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2021 (9) TMI 1384 - ITAT MUMBAIEstimation of income - Addition of bogus purchases - HELD THAT:- When the sales have been accepted as genuine the entire purchases cannot be treated as non-genuine - In the case of Bholanath Polyfab Pvt. Ltd. [2013 (10) TMI 933 - GUJARAT HIGH COURT] held that when the assessee made purchases and sold the finished goods as a natural corollary not the entire amount covered under such purchases would be subject to tax but only the profit element embedded therein. Similar view has been taken in the case of CIT v. Simit P. Seth[2013 (10) TMI 1028 - GUJARAT HIGH COURT]. Simply because the parties were not produced the entire purchases cannot be added as held in the case of CIT v. Nikunj Eximp [2013 (1) TMI 88 - BOMBAY HIGH COURT] - However, at the same time keeping in view the nature of business of the assessee and the fact that the assessee is making some local purchases without any transportation bills, lorry receipts etc, the possibility of making purchases in gray market on cash cannot be ruled out - we direct the Assessing Officer to restrict the disallowance/addition to 12.5% of the non-genuine purchases Allocate the R & D expenditure among 80IB and 80IC units and non 80IB and 80IC units - Allocating/sustaining allocation of Research & Development Expenses incurred by the appellant amongst the different manufacturing unit of the appellant - HELD THAT:- We observe that when the details of products manufactured by the units and products on which R & D is undertaking by the assessee were placed on record before the Assessing Officer to show that they are completely independent from each other, the Assessing Officer completely failed to bring on record that R & D expenditure in fact benefited the existing units and thereby it is necessary to allocate the R & D expenditure among 80IB and 80IC units and non 80IB and 80IC units on the basis of percentage of sales on respective units to the total sales. We further observe that even after allocation of expenses among 80IB eligible and non-eligible units the taxable income from the assessment under consideration remained the same as the tax was assessed under book profits u/s. 115JB of the Act and not under normal provisions of the Act. Almost identical issue has come up in the case of Zandu Pharmaceuticals Works Ltd., v. CIT [2012 (9) TMI 620 - BOMBAY HIGH COURT] wherein the Hon'ble Bombay High Court held that unless expenditure incurred on research and development work relates to units eligible for deduction under section 80-IA, same cannot be apportioned to the said units. Thus we hold that the allocation of R & D expenditure by the Assessing Officer among 80IB and 80IC units and non 80IB and 80IC units on the basis of percentage of sales of respective units to the total sales is baseless and totally unwarranted. Thus, we direct the Assessing Officer to recompute the income under normal provisions of the Act without any allocation of R & D expenditure among 80IB/80-IC and non 80IB/80IC units.
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