TMI Blog2023 (5) TMI 1091X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee failed to establish the genuineness of expenses incurred for business purposes. We agree with the view of the Ld. CIT(A) that disallowance made on ad-hoc basis is not justified and therefore decline to interfere and reject this ground of the Revenue. Disallowance made out of R D expenses - real utility of expenses incurred on R D for assessee's own business is not verifiable and the products of the other concerns are developed by incurring such expenses - HELD THAT:- We do not agree. The nature of assessee's business is such that R D expenditure is a must without which business cannot be run. It is the responsibility of the R D department to ensure continuous development in the products. It also ensures the quality of raw material so that the products may not be harmful in any manner. Research work being of utmost necessity of the business of the assessee and there being no adverse material on record to substantiate that R D expenses were incurred for purposes other than assessee's business, we sustain the findings of the CIT(A) and reject this ground of the Revenue. Refund accrued out of excise duty paid - Revenue's case is that under the accr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ught on record. The creditor confirmed having advanced the loan; copy of ITR and bank statement was filed in support. The impugned addition is totally unjustified and the Ld. CIT(A) has rightly deleted the same. The Revenue's ground is rejected. Disallowance out of sundry creditors - CIT-A deleted the addition - HELD THAT:- CIT(A) examined the ledger accounts of the creditors and found that in many of the accounts balances are being forwarded from the previous year. In independent inquiry made by the AO directly, no incriminating evidence could be brought on record. All the parties replied. As astonishing to notice that the entire sum of sundry creditors appearing in the balance sheet has been added without even examining the outstanding balance brought forward from the earlier year. None of the creditor denied the balance appearing in the ledger account in the books of the assessee. The ad-hoc addition is without any basis. Expenses not relating to business - AO noticed from the details of fixed assets that the assessee incurred an expenditure towards furniture provided at the residence of one Shri Dipak Singh at Guwahati - CIT-A deleted addition - HELD THAT:- The im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cern, disallowance out of interest paid to bank and other concerns cannot be made. CIT(A) has rightly deleted the impugned ad-hoc disallowance. - ITA No. 325/Del/2012 , ITA No. 3054/Del/2010 , ITA No. 3205/Del/2014 - - - Dated:- 6-4-2023 - SHRI G. S. PANNU, HON BLE PRESIDENT AND MS. ASTHA CHANDRA , JUDICIAL MEMBER For the Assessee : Dr. Rakesh Gupta, Advocate Shri Deepesh Garg, Advocate For the Department : Shri Umesh Takyar, Sr. DR Shri Sumit Kumar Verma, Sr. DR ORDER Per Astha Chandra , JM These three appeals of the Revenue are directed against the order dated 24.08.2011, order dated 29.03.2010 and order dated 21.02.2014 of the Ld. Commissioner of Income Tax (Appeals)-XVI, New Delhi ( CIT(A) ) pertaining to the Assessment Year ( AY ) 2004-05, 2006-07 and 2009-10 respectively. These were heard together and are being disposed of by this common order. 2. The assessee is an individual. He is proprietor of two concerns, namely M/s. Ozone Ayurvedics and M/s. 4th D wherein manufacturing, trading and export of Ayurvedic medicines are undertaken. Assessment Year 2004-05 3. The assessee filed his return on 28.09.2004 declaring total income of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Profit Loss account under various heads, which were not supported with documentary evidence and the assessee did not discharge its obligation to prove the truthfulness and genuineness of the expenses, Point No. 5 :-Disallowance made out of R D expenses (Rs. Rs. 40.62,606/-) On the facts and circumstances of the case, the Ld. CIT(A) has erred in allowing the relief of Rs. 40,62,606/-on account of disallowance made out of R D expenses pertaining to various other concerns, the real utility of expenses incurred on R D for its own business, was not verifiable and the products of other concerns are developed by incurring such expenses and these expenses are debited in the P L account of proprietorship concerns, which are not allowable. Point No. 6 :-Refund accrued out of excise duty paid (Rs. Rs. 42,81,469/-) On the facts and circumstances of the case, the Ld. CIT(A) has erred in allowing the relief of Rs. 42,81,469/-on account of refund accrued out of excise duty paid without appreciating the fact that under the accrual system of