,96,000 5,20,19,721 4,54,16,313 30. There is no dispute to effect that assessee has its own funds to extent of more than Rs. 590 crores and as such all these investments are fully covered from own funds and there is no case of any disallowance under rule 8D(2)(ii). Also, there being no case of any direct or indirect claim of interest in connection with investment, disallowance u/s 14A read with Rule 8D, if any, has to be restricted to 0.5% of average investment as specified in Rule 8D2(iii). Further, disallowance as per rule 8D(2)(iii) has to be computed only in respect of investments yielding exempt income and accordingly assessi....
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....He further submitted without prejudice to above submission, in case any disallowance u/s 14A is called for, same should be restricted to extent of exempt income of Rs. 15,96,000/- only. legal position to this effect is well supported from decision of Hon'ble Supreme Court in case of Pr. CIT v. State Bank of Patiala [2018] 259 Taxman 314 (SC) and Delhi High Court in case of Joint Investments Pvt. Ltd. Vs. CIT [2015] 372 ITR 694 (Del). relevant head note in case of Pr. CIT v. State Bank of Patiala [2018] 259 Taxman 314 (SC) is as under: "Section 14A, read with section 263, of Income-tax The Act, 1961 - Expenditure incurred in relation to income not includible in total income (Computation of) - Assessment year 2010-11 - In course of assessment, Assessing Officer made addition on account of apportionment of expenses against exempted income under section 14A - Commissioner passed a revisional order directing Assessing Officer to enhance amount of addition under section 14A - Tribunal set aside revisional order as well as consequent assessment order passed by Assessing Officer enhancing addition made under section 14A - High Court upheld order of Tribunal holding that amount of ....
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....ess of claim of assessee of computing disallowance of INR 437504/- or examining contention of non utilization of borrowed funds for making investment in shares, applied provisions of rule 8D and made a disallowance of INR 50268833/- and reduced it from already disallowed sum of INR 437504/- by assessee. Therefore, net disallowance of Rs. 49831329/- was made. As is well known, section 14A of The Act relates to expenditure incurred in relation to income not includible in total income. Sub-section (1) of section 14A provides that for purposes of computing total income under Chapter IV, no deduction shall be allowed in respect of expenditure incurred by assessee in relation to income, which does not form part of total income under The Act. As per sub-section (2) of section 14A, Ld . Assessing Officer would determine amount of expenditure incurred in relation to such income which does not form part of total income in accordance with method as may be prescribed, if having regard to accounts of assessee, he is not satisfied with correctness of claim of assessee in respect of such expenditure. Method for such purpose has been prescribed under rule 8D of Rules. Sub-rule (1) of rule 8D subst....
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....on u/s 80 IB /IC of the Act. 39. Learned authorised representative at time of hearing of appeal submitted that he does not want to press this ground of appeal. Therefore, it is dismissed. 40. Ground number 8 of appeal is with respect to finding of learned CIT - A in upholding disallowance of deduction u/s 80 IB/IC on ground that fair market value of goods transferred from Noida Division to eligible unit is higher in terms of provisions of section 80 IA (8) read with 80 IB (13) and 80 IC (7) of The Act for reason that in respect of unprocessed goods profit Mark up to extent of 2% instead of 10% as computed by assessing officer was restricted. With respect to processed catechu, he confirmed valuation by assessing officer and uphold markup of manufacturing expenses and profit rate at rate of 37.85% and 10% respectively. Assessee is further aggrieved in respect of processed cardamom where learned CIT - A confirmed valuation done by assessing officer and uphold markup of manufacturing expenses and profit rate @ of 37.85% and 10% respectively. 41. Learned assessing officer-examined fact, that assessee has transferred goods from units located at Noida to eligible undertaking at b....
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....bove issue was contested by assessee before learned CIT - A. Learned CIT - A followed his own order for assessment year 2004 - 05 wherein i. in case of goods, which are not processed and sent to eligible units as such, he directed learned assessing officer to load profit margin of service charges rate of 2% on value of goods transferred which is directly sent without processing. ii. With respect to goods those are processed, he confirmed loading of average manufacturing expenses of 37.85% as processing value addition has taken place and further confirmed charging of profit at rate of 10%. iii. With respect to cardamom, he confirmed action of assessing officer of loading of manufacturing expenses at rate of 37.58 percent and profit at rate of 10% as per Excise rules subject to deduction of cost of Chilka transferred to other units from addition. 42. Therefore, assessee is aggrieved with order of learned CIT - A has preferred this appeal. 43. Ld Authorised representative submitted as under :- i. That issue relates to transfer of following three products from Noida division to eligible unit in Guwahati : a. Supari b. Katha ....
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....d central excise rules for purpose of estimation of profit @ 10%. In this regard we may submit that reference to excise rules is wholly irrelevant and out of context as same have no relevance or bearing under Income Tax The Act. rate of 10% profit as per Rule 8 of Central Excise Valuation Rules is specifically for purpose of calculating excisable value of marketable goods and as such same cannot be made basis for estimating fair market value of consumable items in terms of section 80IA(8) read with section 80IB(13)/80IC(7) of The Act. VIII. It is pertinent to note that provisions of section 80IA(8) read with section 80IB(13)/80IC(7) of The Act authorizes an assessing officer to make adjustments in claim of deduction by substituting fair market value of goods transferred from non-eligible unit to eligible unit. section specifically talks about market value that in itself means that product must be marketable having distinct identity. However, goods in present case are raw material being part of production process having no separate identity. product purchased from third parties is transferred after minimal processing and as such, there is not much difference between purchas....
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.... on by assessee, or where any goods 40[or services] held for purposes of any other business carried on by assessee are transferred to eligible business and, in either case, consideration, if any, for such transfer as recorded in accounts of eligible business does not correspond to market value of such goods 41[or services] as on date of transfer, then, for purposes of deduction under this section, profits and gains of such eligible business shall be computed as if transfer, in either case, had been made at market value of such goods 42[or services] as on that date : Provided that where, in opinion of Assessing Officer, computation of profits and gains of eligible business in manner hereinbefore specified presents exceptional difficulties, Assessing Officer may compute such profits and gains on such reasonable basis as he may deem fit. Explanation - 43[For purposes of this sub-section, "market value", in relation to any goods or services, means- (i) price that such goods or services would ordinarily fetch in open market; or (ii) arm's length price as defined in clause (ii) of section 92F, where transfer of such goods or services is a specified....
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....re transferred from one undertaking to another undertaking without determination of market price of such goods, is not the mandate of provisions of section 80 IA (8) of The Act. Therefore any such attempt to substitute 'cost plus profit" as market value of goods without finding out what could be 'market value' of goods is not acceptable as it is not requirement of law. If views of lower authorities is subscribed to, then it will amount that market price can never be less than cost of goods sold and therefore it presumes a market where only profit exists. Such can never be situation. In view of this, we reject finding of lower authorities and learned assessing officer that value that has been recorded in transfer of goods from one unit to another should further be loaded by cost of 37.58%. Further 10% profit has been presumed under Central Excise provision for purpose of transfer of goods as captive consumption for another unit. Therefore if goods having a cost of Rs. 100/- is transferred to another unit, then transaction value of such goods shall be considered at INR 110/-. Therefore transferring unit will pay excise duty on INR 1 10 and unit to which such goods have been transferr....
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....ble units resulting in reduction of claim of deduction u/s 80IB/IC. The ld CIT(A) rejected action of assessing officer of adopting rate of technical know-how fee/royalty @ 3% on ground that it is maximum ceiling limit fixed by Regional Director and rate of 2.5% being mutually decided as per Technical Assistance agreement is in accordance with provisions of section 80IA(8) of The Act. However, CIT (A) directed AO to load 10% mark-up on technical know-how fee @2.5% paid by assessee and re-compute adjustment after taking rate @ 2.75%. CIT (A) is of view that since technical know-how fee/royalty on goods purchased from DSSP. ltd is expenses in hands of eligible units, there should be mark-up of 10% of such technical know- how fee/royalty. 51. Learned authorised representative submitted that assessing officer himself has accepted rate of technical know-how / royalty @ 2.5% in AY 2013-14 onwards and no adjustment has been made in this regard. In these circumstances, addition in present year is inconsistent and not based on correct appreciation of facts of case. Factual position to this effect is supported from TPO order for AY 2013-14 and 2014-15 placed at Page 38 - 69 of Supplementar....
