TaxTMI 
TaxTMI 
2019 (7) TMI 126
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.... the case and in law, the Ld. CIT (Appeals) erred in deleting the disallowance of Rs. 11,92,955/- made on account of expenses in foreign currency without appreciating the findings of Assessing Officer in the assessment order and in view of circular No. 7 of 2009 of the Board, as held in the case of SKF Boilers & Driers (P) Ltd. (2012) 343 ITR 385/206 Taxman 19/18 taxmann. Com / 325 (AAR-New Delhi). 2. On the facts and circumstances of the case and in law, the Ld. CIT (Appeals) erred in deleting the reduction in net profit of eligible business made by the AO, without correctly appreciating the fact that while calculating the exemption u/s 10AA the reasonableness of the profits from the eligible business is also to be ascertained as per the provisions of section 10AA(9) r.w.s 80IA(10) of the IT. Act, which the AO has taken as that which was reasonably deemed to have been derived there from after comparison with that of a sister concern, manufacturing same product at the same locality. 3. The appellant craves leave to add to, amend or alter the above grounds as may be deemed necessary. Relief claimed in appeal It is prayed that the order of the CIT ....
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....rned Counsel appearing for the assessee submitted before us that the AO wrongly disallowed the payment made by the appellant for Advertisement fee and Sponsorship fee when the payee does not have permanent establishment in India. The payment was made outside India and thus the income to the foreign parties cannot be deemed to accrue or arisen in India. He, therefore relied upon the judgment passed by the Learned CIT(A). It was further contended that the issue is squarely covered by number of judgments passed by the Hon'ble Apex Court in the matter of G. E. India Technology Center Pvt. Ltd. reported in 327 ITR 456 (SC), Toshoku Ltdvs- CIT reported in 1981 AIR 148 (SC). However, the Learned DR relied upon the order passed by the Learned AO. 6. Heard the respective parties, perused the relevant materials available on record. It appears from the records that the appellant incurred expenses pertain to Advertisement and other general business promotion through engagement of a party in UK. The relevant invoice raised by the said party was also before the authorities below wherefrom it was revealed that the party do not fall in the nature of technical, managerial or consultancy services....
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..... Ground No.2 The revenue has challenged the order passed by the Learned CIT(A) in deleting the reduction in net profit of eligible business made by the AO. 8. During the assessment proceeding, it was observed that a group company M/s IWI Cryogenic Vaporisation Systems India Pvt. Ltd. having the same registered office and having manufacturing unit in the vicinity of the manufacturing unit of the appellant was also manufacturing and selling the similar products in addition to trading activity. It was further observed by the Learned AO that assessee reported much higher net profit ratio in comparison to the net profit reported by the said group company. The said group company was not qualifying for any specific exemption/deduction and the net profit reported was very low in comparison to the net profit reported by the assessee claiming exemption of income u/s 10AA. A show-cause, therefore, dated 04.03.2015 was issued as to why such net profit should not be considered to be to the extent of net profit of the group company namely M/s. IWI Cryogenic Vaporisation Systems India Pvt. Ltd. for the purpose of computing exemption u/s 10AA. The reply rendered by the assessee was not found s....
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....m is that there is no business transaction between the appellant and sister concern, neither there is any evidences to show that it has arranged its affairs in a manner to inflate its profits from eligible business. Accordingly, the provisions of sec. 10AA(9) are not applicable. The appellant has also relied upon certain decisions of Tribunal as reproduced above. Thus, primary condition in sec.10AA(9) r.w.s. 80IA(10) are absent in the present case. The decision of jurisdictional Tribunal in the case of M/s, Pramukh International (supra) is also applicable to the facts of this case. Hence, the reduction in net profit of eligible business made by the AO by invoking this section is directed to be deleted and the AO is directed to allow deduction u/s.10AA on the basis of net profit reflected in P&L a/c. of the appellant company." We have also considered the order passed by the Co-ordinate Bench which was before us. Relevant portion whereof is as follows: "7. We have heard the rival contentions and perused the material on record. Solitary grievance of the Revenue in this appeal is against the action of ld. CIT(A) deleting the disallowance u/s 10AA of the Act Asst. Year 2007-....
