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TMI Blog2015 (12) TMI 976X X X X Extracts X X X X X X X X Extracts X X X X ..... TA No. 1026/CHD/2013, for the assessment year 2010-11, claiming the following substantial questions of law:- i. Whether the ITAT is justified in reversing the order of the CIT(A) while ignoring provisions of section 80IA(10) of the Income Tax Act, 1961, though there is no cogent and tangible material/ evidence to show the 'business transacted' between the two units one at Mohali (Non exempt) and another at Baddi (Exempt), which is a 'sine qua non' for the application of section 80IA(10) and relying upon the only ground of higher profit rate which would itself be penalizing the efficient working of the Baddi unit and is illegal and unjustified in the light of judgment of Hon'ble Bombay High Court in the case of Schmetz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laring an income of Rs. 43,95,630/- and claimed benefit of deduction under Section 80IC of the Act at Rs. 76,85,061/-. The assessment was framed by the Assessing Officer vide order dated 26.2.2013 (Annexure A-1). The Assessing Officer instead of allowing 100% deduction under Section 80IC of the Act, re-allocated the purchases between exempt and non-exempt units without following the mandate of Section 80IA(10) read with Section 80IC(7) of the Act and made addition of Rs. 55,41,224/-. Feeling aggrieved, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [for brevity "the CIT(A)"]. The said appeal was partly allowed by the CIT(A) vide order dated 21.8.2013 (Annexure A-2) by deleting addition of Rs. 50,19,196/- made o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it had machinery installed worth Rs. 55,15,306/- and at Baddi unit it was only Rs. 6,60,972/- and the same products were sold from both the units at the same price ranging between Rs. 5,25,000/- to Rs. 6,25,000/-. By mere installation of a machine of Rs. 6 lacs, it could not be presumed that the assessee was achieving economy of scale or some other technological development. The Tribunal had concluded that it was a simple case of inflation of profits in the eligible unit and as per Section 80IA(10) of the Act, the Assessing Officer has powers to compute the reasonable profit and the CIT(A) has wrongly observed that the Assessing Officer had not pointed out any discrepancy whereas the assessee had accepted wrong allocation of various expense ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e reasonably deemed to have been derived therefrom." 12. The reading of the above provision clearly shows that if Assessing Officer is of the opinion for any reason if the business is arranged so as to inflate profits of an eligible unit, then the Assessing Officer has the power to compute the profits of eligible unit on reasonable basis. Admittedly, in the case before us, the purchases are made from the common sources. Some of the customers are also common. The products manufactured by the assessee are also common. Even majority of the expenditure is also common and in fact the assessee has already conceded before the Ld. CIT(A) that expenses were not properly allocated and has accepted the reallocation of expenditure. In addition to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reproduced above. But ignoring even those points if we compare the sales at both the places, we find no price difference. For example in case of Mohali unit out of 39 invoices in 17 cases the assessee had sold "Soap Wrapping Machine MDT-13K". We are giving few instances below:- Sl. No. Date of Sale Name of Customer Product Number of Product Rate per Product (in Rs.) 1. 10.04.2009 M/s Power Soaps Ltd. Soap Wrapping Machine-MDT- 13K 02 525000.00 2. 14.04.2009 M/s Power Soaps Ltd. Soap Wrapping Machine-MDT- 13K 02 525000.00 3. 24.04.2009 M/s Kishoresons Detergent Pvt. Ltd. Soap Wrapping Machine-MDT- 13K 03 500000.00 4. 07.05.2009 M/s Fena Pvt. Ltd. Wrapping Machines-MDT- 13K 02 55000.00 5. 22. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... simple case of inflation of profits in the eligible unit and in such situation the Assessing Officer has clear powers in terms of Section 80IA(10) to compute the reasonable profit. The Ld. CIT(A) has misdirected himself by observing that Assessing Officer has not pointed out any discrepancy because the Assessing Officer has clearly pointed out wrong allocation of various expenses which was accepted by the assessee before the CIT(A). Further, the Assessing Officer has also given reasons showing that profits in exempt unit have been inflated. In Section 80IA(10), it is clearly provided that if Assessing Officer has reasons that the business has been so arranged to show inflated profits in eligible unit then Assessing Officer has power to rec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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