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2015 (2) TMI 989 - AT - Income TaxDisallowance of deduction under section 80-IC - assessee was not carrying on any manufacturing activity as held by AO - complete procedure was not being carried out in Himachal Pradesh, the assessee was not entitled to the claim of deduction under section 80-IC of the Act - CIT(A) deleted part addition - Held that:- In the totality of the facts and circumstances, we are in conformity with the findings of the Commissioner of Income-tax (Appeals) that the old machinery held by the assessee has been transferred from Ludhiana to Parwanoo which in-turn was used for the manufacturing process undertaken by the assessee and the total value of the said plant and machinery transferred was of ₹ 9,500 only. In the first year of start of business, the assessee had established plant and machinery totalling ₹ 3,94,500 and the value of ₹ 9,500 being less than 20 per cent. cost of machinery, we find no merit in the plea of the Assessing Officer in this regard and upholding the observations of the Commissioner of Income-tax (Appeals), we hold that the assessee was entitled to claim of deduction under section 80-IC of the Act. The manufacturing activity undertaken by the assessee is excisable and complete details in this regard were maintained by the assessee and no discrepancy has been found by the excise team in the sales declared by the assessee. The assessee had further furnished the sales tax assessment orders for the assessment year 2003-04 and 2004-05. The manufacturing activity carried out by the assessee has been accepted. Accordingly, we find no merit in the observation of the Assessing Officer in this regard that the assessee was not carrying on any manufacturing activity. During the appellate proceedings, evidence was filed by the assessee that only 5 per cent. of the total manufactured goods were subjected to printing and bleaching process which admittedly was being carried out at Ludhiana. The learned Departmental representative for the Revenue failed to controvert the said findings of the Commissioner of Income-tax and in the absence of the same, we find no merit in the order of the Assessing Officer in holding that the assessee was not entitled to the claim of deduction under section 80-IC of the Act. As during the relevant period, the assessee was engaged in carrying on of manufacturing activity and merely because the unit was closed on a subsequent date, the claim of deduction under section 80-IC of the Act cannot be denied. In view of the discrepancies in mentioning the numbers of various vehicles and also co-relating the information received from the Commissioner Excise and Taxation, Himachal Pradesh, with the facts of the case, we, accordingly uphold the order of the Commissioner of Income-tax (Appeals) and in view of the fact that the assessee has failed to reconcile the passage of vehicle through the barrier carrying the raw material, certain disallowance of deduction under section 80-IC is merited in the case. The total cost of raw material claimed to be transported through such vehicles was ₹ 45,33,495 and the same corresponds to sales of ₹ 67,66,410. The assessee had declared gross profit rate of 37 per cent. and applying the same to the sales, the profit works out to ₹ 25,03,572.Therefore, we hold that the profits of the eligible business are to be reworked and profits to the extent of ₹ 25,03,572 are not liable for claim of deduction under section 80-IC of the Act. However, deduction under section 80-IC(2)(a)(ii) of the Act is to be allowed to the assessee on the balance sales of ₹ 97,34,564. - Decided against revenue.
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