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2019 (7) TMI 535

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..... lorry receipts, bills of transporter, Form 16 issued by the VAT department for entry of any goods in Uttarakhand to show that paper was transported to Rudrapur and sent back to the printer in Delhi, then printed sheets were sent from Delhi to Rudrapur where books were manufactured which were transported to Delhi. No adverse observation in respect thereof was made by the AO in the remand report. Thus, the suspicion of the AO that no manufacturing activity took place at the eligible undertaking of the assessee is not supported with any evidence and is just a surmise. The paper purchased from S. Chand Co. Pvt Ltd was of an insignificant amount and is of no consequence. The gross profit ratio of the appellant company is 34% which is much lesser than the GP ratio of the other two group companies engaged in the same business. Thus, no adverse observation in terms of the provisions of the sub- sections (8) or (10) of the section 80IA of the Act can be drawn. The claim of the assessee in respect of carrying out publishing activity from the eligible undertaking was found genuine on the basis of relevant evidences placed on record and not refuted by the AO in the remand report and thus, .....

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..... this Appeal against the impugned Order dated 29.1.2.016 of the Ld. CIT(A)-42, Rohtak relevant to assessment year 2011-12. 2. The grounds raised in the appeal read as under:- On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in :- 1. Whether on the facts and circumstances of the case and in law, the CIT(A) is justified in deleting the addition amounting to ₹ 7,28,63,103/- made by the AO by disallowing the claim of the assessee u/s. 80IC of the Income Tax Act, 1961. 2. Whether on the facts and circumstances of the case and in law, the CIT(A) is justified in not upholding disallowance of ₹ 7,28,63,013/- u/s. 80IC of the Act by ignoring the fact that the work of printing was not carried out at the premises of the assessee in the notified area for the purpose of Section 80IC of the Act? 3. Whether on the facts and circumstances of the case and in law, the CIT(A) is justified in deleting the addition made by the AO amounting to ₹ 6,04,45,025/- for not deducting the tax at source on commission payment made to M/s S.Chand Company Pvt. Ltd. under the guise of .....

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..... f undertaking at Rudrapur and therefore, disallowed the claim of deduction of ₹ 7,28,63,013/- and made the same to the total income of the assessee. AO with respect to the addition of ₹ 6,04,45,025/- u/s. 40(a)(ia) on account of trade discount offered by the assessee to the buyer, M/s S Chand and Company, the AO by relying upon the decision in the case of M/s Skol Breweries Ltd. (2013) 142 ITD 49 (Mum) and M/s Vodafone Essar Cellular Ltd. vs. DCIT (2011) 332 ITR 255 (Kerala), held that the said discount was in the nature of commission, on which, TDS u/s. 194H was required to be deducted, which the assessee failed to do, hence, the AO made the addition u/s. 40(a)(ia) of the Act. Further, the AO observed that the assessee had claimed expenses under the head employee s contribution of EPF, out of which certain payments aggregating to amount of ₹ 1,11,811/- were made beyond the due date as per the relevant statute. The AO did not accept the plea of the assessee that such payments were made before the due date for filing the return of income and in which regard it placed reliance on the decisions in the case of CIT vs. Vinay Cement Ltd. (2007) 213 CTR CT .....

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..... The assessee itself has admitted that entire printing was done through others and hence deduction u/s 80IC of ₹ 7,28,63,013/- is not allowable. 2. Audit report details as on point number 28(b) mentions that assessee does not have printing units of its own, but gets the books printed from outside parties on job work basis. (Page 16 of AO) 3. Despite being given adequate opportunity, assessee failed to furnish bills of freight paid for lifting of paper from Delhi to Rudrapur as well as freight paid for lifting of printed material. (Page 15 of AO) 4. Perusal of ITR reveals that assessee claimed nil cartage expenses while in audited financial statements filed during assessment proceedings assessee has claimed freight expenses of ₹ 31.24 lakhs (Page 17 18 of AO) 5. In Audit report under rule 10BBB at point number 25(2)(d)(f), the article manufactured is specified as Paper Products while assessee has claimed to be involved in business of printing and publishing of books. The observations have been made by auditor after careful examination of various vouchers, bills and other documents. (Page .....

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..... ure of manufacturing as per Durga Products Vs ITO (2008) 12 DTR (Chd)(Trib) 297. The assessee used various machines for finishing, binding, three side cutting of books at its factory premises. Details of glue expenses and binding charges with supporting bills were also filed. The assessee carried out some of the printing on its own and filed details of expenses of ink and plates which were also sent to the AO in the remand proceedings but no adverse observation was made by the AO on the same in the remand report. Therefore, it is not necessary to have a printing unit of its own or to carry out binding on its own for holding the publication of books as a manufacturing activity in view of CIT Vs A Mukherjee Co. (P) Ltd. (1978) 113 ITR 718 (Cal), Orient Longman Ltd. Vs CIT (1981) 130 ITR 477 (Del) and Gulab Chand Jam vs WTO (1983) 17 TTJ (Jab) 489. Thus, the activity of publishing the books carried out by the assessee was rightly held to be manufacturing activity eligible for deduction u/s 80IC of the Act. A part of the manufacturing activity of the assessee may have been outsourced or the assessee may be carrying out job work for others, does not debar the appeal and to claim deduc .....

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..... ion u/s 80IC of the Act. Once the deduction u/s 80IC of the Act is allowed in the initial assessment year i.e. in the AY 2010-11 after due verification of the prescribed conditions and there is no change in the facts, then the deduction cannot be disallowed in subsequent years on the ground of non-fulfillment of conditions laid down in section 80-IC of the Act. This view has been fortified by the decision of the Hon ble Delhi High Court in the case of CIT vs. Tata Communication Internet SErvicse Ltd. (2012) 251 CTR 290 (Del.) and the decision in CIT vs. Delhi Press Patra Prakashan Ltd. (2013) 260 CTR (Del.) 253 and the decision in the case of Janak Dehydration Pvt. Ltd. vs. ACIT (2010) 134 TTJ (Ahd. (UO), which deal with this issue with regard to the claim of deduction under section 80IA and section 80IB, respectively, which are para material to the section 80IC. We further note that AO has not disallowed the deduction u/s. 80IC on the ground of violation of prescribed conditions but on the basis of finding that the assessee did not actually carry out any operation at the premise of the eligible undertaking. AS the issue has been independently examined on merit and the assessee s .....

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..... ince the benefit given by the assessee to M/s S. Chand Co. Ltd. was in the nature of trade discount and not commission , therefore, the assessee was not required to deduct income tax at source u/s. 194H of the Act, thus, no disallowance can be made u/s. 40(a)(ia) of the Act. Therefore, the action of making disallowance u/s. 40(a)(ia) was not called for, as the assessee is not required to deduct TDS u/s. 194H on such discount, which was not in lieu of any services for effecting sales, but was a trade discount. In view of above, Ld. CIT(A) has rightly allowed this ground in favour of the assessee, which does not need any interference on our part, hence, we uphold the action of the Ld. CIT(A) on the issue in dispute and reject the ground raised by the Revenue. 6.2 With regard to disallowance for delay in deposit of Employees Contribution to PF is concerned, we find that it is undisputed that the employees contribution to EPF was deposited well before the due date of filing of return of income. The assessee has explained the circumstances in which such delay has been occurred. Thus, relying on the judgment of CIT vs. Vinay Cement Ltd. (2007) 213 CTR (SC) 268 and CIT v .....

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