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....how/royalty is liable to be deleted and technical know-how/royalty @ 2.5% be considered on value of goods purchased and transferred. 52. Ld. CIT DR relied upon order of learned AO. 53. We have carefully considered rival contentions and perused orders of lower authorities. Learned auditor has noted that during year under consideration perfumery division unit has transferred perfumery products of INR 1530307821 to various manufacturing units including units eligible for deduction. Perfumery unit manufactures excisable products and transfer same to other eligible units as per valuation of rule 8 of Central Excise (valuation rules, 2000) and read with cost accounting standard - 4 issued by Council of Institute of cost and works accountants of India [ICWA] on cost of production for captive consumption. Learned AO noted that from books of accounts it is observed that technical know-how has been booked at rate of 2.5% instead of 3% of raw material consumed resulting in over statement of profit of eligible units by INR 6227744/- and therefore it was held that such technical know-how fees paid to other concern is in nature of direct expenses and should be included in cost of productio....
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....eady loaded cost in accordance with Rule 8 of central excise rules. 56. Learned departmental representative vehemently supported order of learned assessing officer, he extensively read the order of the d AO and CIT A to support the addition. 57. We have carefully considered rival contention and found that identical issue with respect to applicability of rule 8 of Central Excise valuation rules, ( 2000) has been applied by learned assessing officer to determine fair market value of goods transferred inter-unit. We have already discussed applicability of rule 8 of Central Excise valuation rules, 2000 for purpose of working out market price of goods transferred and rejected same while deciding ground number 8 of appeal of assessee. Therefore, for similar reason we also do not subscribe addition made by learned assessing officer by applying Central Excise valuation rules and imputing 10% profit margin in goods transferred to determine market price of such goods. Accordingly, ground number 10 of appeal of assessee is allowed. 58. Ground number 11 of appeal of assessee is against order of learned CIT - A with a direction to apply a profit margin of 10% against 26.14% applied by ....
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....t on such reimbursements. 60. Learned authorised representative further referred to para number 21.3 of decision of learned CIT - A for assessment year 2004 - 05 wherein he has allowed appeal of assessee and deleted above addition. He therefore submitted that it is applicable for this year also. 61. Learned departmental representative vehemently supported order of learned assessing officer and stated that it page number 177 of order of learned CIT appeal wherein he has held that head office, depot and branches being a separate entity has incurred expenditure on behalf of various units including industrial undertaking eligible for deduction is. He rejected argument of learned authorised representative that no services have been provided for services were not acceptable as these expenditure include even advertisement expenses, sales expenses etc. He further held that even if reimbursement of expenses for purchase of raw material and finished goods which goes for eligible undertaking some services have been provided by head office and branch office. He further held that learned CIT A has upheld that any independent persons would have charged trading profit margin on such transfe....
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.... decision of another coordinate bench in Cadila Healthcare Ltd. v. Addl. CIT [2012] 21 taxmann.com 483/67 SOT 110 (URO)(Ahd. - Trib.) and held as under:- "87. It is one of contention of revenue that selling and distribution activity is itself a separate profit center and therefore whatever services have been provided by selling and distribution arm of company to eligible undertaking should have been charged and reduced from profit of industrial undertaking after valuing service of selling and distribution arm of company at market rate. At present assessee has allocated it at cost. Therefore, ld. AO has invoked provisions of section 80 IA (8) of The Act. It is not dispute that that products manufactured by these industrial units are sold by selling and distribution arm of assessee and cost incurred is allocated to these respective units on basis of appropriate allocation key of 'sales'. Ld. AR of appellant relying on decision of coordinate bench of Cadila Healthcare Ltd. (supra) has submitted that there cannot be any specific demarcation between manufacturing and selling activities of assessee and profit accrues only at time of sales of goods only. Therefore, conten....
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....r sources of income, such as, profits of marketing division or profits on account of established brand. For allocation of profit of manufacturing unit mandate is very clear because Income Tax Rule, 1962 contains Rule 18BBB wherein as per sub-rule(2) a separate report is to be furnished by each undertaking and that report shall be accompanied by a profit & loss account and balance-sheet of that Undertaking as if Undertaking is a distinct entity. He has therefore argued that allocation of profit of a manufacturing unit should be made on stand alone basis. He has questioned that how sale price of products of Baddi Unit were determined and recorded. Because of brand value sale price must have been determined by management as if profit is earned by assessee-company on sale of products of Baddi Unit. It was recorded on presumption that sales were executed by Head Office by charging brand value, name of product and goodwill of Company. In any case, according to Ld. DR, a reasonable expenditure should have been provided, so that such an abnormal profit @ 58.66% could be checked. 9.6 In support of above submissions, Mr. Srivastava has placed on strong reliance on decision of Hon....
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....ufacturing' is first criteria for eligibility of 'business' to qualify for deduction. Hence 'profits' are required to be derived from a manufacturing undertaking which is producing specified article. That 'profit' is inclusive in 'gross total income'. As already noted, terminology "profit" has not been defined in this The Act therefore we have taken help of other resources. basic question is that what is "profit" of a manufacturing unit? Firstly, term "Profit" implies a comparison between stage of a business at two specific dates separated by an interval of a year. Thus fundamentally meaning is that amount of gain made by business during year. This can be ascertained by a comparison of assets of business at two dates. To determine "profit" of a manufacturing Unit accounting standard has given certain guidelines, enumerated in short. In accounting "profit" is difference between purchase price and cost of bringing product to market. A "gross profit" is equal to sales revenue minus cost of goods sold or expenses that can be traced directly to production of goods. Rather, "operating profit" is also defined as equal to sales revenue minus cos....
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....was claiming deduction u/s.80IA in respect of a Unit No.4. said Unit was showing profit @ 62%. As against that, AO has noticed that a margin of profit shown by assessee as a whole was only to extent of 10%. AO has therefore recomputed profit of said Unit by applying sub-section (10) of section 80IA and restricted profit of said Unit to 10% only. While dealing this issue, Respected Coordinate Bench has concluded that it was not justified to disturb working of profit merely because profit rate of eligible unit was substantially higher than overall rate of profit of other Units of assessee, more so when separate books were maintained by assessee in respect of said eligible Unit. In present case as well AO has proceeded to disturb profit of Baddi Unit and held that only 6% profit is eligible for deduction u/s.80IC. While doing so, identically, AO has not pinpointed any defect in working of "profit" of Baddi Unit. In such a situation, we can say that legal proposition as laid down by Delhi Bench can also be applied in present appeal as well. 10.4 AO has also concluded that only incremental profit, representing difference between profits earned earlier when products were procure....
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.... close connection of agent's marketing activity proportionate profit was attributed to said activity. Contrary to this, there was no finding that upto extent of 80%, profit was attributed to assessee-company. segregation between 80% and 6% was not on account of any evidence through which it could independently be established that major portion of profit could be attributed to assessee-company and rest of profit could only be attributed to Baddi Unit. 10.5 AO has also made out a case that book profit percentage of Baddi Unit was 58.67%, whereas profit of assesseecompany as a whole was 11.88%. If we further elaborate this aspect, then AO has also given a working through which average selling rate was 86.36% of Baddi Unit. Meaning thereby if we presume for example that assessee has gross profit of 86%, then net profit was disclosed at 58%. A question thus arises that what beneficial purpose could be served for reduction of gross profit to a lower percentage of net profit, specially when allegation of A.O. was that there was an attempt to declare higher profit of Baddi unit to get more advantage of deduction. On perusal of P&L account, it is an admitted factual position th....
