2014 (8) TMI 950

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..... of penalty are stated in brief. The Assessee is a manufacturer of pharmaceutical formulations and bulk drugs. During the year under consideration, it was having two units, viz., (a) Formulations division and (b) Atenolol division. The Assessee declared a profit of Rs. 86.50 lakhs in Atenolol division and it declared a loss of Rs. 6.90 lakhs in Formulation division. In the Atenolol division, the Assessee was doing the job work for M/s J B Chemicals and received labour charges at the rate of Rs. 140/- per kg. . The Assessee claimed deduction u/s 80IA of the Act in respect of the profits derived from Atenolol division. 3. During the course of assessment proceedings, the AO took the view that the job work charges received @ Rs. 140/- per kg i .....

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..... has filed this appeal before us. 4. The ld. Counsel for the assessee submitted that the deduction claimed u/s 80IA of the Act came to be reduced only due to allocation of higher amount of expenditure to the Atenolol division. The ld. AR further submitted that the Assessee was doing job work activity in that division and hence effectively no expenditure was required to be incurred in that division. Accordingly, the assessee had allocated a sum of Rs. 4,55,707/- out of common management and other expenses and Rs. 10,000/- out of the computer charges. However, the AO allocated additional amounts out of Common management and Computer charges and also allocated expenses out of vehicle expenses, travelling expenses and other expenses at an esti .....

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..... other hand, ld. DR relied on the orders of authorities below. 6. We have heard the rival contentions and perused the record. The deduction claimed by the assessee u/s 80IA of the Act came to be reduced due to allocation of additional expenses to Atenolol division. Such reduction has resulted in enhancement of income by corresponding amount and the penalty u/s 271(1)(c) of the Act has been levied on the said enhancement. On a perusal of the assessment order, we notice that the AO has not adopted any rational basis for determining the amount of expenses to be allocated to the Atenolol division, but proceeded to allocate the same on adhoc basis estimated at the rate of 10% of each of the expenditure. It is also fact that the AO has not given .....

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