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2015 (3) TMI 769 - AT - Income TaxDisallowance u/s 80IC - allegation that assessee has inflated the receipts in Baddi unit to a tune of ₹ 2039591/- (3650576- 1610985 2039591) and took undue benefit of deduction u/s 80IC as said by AO - CIT(A) deleted disallowance - Held that - AO has mechanically proceeded to disallow the sum of ₹ 20,39,591/- merely on the basis of comparative rate of the products between the old unit in Delhi and the new unit at Baddi. AO has failed to establish any of the above pre-requisites, viz. close connection, course of business being d, more than the ordinary profits, for invoking the provisions of the above section. No infirmity in the order of CIT(A) inasmuch as the alleged close relation of assessee and Ranbaxy does not exist. In the absence of establishing such relationship assessing officer has no justification to tinker with the computation of 80IC claim on assumptions and presumptions. The books of account of both the units are separately managed. In view thereof we uphold the order of CIT(A). CIT(A)didnot erred in directing the AO to delete the disallowance of ₹ 20,39,591/- u/s 80IC. - Decided against revenue. Inclusion of amount on sale of scrap in the computation of deduction u/s 80IC - Held that - CIT(A) in his order has relied on the ratio of decision of Hon ble Delhi High Court in the case of Sadhu Forging Ltd. ( 2011 (6) TMI 9 - DELHI HIGH COURT ) in allowing the claim. We see no infirmity in the order of CIT(A) - Decided against revenue.
Issues:
- Disallowance of deduction u/s 80IC for A.Y. 2007-08 - Inclusion of processing charges for computation of disallowance u/s 80IC for A.Y. 2007-08 - Disallowance of deduction u/s 80IC for A.Y. 2008-09 - Inclusion of sale of scrap amount for computation of deduction u/s 80IC for A.Y. 2008-09 A.Y. 2007-08: The revenue challenged the CIT(A)'s decision to delete the disallowance of deduction u/s 80IC amounting to Rs. 20,39,591, claiming it exceeded ordinary profit compared to similar businesses. The assessing officer disallowed the amount, alleging inflation of receipts by the assessee. However, the CIT(A) found no close connection or extraordinary profits as required by the law. The CIT(A) upheld the assessee's claim, stating that the upward revision of conversion charges was based on renegotiation considering excise duty waivers and investments. The CIT(A) dismissed the inclusion of processing charges for computation of disallowance as it was related to the Okhla unit, not the Baddi unit. The Tribunal upheld the CIT(A)'s decision, emphasizing the lack of justification for the assessing officer's assumptions and presumptions, as the books of accounts for both units were maintained separately. A.Y. 2008-09: In this year, the revenue contested the CIT(A)'s decision to delete the disallowance of deduction u/s 80IC and the inclusion of the sale of scrap amount for computation of deduction. The CIT(A) relied on the Delhi High Court's judgment in Sadhu Forging Ltd., stating that the sale of scrap was part of the manufacturing process and should be considered for the deduction. The Tribunal upheld the CIT(A)'s decision, emphasizing that the assessing officer had no justification to interfere with the 80IC claim without establishing a close relationship between the parties. The Tribunal dismissed the revenue's grounds for both years, affirming the CIT(A)'s orders and rejecting the revenue's appeals. In conclusion, the Tribunal dismissed the revenue's appeals for both A.Y. 2007-08 and A.Y. 2008-09, upholding the CIT(A)'s decisions regarding the disallowance of deductions u/s 80IC and the inclusion of processing charges and sale of scrap amounts for computation of deductions.
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