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.... during previous year relevant to initial assessment year and to every subsequent assessment year up to and including assessment year for which determination is to be made." As per this section, profits of an eligible undertaking shall be computed as if such eligible business is only source of income of assessee. In this section again, Statute has used three terms, i.e. "profit", "business" and "income". As narrated hereinabove an 'income' has a wider expression than 'profit'. Likewise, 'business' has also a wider meaning than word 'income'. In present case, manufacturing of pharmaceutical products is declared as "eligible business". Then question is that what is profit of such an eligible business? On careful reading of this sub-section, it transpires that said eligible profit should be only source of income. If we examine separate profit & loss account of Baddi Unit, then it is apparent that only source of income was sales of qualified products. In said P&L A/c there was no component of any other sources of income except sale price and otherwise also assessee has confined claim only in respect of eligible profit which was derived from sale....
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....or services] as on date of transfer, then, for purposes of deduction under this section, profits and gains of such eligible business shall be computed as if transfer, in either case, had been made at market value of such goods or services as on that date: Provided that where, in opinion of Assessing Officer, computation of profits and gains of eligible business in manner hereinbefore specified presents exceptional difficulties, Assessing Officer may compute such profits and gains on such reasonable basis as he may deem fit. Explanation : For purposes of this sub-section, "market value", in relation to any goods or services, means price that such goods or services would ordinarily fetch in open market. Where any goods held for purpose of eligible business are transferred to any other business carried on by assessee, then if consideration for such transfer as recorded in accounts of eligible business do not correspond to market value of such goods, then for purposes of deduction profits and gains of such eligible business shall be computed as if transfer has been made at market value of such goods as on that date. Though section has its own importance but a....
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....d by this assessee when a very simple method is adopted that on one side of P&L A/c production cost plus overheads were debited and on other side of P&L A/c sale price was credited to computed profit. There are certain expenditure which are notional expenditure and there are certain expenditure which are self-generated to create brand value of a product. Naturally, allocation of notional expenditure particularly in respect of self- generated brand is a matter of hypothesis and not a matter of realty. Logically it is not realistic to set apart a value of a self generated brand which had grown in number of years. 10.10 segment reporting of profit is although in practice but purpose of such reporting is altogether different. Such segment information is particularly useful for financial analysis, so that management may keep a close watch on performance of diversified business lines. areas of demarcation are business segment, geographical segment, etc. But as far as Revenue of an enterprise is concerned while segmentation is required, then Revenue from sales to external customers are reported in segmented statement of profit and loss. In an accounting system, an intra-company s....
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....s. produced at Raichur, Hyderabad is partly sold at Raichur and partly in Bombay. question was in respect of liability under Excess Profit Tax The Act (EPT The Act) for oil manufactured at Raichur but sold in Bombay. controversy was that assessee had contended that a part of profits derived from sales in British India of oil manufactured at Raichur was attributable to manufacturing operations at Raichur which are an essential part of their business and that such profit must be excluded from assessment under EPT The Act. It was narrated that in other words, The Act brings within its ambit all income in case of a person resident in British India which accrues or arises or which is deemed to accrue or arise to him in British India during accounting year. If Sec. 5 of The Act stopped short at that stage, it was undoubted that in case of respondent who is a resident in British India all his income, no matter where it arose, within British India or without British India, would be chargeable to excess profits tax just in same way as it chargeable to income-tax under Indian IT The Act. whole of his income arising in Raichur has legitimately been taxed under that The Act. In that decision a....
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....m which profits could accrue. There was an interesting contradiction because of divergent views and it was also expressed that it was a fallacy to regard profits as arising solely at place of sale. It was said that revenue of company are derived from a series of operation, including purchase of raw-materials or partly manufactured articles, completely manufacturing its products and transporting and selling them, and receiving proceeds of such sales. essence of its profit-making business is a series of operations as a whole. 10.12 We have carefully perused this decision of Hon'ble Supreme Court as cited by Special Counsel Mr. Srivastava. At outset, we want to place on record that entire issue before Hon'ble Supreme Court was in respect of third proviso to section 5 of EPT The Act. said proviso was duly a reproduced in para-40 of order and for ready reference typed below:- "Provided further that this The Act shall not apply to any business whole of profits of which accrue or arise in an Indian State, and where profits of a part of a business accrue or arise in an Indian State, such part shall, for purposes of this provision, be deemed to be a separate business whole ....
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....sed that there could be apportionment of net profit that accrue to business of assessee and one portion of it could be allotted to that part of business which relates to manufacture of said commodity which was ultimately sold in market. Raichur factory certainly has business connection in British India for a part of oil manufactured by it is sold through Bombay establishment of assessee. That all operations of Raichur business are not carried on in Bombay. Therefore, profits that would be deemed under this section to accrue or arise in Bombay will only be profits which may reasonably be attributed to that part of operations carried on in Bombay, that is to say, to sale of part of its oil in Bombay. In this context, an observation was made that a trade is completed at a place where a business transaction is closed. Profits of a business are undoubtedly not "received" till commodity are sold and they are ascertained only when sale take place. This aspect has not been doubted or challenged even in said order. But in said order question was that if a part of a business consisted of manufacturing activity and that activity can be segregated so as to compute yield profit, then w....
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....rst to be brought into Statute and then to be implemented. Without such law, in our considered opinion, it was not fair as also not justifiable on part of AO to disturb method of accounting of assessee regularly followed in normal course of business. It is true that otherwise no fallacy or mistake was detected in books of accounts of Baddi Unit prepared on stand alone basis through which only source of income/profit was manufacturing of specified products. We therefore hold that AO's action of segregation was merely based upon a hypothesis, hence hereby rejected. These two grounds Nos.6 & 7 are allowed." 88. We have carefully perused this decision and note that controversy in this ground of appeal with respect to applicability of section 80 IA (8) of The Act, on marketing and other selling distribution as well as research and development services provided by undertaking as a whole to eligible industrial undertaking at cost or market rate for working out eligible profit for deduction, has been decided. Ld. DR could not point out any other contrary judgment to decision cited by Ld. AR. Therefore, we respectfully following above decision of coordinate bench hold that prov....
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....are allocated to eligible undertaking would have reduced eligible profit for deduction by INR 3 9571939/-. Assessee submitted before learned assessing officer that no expenses are incurred by eligible units in this regard nor any income has been earned for use of brand name. It was further stated that above brand is owned by assessee company itself and therefore there is no question of charging any royalty of nature suggested by AO. Learned assessing officer rejected contention of assessee and stated that it is evident that royalty attributable to use of brand name by eligible undertaking has not been charged by brand owning entity. It is further noted by him that above brand is owned by head office/corporate office and accordingly for working out correct profit of eligible unit is provided u/s 80 IA (8) of The Act, non charging of such royalty for use of brand has resulted into distortion of real profit of eligible undertaking. He proposed that profits of eligible undertaking should be reduced by INR 39571939/-. On appeal before learned CIT - A he held that definitely brand has been developed overall long period and is property of corporate or head office of company. Therefore, he....
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....other brand of ' Tulsi mix' to another party. Admittedly, in case of assessee for assessment year 13 - 14, learned transfer-pricing officer in order dated 30/10/2017 while benchmarking specified domestic transactions has also not made any adjustment on this account. No doubt, there is a service to the eligible unit for using the brand name but its market value is required to be determined. Assessee has not given this brand name for exploitation to any third party. Further for market value in relation to services of user of above brand name would be price that such goods or services would ordinarily fetch in open market. Assessee has also not allowed anybody else to utilize above brand. Ld AO has compared with the brand name 'Tulsi Mix' for which assessee is paying royalty, which is owned by third party. There is no comparison shown by the ld AO that both are similar brands. Further in later on years ld AO himself has not adjusted the legible profit on this account, therefore, it is apparent that ld AO himself do not think that such adjustment is required to be made. Therefore, brand market value is also not determined by learned assessing officer. In view of this ground number 12 o....
