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2011 (10) TMI 499 - AT - Income TaxDeduction u/s 10BA - denial on non fulfillment of conditions mentioned in clauses (a),(b),(c),(d)and (e) of Section 10BA(2) - assessee engaged in the business of manufacturing and export of wooden handicraft articles - Held that:- It is undisputed that the appellant is not using any imported raw materials and mainly "wood" is used as a raw material - appellant is manufacturing eligible articles - commercially different article or thing is produced, hence said activity has to be treated as manufacturing activity - appellant would be treated as engaged in the manufacturing of articles, in respect of the purchases of semi finished goods from job-workers who manufacture goods under the supervision/control and as per the requirements and specifications of the appellant - mainly labour is used in the manufacturing - there are elements of innovation, imagination and creativity in the articles produced. Therefore, appellant has fulfilled the conditions of clause (a) of S. 10BA(2) Conditions of S10BA(2)(b) and (c) - Held that:- Issue in hand, which is identical to the requirements of S80-IB(2)(i)and (ii) respectively, is directly covered in favour of the appellant by ITAT, in the appellant's own case for A.Y. 2005-06 Conditions of S10BA(2)(d) - Held that:- Explanation (d) to S10BA requires the use of wood" as the main raw material, which means that there is no prohibition for some use of the other materials (other than the wood) in the manufacturing/production of the eligible articles or things. It is also observed that none of those articles/goods was found to be made up of metal alone. Further, requirement of aforesaid clause is that 90% or more of the "sales" during the relevant previous year should be by way of exports of the eligible articles or things and not the "sale proceeds received in convertible foreign exchange" during that year. Therefore, C&F expenses related to the forwarding of goods in India upto the sea port were to be included in the export turnover, thereby fulfilling requirement of 90% of export sales. Thus it is held that the appellant fulfilled the conditions of Sec 10BA(2)(a),(b),(c)&(d) hence, the appellant was entitled to the claimed deduction u/s 10BA - Decided in favor of assessee. Trading addition - rejection of books of account - Held that:- Upholding the order of CIT(A) in holding that AO was fully justified in rejecting the appellant's books of account u/s 145(3) and applying the GP rate of 17.20%. However, AO was not justified in estimating the sales without bringing any adverse material/evidence on record, indicating any out of books sale by the appellant. Therefore, trading addition is confirmed to the extent of Rs. 24,11,395/-, against the trading addition of Rs. 28,24,170/- made by the AO. Dis-allowance u/s 43A(3) - Held that:- Firstly, amended provisions of S40A(3) were not applicable in the appellant's case in the A.Y. 2006-07, under consideration of this appeal. Secondly, when the GP rate has been estimated in this case (which has been upheld ), no separate addition is called for u/s 40A(3) in respect of any manufacturing/trading expenses - Decided against the Revenue.
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