TMI Blog2014 (1) TMI 976X X X X Extracts X X X X X X X X Extracts X X X X ..... s declared more than ordinary profit - AO rightly applied the provisions of section 80IA(10) of the Act to re-determine the profit - AO is reasonable to consider the net profit rate of 10% of the eligible unit as against 5% net profit of the unit which is not eligible for deduction u/s 80IA. The assessee could not controvert the facts as stated by AO and neither could controvert the submissions as made by ld. DR and /or query raised by the Bench at the time of hearing - The AO is justified to apply the provisions of sub-section (10) of section 80IA of the Act to re- determine the profit as the profit shown by eligible unit is abnormally high particularly when the cost of the material is the same, most of the sales are also made to the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bai in the name of M/s Malay Sanghavi Co. and (b) M/s Malay Sanghavi Co. (Jammu). The nature of business from Mumbai is trading and whereas the nature of business from Jammu is manufacturing and sale. However, the AO has stated that assessee is having three units, apart from above other two units, the AO has stated that M/s Umbergam industries at Umbergaon, Valsad. The assessee contended that the said third unit at Valsad belongs to his wife Mrs.Parul Parekh. 3. AO has stated that during the course of assessment proceedings, it was found that the net profit ratio shown by assessee of Unit at Jammu is 35% which is eligible for deduction u/s 80IB (Presently 80IA) of the Income Tax Act, 1961 (the Act) and whereas the profit of its sister ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tability of both the unit. The Jammu unit is focusing only on Manufacturing of set product to existing customer whereas The Umbergam Industries always do different formulation for various customers. We are also submitting the customer wise operation wise sales during year of both the company in support of our contention of not to compare the profitability on merely doing business in same nature of product. We are also presenting some factual of figure to support out above contention. During the year under consideration the Malay Sanghvani Co. Jammu has sold Rs.11641131/- (GLC Pink) to Kimberly clark out of sales of Rs.11707731/- only the product whereas, The Umbergam Industries has sold Rs.4007539/- to Kimberly clark the same product an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble unit at Jammu has been inflated to claim deduction u/s 80IB(4) (80IA) of the Act. AO after applying the provisions of sub-section (8) and (10) of section 80IA considering the net profit rate of unit at Jammu 5% over and above sister concern at Valsad and thus stated that net profit rate be adopted for Jammu unit at 10% and accordingly restricted the deduction of 10% of the total sales which comes to Rs.12,03,773/- as against deduction of Rs.41,65,688/- claimed by assessee. Being aggrieved, the assessee filed appeal before the First Appellate Authority. 6. On behalf of the assessee, it was contended that the provisions of section 80IA(8) can be applied only in the case where the goods or services are transferred inter-se between the tw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal sales of Rs.1,17,07,731/- which is about 99.43% and whereas in the case of wife of assessee's unit M/s. The Umergaum Industries, Valsad, the sales to Kimberly Clark Hygiene Product Pvt. Ltd is of Rs.52,93,751/- out of total sales of Rs.74,57,454/- which is about 70.98%. The ld. CIT(A) considering the submissions of the assessee and vide para 2.2 of the impugned order directed the AO to allow the deduction to the assessee as claimed by it u/s 80IA of the Act. The said para 2.2 of the order of ld. CIT(A) reads as under : "2.2 I have considered the submissions of the ld. Counsel and in view of the facts brought on record- particularly that there is no arrangement between the two assessees and that it produces to the assessee more than or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of goods from the same places that of sister concern but still unit eligible for deduction u/s 80IA and could maintain 35% even if taking additional cost of transportation which cannot be justified. Ld. DR referred para 4.2 of the order of Assessing Officer and stated that both the concerns carrying similar business of liquid soap material and most of the sales are made to the same concern viz M/s Kimberly Clark Hygiene Product Pvt Ltd where the rate is common for both the concerns. He submitted that AO rightly applied the provisions of section 80IA(10) of the Act to re-determine the profit . He submitted that AO is reasonable to consider the net profit rate of 10% of the eligible unit as against 5% net profit of the unit which is not eli ..... X X X X Extracts X X X X X X X X Extracts X X X X
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