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Issues involved: Dispute regarding allowability of exemption u/s 10A of the Income-tax Act for the assessment year 2005-06.
Summary: The appellant, a business engaged in manufacturing and sales of combs and hair accessories, had two units - M/s. Presto Industries at Mumbai and M/s. Presto Manufacturing and Trading Co. at Kandla, which was a new 100% export unit eligible for deduction u/s 10A. The Assessing Officer compared costs between the two units and made additions to the new unit's expenses, which the appellant disputed. The appellant argued that the comparison was not valid due to different locations and business models of the units. They explained that the new unit's lower costs were due to various factors like production as per orders received, lower input costs for export market, and economies of scale. The Commissioner of Income-tax (Appeals) accepted the appellant's explanation, noting the new unit's modern export-oriented nature and different profitability considerations. Upon hearing both parties, the Tribunal found no evidence that the appellant had incurred unaccounted expenses in the new unit. The Assessing Officer's additions were based on hypothetical computations without concrete evidence of unexplained expenditure. The Tribunal upheld the Commissioner's decision to delete the additions, emphasizing that the burden was on the Revenue to prove actual unexplained expenses, which was not done in this case. Ultimately, the Tribunal dismissed the Revenue's appeal, affirming the Commissioner's decision to delete the additions as there was no evidence of unaccounted expenses in the new unit. The order was pronounced on January 11, 2010.
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