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TMI Blog2014 (1) TMI 976X X X X Extracts X X X X X X X X Extracts X X X X ..... s and in the circumstances of the case and in law, the CIT(A) erred in directing the AO to allow deduction u/s. 801B(4) fully as claimed by the assessee without appreciating the findings of the AO for invoking the provisions of sec.801A(8) and sec.801A(10) for the I.T. Act in restricting the deduction." 2. Relevant facts giving rise to this appeal are that the assessee is an individual and carries on business from two places (a) at Mumbai 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent formulation with our technical team and lab setup at factory. The Umbergam Industries are manufacturing product in different formulation to our existing customer and targeting new customers also. The major item sold by The Umbergam Industries to Kimberly clark is generic product where as major item sole from Jammu to Kimberly clark is customized product and both product has different formulation. Hence we cannot compare the profitability 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td. where the rate is common for both the concerns. That the cost of material, administration, selling and other expenses , depreciation are very much in the same range. However, the assessee has purchased and sold the goods from the same places that of its sister concern but still could maintain the profit at 35% even after paying additional cost of transportation. 5. In view of above, AO was satisfied that the profit for the eligible 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as also contended that there was nobody's case that some of the expenses pertaining to assessee's unit have been incurred by assessee's wife who is a proprietor of M/s. The Umergaum Industries, Valsad without getting it reimbursed against the expenses so incurred with regard to the assessee's unit. It was also contended that total sales by the assessee unit to Kimberly Clark Hygiene Products Pvt.Ltd. is Rs.1,16,41,130/- out to total 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Hon'ble Bombay High Court has also held in the case of CIT V/s Schmetz India (P) Ltd in IT Appeal No.4508 of 2010, dated 4.9.2012 that the provisions of section 80IA(10) of the Act empowers the AO to redetermine the profits which may be reasonably deemed to have arisen from such eligible business, if the said undertaking has declared more than ordinary profit. Ld. DR submitted that both the units are making purchase and sales 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons as made by ld. DR and /or query raised by the Bench at the time of hearing, we are of the considered view that 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 same party and both units are carrying on the similar business of manufacturing of liquid soap material. We are of the considered view that the AO is justified and reasonable to restrict deduction at Rs.12,03,773/- by taking the net profit rate of 10% of the total sales by the assessee of the Jammu unit inspite of the fact that the other unit i.e. M/s. The Umerga ..... X X X X Extracts X X X X X X X X Extracts X X X X
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