accounting followed by assessee, the excise duty refund sanctioned by Excise Department was required to be credited in P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee. Point No. 13 :-Undisclosed income from sale of closing stock of preceding year (Rs. 11,70,847/-) On the facts and circumstances of the case, the Ld. CIT(A) has erred in allowing the relief of Rs. 11,70,847/-on account of undisclosed income from sale of closing stock of preceding year without appreciating the fact that the closing stock of preceding year is a part of opening stock and also of closing stock, if the same has not been sold during the year, since it neither reflected as opening stock nor as closing stock, therefore, it is clear that the said magazines have been sold during the year. Point No. 15 Deduction u/s 80IB of the IT Act (Rs. 1,21,84,143/-) On the facts and circumstances of the case, the Ld. CIT(A) has erred in allowing the relief of Rs. 1,21,84,143/-on account of deduction u/s 80IB of the IT Act without examining the following defects brought out by the AO:- (a) The business of the assessee at Guwahati unit was set up after substantial split of Baddi Unit. (b) Both the units at Baddi and Guwahati are engaged in manufacture/ production of similar/identical products. (c) Mismatch of sales disclosed ini the Bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of supporting documents. Most of the expenses of one unit are debited to the other unit. As the correctness or completeness of the accounts of the assessee are not relied upon and not supported fully with the bills and vouchers, he rejected the books of account by invoking provisions of section 145(3) of the Act. He observed that the assessee is manufacturing same items of cosmetic creams, raw material consumed is the same and only there is quantitative difference among Baddi and Guwahati unit, this may indicate that the production/manufacturing may still be carried on by Baddi unit and profits diverted to Guwahati unit for the purpose of enjoying tax deductions and sales tax exemptions. The Ld. AO applied NP ratio of 7.67% on declared sales of Rs. 3,33,83,638/- from Baddi unit which resulted in the impugned trading addition as against loss of Rs. 32,54,803/- declared by the assessee. 8.2 Before the Ld. CIT(A) the assessee contended that the Ld. AO wrongly invoked the provisions of section 145(3) of the Act by rejecting the books of account which were accepted and vetted by other statutory authorities i.e. excise, sales tax, ESIC, PF, Drug Deptt., Factory Act without any negati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were recorded in Baddi Unit, or some sales made of Baddi unit were recorded in Guwahati Unit. Various doubts raised by the A.O. in the remand report and my observations thereon are discussed hereunder:- i) Whether all the sales and purchases made are supported with complete bills and vouchers and whether the same were recorded in the regular books of accounts - A.O'. has himself mentioned that books are maintained separately for two units. He has also mentioned that these were examined. No instance is brought on record by the A.O. to strengthen his case before invoking provisions of section 145(3) that any bills or vouchers were found defective or not recorded in books of accounts of the appellant. ii) Whether actual manufacturing/production undertaken by two units are matching with the quantity of raw material purchased for such units - The A.O. has raised a doubt but has failed to bring on record any material to substantiate this doubt. Moreover it is not the case of the A.O. that he made analysis of the raw material consumed according to formulas of various products manufactured by the appellant. iii) Failed to produce any evidence of the quantum of manufactur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmissions, it was explained that the products are being manufactured in automatic plant with high capacity and latest technology for production in Guwahati unit as against the manufacturing in Baddi which is done with semi automatic machines with less capacity. ix) Failed to establish that the samples given free of cost are only manufactured from Baddi unit and no samples have been manufactured from Guwahati unit. Doubts of the A.O. in this regard are without any basis as complete details and information have been given by the appellant and A.O. has nothing in his possession to reject and disbelieve the claim of the appellant. x) Failed to establish that the products manufactured /produced by the assessee are ethical and allowable under different law agencies in the field of drugs and cosmetics and no banned drugs are manufactured or produced by the assessee. - Doubt expressed by A.O. is without any basis. xi) The assessing officer rejected the books of account by invoking provisions of section 145(2) of Act, for the various discrepancies enumerated in the assessment order: - These discrepancies enumerated do not give any specific instances on the basis of which act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an old unit while the Guwahati unit was new unit which used advanced automatic machines, capable of producing medicines in large quantities as against semi- automatic machinery used in Baddi unit. Thus, the gross profits of the two units could not have been compared. 