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....sentative submitted that identical issue has been considered by Hon'ble ITAT in order for AY 2005-06 to 09-10 in favour of appellant wherein Hon'ble court has held that alleged seized documents relied upon by AO are neither incriminating in nature nor credible evidence to justify allegation of inflation of purchase price. It has been held by Hon'ble ITAT that entire story of inflated purchases is merely on basis of conjectures and there is no real evidence to establish any sort of case against appellant. It was submitted that whole basis of disallowance is based on Page No. 52 of Annexure A/1 seized during course of search on 21.01.2011 and same is year specific and it is not known as to how such document is relevant for AY 2010-11 i.e. year under consideration. In light of finding of Tribunal, alleged annexure A-1/ Page 52 is not relevant to AY 2010-11 and same could not be considered as basis for any addition in AY 2010-11. Further, AO and CIT(A) has not disputed fact that entire purchases of Sandalwood Oil is fully supported from invoices issued by parties and use of same for manufacturing of final product. Further, assessing officer was not justified in relying upon seized docu....
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....8) or 80IA(10) are applicable and as such there is no ground or basis for any disallowance of purchases of Sandalwood Oil from M/s. Surya Vinayak Industries Ltd. and M/s Allied Perfumers Pvt. Ltd. keeping in view documentary evidences placed on record in form of bills, vouchers, documents showing actual receipt of material, documents in support of actual movement of goods and actual consumption in manufacture of final products, viz., Pan Masala, Tobacco and Gutka products. Even otherwise, CIT (A) has erred in applying third party minimum rate while computing value of purchase in case of SVIL and APPL. It is relevant to mention that no investigation has been carried out to demonstrate comparability of cases. There are several factors which affect price of a commodity and without making any objective comparison with regard to quality, brand, nature and type of product, there could be no ground or basis for applying data of a third party transaction. While applying minimum rate of other party, CIT (A) has ignored fact that other parties have also supplied Sandalwood Oil at different rates as per details given at page 70 of Supplementary paper book 2. Further, CIT (A) has also ignored ....
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....rely issued bogus bill to assessee and received cheques from assessee and paid back to assessee in cash after some adjustment in rate and apportioning excise duty. After giving this finding, he further held that Sandalwood oil is an excisable product and entered in excise registrar of perfumery compound division of assessee. He further noted that on date of such there was no discrepancy in stock of sandalwood oil found which is apparent from assessment order where assessing officer himself as mentioned that during course of search proceedings conducted sandalwood oil was found in production for being hundred KG and in managing director room wearing 208.74 KG. He further considered consumption of sandalwood oil after reducing purchases from two companies and also after incorporating quantity purchased from these two companies and compared them. He noted that if quantity purchased from these two entities are disallowed and not taken into consideration than revised yield ranges from 102.57% to 112.62 percentage of entire consumption of raw material, which gives an absurd result of finished goods production, which is exceedingly consumption. He further noted that quantity of finished p....
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....t how this issue is related to AY 2010-11. The coordinate bench in its order in case of the assessee for the above paper has held that it pertains to Ay 2011-12. Therefore cognizance of the same can be taken only for the year Ay 201-12. There is no evidence found during the course of search that these are the transactions related to this year. The order of the coordinate bench in assessee's own case is clear on this issue with respect to which year the cognizance of these seized material would be taken. " 28. The main seized paper on which heavy reliance is placed up on by revenue is Page No. 52 of annexure A-1 which is a statement dated 30.11.2010 where in the details of three bills dated 19.11.2010 and 26.11.2010 are given. The details of the bill show quantity, rate, and the amount. The total quantity purchased by the assessee is 650 kgs and corresponding amount is Rs. 4.64 crores. There is account statement below which gives the details of payment made up to 31.10.2010 of Rs. 6.70 crores as excess and there is two entry of rate difference and further there is an adjustment on account of excise duty and thereafter Rs. 2.04 crores is determined as amount to pay from which an a....
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....s evident that the where nothing assessment year and assessee specific incriminating "money, jewellery or other valuable article or thing or books of account or documents", the assessments for assessment years cannot be disturbed. Further, the concluded assessments should not be disturbed merely for making routine additions, which could have been otherwise done in the regular assessment and of course, the pending assessments fall under exceptions. As stated by the learned counsel point No. 9 of his note reproduced above, "nothing is seized pertaining to asst. yrs. 2000-01 to 2003-04 obviously there is no question of recording satisfaction note". On this reasoning itself, we find that the assessee has to succeed. Therefore, we do not examine the other arguments of the counsel. Otherwise, the counsel argued that the reopening of the assessment for the asst. yrs. 2000- 01 to 2001-02 is impermissible in view of the judgment of Ahmedabad Bench in the case of Vijay M. Vimawal (supra). Further, he also argued that the assessment of asst. yr. 2003-04 was actually completed under s. 143(3) on 30th March, 2006 i.e. prior to receipt of the impugned documents by the AO on 18th April, 2007, thi....
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....e sole ground that notice under Section 153C of the Act was legally unsustainable. The events recorded above further disclose that the issue pertaining to validity of notice under Section 153C of the Act was raised for the first time before the Tribunal and the Tribunal permitted the assessee to raise this additional ground and while dealing with the same on merits, accepted the contention of the assessee. 17. First objection of the learned Solicitor General was that it was improper on the part of the ITAT to allow this ground to be raised, when the assessee had not objected to the jurisdiction under Section 153C of the Act before the AO. Therefore, in the first instance, it needs to be determined as to whether ITAT was right in permitting the assessee to raise this ground for the first time before it, as an additional ground. 18. The ITAT permitted this additional ground by giving a reason that it was a jurisdictional issue taken up on the basis of facts already on the record and, therefore, could be raised. In this behalf, it was noted by the ITAT that as per the provisions of Section 153C of the Act, incriminating material which was seized had to pertain to the....
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....sessee, and, therefore, the said condition precedent for taking action under Section 153C of the Act had been satisfied. 21. Likewise, the Delhi High Court also decided the case on altogether different facts which will have no bearing once the matter is examined in the aforesaid hue on the facts of this case. The Bombay High Court has rightly distinguished the said judgment as not applicable giving the following reasons: "8. Reliance on the judgment of the Division Bench of the High Court of Delhi reported in case of SSP Aviation Ltd. v. Deputy Commissioner of Income Tax [2012] 346 ITR 177 is misplaced. There, search was carried out in the case of "P" group of companies. It was found that the assessee before the Hon'ble Delhi High Court had acquired certain development rights from "P" group of companies. Based thereon, the satisfaction was recorded by the Assessing Officer and he issued notice in terms of Section 153C. Thereupon the proceedings were initiated under section 153A and the assessee was directed to file returns for the six assessment years commencing from 2003- 04 onwards. The assessees filed returns for those years but disclosed Nil taxable income....
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....ssessment Year: 2005- 06 to 2009-10) Page | 56 by the assessee from this party is not at the market rate prevailing on those days. Mere assertion that assessee has purchased material from this party in these years and therefore there has to be over invoicing of the purchases is a mere assertion without any material. Therefore, we do not have any hesitation to hold that In the present case the impugned seized paper does not belong to the Assessment Years involved in the impugned appeals. 31. Furthermore, with respect to the same paper it is also important to note that it is evident from that paper that Surya Vinayak Industries have over paid the assessee than what it should have allegedly paid for over invoicing. This evident facts also runs contrary to the other finding that Surya Vinayak industries is company of not having capacity to supply so much material in para no 145 of the order. If it is so then how it could have paid the assessee over and above what is required to be paid if the goods are over invoiced. The sum over paid by that company to the appellant is not small compared to the purchases. Even circular route stated by ld AO in various para of assessment order....
