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2018 (4) TMI 805 - HC - Income TaxStay application - grant of interim order - Eligibility for deduction u/s 80IC denied - processes adopted by the petitioner do not amount to manufacture and that the unit at Rudrapur is not eligible for deduction u/s 80IC - Held that:- AO could not have gone beyond the observations rendered or findings recorded by the Central Excise Department, as, even in the show cause notice, there is a reference only to the findings recorded by the Central Excise Department. Therefore, the observations made by AO that 50% of the products sold at Rudrapur are not subjected to any manufacturing activity, appear to be in contradiction with the findings rendered by the Central Excise Department. This aspect also touches upon the jurisdiction of the Assessing Officer to render such a finding, when he had no independent material at the first instance while issuing the show cause notice dated 24.3.2015. If this interpretation is to be accepted, then, to the extent where there is no manufacturing activity, the Assessing Officer would be justified in denying deduction under Section 80IC of the Act. However, such procedure was not followed by the AO. The Appellate Authority, while testing the correctness of the orders passed by the Assessing Officer, appears to have not made an independent exercise to refer to the findings recorded and the observations made by the Assessing Officer. This aspect of the matter ought to have been considered by the Tribunal while exercising jurisdiction by stating that the petitioner has made out a prima facie case. 30% of the demand has already been adjusted/paid by the petitioner/assessee. In our considered view, 30% of the demand, having been adjusted/paid, will sufficiently safeguard the interests of the Revenue and will be in tune with the Office Memorandum issued by the Central Board of Direct Taxes, which rationalizes grant of stay orders for the Appellate Authority to follow by imposing a condition of payment of 20%. Hence, we are of the view that the petitioner has made out a prima facie case for grant of interim order, as payment of 30% sufficiently safeguards the interests of the Revenue.
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