4.43. It is seen that in A.Y.2003-04 similar addition was made by the A.O. rejecting books of the appellant, and after detailed discussion the same was partly upheld by my predecessor, but the Hon'ble ITAT deleted the entire addition made on this ground. It has been observed that in preceding year i.e. A.Y. 2003-04 also the A.O. made an addition of Rs.69,35,757/- as against net loss declared of Rs.35,57,470/- from Baddi Unit. The additions were made on the same grounds as made in the impugned year. In that year also it was explained by the appellant that it had maintained all relevant records viz. raw' material stock register, RG-1 Register, finished goods stock register, RG-23 Register, Sales Tax record, Octroi Record, Transport bills, wages payment register, purchase and sales vouchers, etc. It was also explained that the two sets of undertakings are at a distance of 2300 K.M. and the production is with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would transfer expenses to the other unit, particularly when there is substantial decline in sale of Guwahati unit as well in the year under consideration, as compared to the immediately preceding year. It also cannot be denied that the net profits ratio of the appellant has also come down in the year under consideration as compared to previous years. In view of these reasons I do not find any logic to confirm the action of the A.O., for rejecting the books of the appellant and also to apply rate of Guwahati Unit, which is a separate and independent unit of the appellant, and specifically when, no such instance has been brought on record by the A.O. to justify any of his grounds taken for , applying the N.P. rate of Guwahati unit on sales made by the appellant from Baddi Unit. The addition made by the A.O. of Rs.25,60,525/- is deleted, and the loss claimed by Baddi Unit of Rs.32,54,803/- is allowed. 8.5 We observed that the assessee maintained complete books of accounts as in the preceding AY 2003-04 which was rejected by the Ld. AO under section 145(3) of the Act. However, the Tribunal in its order dated 27.02.2009 for AY 2003-04 held that the assessee had maintained complete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ooks of account were produced along with supporting vouchers and the Ld.CIT(A) test checked them and disagreed with the Ld. AO that the assessee failed to establish the genuineness of expenses incurred for business purposes. We agree with the view of the Ld. CIT(A) that disallowance made on ad-hoc basis is not justified and therefore decline to interfere and reject this ground of the Revenue. Ground 3: Disallowance made out of R D expenses - Rs. 40,62,606/- 8.11 The Ld. AO discussed the issue in para 38 page 23 of his order. He observed that no evidence regarding any research and development done in the case of the assessee's business or its products have been produced for examination. The R D expenses remained unverifiable. Moreover, the assessee is having substantial interest with various other concerns, the real utility of expenses incurred on R D for its own business is not verifiable. With the above observations, he made the impugned disallowance. 8.12 The Ld. CIT(A) dealt with this issue in para 8 page 52-54 of his appellate order. It was submitted by the assessee that the assessee is having an in-house R D Centre at Bahadurgarh for its own products which is ut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is following mercantile system of accountancy and the exemption is accrued as per the certificate issued by Central Excise Department. In the absence of any clear explanation furnished by the assessee with documentary evidences, he added back the impugned sum to the income of the assessee. 