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....s chart there is any mention of Sandalwood oil [C] and Sandalwood Oil [SU]. At S. No. 121, there is mention of 'SANDALWOOD OIL' as 'raw material'. Their suppliers are mentioned in the next column with party name and yearly quantity purchased from them. In this column there is no classification of any sandalwood oil [C] or sandalwood oil [SU]. Just one item is mentioned and that is sandal wood oil. SVIL and Kamakhya Oil Co and other concerns are shown as their suppliers. This proves that only sandalwood oil is being supplied by SVIL. Page No.7 to 12 of Annexure A-16 of Perfumery Division is the statement of raw materials taken from the I.A.S. software which is used in the perfumery division. This statement shows the opening balance, total receipts, total consumption, closing balances, physical balance along with short/excess for the period 1.4.09 to 31.03.10. This statement is showing the date in respect of more than 150 raw materials being purchased by Perfumery Division. In this statement there is mention of only sandalwood oil and not any [C] or [SU]. In the same way page No.2 to 6 of this annexure are the statement of physical stock as on 23.03.2010 prepared by the staff of Perf....
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....at out of Rs.l 42.00 crores of sale, the most expensive ingredient is sandalwood oil and value thereof is Rs. 118.00 crores" 34. On reading of the above paragraph the main contention of the ld Assessing Officer is that there is no product by the name of sandalwood oil (C) or Sandalwood Oil (U) being supplied by Surya Vinayak Industries ltd to M/s. Dharampal Stayapal Ltd (assessee). The page NO. 226 of Annexure 11, which is also the statement of physical stock as on 23.03.2011, does not fall into the assessment years in the above appeal. Further page NO. 72 of Annexure A-14 also pertain financial year 01.04.2010 to 31.12.2010. The central Excise Return Filed in Form NO. ER-1 cannot be said to be incriminating material, as it does not show any escapement of income involved in those papers. Hon'ble Supreme Court Sinhgad Technical & Education society ( supra) in the para No. 18 has endorsed the reasoning given by the coordinate bench stating it to be logical and valid that incriminating material, which was seized, had to pertain to the Assessment Years in question and the documents seized must established any correlation document-wise with the Assessment Years involved. From the ab....
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....tional Commissioner Of Income Tax, Transfer Pricing Officer - I (1), New Delhi for determination of arm's-length price. International transaction is that assessee has advanced foreign currency loan to its subsidiary in Switzerland of INR 176420000/- where rate of interest charged is only 3%. Assessee benchmarked this transnational transaction adopting CUP as most appropriate method. Learned transfer pricing officer issued a show cause notice to assessee on 20/11/2013 wherein he noted that since tested party is assessee , prevalent interest rate that could have been earned by taxpayer by advancing loan to an unrelated party in India, with weak financial health as that of associated enterprises, as there is no security provided by subsidiary against loan advanced, he proposed to charge interest at rate of 16.31% on rupee equivalent of loan advanced to associated enterprise. Assessee submitted its reply on 3/12/2013 submitting that assessee company has given foreign currency loan to its wholly owned subsidiary in Switzerland at interest of 3%. It was further contested that where transaction was of lending money in foreign currency to its foreign subsidiaries in such a situation domest....
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....rency of loan is in Indian rupees only and therefore foreign currency fluctuation in Indian rupee loan will not effect and therefore primary LIBOR rate or interest rate prevailing in foreign country will not apply on this loan. Accordingly, he upheld action of learned transfer pricing officer holding that Indian interest rate on such loan for benchmarking interest transaction of loan advanced is required to be taken by taking state bank of India prime lending rate for purpose of benchmarking interest rate under CUP method. Assessee aggrieved with order of learned CIT - A preferred this appeal by this ground of appeal. 75. Learned authorised representative submitted that in remand report submitted before learned CIT - A for assessment year 13 - 14 learned AO has accepted that loan has been advanced in foreign currency. He further referred to copy of remand report placed at page number 72 of paper book number 2. He further submitted that assessee has determined its arm's-length price at Rs. 2 2163283/- at rate of 3% per annum inclusive of LIBOR rate applicable on loan. However learned transfer pricing officer determine ALP at INR 8 1714969/- and thereby addition of INR 59551686 ha....
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.... have earned one has to see interest that assessee would have earned on foreign currency loans and not rupee dominated loans. He further referred to decision of honourable Bombay High Court in CIT vs. Tata auto comp systems Ltd [374 ITR 516 ] wherein it is held that where assessee advance loan to its foreign associated enterprise, rate of interest was to be determined on basis of rate prevailing in country where loan had been consumed. Therefore he is submitted that benchmarking of interest, if any, should be done on basis of LIBOR instead of prime lending rate of state bank of India is all transaction with its associated enterprise have been undertaken in one currency and as such transfer pricing adjustment is not sustainable under law. 76. Learned departmental representative vehemently supported order of learned transfer pricing officer and learned CIT - A. 77. We have carefully considered rival contention and perused orders of lower authorities. Facts in facts show in present case is that assessee has given a loan to its wholly owned subsidiary in Switzerland namely DS Business AG, Switzerland at interest rate of 3% per annum. Currency of loan is Foreign currency and there....
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....hem process goods and by reducing 80 IB/ 80 IC to that extent. Both parties agreed that this issue is squarely covered by ground number 8 of appeal of assessee. For reasons given while deciding ground number 8 of appeal of assessee and of a direction therein to compute 2% of value of job work charges only in certain transactions, we dismiss ground number 1 of appeal of learned assessing officer. 80. Ground number 2 of appeal of assessee is with respect to direction of learned CIT - A in directing learned assessing officer to calculate royalty at rate of 2.5% of raw material without excise duty as against 3%, rate approved by Ministry of company affairs in respect of service/ goods transfer from perfumery division to eligible units. Both parties confirmed that this ground is connected to ground number 9 of appeal of assessee. We have decided ground number 9 of appeal of assessee wherein we have held that because assessing officer himself has accepted rate of technical know-how/royalty at rate of 2.5% in assessment year 2013 - 14 onwards and no adjustment has been made in this regard and therefore in present case addition is unwarranted. In view of this ground number 2 of appeal o....
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....ed exclusively for business. As far as, other expense amounting to Rs. 20,11,566 debited for specific division "Noida Gutka Division" there is no question of allocating such expense to eligible units unless it is proved that same is not pertaining to "Noida Gutka Division". Therefore, I direct AO to delete these additions. I would like to clarify here that I do not agree with argument of Ld AR that proportionate disallowance of deprecation or expense from other unit to eligible unit claiming deduction u/s 80IB/80IC will not effect quantum of deduction, as shifting of expense from other unit to eligible unit will reduce profit of eligible unit, hence quantum of deduction and therefore total income will reduce, though total income will remain same. Accordingly, there will be impact on total income. However on merits of addition, I have given relief. As a result this ground of appeal is allowed. Depreciation under Income Tax The Act u/s 32 is eligible even asset is used for single day during FY for business of assessee is entitled for claiming depreciation u/s 32 of IT The Act. In present case, definitely there are units of appellant which are not claiming deduction u/s 80IB/....
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....n view of findings given by ld. CIT(A) which are reproduced somewhere above in this order, we hold that ld. CIT(A) was justified in allowing claim of assessee." 85. Further, during course of hearing it was submitted that even otherwise, assessing officer has not made any adjustment on account of allocation of depreciation from AY 2013-14 onwards, which is also supported by order of learned transfer pricing officer for AY 2013-14 and 2014-15. In view of above facts we do not find any infirmity in order of learned CIT - A in directing learned assessing officer to not to consider depreciation on various assets for purpose of reduction of claim under section 80 IB and 80 IC of income tax The Act. Accordingly, ground number 3 of appeal of learned assessing officer is dismissed. 86. Ground number 4 of appeal of learned assessing officer is with respect to deletion of reduction of claim u/s 80 IB/80 IC of INR 150836977/- for which learned assessing officer taking into consideration fair market value of services obtained by eligible undertaking from corporate offices, depose and branches et cetera was made. Both parties confirmed that this is connected to ground number 11 in appeal o....
