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2015 (3) TMI 766 - HC - Income TaxAdmissibility of claim under Section 80HH in respect of Namoli Unit and 80I in respect of Malanpur Unit - CIT(A) and ITAT allowed claim - Held that:- Both the CIT (A) and the ITAT carried out an elaborate factual analysis about the existence of manufacturing activity at Namoli and Malanpur. Based on this analysis, these fact finding authorities concurrently ruled in favour of the assessee. In contrast, the AO - as is evident from the extracts of his order - based his decision entirely on assumptions. Those assumptions stemmed out of his belief that the claim for losses of the Noida unit could not co-exist with the profits derived from the Namoli and Malanpur units. We also noticed that the AO’s order did not take into account the materials which were ultimately considered by the CIT (A). The latter, in fact, took care to call for the AO’s comments during the course of the appellate proceedings. The material in the form of factory register, employee’s rolls, periodic sales tax and excise returns, evidence of electricity payments etc. was decisive enough for both the CIT (A) and ITAT to be satisfied that in fact the two units in question functioned.- Also whether the activity carried out in Malanpur and Namoli amounted to manufacturing goes, the fact that the assessee claimed and was granted modvat credit under Rule 57H of the Central Excise Rules at the relevant time itself is indicative that for purposes of excise, “the assembling of cassettes amounted to manufacture”. It goes without saying that the goods in question, i.e. Audio Video Tapes are manufactured in bulk - as in the present instance in Noida, which in turn constitute the raw materials for the ultimate assembly of the marketable products into cassettes in which several intervening stages would be involved. These would be cutting of the tapes into requisite levels, their placement in cassettes shells, packaging of such finished cassettes and labelling etc. In these circumstances, the Revenue’s argument that no manufacturing activity was involved in the assembling of cassettes is unsustainable - Decided in favour of assessee. Depreciation claims for the Namoli unit - Held that:- In view of the concurrent findings of the CIT (A) and the ITAT that in fact Namoli unit actually functioned during the relevant year, the depreciation was correctly allowed. - Decided in favour of assessee. Alleged suppression of sale - Held that:- In 1993-94, one of the Noida units transferred 5000 pieces of VMT to the Malanpur Unit for ₹ 97 per piece including the excise duty component of ₹ 55.05. The Malanpur unit had moved 1960 video cassettes in the two years in question, i.e., 1993-94 and 1994-95. The reduced excise duty led to fall in the price of video cassettes. Consequently, the average market price also went down. In order to compensate the Malanpur unit, M/s Super Cassettes Industries purchased video cassettes at the price of ₹ 104. The concurrent findings of fact are that there was no suppression of sale prices since 83% of the total video cassettes sales was exported at an average price of ₹ 27.79/-. The CIT (A) held that these exports are substantial enough and that the allegations that there was under-invoicing of exports by the assessee could not be validly returned. These findings were affirmed by the ITAT. Again being entirely factually in nature, the Court sees no reason to interfere with them - Decided in favour of assessee. Disallowance of loss claimed in respect of Noida unit - ITAT allow the loss to the extent of ₹ 39,45,798/- and to sustain the balance loss of ₹ 26,80,087 - Held that:- Apart from stating that the findings are erroneous, the Revenue has not pointed out either perversity or unreasonableness or that any of these findings were not based upon the inference that could not have been drawn in the circumstances of the case. Consequently, no substantial question of law arises. - Decided partly in favour of assessee. Disallowance of foreign exchange fluctuation - CIT (A) and ITAT allowed the claim - Held that:- It is not disputed that this head of expense was correctly treated as falling in the revenue stream in view of the decision of this Court in CIT vs. Woodward Governor India P. Ltd. (2007 (4) TMI 118 - HIGH COURT , DELHI) also affirmed by the Supreme Court in CIT v. Woodward Governor India (P.) Ltd. (2009 (4) TMI 4 - SUPREME COURT ). - Decided in favour of assessee.
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