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2016 (5) TMI 1443 - ITAT DELHIDeduction u/s.80 IB - CIT (A) directed the AO to allow the netting of royalty to the profit and loss account while calculating the deduction under section 80 IB in respect of Jammu unit - Held that:- Present facts of assessee’s case stands squarely covered by the ratio laid down by Hon’ble Bombay High Court in the case of Zandu Pharmaceuticals Works Ltd (2012 (9) TMI 620 - BOMBAY HIGH COURT). The assessee has paid certain royalty towards the technical know-how obtained by itand it had received certain license fee in respect of the same technical know-how as it was passed out to an outside party. The assessee could not exploit the technical knowhow for manufacture of goods at Jammu unit and therefore the assessee had shown the sums under corporate division. Respectfully following the decision above we hold that the sums of rupees for ₹ 4.25 crores and ₹ 1.96 crores has to be shown under corporate division and the excess along with other corporate expenses has been rightly been allocated to the 3 manufacturing units by the assessee. Deflation in the inter-unit transfer of goods - Difference in the price - Held that:- Difference in the price is due to quality of shashet manufactured as per the requirement of the client. A.O. has only taken the highest value of shashet sold to the outside parties especially M/s. Kothari Products Ltd. and has compared with the lowest value of shashet charged to inter unit transfers. M/s. Kothari Product Ltd. Being a leading entrepreneur in Pan Masalas, would definitely opt for a high quality of shashet as compared to other parties. Such a comparison cannot be made as the requirements in respect of quality and quantity of each party would be different. Further, it has been observed that there has no other material / document / evidences brought on record by the A.O. to prove that the assessee has deflated the expenses of inter unit transfers. Thus no deflation in the inter-unit transfer of goods proved - decided against revenue. Whether the excise duty refund in respect of Jammu unit has been “derived for”, for the purposes of deduction under section 80 IB? - Held that:- The paramount consideration of the central Government in providing the incentives to the new industrial units and substantial expansion of the existing units, was the generation of employment through acceleration of industrial development, to deal with the social problem of unemployment in the State, additional creating opportunities for self employment, hence a purpose in public interest - test of proximity, i.e., direct nexus with the industrial activity is not necessary while claiming deduction under section 80-IB of the Act. – Deduction allowed u/s 80IB – See CIT vs. Dharam Pal Pream Prakash Ltd [2008 (11) TMI 231 - DELHI HIGH COURT] also confirmed by SC [2010 (2) TMI 1202 - SUPREME COURT]- decided against revenue. Allowability of ₹ 9 crores on account of license fee paid - Held that:- The assessee has not been able to justify the sudden rise in the license fee in the middle of the year. There does not seems to be any valid reason for such an increase of the license fees. It is also evident from the order passed by the Ld. AO that there is no material on the basis of which he has made an addition of ₹ 9 crores towards the license fees. It is therefore just and proper to consider the license fee for the period from 01.03.2005 to 31.01.2006 at ₹ 50 Lacs per month and ₹ 2 crores for the remaining months from 01.02.2006 to 31.03.2006. To meet the ends of Justice we therefore confirm the addition to an extent of ₹ 6 crore. - Decided partly in favour of revenue Addition u/s 68 - unverifiable and unconfirmed advances from customers - Held that:- The trade customers as appearing in the list are the regular customers making purchases from the assessee from past many years it is evident from the Ledger account for the current as well a subsequent years shows that the assessee has been supplying goods to these parties in the normal course of the business and therefore the realisation of proceeds thereof is an ongoing process during the course of the business activity. The only finding of the AO that the assessee has not been able to produce confirmations from few of the parties cannot be the basis to arrive at a conclusion that these are unverifiable and unconfirmed. - decided against revenue
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