8.16 Before the Ld. CIT(A) the assessee submitted that excise duty is paid on the various purchases made during the year and as per excise law, excise duty paid at the time of purchases is not refundable. Hence, no such refund accrued from the excise department to the assessee. It was argued before the Ld. CIT(A) that since the amount of excise duty paid through CENVAT credit is not entitled to refund, the same was debited to P L account. The Ld. CIT(A) gave relief to the assessee recording the following findings in para 9.13 of his appellate order :- 9.13 I have considered the submissions made by the authorized representative of the appellant. I have gone through the findings of the AO in the impugned assessment order and remand report. I have also examined the order of the Assistant Commissioner, Central Excise, Bhangagarh, Guwahati dated 18.10.2001 (PB 229-230), according to which Guw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the appellant in its profit and loss account which infact is an expense of the appellant, on the purchases made by the appellant. Thus the claim of the appellant is bona fide. I also find from the profit and loss account for the period ending 31.3.2003 that similar expenses for Rs.93,06,540/- were claimed by the appellant, and the same was allowed even after special audit and no such disallowance was made by the A.O. and there is no change in facts and accounting system of the appellant for the year under appeal. In view of these discussions, and after verifying the records of the appellant, produced before me, and following the principle of consistency, I find that there is no wrong claim made by the appellant on account of excise duty debited to Profit and Loss A/c, and therefore, addition made on account of alleged refund is directed to be deleted. This ground of appeal is allowed and the appellant's income shall be reduced by Rs.42,81,469/-. 8.17 The Revenue's case is that under the accrual system of accounting followed by the assessee, the excise duty refund sanctioned by excise department was required to be credited in P L account which the assessee did not do. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r wastage of different items, and the same was allowed. Even for A.Y 2006-07, for which appeal has been decided by CIT(A) (my predecessor), there is no such addition made by the A.O. on this ground. No addition has been made for A.Y. 2005-06 as well. Ld. Counsel further stressed that the books of accounts of the appellant are audited by statutory auditors, and the wastage has been discussed in the audit report in each year. Ld. AR further argued that the units of the appellant are subject to audit by the excise department as well and no such defect has ever been pointed out by them on this issue. It is observed from the impugned assessment order as well that the AO relied on the figures declared by the appellant in Annexure 6 of the 3 CD report. Ld. AR has given explanation for the wastage claimed stating that it was due to very hot mixture filled in the tubes because of which the tubes got leaked and these tubes were of no use and also were not in saleable position in the market. The appellant is justified in making the assertion. It is difficult to imagine that in such manufacturing systems there would not be any wastage, either because of mishandling or because of disproportion. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. the total amount of interest paid by the appellant in respect of loans taken, details of which are given by the A.O. at page 26 of the impugned order. It is seen that the amount is paid by the appellant to Citi Bank, term loan interest, interest paid to NEDFI, for auto finance, and some interest is paid on unsecured loans. The A.O. has further mentioned at page 27 of the impugned order, that appellant had secured loans of Rs.2,20,14,879/-. It is no where stated by the A.O. as to which part of the loan was not used by the appellant for his business purpose. Details of loans of Rs.2,20,14,879/- was submitted by the appellant with his reply dated 30.12.2010. It was submitted by the Ld. Counsel that the AO's allegation that the amount of loan received from NEDFI was utilized by transferring to M/s. OPL (Ozone Pharmaceuticals Ltd.), was factually incorrect, as no specific incidence of diverting funds to M/s. Ozone Pharmaceuticals Limited has been brought on record by the A.O. As per these details, secured loans are reduced to Rs.2,20,14,879/- as compared to the immediately preceding year's figure of Rs.3,31,99,717/-. It is further observed that during the year the appellant h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o OPL. Moreover, the Ld. CIT(A) found that the allegation of transfer of loan obtained from NEDFI to OPL was factually incorrect as no specific instance of diverting funds to OPL was brought on record by the Ld. AO. The Ld. AO made the impugned disallowance on ad-hoc basis which cannot be sustained. We endorse the findings of the Ld. CIT(A) and decide this ground against the Revenue. Ground 7 :Unsecured loans -Rs. 34,33,200/- 8.26 The Ld. AO discussed this issue at para 43 on page 28-29 of his order. The Ld. AO found that the assessee has shown unsecured loan to the tune of Rs. 34,33,200/-. He made the impugned addition for the reason that the assessee failed to discharge his onus of proving the genuineness of the transaction and creditworthiness of the lender. 