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2024 (4) TMI 662 - AT - Income TaxDeduction u/s 10 B - New Undertaking or The units were formed by the transfer of previously used machinery - Assessee company is engaged in the business of garlic powder, ginger powder, madras curry powder including pickles and spices, etc. and also claimed deduction u/s 10B - Whether the assessee is entitled to deduction u/s 10 B of the income tax act with respect to the eligible profits of eligible units at the Nasik and Ratlam? - whether the assessee manufacturing pickles by purchasing raw fruits and vegetables, using masala and different process can be said to engaged in manufacturing activity or not ? - HELD THAT:- Identical issue arose in case of Sterling Agro Products Processing (P.) Ltd [2011 (8) TMI 460 - ITAT CHENNAI] wherein as held assessee is entitled to the deduction under section 10B of the Act as the assessee is manufacturing gherkin pickles from gherkin for the purpose of deduction u/s 10B. No reason to hold that the assessee is not engaged in manufacturing activities. Thus, we hold that the process of manufacturing pickles from raw vegetables and fruits, masala and other ingredients has different marketable commodities than the raw materials which are a different value addition, and a new product emerges therefrom. With respect to the realization of the export proceeds it has been stated that the assessee has produced bank realization certificates, bank certified statement of the Forex receipt, and certificate of the auditor, therefore we do not find any infirmity in the order of the CIT – A in allowing the claim of the assessee u/s 10 B to the extent of foreign exchange received during the specified period. With respect to the conversion of the firm into a company and use of plant and machinery, it is a fact that both the units of the assessee became hundred percent export-oriented units in 2001 – 01. The first year of claim of deduction under section 10 B was assessment year 2001 – 02. With respect to the use of plants and machinery the CIT – A gave a categorical finding about acquisition of the machinery in different years. This is held after the obtaining of the remand report. Thus, the finding of the learned assessing officer was in consequence of nonproduction of detail by the assessee. When the assessee has produced the details before the learned CIT – A, the remand report is obtained; there is no reason to sustain the disallowance. Difference of stock submitted to the banker and book stock - AO has noted that there was a difference of stock shown in the books of account in the statement shown to the banks and that the difference to the total income of the assessee of ₹ 21,909,800 - CIT – A held that a similar issue arose in the case of the assessee for assessment year 2003 – 04 and on the basis of reconciliation the addition was deleted as difference to explained - HELD THAT:- We do not find any infirmity in the order of the CIT – A because addition could not be made on the basis of difference between the closing stock declared in the statement submitted by the banker is less than the book stock. Accordingly, we dismiss this ground of appeal of the AO also. Allowability of loss in trading and spices - assessee explained that it was on account of trading operations however the learned assessing officer without verifying the details filed is held that the trading activities nothing but a speculation loss which the appellant is not entitled to get set of against the normal business income - HELD THAT:- On careful consideration of the argument of the parties it was found that that it is a loss arising from the sale of goods and high seas. Therefore, it cannot be said to be a speculation loss. Accordingly, the order of the learned CIT – A holding it to be a regular trading loss is upheld. Ground of the appeal is dismissed. Addition on account of difference in closing stock which could not be reconciled by the assessee and therefore rejecting the books of accounts estimated the profit at the rate of 26% - HELD THAT:- We find that when the assessee has shown higher stock in books of accounts and shown lesser stock to the bank, we do not find any reason to make any addition in the hence of the assessee. Thus, the order of the learned CIT – A is reversed to the extent of confirmation of the addition. Disallowance in respect of provident fund and ESIC payment - When the matter reached before the learned CIT – A the assessee submitted that there is a double disallowance of the same amount - CIT – A rejected the same holding that the learned assessing officer has started the computation from the net profit as per profit and loss account and thereafter made the disallowance. Before us also the same argument was advanced - HELD THAT:- We do not find any infirmity in the order of the learned CIT – A as the computation by the learned assessing officer started from the net profit as per profit and loss account there cannot be any question of double disallowance. Thus, ground of the appeal of the assessee is dismissed. Suppression of profit by rejecting the books of accounts - CIT- A considering the average gross profit shown by the assessee held that by showing the valuation of the closing stock of inventory at higher amount by ₹ 1 20 crores the appellant has offered higher gross profit/net profit for taxation and not vice versa. The charge regarding the suppression of profit by the AO was without pointing out any defect in the books of account maintained by the assessee company. Further the manner of making an addition was also not correct - HELD THAT:- On careful consideration of the rival arguments, we find no infirmity in the order of the CIT – A wherein the addition was deleted. We do not find any reason to sustain the rejection of the books of accounts by invoking the provisions of section 145 (3) of the act when the assessee has maintained the details of the accounts and the gross profit and net profit are also comparable. The rejection of the book profit and the books of accounts which are audited without pointing out latent, patents and glaring defects are not sustainable. Accordingly ground of the appeal of the AO is dismissed.
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