TMI Blog2006 (3) TMI 225X X X X Extracts X X X X X X X X Extracts X X X X ..... basis that the profit margin shown by the assessee in respect of the said unit was higher at 62 per cent as against profit margin of 10 per cent shown in respect of other units of the assessee. In our opinion, this action of the AO was not sustainable in law in the facts and circumstances of the present case including especially the fact that no material or specific defects were pointed out by him in the books of account maintained by the assessee in respect of unit 4 and there was nothing brought on record by him to show that the profit margin of 62 per cent shown in the said books was actually lower. On the other hand, such higher profit margin in respect of unit 4 was satisfactorily explained by the assessee-company and having satisfied with such explanation, the AO was directed by the learned CIT(A) to allow the deduction claimed by the assessee u/s 80-IA of the Act on the book results of unit 4. Thus, we are of the view that the relief allowed by the learned CIT(A) on this issue to the assessee was fully justified and there being no infirmity in the impugned orders of the learned CIT(A) allowing such relief, we uphold the same. In the result, the appeals of the Revenue for AY ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion done for unit No. 4 as compared to the overall price mechanism of the assessee. According to him, the business of unit 4 as well as profit derived from the said unit was directly dependent on the marketing and distribution of unit No. 1 of the assessee and, therefore, all the expenses of unit No. 1 relating to marketing and distribution ought to have been taken into account while determining the profit of unit 4. He also observed that the line of business of both the units being similar, there was no reason to have such huge difference/variation in the profit margin of both the units. He, therefore, applied the profit rate of 10 per cent to the sales made by the said unit No. 4 to unit No. 1 as against 62 per cent shown by the assessee and recomputed the profit of the said unit as follows, placing reliance on the provisions of sub-s. (10) of s. 80-IA of the Act: "Sales of unit No. 4 to unit No. 1 6,49,55,986 Profit on sale of items to unit No. 1 @ 10% 64,95,598 Profit on work of Indian Express Newspaper Ltd. 30,28,971 @ 66 per cent of 45,89,351 as per calculation given by the assessee. Since the work relates to an outside agency, the profit margin is accepted Profit @ 66 per c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee-company under s. 80-IA of the Act on the basis of book results of unit 4 for the following reasons given in para Nos. 9 to 11 of the impugned order for asst. yr. 1997-98: "9. The submissions of the appellant are considered. The first issue is whether sub-s. (10) of s. 80-IA can be applied in a case where there is a close connection between the assessee carrying on the eligible business and an undertaking belonging to the same company. As per the provisions of the Act, this sub-section would apply in the case of close connection between the assessee and "any other person". The phrase 'any other person' is a wide phrase and would cover any undertaking whether run by the same industrial house or whether rune by separate industrial house. The contention of the appellant that this sub-section would not apply to a case where the industrial undertaking is run by same house is without merit. It now remains to be seen whether in the present case there was enough reason for the AO to invoke the provision of sub-s. (10) and if so whether he was justified in applying the profit rate of 1 per cent on sales made by unit 4 to unit 1. In this background, I requested the appellant to speci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of the AO as well as in the order of the learned CIT(A), the printing work was being done by unit 4 of the assessee-company for unit 1 at fixed rates and the claim of the assessee that the said rates were even lower than the market rates was not rebutted/refuted by the AO by bringing any material on record. As rightly contended by the learned counsel for the assessee before us, the expenditure on marketing and distribution of the publications was entirely required to be done for the business of publishing house i.e. unit No. 1 and the same was not connected with the printing business of unit 4. It appears that all these material and relevant aspects, however, (were) simply brushed aside by the AO and he proceeded to reject the book results of unit 4 shown by the assessee merely on the basis that the profit margin shown by the assessee in respect of the said unit was higher at 62 per cent as against profit margin of 10 per cent shown in respect of other units of the assessee. In our opinion, this action of the AO was not sustainable in law in the facts and circumstances of the present case including especially the fact that no material or specific defects were pointed out by him ..... X X X X Extracts X X X X X X X X Extracts X X X X
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