TMI Blog2017 (11) TMI 519X X X X Extracts X X X X X X X X Extracts X X X X ..... ble business. Section 80-IA (10) of the Act further requires the AO to compute the profits and gains of the eligible business by taking the amount of profits “as may be reasonably deemed to have been derived therefrom”. The adjective “reasonably” carries with it the responsibility of the AO to base his conclusion on some empirical data. In the present case the AO’s conclusion that the profits of the Assessee were “more than ordinary” was based on surmises and conjectures. During the course of his submission, Mr Singh sought to suggest that a 40% GP ratio by itself should be taken to be “more than ordinary”. Neither the Court nor the CIT (A) or the ITAT can take judicial notice of what percentage of GP ratio should be considered to be ‘mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n dismissed by this Court through a separate order today. 3. There are several points of similarity between the two sets of cases. The similarity is that just like the Assessee in the present appeal, the Assessee in those appeals i.e., ITA Nos. 141/2017 142/2017 also had units located at Baddi, Himachal Pradesh as well as in Delhi, engaged in the manufacture of cosmetics. The question in those appeals, as well as in the present one, was whether the Assessee could be denied deduction under Section 80-IC of the Act? 4. The distinction in the cases is that the denial of deduction was by invoking Section 80-IA (8) and (10) of the Act whereas in the present case the denial of the deduction by the Assessing Officer ( AO ) by order dated 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsignment basis, then even though the AO may have erred in rejecting the gross profit (GP) ratio, the CIT (A) or the ITAT itself ought to have undertaken the required exercise in terms of Section 80-IA (10) of the Act. 7. This Court is unable to accept the aforesaid submissions. For the purposes of Section 80-IA (10) of the Act, it is not enough for the AO to show that there was a close connection between the Assessee carrying on the eligible business and the other person with whom it has transactions. The AO has to further show that the business between them is so arranged that it produces for the Assessee more than the ordinary profits which might be expected to arise in such eligible business. Section 80-IA (10) of the Act further ..... X X X X Extracts X X X X X X X X Extracts X X X X
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