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2011 (6) TMI 10 - HC - Income TaxDisallowance - Exemption u/s 10B - Scrutiny - the assessee also gave alternate working of the total expenditure based on total turnover of CEL-I and CEL-II and consequently reduced the claim under Section 10B to the extent of 1.00 crore approximately by relocating the expenses based on turnover - the assessee was involved in manufacturing of an article or thing and that the mere fact that it was getting some works done on job basis from its sister concern would not deprive the assessee of its entity to be an EOU manufacturing unit - Even for the assessment year 2005-06, the appeal filed by the assessee has already been allowed by the CIT(A) holding the assessee to be entitled to claim deductions under Section 10B - The appeal is dismissed
Issues involved:
1. Disallowance of claim under Section 10B for assessment year 2003-04. 2. Exemption under Section 10B allowed by CIT(A). 3. Tribunal's decision upholding the claim of the assessee under Section 10B for multiple assessment years. Issue 1: Disallowance of claim under Section 10B for assessment year 2003-04: The Revenue appealed against the Tribunal's decision disallowing their appeal against the CIT(A)'s order for the assessment years 2003-04, 2004-05, and 2005-06. The assessee, an export-oriented unit, made significant purchases from sister concerns, leading to an investigation by the Assessing Officer. The AO disallowed the claim under Section 10B, citing the failure to fulfill conditions and alleging manipulation of accounts. The CIT(A) allowed the exemption under Section 10B, emphasizing the manufacturing processes undertaken by the assessee, leading to the production of marketable goods. The Tribunal upheld the CIT(A)'s decision, stating that the assessee fulfilled the conditions for claiming the exemption under Section 10B. Issue 2: Exemption under Section 10B allowed by CIT(A): The CIT(A) considered the assessee's approved status as an EOU and accepted exports made from the unit. The CIT(A) analyzed the manufacturing processes carried out by the assessee, concluding that the production of finished goods constituted manufacturing under Section 10B. The CIT(A) dismissed the AO's objections regarding job work done by sister concerns, stating that the creation of new articles or goods qualified for the exemption. The CIT(A) noted the proper maintenance of accounts and the comparable profitability of the units. The assessee's alternative working of expenses based on turnover further supported the claim under Section 10B. The CIT(A) allowed the revised claim under Section 10B, withdrawing the deduction under Section 80HHC accordingly. Issue 3: Tribunal's decision upholding the claim of the assessee under Section 10B for multiple assessment years: The Tribunal affirmed the CIT(A)'s decision to allow the claim under Section 10B for the assessment years in question. It acknowledged the assessee's status as an approved EOU and its involvement in manufacturing activities. The Tribunal highlighted that job work done by sister concerns did not disqualify the assessee from claiming the exemption under Section 10B. The Tribunal referenced the AO's acceptance of the conditions for deductions under Section 10B in prior assessment years, further supporting the assessee's eligibility. As no substantial legal questions arose, the Tribunal dismissed the appeal, upholding the decision in favor of the assessee. This comprehensive analysis of the judgment highlights the key issues, arguments, and decisions made by the authorities involved in the case regarding the disallowance and subsequent allowance of the claim under Section 10B for the relevant assessment year.
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