TMI Blog1993 (3) TMI 142X X X X Extracts X X X X X X X X Extracts X X X X ..... cient than the electric arc furnace. SMS-IV was added in March 1988. It had also an induction furnace. SMS-V was also added in 1988. Steel Rolling Mill was started in 1976-77. C.I. Foundry Unit was added in 1980 and the Oxygen Plant Unit was set up in September 1983. 17. The assessee-company claimed deduction under section 80-I amounting to Rs. 1,96,26,951 in respect of four units as per the following details: (i) SMS-II Rs. 1,14,75,095 (ii)SMS-III Rs. 54,57,021 (iii)SMS-IV Rs. 14,72,070 (iv) Oxygen Plant Rs. 12,22,765 --------------- Rs. 1,96,26,951 ---------------------- 18. The Assessing Officer asked the assessee to give separate manufacturing and profit and loss account of all the units. He noticed that expenses were debited in SMS-I which was the head office of the assessee-company and that these expenses were manifold as compare ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne argument was that section 80-I(8) was not applicable at all and, therefore, no adjustments were permitted or warranted by law because the Assessing Officer had accepted the transfer price of ingots as the market price. It was also pointed out that there was no inflation or suppression in respect of the cost of raw-material and the consumable stores. The learned CIT(A) impliedly accepted the argument of the assessee that the provisions of section 80-I(8) were not applicable in the instant case. She, however, held that the provisions of section 80-I(6) were applicable and hence adjustments in respect of certain expenses had to be made. 20. Before the learned CIT(A) it was further argued by the assessee that the Assessing Officer's method of allocation of various expenses on the basis of production and not on the basis of value was not correct and yielded distorted results. The learned CIT(A), however, embarked upon her own method of allocation in respect of various items of expenses and decided the issue accordingly. In respect of insurance expenses and some other expenses, it appears that the assessee agreed to the allocation as suggested by the learned CIT(A). 21. As regards ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other units to unit No. I was "blatently excessive". Reliance in this regard was placed on the Supreme Court decision in CIT v. Daulat Ram Rawatmull [1973] 87 ITR 349. It was vehemently argued that the conclusion by which provisions of section 80-I(8) have been invoked was perverse because the Assessing Officer did not say that the profits of the other units in which relief under section 80-I had been claimed were inflated. According to the learned counsel for the assessee the only fault found by the Assessing Officer was that the transfer price was excessive which was not based on any evidence. It was submitted that section 80-I(8) had no application in the instant case because goods had been transferred at the "maximum realisable price". It was also submitted that the learned CIT(A) had accepted the assessee's plea that the provisions of section 80-I(8) were not applicable and the revenue had accepted that finding insofar as it had not challenged the same in the cross appeal. It was also explained that the proviso to section 80-I(8) could not be read in isolation and could be pressed into service only if the main provision, namely, section 80-I(8) was applicable. According to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not there in the earlier years in respect of SMS-IV and SMS-V because these units were set up in 1988, the manufacturing expenses claimed at 17.46% and 14.40% respectively were quite reasonable. Similarly it was explained that in SMS-I, manufacturing expenses with regard to the sale value of production of two units of electric arc furnaces, the percentage in the accounting year 1984-85 was 41.39%, for accounting year 1985-86 at 41.54%, for accounting year 1986-87 at 46.31% and for the year under consideration at 46.02%. It was pointed out that in all the earlier years, the manufacturing expenses had been accepted and the trading and profit and loss account had not been recasted and that the percentage of expenses at 46.02% in the year under consideration compared favourably with the earlier years. Similarly, as regards SMS-II, it was explained as per details placed at page 28 of the assessee's compilation that such manufacturing expenses on the basis of value of production worked out to 25.72% for accounting year 1984-85, 30.31% for accounting year 1985-86, 29.69% for accounting year 1986-87 and 28.30% for accounting year 1988-89. It was submitted that the expenses in the year unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... particular manner before the learned CIT(A) and that there could not be any grievance on the part of the assessee regarding that part of the impugned order. It was vehemently argued that there was no record of each unit and so the provisions of section 80-I(8) were applicable. It was also pointed out that the market price arrived at by the assessee was on month's average price and not a representative price. The learned D.R. further challenged the direction of the learned CIT(A) regarding the assessee's claim under section 32AB for arriving at the deduction under section 80-I. 29. We have carefully considered the rival submissions as also the facts on record. The first question to be decided is whether the provisions of section 80-I(8) are applicable in this case or not. That section provides that where any goods held for the purposes of the business of the industrial undertaking are transferred to any other business carried on by the assessee or where any goods held for the purposes of any other business carried on by the assessee are transferred to the business of the industrial undertaking and, in either case, the consideration, if any, for such transfer as recorded in the ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f fact. Against this background, it cannot now be said that the goods were transferred from various units to the industrial undertaking and vice versa at less than the market price. In fact, the onus is on the revenue to record a finding and to prove that the transfer of goods is at less than the market price. Instead of recording that finding, the Assessing Officer gives a certificate that the goods in the instant case had been transferred at the "maximum realisable price". In that view of the matter, it is clear that the provisions of section 80-I(8) are not applicable in the instant case and hence the proviso to section 80-I(8) can also not be invoked. It is significant to note that the learned CIT(A) has also held though impliedly that the provisions of section 80-I(8) are not applicable to the facts of the instant case. That finding has also not been challenged by the revenue. We, therefore, hold that the entire exercise of re-allocation of various expenses on the facts and in the circumstances of the case was unwarranted. 32. Now we come to the question as to, whether the learned CIT(A) was justified in saying that the provisions of section 80-I(6) were applicable in this c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the assessee had agreed to certain expenses being allocated like insurance expenses etc. Since this was a specific concession by the assessee, we cannot accept the plea of the assessee that even in respect of those expenses, there should be no reallocation. In the face of the acceptance by the assessee, the reallocation as suggested by the learned CIT(A) in respect of only those expenses where the assessee's agreement has been secured would remain unaffected and the Assessing Officer would be justified in making the allocation and re-casting the profit and loss account of various units in respect of only those items. 35. As regards the question of reducing relief under section 32AB from the profits for the purposes of computing deduction under section 80-I, the learned Counsel for the assessee submitted that though the learned CIT(A) had given partial relief, this was not enough. It was contended that the Assessing Officer had allowed deduction under section 80-I after reducing the assessee's claim under section 32AB from the profits of two units, namely SMS-II and the Oxygen Plant as per Annexure 'B' to the assessment order. It was submitted that section 32AB was an independe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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