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2014 (12) TMI 1060 - AT - Income TaxDisallowance of claim of deduction u/s 80IB deleted job work done by the assessee amounted to carrying out manufacturing activity by an industrial undertaking or not - Held that:- The assessees claim for deduction u/s 80IB is mainly on account of job work which was carried out from the plant and machineries installed by the assesse for its own manufacturing purposes - the only requirement for claim of deduction u/s 80IB is that, income should be derived from the industrial undertaking and assessee is liberty to manufacture the goods for itself or for others - The section does not make any difference for the purpose of claiming deduction u/s 80IB - If the job work has been done from the raw material supplied by the customers and assessee has manufactured the goods from those raw materials, then it amounts to manufacturing from the industrial undertaking - CIT(A) noted that the plant and machinery were used for manufacturing of plastic bags and polypropylene sheets to carry out the job work for others - The only difference is that assessee instead of its own raw material, has used raw material supplied by others - Thus such an income from job work is nothing, but income derived from industrial undertaking as per the provisions of section 80IB CIT(A) is upheld Decided against revenue. Disallowance on sale if manufactured product to be treated as "trading receipt" deleted Held that:- The genesis of the controversy started when the AO noted that in the P&L Account, the assessee as debited more labour charges has compared to the labour charges shown in the TDS certificate - When required to reconcile the difference, the assessee submitted that the amount of ₹ 98,08,414/- was not on account of labour charges but on account of trading receipts - such a reconciliation statement given before the AO was not correct as the correct position is that, the said amount represents sales of manufactured goods and no trading receipt - the assesse had shown income from two kind of activities, one form job work of manufacturing and sale of manufactured goods and other on account of trading activities - under the head manufacturing, the assesse had shown opening stock of manufactured goods as on 31.07.2007 at ₹ 95,57,961/-The sale of manufactured goods was shown at ₹ 3,13,34,736/- which also included sale on account of job charges out of ₹ 2,15,25,722/- The amount was finally reconciled in the accounts - Though there has been some misrepresentation of facts before the AO, CIT(A) has duly verified the same from sales register and also copy of sale memos and has given a categorical finding that it pertains to sale of manufactured goods and not trading receipts - Thus such a finding of fact appears to be correct from the material placed on record, thus, there was no reason to disturb such a finding of fact Decided against revenue. Disallowance of reallocation of expenditure such as interest charges, repairs & maintenance and insurance charges between trading and manufacturing activity deleted Determination of net profit by AO Held that:- The finding of the Ld.CIT(A) appears to be correct, firstly, the assessee has maintained separate books of account, one for the manufacturing activity and other for trading account - The book results of manufacturing and trading activity has not been disturbed by the AO in as much as, no discrepancy with regard to the allocation of the expenses by the assessee - The entire basis of the AO for reallocation of expenses is based on presumption that certain expenses are more in the job work activity - so far as the major component of interest expenditure, the CIT(A) has analyzed the loan taken from the bank and the purpose of which the loans were taken - the finding of the CIT(A) is upheld decided against revenue.
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