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....tion u/s 80IB/80IC. Reasons given by ld CIT (A) for deleting addition are found to be correct. No infirmity was also pointed out by learned departmental representative. It may be appreciated that rate approved by Regional Director is maximum rate and there could we no ground or basis for treating same for any adjustment in terms of provisions of section 80IA(10) r.w.s 80IB(13) and 80IC(7) of The Act. It is relevant to note that same rate of royalty @1% is being paid by both eligible as well as non-eligible units and as such, impugned adjustment is on arbitrary and mechanical basis. In view of this , order of ld CIT(A) deleting adjustment of deduction u/s 80IB/IC on account of notional royalty in respect of "Tulsi" Brand in excess of 1% being payable by eligible units to M/s. Dharampal Satyapal & Sons P. Ltd. Deserves to be upheld as same rate was applied and accepted even by AO in respect of non-eligible units. Accordingly, ground number 5 of appeal of learned assessing officer is dismissed. 89. Ground number 6 is also with respect to deleting reduction of claim u/s 80 IB/80 IC of Rs. 2295045/- made by learned assessing officer on account of processing charges of betel not at ra....
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....stioned to reduce profit to eligible undertaking. Even otherwise, Maximum ceiling rate of job charges cannot be taken as market rate of such charges. Further, appellant has charged similar rate of job charges for other industrial undertaking, which are not eligible for deduction u/s. 80IB/80IC. Under these circumstances, ld AO has taken an incorrect view that on account of job charges to its associate concern for processing beetling has resulted into over statement of profit of industrial undertaking eligible for deduction u/s. 80IB/80IC. finding of CIT(A) is well reasoned as he has held that rate approved by Regional Director is maximum rate and there could no ground or basis for treating same for any adjustment in terms of provisions of section 80IA(10) r.w.s 80IB(13) and 80IC(7) of The Act. It is relevant to note that same rate of processing charges @ Rs. 2.5 per Kg is being paid by both eligible as well as non-eligible units and as such, impugned adjustment is on arbitrary and mechanical basis. Accordingly, we uphold order of ld CIT (A) and direct assessing officer not to alter deduction u/s. 80IB/80IC of eligible undertaking on account of variation in job charges. Ground numbe....
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....tentions. learned CIT - A has deleted disallowance on ground that neither special auditor nor assessing officer has specifically mentioned any details about prior period expenditure and he also considered that assessee himself is also disallowed prior period expenditure of Rs. for 527338/- in return of income itself. Further, as learned assessing officer has not pointed out about time when bills were admitted by assessee has a liability by approving it. Further finding and conclusion of CIT (A) are well reasoned. Special auditor and assessing officer have failed to point out specific expenditure and disallowance is on mechanical basis without appreciating facts of case. Learned CIT DR also could not point out any infirmity in order of learned CIT - A. In any case, genuineness of expenses is not dispute and only issue being year of allowability particularly when tax rate remains same; disallowance is merely on technical ground. In view of this we uphold order of learned CIT - A deleting addition of INR 1 934839/- on account of prior period expenditure. Accordingly, ground number 8 of appeal of AO is dismissed. 95. Learned assessing officer has challenged in ground number 9 deleti....
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....re, therefore, for reasons stated therein, we dismiss ground number 10 of appeal of learned AO. 97. Ground number 11 of appeal of learned assessing officer is with respect to direction of learned CIT - A with respect to computing income of assessee with respect to bogus purchases found during course of search taking lowest purchase price from third parties. Both parties agreed that this ground is identical to ground number 13 of appeal of assessee. As we have already held in that particular ground that seized paper relates to assessment year 2011 - 12 and not to assessment year 2010 - 11 and therefore no addition can be made during year as seized paper do not relate to assessment year concerned. Accordingly, ground number 11 of appeal of assessee officer is dismissed. 98. Ground number 12 of appeal is with respect to addition deleted by learned CIT of INR 387876/- made on account of lesser rate of job work charges from sister concern in comparison to other related parties. LD AO has considered addition on basis of report of Special auditor wherein it has been observed that Silver foil division of assessee was charging Rs. 3,000/- per Kg from M/s. Dharampal Premchand Ltd. towa....
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....f Rs. 82,50,00,000/- thereby earning profit. Subsequently, M/s. S.R. Credits P. Ltd. sold these shares for total consideration of Rs. 110,99,93,126/- to foreign institutional investors. LD AO has alleged that entire arrangement is a colourable device and profit earned by M/s. S.R. Credits P. Ltd. actually belongs to assessee. As a result, gain earned by M/s. S.R. Credits P. ltd. is taxed in hands of assessee. In fact, transaction between M/s. S. R. Credits P. Ltd. and foreign institutional investors was of independent nature based on their own business interest and it could have no bearing to assessee. Further, assessee has already earned reasonable profit in transaction as short-term capital gain and in light of documentary evidences on record, it should be considered as in order. In any case, there can be no justification for any addition on notional and hypothetical basis. 101. The ld CIT(A) deleted addition on ground that in case of M/s. S.R. Credits P. ltd., first appellate authority has upheld sanctity and genuineness of transaction and as such there is no ground or basis for any addition in hands of assessee. Therefore learned AO aggrieved with order of learned CIT - A pr....
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....estment Holding & Dents Cheque Bank AG, Hongkong Branch. Through these agreements, new investors have agreed to purchase shares held by M/s. DSL at a price of Rs. 553.24 per equity. Therefore, above, seized documents are related to findings that shares of CPPL acquired by DSL@Rs. 400 per share was intended to FIIS15 for higher consideration by DSL which has been sold to appellant at lesser rate. Therefore, in my view, there are incriminating seized document which supports stand of assessing officer that transaction of sale and purchase of shares by appellate is not real but these shares are sold by M/s. DSL. In view of above facts, assessing officer regarding transaction of shares of CPPL. Hence, arguments of Ld AR that eh action of assessing officer regarding treatment of shares by assessing officer is not based on any incriminating seized documents is not correct. Therefore, judicial pronouncement relied by Ld. AR is misplaced on fact. Therefore, judicial argument of Ld. AR are dismissed. i) I would discuss issue on merits. Sale of shares of coastal power projects Pvt. Ltd. by appellant to FIIS. assessing officer held that sale of shares of Coastal Powe....
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....al Satyapal Ltd. they were representing M/s. SR Credit Pvt. Ltd. only as formal engagement letter was issued in name of appellant by Yes Bank official as per version of assessing officer also. Therefore, Ld AR argued that there is no evidence to suggest that transaction entered by appellant is only paper transaction to divert profit of Dharampal Satyapal Ltd. I have considered entire facts and circumstances of case. agreement seized suggest transfer price of shares held by Dharampal Satyapal Ltd. at Rs. 100.29 crores is dtd. 12/03/2008 was not complied. In seized document in form of e-mail dtd April, 2009 evidences that said share transaction as not concluded as per seized agreement dtd. 21/08/2009 relied by assessing officer in support of higher price. As per seized e-mail offer of share was only Rs. 73 crores and appellant has purchased these shares for Rs. 82.50 crores. Therefore, it is not proved that shares of Coastal Power Project Pvt. Ltd. was sold to appellant company at lesser rate. Further, I agree with arguments of Ld AR that statement of Sh. Sumit of Yes Bank relied by assessing officer that initial meeting for transfer of said shares was held between ....
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....On 25/09/2009, these shares were sold to Maroo family again for consideration of Rs. 3,60,00,000/-. Therefore there was a loss of Rs. 7,03,15,125/- to appellant. Ld. Assessing Officer has disallowed said loss on found that same is a share transaction with a view to decrease profit on account of sale of shares of Coastal Power Project Pvt. Ltd. Ld. AR during appellate proceedings argued that appellant is in business of shares trading and transaction of shares of Blue Wings and Travels Pvt. Ltd. are all reflected in books of accounts of respective parties supported by transfer of shares. shares of M/s. Blue Wings Tower & Travels Pvt. Ltd. is sold to outside various person of Maroo Family Ld AR argued that assessing officer has not corroborated any evidence against said transaction. I agree with arguments of Ld AR that all transaction are backup by evidence and assessing officer has not corroborated any evidence on record to prove these transaction as in genuine. Therefore, I direct assessing officer to allow loss on sale of shares of M/s. Blue Wings Tower & Travels Pvt. Ltd. 3rd ground of appeal is allowed. As, I have held that capital again is taxable in h....