8.27 On appeal, the Ld. CIT(A) deleted the impugned addition observing in para 13.6 page 70-71 of the appellate order as under :- 13.6 I have examined the impugned order, the remand report, and also considered the submissions made by the Ld. Counsel, and averments made in the rejoinder filed. The A.O. has not offered any comment in his report on this addition made in the assessment order. The Ld. Counsel refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation filed of Mrs. Anupama Verma is placed at PB 114-116. The appellant has been able to prove identity and creditworthiness of Mrs. Verma and transaction has also been confirmed by her. There is nothing in the possession of the A.O. to doubt the genuineness of the transaction. The A.O. has totally ignored these facts and even during remand proceedings he has not brought anything on record to negate the claim of the appellant and to reject the evidences placed by the appellant on record. In view of these reasons no addition can be made by the A.O. for the unsecured credit balances brought forward, and for the new loan, since confirmation has been filed, and the unsecured loan creditor has also confirmed the fact of loan given, together with her copy of ITR, and bank statement. Considering all these facts, I am of the view that the appellant has discharged his onus in respect of the unsecured loan creditors and no addition can be made for unsecured loans as has been done by the A.O. in the impugned order before me. 8.28 We concur with the finding of the Ld. CIT(A) that addition cannot be made for the unsecured credit balances brought forward. For the new unsecured loan obtaine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actions in each account. The AO has not disputed any transaction in any account of any of the sundry creditors. Thus there seems to be no reason to make addition of the closing balance of unsecured creditors appearing in the balance sheet of the appellant as on 31.3.2004, when the appellant has furnished the copies of the ledger accounts of all these sundry creditors and their complete addresses as well in respect of all units of the appellant. I have also seen the remand report of the A.O. wherein no comments are offered by the A.O. on this addition made. I have further considered the various submissions made by the Ld. Counsel of the appellant company and his rejoinder on the remand report. The Ld. Counsel also referred to reply dated 3.6.2008 (PB 430) submitted before my predecessor during the course of appellate proceedings. In this reply, the appellant submitted the complete details such as names, addresses, PANs etc. of the parties to the Assessing Officer on 16.5.2008 (Refer PB 454) wherein he specifically asked the A.O. to inform in case any further information was required by him in respect of the sundry creditors. Ld. AR further stated that similar details were again aske ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that the entire sum of sundry creditors appearing in the balance sheet has been added without even examining the outstanding balance brought forward from the earlier year. None of the creditor denied the balance appearing in the ledger account in the books of the assessee. The ad-hoc addition is without any basis. We hold that the Ld. CIT(A) was fully justified in deleting the impugned addition. The ground raised by the Revenue is decided against the Revenue. Ground 9 : Expenses not relating to business- Rs. 28,950/- 8.32 The Ld. AO noticed from the details of fixed assets that the assessee incurred an expenditure of Rs. 28,950/- towards furniture provided at the residence of one Shri Dipak Singh at Guwahati. Since the business exigency was not established, the Ld. AO made the impugned disallowance. The assessee explained that Shri Dipak Singh is his employee who resided in guest house of the assessee at Guwahati unit. The expenditure was incurred on account of furniture for guest house where Shri Dipak Singh resided. The assessee is paying rent of the guest house which is wholly for the business purposes. The Ld. CIT(A) deleted the impugned disallowance with the followin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wering of the income declared by the assessee. We agree with the reasoning given by the Ld. CIT(A) and uphold his decision to delete the impugned addition and reject this ground of the Revenue. Ground 11 : Deduction under section 80IB of the Act-Rs. 1,21,84,143/- 8.35 The Ld. AO has discussed this issue in para 18-27 at page 10-17 of his order. The Ld. AO observed that the assessee has not satisfied the conditions for claim under section 80IB of the Act, namely that it should be a new undertaking; it should not be formed by transfer of old plant and machinery; it should manufacture or produce articles other than non- priority items given in the Eleventh Schedule; manufacture or production should be started within a stipulated time limit; it should employee 10/20 workers and that return of income should be submitted on or before due date of submission of return of income and except this condition assessee has not fulfilled any of the other above conditions. 