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2015 (12) TMI 976 - PUNJAB AND HARYANA HIGH COURT

2015 (12) TMI 976 - PUNJAB AND HARYANA HIGH COURT - [2016] 384 ITR 154 - Invoking Section 80IA(10) while denying benefit of Section 80IC - ITAT reversing the order of the CIT(A) - Held that:- The same products are being sold from both the units and at the same price ranging between ₹ 5,25,000/- to ₹ 6,25,000/- in both cases. How the machines were costing less at Baddi was not explained. When the end product is same, the cost would also be the same. By installing a machine of ₹ .....

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enses 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 recompute the profits of such eligible unit. As seen from the sale invoice there is definitely a reason to believe that assessee ha .....

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1. This appeal has been preferred by the assessee under Section 260A of the Income Tax Act, 1961 (in short the Act ) against the order dated 19.6.2014 (Annexure A-3) passed by the Income Tax Appellate Tribunal, Chandigarh Bench B , Chandigarh (hereinafter referred to as the Tribunal ) in ITA 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 se .....

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bay High Court in the case of Schmetz India (P) Ltd. (supra)? ii. Whether the order of the ITAT is justified in not interpreting the mandate of Section 80IA(10) in its strict sense in the light of catena of judgments of Hon'ble Supreme Court like CIT v. ACE Builders (P) Ltd. (Supra), as Section 80IA (10) being a deeming provision, whereby a legal fiction is created, and can only be invoked subject to the fulfilment of all the ingredients stated in the section, which has not been done in the .....

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s same the cost would also be same and thereby comparing the two units, particularly when both the units are drastically different working on different technologies and having different 'modus operandi' in view of the chart produced supra, and also cannot be said to have any connection within the meaning of section 80IA(10)? 2. Put shortly, the facts necessary for adjudication of the instant appeal as narrated therein may be noticed. The assessee filed return of income on 15.10.2010 for .....

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ddition of ₹ 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 ₹ 50,19,196/- made on account of reallocation of purchases. Against the order, Annexure A-2, the revenue filed an appeal before the Tribunal who vide order dated 19.6.2014 (Annexure A-3) set aside the order of the CIT(A) and .....

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or enterprises in certain special category States. Sub-section (7) of Section 80IC of the Act makes the provisions of sub-section (5) and sub-sections (7) to (12) of Section 80IA of the Act applicable to eligible undertaking or enterprise under this Section. According to Section 80IA(10) of the Act, where profits in the eligible units have been inflated by an assessee, the Assessing Officer is empowered in terms of the aforesaid Section to determine the reasonable profit. 6. In the present case, .....

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,000/- to ₹ 6,25,000/-. By mere installation of a machine of ₹ 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 .....

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essee has claimed deduction reads as under:- (7) The provisions contained in sub-section (5) and sub-sections (7) to (12) of section 80IA shall, so far as may be, apply to the eligible undertaking or enterprise under this section. From the above, it becomes clear that provisions of sub-section (5) and sub-sections (7) to 12 of Section 80IA are also applicable for considering the claim of deduction under this section. Section 80IA(10) reads as under:- (10) Where it appears to the Assessing Office .....

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on under this section, take the amount of profits as may be 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 custome .....

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is very high. During the course of hearing, we had asked the assessee to file copy of the invoices to find out it the products were of so called better technology were sold at a higher price and sale invoices for both the units were filed on 22.5.2014. 13. The Assessing Officer in para 9 analyzed the reasons again before him for higher profits at Baddi unit. The first point mentioned is that according to Assessing Officer, the Mohali unit had machinery of about ₹ 55,15,306/- whereas the ma .....

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consist of some screw drivers and drilling machine. At the same time the machinery at Baddi unit is also stands at ₹ 6,60,972/- and assessee could not give exact details or how the better technology could be adopted through this small machine. The other reasons have been discussed at Point-ii in para 9 which have already been 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 3 .....

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hines-MDT- 13K 02 55000.00 5. 22.05.2009 M/s Kishoresons Detergent Pvt. Ltd. Soap Wrapping Machine-MDT- 13K 02 625000.00 6. 17.07.2009 Divij Detergents and Chemicals Pvt. Ltd. Soap Wrapping Machine-MDT- 13K Change Parts 01 01 600000.00 20000.00 7. 05.12.2009 M/s Patanjali Ayurved Ltd. Soap Wrapping Machine-MDT- 13K 04 625000.00 14. In Baddi unit also out of total 16 sales during the year, in six cases the assessee has sold the same machinery i.e. Soap Wrapping Machine MDK-13K and the details in .....

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