TaxTMI 
TaxTMI 
2015 (6) TMI 1193
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.... units are eligible for deduction u/s 10B of the Act. The assessee declared profit in the Pune unit and claimed deduction u/s 10B of the Act. It declared loss in Nashik unit. In the assessment proceedings, the AO drastically reduced the deduction claimed by the assessee u/s 10B of the Act for various reasons. The AO also rejected claim of loss incurred in Nashik unit. The Ld CIT(A) also confirmed the same. Aggrieved, the assessee has filed this appeal before us. 3. The first issue relates to the rejection of Gross Profit declared by the assessee for its Nashik Unit and instead estimating the same at 10% of the sales. The assessee declared sales of Rs. 56,38,296/- in its Nashik unit and the Cost of goods sold was shown at Rs. 94,51,030/-.....
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....see. 6. We have earlier noticed that the AO has estimated the Gross Profit @ 10% of the Gross sales. We notice that the AO has compared the Gross profit rate declared in the Pune unit and accordingly determined the rate of GP at 10%. The Ld CIT(A) also confirmed the same. Before us, though the assessee contended that it was not correct to estimate the Gross profit, yet no material was placed before us in order to compel us to disturb the estimate made by the AO. Accordingly, we confirm the order of Ld CIT(A) on this issue. 7. The next issue relates to the computation of deduction u/s 10B of the Act in respect of Pune Unit and also the disallowance of loss declared by the Nashik Unit. The facts relating to the same are discussed in bri....
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....ks on its own. Accordingly, the AO computed the profit relating to manufacturing activity of Pune unit at Rs. 16,36,483/- out of the Profit of Rs. 39,22,420/-, referred in the immediately preceding paragraph. After reducing the proportionate profit pertaining to domestic sales at Rs. 17,822/-, the AO allowed the deduction u/s 10B of the Act at Rs. 16,18,661/-. 10. The Ld CIT(A) confirmed all the workings made by the AO. 11. The first reason cited by the AO to reduce the profit of Pune unit is that the assessee has enhanced the profit in Pune unit through the sub-contract work being to the Nashik unit, a non-10B unit. Accordingly he transferred the loss declared in the Nashik unit to Pune unit. The Ld A.R submitted that the Nashik unit....
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....O not to transfer the loss determined for Nashik Unit to Pune unit. 13. The next controversy in this issue relates to reduction of interest income from the profit of Pune unit for computing deduction u/s 10B of the Act. The said action, in our view, is in accordance with the decision rendered by Hon'ble Supreme Court in the case of Pandian Chemicals Ltd (2003-TIOL-51-SC-IT) and Sterling Foods (2002-TIOL-222-SC-IT), since the interest income cannot be considered to the profit derived from export of goods or articles. The Ld A.R placed reliance on the decision rendered by Kolkatta bench of Tribunal in the case of Hindustan Gum & Chemicals (23 SOT 143). However, the said decision shall not be applicable in the present case, since the AO, in....
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....t eligible for deduction u/s 10B of the Act in respect of profit attributable to sub-contract works. Accordingly, the Ld CIT(A) was not justified in confirming the same. Accordingly, we set aside the order of Ld CIT(A) as well as the AO on this issue. 16. The last issue relates to the disallowance made u/s 14A of the Act. It is to be noted that the AO did not make any disallowance u/s 14A of the Act. The Ld CIT(A) enhanced the assessment by directing the AO to compute the disallowance in terms of Rule 8D of IT Rules, since the assessee had received dividend income of Rs. 1,23,492/-. 17. The ld A.R submitted that the assessee has got sufficient own funds and hence there was no requirement of making any disallowance out of interest expe....