8.36 According to the Ld. AO Guwahati unit of the assessee is result of splitting of existing unit. Similar products with similar unit with similar composition and size have been manufactured/produced from two units, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal in para 23.13 recorded the finding that the Guwahati unit was newly set up with new machinery for production of ayurvedic medicines. 8.40 The Ld. CIT(A) concluded his findings recording in para 20.91 and 20.92 as under :- 20.91 On maintenance of books of accounts, Hon'ble ITAT held in para 23.15 of their order that with regard to books of account of the Guwahati unit not being properly maintained, there is no evidence to that effect as the books have been audited and produced before the lower authorities, including before the statutory auditors. Audit report u/s 44AB has also been filed. We have also seen that there was no transfer of finished goods from the Baddi unit to the Guwahati unit and the confusion arose because of the narration of stock transfer in bill no. 17 of the Guwahati unit were exported through the head office and accounted for in the books of the Baddi unit, as was usual in respect of the exports. We are also of the view that the results of the two units are not comparable and in any case if the deferred expenditure of advertisement of about Rs.8 crores, which has already been discussed by us and higher advertisement expenses in the Baddi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction. 8.41 There is no dispute that the facts remain identical with those in the preceding AY 2003-04 and the issue of deduction claimed by the assessee under section 80IB of the Act is fully covered by the decision of the Tribunal for the AY 2003-04. The Ld. CIT(A) directed the Ld. AO to allow deduction to the assessee under section 80IB of the Act in view of the facts, evidences found on record and after verifying the same and following the order of the Tribunal for AY 2003-04, and therefore, we endorse his decision on the issue and decide this ground of the Revenue against it. 9. In the result, appeal of the Revenue for AY 2004-05 is dismissed. Assessment Year 2006-07 10. The Revenue has taken six grounds of appeal as under :- (1) The Ld. CIT(A) erred in facts and in law by deleting deduction of Rs. 4,28,12,655/- u/s 80IB of IT Act,1961. (2) The Ld. CIT(A) has erred in deleting the disallowance u/s 80IB ignoring the fact that Guwahati unit was formed by splitting up or reconstruction of business already in existence at Baddi Unit. (3) That on the facts and circumstances of the case and in law the Ld CIT(A) erred in following the order of ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment order. 10.1. Ground No. 1, 2 and 3 relate to denial of deduction of Rs. 4,28,12,655/- claimed by the assessee under section 80IB of the Act which has been deleted by the Ld. CIT(A). 10.2. The Ld. AO discussed this issue in para 19-24 of his order dated 26.12.2008 under section 143(3) of the Act. According to him the basic conditions as stipulated for allowing deduction under section 80IB are not fulfilled for the reason that Guwahati unit is formed on account of business restructuring of Baddi unit and employing 9 workers which is contrary to mandatory requirement as stipulated in sub-section (2) of section 80IB of the Act. He, therefore, made the impugned disallowance. 10.3. In his appellate order dated 29.03.2010 the Ld. CIT(A) quoted the observation of the Tribunal in ITA No. 1125/Del/2008 and 1867/Del/2008 dated 27.02.2009 for AY 2003-04 in para 3.5.1 wherein the Tribunal after noticing the facts on record held that all these facts lead to an inescapable conclusion that the Guwahati unit was newly set up with new machinery for production of ayurvedic medicines. In view thereof, we are not in opposition to uphold the findings of the assessing officer that the bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ITAT order, I direct the assessing officer to allow the deduction to the appellant company u/s 80IB of the Act. This being the case, there is no requirement to adjudicate on the alternate claim of deduction u/s 80IC of the Act. 10.5. Similar disallowance of claim of deduction under section 80IB was made by the Ld. AO in AY 2004-05 which was deleted by the Ld. CIT(A). In our order of date for AY 2004-05 we have endorsed the findings of the Ld. CIT(A). The facts and circumstances remaining the same as in AY 2004-05, we do not find any substance in the appeal of the Revenue and reject the ground No. 1, 2 and 3 taken in AY 2006-07. 