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2016 (2) TMI 513 - AT - Income TaxExemption u/s 10B - Disallowance of foreign participation expenses - bifurcation between two units - Held that:- What is to be seen is when the initial deposit was made, whether it was claimed as an expense in the profit and loss account or shown as an advance in the balance sheet. In the instant case as submitted by the ld. AR, the initial deposit was shown in the balance sheet as an advance in the account of Gem & Jewellery Export Promotion Council. Therefore it cannot be said conclusively that the said advance pertains to unit-I only. The assessee has not brought on record any specific documentation to substantiate that the foreign participation relates to the goods being manufactured at unit-I only. Merely by paying the initial deposit and showing the same as an advance in the balance sheet of unit- I, it cannot be said that the expenses pertains to unit-I only, as per the well laid down principle of the law that the entry in the books of accounts are not determinative of real nature of the transactions. Given that both the units are in the same business and 100% of its production is exported and there was no local sale in unit-I held by the AO, and in absence of any contrary facts brought to our notice by ld. AR, a more logical view which emerges is that the booking of stalls in the exhibition was done for both the units and the expenses should relate to both units. In light of above, we are of the considered view that the AO has rightly apportioned the foreign participation cancellation expenses in the hands of both the units and necessary additions/ disallowances have been made in the hands of the respective units - Decided against assessee Proportionate addition in hands of unit-II which is 100% EOU @ 25% of unverifiable purchases - Held that:- We have gone through the submissions of the ld. AR as well as the order of the lower authorities. Given that the said disallowance relates to unverifiable purchases and the fact that the said disallowance is in hands of unit-II which is enjoying tax exemption u/s 10B of the Act. We do not like to interfere with the order of the ld. CIT(A). - Decided against assessee
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