TMI Blog2012 (9) TMI 407X X X X Extracts X X X X X X X X Extracts X X X X ..... s any arrangement between the parties to show extraordinary profits in respect of its Kandla division so as to claim deduction under Section 10A - The appellant- revenue have not been able to show that the findings are perverse or arbitrary - against revenue. Computation of deduction u/s 10A without setting off of the loss from the trading unit - Held that:- As decided in CIT v. Black & Veatch Consulting Pvt. Ltd [2012 (4) TMI 450 - BOMBAY HIGH COURT] Section 10A is a provision which is in the nature of a deduction and not an exemption - the deduction under Section 10A has to be given effect to at the stage of computing the profits and gains of business - Section 80B(5) defines for the purposes of Chapter VI-A “gross total income” to me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 508-10.doc profits of the 10A unit eligible for deduction invoking the provisions of S.80 IA(10) read with S.10A(7) of the Act was based on proper and reasonable appraisal of the material available on record? C) in holding that the deduction under S. 10A of the Act has to be computed without setting off of the loss from the trading unit against the profits of the export oriented unit entitled to deduction under S.10A of the Act.? 3 The respondent-assessee is a wholly owned subsidiary of a German Company. The respondent-assessee has two divisions in India. One division at Kandla in the Kandla Free Trade Zone, is engaged in the manufactures and export of industrial sewing machine needles. The other division at Mumbai is engaged in trading ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as under : i) The entire production of the company is being exported to Associated Enterprises and accordingly there is no risk of unsold finished goods. This results in the company concentrating mainly on the production side. ii) The company does not have to wait for the orders on the basis of which the production line is determined. But the company has large variety of the products to be manufactured for the Associated Enterprises. This results in machinery working at full capacity which results in the best results. iii) The sales of the company being secured no marketing efforts or cost is involved. iv) The sales are affected in bulk packing conditions, which saves the cost of packing materials too. v) The basic raw material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opted by the Assessing Officer as against 77.91% gross profit ratio declared by the assessee was reasonable. The profits in excess of the above was correctly brought to tax as 'income from other sources'. So far as the second issue is concerned, the Commissioner of Income Tax (Appeals) held that before exemption of income under Section 10A of the Act is availed, the respondentassesee must set off the losses of other units against the income of 10A units and only the balance amount available thereafter would be allowed deduction under Section 10A of the Act. Thus, the Commissioner of Income Tax (Appeals) upheld the order of the Assessing Officer. 7 In second appeal, the Tribunal by its order dated 30.07.2008 held that merely because an ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction under Section 10A of the Act. 8 So far as questions (a) (b) are concerned, we find that the Tribunal has considered the entire evidence and on facts come to the conclusion that the profits earned by Kandla division of the respondent-assessee is not abnormally high due to any arrangement between the respondent-assessee and its German Principal. The Tribunal correctly held that extraordinary profits cannot lead to the conclusion that this is an arrangement between the parties. This would penalize efficient functioning. Further, the authorities have also recorded a finding that the industrial sewing machine needles imported and traded by the Mumbai division are different from those manufactured exported by the Kandla division. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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