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TMI Blog2019 (12) TMI 602X X X X Extracts X X X X X X X X Extracts X X X X ..... as per and in terms of Cost Accounting Standards CAS-I, and CAS-IV in respect of the valuation of goods ( Shoe uppers) transferred from Noida to Baddi unit accepted under the excise laws as well holding that these certificates do not throw any light upon the exact costing of the shoe uppers transferred, surely on the basis of surmises and suspicion rather on the basis of any legal and valid consideration. 2. That the Learned Commissioner of Income Tax (Appeals) has erred both the law and on facts in upholding action of the Assessing Officer in rejecting the certificates issued by the practicing Cost Accountant as per and in terms of Cost Accounting Standards CAS-I, and CAS-IV in respect of the valuation of goods ( Shoe uppers) transferred from Noida to Baddi unit accepted under the excise laws as well holding that these certificates do not throw any light upon the exact costing of the shoe uppers transferred, surely on the basis of surmises and suspicion rather on the basis of any legal and valid consideration. 3. That the Learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in making further allocation of Cartage inward and Diesel & oil expenses am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is therefore prayed that the addition made by the Ld. Addl. Commissioner o, Income Tax an upheld by the learned Commissioner of Income Tax (Appeals, he held to be no, in accordance with law and therefore the additions so made along-with interest levied be Kindly deleted and appeal of the appellant company be kindly allowed." 3. Briefly stated the facts of the case are that the assessee is a company engaged in manufacturing and sale of footwear and allied products. It filed its return of income on 25/9/2008 at after claiming deduction under section 80 IC of the income tax act of INR 74394991/-. The assessee was paying tax on book profit. 4. During the course of assessment proceedings the learned assessing officer noted that there is a decline in the gross profit and net profit ratio of the 2 units of the assessee. Assessee has Noida unit and another unit at Baddi, which is eligible for deduction u/s 80 IC of The Income Tax Act. In the last year Noida unit assessee has earned gross profit of 25% whereas in the Badddi unit assessee has earned gross profit of 53% in last year, whereas in the current year the gross profit in Noida unit was 51% whereas the gross profit in baddi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of INR 6 8285030/- which is not at market rates and thus in contravention of the provisions of section 80 IA (8) of the income tax act. Based on this he computed the sum of INR 15,000,000 difference in market rates and the transfer price of material transferred in manufacturing expenses. Accordingly computed the deduction u/s 80 IC to the extent of profit of baddi Unit at Rs. 76823059/-.The learned assessing officer further found that assessee has paid a royalty of INR 2 6086786/-. On perusal of the agreement of the royalty he noted that royalty payment is made in of rights, transfer of technical know-how, facilities and technical assistance granted to the assessee by Lee Cooper and Provogue. He held that the benefit to the assessee is of an enduring nature and he disallowed 25% of the royalty payment of INR 2 6086786/- amounting to INR 6 521697/- as capital expenditure and added back to the income of the assessee. He further allowed depreciation at the rate of 25% of this amount and the net addition of 70% in baddi and 30% in Noida unit was made. Accordingly he made an addition of INR 6 521697. According to this the royalty payment of INR 3 423890/- was considered to be related t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certificates do not throw any light upon the exact costing of the material transferred and therefore the certificates cannot be relied upon to determine the arm's-length price of the material transferred. He further noted that the certificates might have some relevance from excise point of view however for the purpose of determination of income they do not have any relevance as the material is required to be transferred at the market rate for the purpose of working out the eligible profit. He further noted that assessee has not considered the market price of the goods that should be determined but has only taken the direct cost of material and manufacturing overheads. He therefore held that the assessing officer is correct in rejecting the cost certificates produced by the appellant in making an adjustment in view of the provisions of section 80 IC (7) read with section 80 IA (8) of the income tax act. With respect to the allocation of the expenses, he noted that the assessee has produced unit wise chart in which the allocation of the various selling and administrative expenses have been made on the basis of 70% and 30% between baddi and Noida unit in percentage of sales. He noted ..... X X X X Extracts X X X X X X X X Extracts X X X X
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