10.6. Ground No. 4 ad 5 relate to disallowance of various expenses amounting to Rs. 86,00,000/- made by the Ld. AO which has been deleted by the Ld. CIT(A). It is observed that the Ld. CIT(A) noticed the reasons given by the Ld. AO for the impugned disallowance on page 22 of the appellate order which mainly consist of non production of bills and vouchers and books of account. The Ld. CIT(A) observed that no disallowance can be made as the Ld. AO has failed to indicate any instances where the expenditure is proved to be either bogus and/or of non-bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1961. 3. On the facts and circumstances of the case and in law, the Id. CIT(A) has erred in deleting the disallowance u/s 80IC of Rs.2,08,53,170/- by ignoring the fact that Guwahati unit was formed by splitting up or reconstruction of business already in existence at Baddi Unit. 4. On the facts and circumstances of the case and in law, the Id.CIT(A) has erred in following the order of earlier years and in holding that comparative analysis of financial results, production details, unreasonable profitability difference etc of the units at Guwahati Baddi were not relevant to the issue under consideration as the AO had not invoked Section 80IB(13). That even if section not specifically mentioned, the AO had held at a number of places during this year that the profit of Guwahati unit was highly inflated by, among others, shifting of Guwahati unit expenses to Baddi unit on one hand and by shifting turnover of Baddi unit to Guwahati unit which is prohibited by various provisions of section 80IC of the Act. 5. On the facts and circumstances of the case and in law, the Id. CIT(A) has erred in deleting disallowance of various expenses amounting to Rs. 10,00,000/- without app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no dispute that the Guwahati unit of the appellant is located in notified area in EPIP, Amingaon, Guwahati in Assam. There being no article or thing specified in thirteenth schedule for industrial undertaking in notified area in NER, therefore, manufacture of any article or thing by an industrial undertaking in notified area in NER is eligible for deduction u/s 80IC. Therefore, under the new provisions of sec 80IC(2)(a)(iii) and 80IC(3)(i) the profits and gains derived from Guwahati unit is eligible for 100% deduction u/s 80IC(1) for a period of 10 assessment years commencing with initial assessment year 2002-03. The instant AY 2009-10 being the eighth year setting up of the unit, therefore, the Guwahati unit is eligible for 100% deduction u/s 80IC of the Act, provided profits and gains are derived from manufacture or production of any article or thing and other conditions specified therein are fulfilled. 4.1.5 Under the new provision of sec 80IC, there is no restriction regarding number of workers to be engaged in the industrial undertaking. Therefore, disallowance of deduction u/s 80IC by the AO on the ground that required number of workers were not engaged in Guwahati unit, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve, the deduction u/s 80IC of Rs. 2,08,53,170/- claimed by the appellant is allowed. 12.3. On careful consideration of the issue involved, we are of the view that the Ld. CIT(A) has dealt with the matter from all the angles and arrived at the conclusion that the assessee's claim of impugned deduction under section 80IC is allowable. We concur with his conclusion. Finding no substance in ground no. 1 to 4 of the Revenue, we reject them. 12.4. Ground No. 5 and 6 relate to disallowance of expenses under various heads amounting in all to Rs. 10,00,000/- which stands deleted by the Ld. CIT(A). The Ld. AO disallowed Rs. 2,00,000/- each out of (i) sales promotion (ii) marketing (iii) general expenses (iv) repair and maintenance and (v) vehicle repair and maintenance aggregating to Rs. 10,00,000/- for the reason that the assessee has not produced complete books of account; that it was not proved that expenses incurred were wholly and exclusively for the purpose of business and that these were not supported by bills. 12.5. On appeal, the Ld. CIT(A) noted that similar disallowance was made in preceding last five years which were deleted by the Ld. CIT(A) as the additions were ..... X X X X Extracts X X X X X X X X Extracts X X X X
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