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....ITA number 388 2/Del/2016 for assessment year 2010 - 11 is dismissed. 107. Now we proceed to decide appeal of assessee for assessment year 2011 - 12, which is also filed against consolidated order of learned CIT - A - 44, New Delhi dated 29/2/2016. Assessee has raised following grounds of appeal in ITA No. 3739/Del/2016 for Assessment Year 2011-12:- 1(i) That on facts and circumstances of case, Ld. CIT(A) was not justified in confirming disallowance of Rs. 12,11,775/- u/s 40A(3) of I.T. The Act, 1961. (ii) That claim is in respect of reimbursement of expenses by employees and there being no dispute about genuineness and justification of claim, there is no case of any default in terms of provisions of section 40A(3) of The Act. (iii) That even otherwise, payment is covered under exception in clause (k) of Rule 6DD and as such there is no case of any default u/s 40A(3) of I.T. The Act, 1961. 2. That finding of conclusion of CIT(A) in respect of value of work in progress is illegal and arbitrary as valuation of work in progress is based on regular system of accounting and based on legal and accounting principles. 3(i) That CIT(A) having ....
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....ing provisions of section 80IA(8) read with 80IB( 13) and 80IC(7) of The Act, on ground that rate of technical know-how fee on value of goods transferred from perfumery division to eligible unit should be @2.75% as against 2.5% declared by appellant. (ii) That adjustment of cost and consequential claim of deduction u/s 80IB/80IC is illegal, arbitrary and based on conjectures and surmises. 7(i) That on facts and circumstances of case, Ld. CIT(A) was not justified in upholding disallowance of deduction u/s 801B/80IC to extent of Rs. 1,36,34,222/- by applying provisions of section 80IA(8) read with 80IB(13) and 80IC(7) of The Act, on ground that fair market value of goods transferred from 'Silverfoil Division' to eligible undertaking was higher than that declared by appellant. (ii) That adjustment of cost and consequential reduction of claim of deduction u/s 80IB/80IC is illegal, arbitrary and based on conjectures and surmises. 8(i) That on facts and circumstances of case, Ld. CIT(A) was not justified in upholding disallowance of deduction u/s 80IB/80IC to extent of Rs. 5,82,029/- by increasing value of goods transferred from Canpack division to eli....
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....djustment of royalty and consequential reduction of claim of deduction u/s 80IB/80IC is illegal, arbitrary and based on conjectures and surmises. ll(i). That Ld. CIT(A) erred on facts and in law in sustaining disallowance of purchase of sandalwood oil to extent of Rs. 84,54,88,059/- holding same to be bogus. (ii) That Ld. CIT(A) erred on facts and in law in endorsing allegation of assessing officer that bogus bills were obtained by appellant from two companies, viz., M/s. SurvaVinayak Industries Limited (in short 'SVIL') and M/s. Allied Perfumery Private Limited (in short 'APL') , in order to inflate purchase of sandalwood oil. (iii) That Ld. CIT(A) erred on facts and in law in endorsing allegation of assessing officer that cash was received by appellant from above two concerns, that too, on basis of erroneous inferences/ assumptions on basis of certain seized documents. (iv) That Ld. CIT(A) erred on facts and in law in relying upon ex-parte statements/ materials collected behind back of appellant, without allowing cross-examination and/ or confronting same to appellant, in gross violation of principles of natural justice. (v) That Ld. C....
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.... - 11. Both parties also agreed that there is no change in facts and circumstances of case. We have already decided above ground of appeal in appeal of assessee for assessment year 2010 - 11 wherein because of reason that in subsequently from assessment year 2013 - 14 method and component of cost of inventory have been accepted by learned assessing officer we have deleted addition made for that year in appeal of assessee. Further similar reasons we reverse order of learned CIT - A. Accordingly, ground number 2 of appeal of assessee is allowed. 110. Ground number 3 of appeal is with respect to disallowance of interest expenditure u/s 36 (1)(iii) of INR 3 00903 wherein national interest has been charged and advances to sister concern for purpose of business. Both parties agreed that this is identical to ground number 5 of appeal of assessee for assessment year 2010 - 11. On careful consideration of facts in this year also, and for reason that assessee has huge non-interest-bearing funds in form of share capital and reserves and surpluses more than amount advanced by assessee to its sister concern addition was deleted in that year. There is no change in facts and circumstances of c....
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....al know-how fee on value of goods transferred from perfumery division to eligible unit should be 2.75% as against 2.5% declared by appellant. Both parties agreed that this is similar to ground number 9 of appeal of assessee for assessment year 2010 - 11. While deciding ground number 9 of appeal has been allowed for reason that claim of assessee has been accepted in subsequent year on identical facts and circumstances. Therefore, for similar reasons we allow ground number 6 of appeal of assessee for this year too. 114. Ground number 7 of appeal of assessee is with respect to disallowance confirmed by learned CIT - A of eligible income u/s 80 IB/80 IC to extent of INR 13634222/- by applying provisions of section 80 IA (8) on ground that fair market value of goods transferred from silver foil division to eligible undertaking was held than that declared by appellant. Brief facts of issue are that special auditor is reported that during year under consideration silver for unit has transferred goods of INR 9 7796985 to various units including INR 4 5266554/- to manufacturing units eligible for deduction u/s 80 IB/80 IC of income tax Act. Learned auditor has considered for arriving at ....
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....erefore should be deleted. 116. Learned departmental representative vehemently supported orders of lower authorities and submitted that when assessee has sold identical material to 3rd party then same is market price of goods as on that date and therefore assessee has reduced profit of non eligible unit and enhanced/increased profit of eligible unit and therefore above disallowance as rightly been made by lower authorities. 117. We have carefully considered rival contentions and perused orders of lower authority. Appellant has procured silver for from third-party vendors and transferred to eligible units at actual cost comprising procurement cost, processing cost, freight expenses et cetera on FIFO basis. Whereas learned assessing officer has taken average sale cost rate to 3rd party to file market value of such civil file to eligible undertaking claiming deduction u/s 80 IB/80 IC of The Act. It is apparent that silver foil item is sold to outsiders; actual price realized by assessee on sale of these items to third party is market value of product as on that date. However, assessee has purchased raw silver from third parties and as on date raw material purchased by assessee f....
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....r 9 of appeal of assessee is with respect to disallowance of cost of service/common cost of eligible undertaking which is similar to ground number 11 of appeal of assessee for assessment year 2010 - 11. Both parties also confirmed that there is no change in facts and circumstances of case. While deciding issue in assessment year 2010 - 11 we have held that gross profit ratio of 10% over and above actual cost incurred by assessee cannot be imputed for working out eligible profit of unit. We have allowed ground number 11 of appeal of assessee for that year holding that there is no value addition made by these head office or branches to various cost allocated by assessee. For similar reasons we allow ground number 9 of appeal of assessee reversing order of learned CIT - A. 120. Ground number 10 of appeal of assessee is with respect to disallowance of deduction u/s 80 IB/80 IC to extent of Rs. 5,51,62,247/- wherein learned assessing officer has made addition which is confirmed by learned CIT appeal that eligible undertaking should have paid royalty to head office for using brand allegedly owned by head office. Both parties confirmed that this ground of appeal is identical to ground ....
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....sessment order. Ld. AO has made such disallowance without appreciating use of actual quantity with reference to manufacturing carried out by assessee. Ld CIT (A) has also disputed price of purchases from SVIL and APPL and has observed that purchases are inflated and adjustment was made in respect of overall purchase price based on quantity purchased from these two parties by referring to lowest price of other suppliers. However, quantum of purchase and use of same in manufacturing process was not disputed after making necessary verification of raw material used and quantity manufactured. He corroborated it with excise records. Ld. CIT (A), after considering overall facts of case, held that there is no dispute regarding correctness of quantity of Sandalwood oil purchases and recorded in books of assessee and only dispute is regarding value of purchases. Accordingly, ld. CIT(A) applied minimum purchase rate from third party to quantity of Sandalwood oil purchased from SVIL and APPL. Relevant working is at Page 297-298 of CIT(A)'s order. Disallowance was restricted to Rs. 84,54,88,059/- as against Rs. 123,92,46,117/- . Therefore, assessee is in appeal on this ground. 122. Learned a....