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....ed the entire evidence and on facts come to the conclusion that the profits earned by Kandla division of the assessee is not abnormally high due to any arrangement between the assessee and its German Principal. The Tribunal correctly held that extraordinary profits cannot lead to the conclusion that this is an arrangement between the parties. This would penalize efficient functioning. Further, the authorities have also recorded a finding that the industrial sewing machine needles imported and traded by the Mumbai division are different from those manufactured and exported by (he Kandla division. Consequently, this also negatives any arrangement between the parties to show extraordinary profits in respect of its Kandla division so as to claim deduction under section 10A. These are findings one of fact. The revenue have not been able to show that the findings are perverse or arbitrary. In the circumstances, issues raised by the revenue do not raise substantial questions of law in the instant facts and are, therefore, dismissed. [Para 8] 7.3 We observe that the Co-ordinate Bench, Delhi in the case ofA.T. Kearney India (P) Ltd. vs. Addl. CIT, Range-1, New Delhi in IT Appeal No.348(Delh....
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....ed in a finished form. It is also known that the SEZ is a custom bound area and every movement of goods/ material/asset has to pass through the check of officer of the Central Excise and Customs Department deputed at the gates and the details of such goods/raw material/asset are entered therein. Therefore, had there been any violation of SEZ rules then such movement would have Asst. Year 2007-08 been restricted. Further in order to examine this aspect that whether the goods which are manufactured on job work basis are covered under the manufacturing activities. Ld. AR has relied on the decision of the Tribunal (Delhi) in the case of Rajiv Bhatnagar vs. DCIT ITA No.1026/Del/2011 wherein similar issue has been dealt with and while deciding the issue in favour of the assessee the Coordinate Bench vide its order dated 17.12.2012 has observed as under :- "12. After having considered the facts, material on record and other relevant details, we find that all the conditions to qualify for deduction u/s 80IB of the Act is found to have been fulfilled by the assessee, inasmuch as, first conditions of employing 10 or more labour when use of power is not disputed has been fulfilled be....
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....them into the designed machines for chiseling them at the required places in order to fold those sheets and pin them at the folded points and after pinning at the folded points and after the sheet got transformed in the shape of a box, the box is again kept in a flat position for easy transportation. That flat positioned paper corrugated boxes are the final products of the respondent assessee. 3. According to the appellant, since the corrugated sheet in the process of being folded into a box, it has not lost its original characteristics of corrugated sheet, no manufacturing activity had taken place and therefore, the ingredients of Section 80IB of the Act, are not attracted. 4. The Commissioner of Income-tax (Appeals) however differed from the Assessing Authority and took the view that the corrugated sheets once are shaped into corrugated boxes, that would amount to a 'manufacturing activity* and therefore, the respondent/assessee was entitled for deduction under Section 801B of the Act. The Commissioner of Income- tax (Appeals) therefore directed the Assessing Officer to ascertain the exact quantum of deduction after making proper verification to grant the re....
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....nt if, on an overall view of the matter, it is found that it was the assessee-company which was the real manufacturer and the assessee had merely employed the agency of someone else through whom the goods were caused to be manufactured. It is also not necessary that the assessee must pay the wages of the workers employed in the manufacturing process.--CIT vs. Neo Pharma Pvt. Ltd. (1982) 28 CTR (Bom) 223 : (1982) 137 ITR S79 (Bom) : TC24R.210 followed." 10. We also observe that Hon. Calcutta High Court in the case of Addl.CIT vs. A. Mukherjee & Co. (P) Ltd. 113 ITR 0718 (Cal) has held as under :- The argument is that unless an assessee owns a manufacturing plant, he cannot be a manufacturer and similarly unless he himself does the binding or packing he cannot be a manufacturer. In order that a publisher of books should be a manufacturer of books it is wholly unnecessary for him either to be an owner of a printing press or to be a book-binder himself. A paper is not a book, though it is printed on papers. A publisher may get the books printed from any printer but the printer is not the manufacturer but a mere contractor. The findings of the Tribunal conclusively sho....