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2014 (7) TMI 1277 - ITAT VISAKHAPATNAMEligible for grant of deduction u/s 10B - whether the unit was actually in existence in the previous year relevant to AY and whether it started manufacture and process of herbal extracts? - Held that:- AO erred in considering only manufacturing expenses for the purpose of arriving at ratio of outsourcing by way of job work of manufacturing activity. This is illogical. CIT(A), in our view, has correctly considered raw material cost, cost of chemicals, packing materials, fuel and power manufacturing expenses as well as manufacturing establishment expenses as total cost of manufacturing and the amount paid towards job works as a percentage of this expenditure and thereafter arriving at 21.27% as the percentage of job work that was out sourced from the total manufacturing cost. This demonstrates that the conclusion of the AO that major portion of manufacturing activity is not conducted in the assessee premises, is factually incorrect. In fact Laila Impex is also an EOU. Thus, we uphold these findings of the first appellate authority and dismiss the grounds raised in this regard. Appeal of the revenue is dismissed. In the issue of directions of the CIT(A) to the AO to compute the profit of 21.27% of the turnover, as the same is attributable to the outsourcing of manufacture through job works and, then to exclude such profits from the profits eligible for deduction u/s 10B, we hold that the same is contrary to law. No such exclusion is contemplated in the Act. We are supported by the propositions laid down by the Mumbai Bench of Tribunal in the case of Gebbs Infotech Ltd. (2010 (10) TMI 1083 - ITAT MUMBAI). Thus uphold the directions of the learned CIT(A) as in this case also, what was outsourced was a part of the job of manufacturing i.e. step 1 out of the 6 steps or stages of manufacturing activity.
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