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2019 (6) TMI 858 - AT - Income TaxDeduction u/s 10AA - AO estimated profit of SEZ unit at 3% of the turnover by replacing 6.95% which is actual profit of the unit eligible for deduction u/s 10AA - alleged more than ordinary profits - HELD THAT:- The onus is on AO to prove the presence of any arrangement between the parties which have resulted in extraordinary profits to the eligible unit. The AO could have, at least, brought variation in price of supply of commodity from different units on record to establish collusion/arrangement. The onus remains undischarged except for presence of suspicious circumstances. As perused the decision rendered in the case of Deepak Verma [2015 (12) TMI 976 - PUNJAB AND HARYANA HIGH COURT] relied upon on behalf of the Revenue. The aforesaid case relates to re-allocation of expenses between eligible unit and non eligible unit. We agree with the case made out on behalf of the AO for re-allocation of expenses to the extent of ₹ 17.70 Lakhs and therefore do not delineate with the same any further. In the light of factual position and applicable law as interpreted by the judicial fiats, we are of the view that Section 80IA(8) and 80IA(10) has not applicability to the facts of the Case. Therefore, the adjustments made by the AO scaling down the deduction u/s 10AA is without sanction of law. However, once the regular profits as declared for eligible unit is restored, the re-allocation of expenses relatable to eligible unit would be necessary. This aspect was confronted to the assessee in the course of hearing. It was fairly conceded on behalf of the assessee that it does not seek to press the aforesaid re-allocation on restoring the claim of deduction of the assessee. AO directed to restore the claim of deduction u/s 10AA subject to adjustment towards re-allocation of expenses to the extent of ₹ 17.70 Lakhs. Accordingly, the issue concerning deduction of expenses under s.10AA of the Act is allowed in part. Allocation of loss towards option premium to Cochin unit on the basis of turnover - case of the assessee that the aforesaid loss of option premium has resulted from buying and selling of US currency in respect of hedging transaction done for diamond trade attributable to non SEZ unit - failure to prove nexus between hedging of US currency with the diamond business to non SEZ unit - HELD THAT:- AO as well as the CIT(A) has given the concurrent findings that assessee has failed to demonstrate the nexus between loss and non SEZ unit. The assessee, on the other hand has attempted to contend before us that the option premium was solely and exclusively incurred for diamond business relatable to non SEZ unit and therefore loss has been rightly claimed against the profits of non SEZ unit. The details of supply of diamond from non-eligible unit and its relation to option premium would be necessary to appreciate the facts in perspective. In the absence of complete documentation in this regard, it will be difficult for us to give a categorical findings of fact on the issue. We therefore consider it expedient to restore the matter back to the file of AO for de novo examination.
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