9911796707
TMI Blog2007 (9) TMI 309X X X X Extracts X X X X X X X X Extracts X X X X ..... under s. 69C. 7. We have heard the parties. The brief facts of the case are that the assessee is proprietor of M/s Koolmint Manufacturing Company, Assam. The said concern is manufacturer of menthol, DMO and other essential oils. During the year, the said concern has declared a turnover of Rs. 19,35,14,478 and a gross profit of Rs. 3,97,91,859 at a GP rate of 20.56 per cent. The manufacturing unit is at Assam and the assessee is having branch office in Delhi. The AO at p. 2 of his order has stated that the raw material which is used in the industry is mentha oil which comes from the grass named mentha arvensis. The main area of this crop is Western part of Uttar Pradesh like Moradabad, Sambhal, Chandausi. Rampur, Kashipur and Badayun and some other places are Barabanki and Sitapur. The farmers of this particular area produce mentha arvensis and after a routine process find oil from the grass which is called mentha oil. The farmers sell their oil either to the wholesaler or to the industries as per their convenience. It is stated that mostly purchases of raw material are through Delhi branch from the farmers directly. After necessary testing, Delhi branch transfers the material to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of duty. The gross profit declared by the assessee was Rs 3,97,91,859. The AO at the first instance excluded a sum of Rs. 2,90,51,228 from the gross profit on the alleged plea of the same having not been derived from industrial undertaking. After excluding the said sum (bringing the gross profit at Rs. 1,07,40,631 i.e. Rs. 3,97,91,859 - Rs. 2,90,51,228), he applied a GP rate of 3.5 per cent holding the same to be reasonable profit derived from industrial undertaking. Thus gross profit of Rs. 67,73,006 (3.5 per cent of Rs. 19,35,14,478) was held to be business income and rest amount of Rs. 39,67,625 (i.e. Rs. 1,07,40,631 - Rs. 67,73,006) was held to be resulting from overbilling of sales and suppression of expenses. Out of this amount, he proceeded to tax Rs. 25,00,000 under s. 69C. Out of the gross profit of Rs. 67,73,006 expenses claimed amounting to Rs. 65,02,460 were allowed and on the balance sum i.e. Rs. 2,70,546 deduction under s. 80-IC(2)(a)(iii) was allowed by the AO. The learned CIT(A) confirmed the applicability of provisions of s. 145(3) of the Act but however, he deleted the addition of Rs. 25 lacs under s. 69C of the Act for the reasons mentioned in his order. 9. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the product is purely agricultural and the assessee purchases the same directly from the farmers. Therefore, the learned Authorised Representative has rightly pointed out that the purchases are covered under the exception to s. 40A(3) of the Act under r. 6DD(f) of the IT Rules. The AO has failed to point out the specific defect in the expenses incurred by the assessee. Therefore, the AO is not justified in invoking the provisions of s. 145(3) of the Act. Hence, the decision of the learned CIT(A) is reversed on this issue. 11. The learned Authorised Representative has argued that the unit of the assessee is totally exempt from the excise duty but the manner to give the effect to this exemption provides that the duty will be paid in cash for allowing the clearance of goods and thereafter by 15th of the following month, the said amount will be returned to the manufacturer. The said exemption is as per Notification No. 33/99-C.E. dt. 8th July, 1999 (PB-1). The procedure is adopted for administrative convenience and the unit remains exempt from excise duty ab initio and the object is to promote the industrialization of North Eastern States. The excise duty paid is debited to the excis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le in the present case since the issue in the present case is quite different and distinguishable from the cases relied upon by the AO. The learned Authorised Representative has rightly relied upon the decision of Delhi Bench in the case of Asstt. CIT vs. Dharampal Premchand in ITA No. 4031/Del/2003, dt. 31st Jan., 2006 [reported at (2008) 113 TTJ (Del) 290-Ed.] where the facts are similar to the facts in assessee's case and the issue has been decided in that case in favour of the assessee that by credit of the excise duty refund with P L a/c, the net effect is nil. The assessee was refunded the same amount which he paid under the modalities for giving effect to notification and mere book entries cannot give rise to the income to the assessee. Therefore, following the decision in the case of Asstt. CIT vs. Dharampal Premchand, the assessee is allowed the excise duty refund for the deduction under s. 80-IC of the Act as claimed by the assessee and deduction of Rs. 3,32,89,399 under s. 80-IC is directed to be allowed. As mentioned hereinbefore, the AO has not brought any material on record with regard to the suppression of the expenses and the assessee has also not made the overbilli ..... X X X X Extracts X X X X X X X X Extracts X X X X
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