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2014 (1) TMI 976 - AT - Income TaxDeduction u/s 80IB - Held that:- Both the concerns carrying similar business of liquid soap material and most of the sales are made to the same concern where the rate is common for both the concerns - The profit shown by the unit which is eligible for deduction u/s 80IA is very high i.e. 35% as compared to the profit of the other unit (belongs to his wife) only at the rate of 5% - Following CIT V/s Schmetz India (P) Ltd [2012 (9) TMI 407 - BOMBAY HIGH COURT] - As per section 80IA(10) of the Act - AO has been empowered to redetermine the profits which may be reasonably deemed to have arisen from such eligible business, if the said undertaking has declared more than ordinary profit - AO rightly applied the provisions of section 80IA(10) of the Act to re-determine the profit - AO is reasonable to consider the net profit rate of 10% of the eligible unit as against 5% net profit of the unit which is not eligible for deduction u/s 80IA. The assessee could not controvert the facts as stated by AO and neither could controvert the submissions as made by ld. DR and /or query raised by the Bench at the time of hearing - The AO is justified to apply the provisions of sub-section (10) of section 80IA of the Act to re- determine the profit as the profit shown by eligible unit is abnormally high particularly when the cost of the material is the same, most of the sales are also made to the same party and both units are carrying on the similar business of manufacturing of liquid soap material - The AO was justified and reasonable to restrict deduction by taking the net profit rate of 10% of the total sales by the assessee of the Jammu unit inspite of the fact that the other unit i.e. M/s. The Umergaum Industries, Valsad whose proprietor is wife of assessee showing net profit rate of 5% only - Decided in favour of Revenue.
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