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....antitative trading results. Further, there is no adverse evidence on record regarding disputing quantum of purchases of sandalwood oil and reconciliation of purchases with production. Therefore, according to him it is self evident that whole addition is merely based on inferences and bald allegations, which are not supported from any documentary evidences. 125. He further submitted that in any case, once correctness of purchases recorded in books is accepted, dispute regarding valuation of it is wholly irrelevant as revenue authorities cannot sit in armchair of assessee and decided reasonableness of an expenditure. 126. It is not case of revenue that M/s. Surya Vinayak Industries Ltd. and M/s Allied Perfumers Pvt. Ltd. are related parties or provisions of section 80IA(8) or 80IA(10) are applicable and as such there is no ground or basis for any disallowance of purchases of Sandalwood Oil from M/s. Surya Vinayak Industries Ltd. and M/s Allied Perfumers Pvt. Ltd. keeping in view documentary evidences placed on record in form of bills, vouchers, documents showing actual receipt of material, documents in support of actual movement of goods and actual consumption in manufacture of....
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....le issue and held that based on all evidences gathered during search and post search proceedings in case of appellant and Florian a group of cases, he is satisfied that there are enough evidences in form of seized documents and statement recorded during search and post search proceedings which clearly establishes that Surya Vinayak industries Ltd and Allied perfumery private limited has not supplied goods namely Sandalwood oil to assessee and they have merely issued bogus bills to assessee and received cheques from assessee and paid back to assessee in cash after some adjustment in rate and apportioning excise duty. After giving this finding, he further held that Sandalwood oil is an excisable product and entered in excise registrar of perfumery compound division of assessee. He further noted that on date of search, there was no discrepancy in stock of sandalwood oil found which is apparent from assessment order where assessing officer himself has mentioned that during course of search proceedings conducted sandalwood oil was found in production and in managing director room. He further considered consumption of sandalwood oil after reducing purchases from two companies and also af....
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....urchases and consumptions. Accordingly, he upheld that in fact assessee has purchased sandalwood oil from grey market, quantity of such purchases were entered into Central Excise register however for purpose of accounting and recording it in books of accounts assessee used these two entities and obtained bogus bills from them at higher rate than what is actual purchases rates from grey market. These findings of learned CIT - A are convincing, based on proper analysis of quantitative details maintained by assessee. These are further not controverted by both parties by producing any cogent evidence. 131. First contention that is raised by assessee is that issue squarely covered in favour of assessee by decision of coordinate bench for assessment year 2005 - 06 to 2009 - 10 in favour of appellant is devoid of any merit as those cases were decided on issue of whether there was any incriminating material found during course of search or not with respect to those assessment years. Further as document also do not pertain to those years therefore, we have not confirmed any addition up to AY 2010-11. In fact, in that, decision coordinate bench has categorically held that evidence in form....
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.... any merit. In fact, these parties have dealings with assessee. Those parties have deposed against fact stated by assessee. Therefore if assessee finds that those parties have misquoted facts than it is duty of assessee to produce those parties before assessing officer with adequate evidence corroborating fact that those quote by these parties was erroneous. Assessee has not done anything to prove so. In view of this argument of corroboration or cross-examination is devoid of any merit. 135. Fifth arguments of assessee is that manufacturing and sales are fully reconcile uncorroborated with Vat t return and excise records also does not hold any water in view of fact that assessee has purchased material from grey market and replaced them with bills in books of accounts obtained from these two parties. Therefore, naturally manufacturing and sales would be reconciled and so VAT record and excise records. 136. Sixth argument of assessee is that once correctness of purchases recorded in books are accepted dispute regarding valuation of it is wholly irrelevant. Further, claim of assessee that these two parties were alleged to have provided bogus bills to assessee are not related par....
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....ll value in bogus bills issued by these two parties. learned CIT - A has considered market price as minimum price paid by assessee with respect to various parties during year, whereas alternative claim of assessee is that such market price should be taken as average price of sandalwood oil during year. Claim of assessee is that because of several factors, which affect price of commodity such as quality, brand, nature, and type of product and therefore minimum price always, demonstrates lower quality material without brand and in smaller quantities. This is also apparent from fact that page number 298 of order of learned CIT appeal where to derive at minimum price of sandalwood oil he has taken a bill wherein assessee has purchased only hundred kilograms of material, where rate of sandalwood per KG is only INR 28142.40, whereas assessee has purchased total quantity of INR 18894.210 kg during year amounting in all to INR 1436436257/-. Further alleged purchase of material from grey market and substituting it with bill price of these two alleged parties total quantity purchased by assessee is of 16702.800 kg and for making of addition purchase transaction of only hundred kilograms is t....
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....round number 14. It was further stated that there is no change in facts and circumstances of case. 140. We have carefully considered rival contention and find that identical ground of appeal of assessee for assessment year 2010 - 11 has been decided by us wherein relying on decision of honourable Delhi High Court in cotton natural private limited appeal of assessee was allowed on that ground. Therefore, for similar reasons ground number 12 of appeal for this year also is allowed. 141. Ground number 13 is with respect to charge of interest u/s 234A, 234B and 234C of The Act. Before us, no arguments were advanced by assessee. Therefore, it is dismissed. 142. Accordingly, appeal of assessee is partly allowed. 143. Now we come to appeal of learned assessing officer wherein following grounds have been raised l in ITA No. 3883/Del/2016 for Assessment Year 2011-12:- "1. Whether on facts & in circumstances of case, Ld. CIT(A) has erred in law & on facts in deleting reduction of claim u/s 80IB/80IC of Rs. 12,12,36,832/- made by AO by increasing value of goods transferred from Noida units to eligible units treating them processed goods and by reducing 80IB/80IC to that e....
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....e to extent of exempt income. 10. Whether on facts & in circumstances of case, Ld. CIT (A) has erred in law & on facts in directing to take basis of calculation from lowest purchases from third party, thus ignoring facts and evidences of bogus purchases unearthed during course of search and post search proceedings. 11. Whether on facts & in circumstances of case, Ld. CIT (A) has erred in law & on facts in deleting addition of Rs. 2,45,310/- made on account of lesser rate of job work charged from sister concerns in comparison to other related parties. 12. That order of CIT (A) is perverse, erroneous and is not tenable on facts and in law. 13. That grounds of appeal are without prejudice to each other." 144. Ground number 1 of appeal is with respect to addition deleted by learned CIT - A with respect to deduction claimed under section 80 IB and 80 IC of INR 1 21236832 by increasing value of goods transferred from Noida units to eligible units treating them process goods and by reducing eligible profit to that extent. Both parties confirmed that this is identical to ground number 1 in appeal of learned assessing officer for assessment year 2010 -....
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.... assessing officer is with respect to allowability of deduction u/s 80 IC in respect of excise duty refund considering same as an eligible income or not. Identical issue has been considered by us in appeal of learned assessing officer in ground number 7 for AY year 2010 - 11 wherein we have held that excise duty refund is an income eligible for purpose of deduction u/s 80 IB of income tax the act as it is derived from industrial undertaking. accordingly ground number 6 of appeal of learned assessing officer is dismissed 150. Ground number 7 of appeal of assessee is with respect to disallowance of prior period expenditure. Both parties confirmed that this is identical to ground number 8 of appeal of assessee officer for assessment year 2010 - 11. We have carefully considered rival contention and find that ground number 8 of appeal of assessing officer for assessment year 2010 - 11 has been dismissed by us in therefore for similar reasons we also dismiss ground number 7 of this appeal. 151. Ground number 8 of appeal is with respect to foreign exchange fluctuation loss, which is identical to ground number 9 of appeal of learned assessing officer. We have already decided this gro....