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TMI Blog2005 (5) TMI 548X X X X Extracts X X X X X X X X Extracts X X X X ..... been furnished. There is no reconciliation of details of free samples filed before the Assessing Officer and the details as given in the Tax Audit Report. There is also no evidence how these samples are utilised for the purposes of business. Further, the Marketing agent of the assessee-company is M/s. Warrant Pharmaceuticals Pvt. Ltd., a sister concern. Hence, it was not required for the assessee-company to distribute free samples. Further, according to Assessing Officer, the quantum of claim is very high. The Assessing Officer worked out an addition of Rs. 9,53,019. The CIT(A) confirmed the view of Assessing Officer, that there is no evidence of actual distribution of samples. But accepted that samples distribution is a part of medicine trade. He allowed expenditure on this account @ 2% of total sales. Thus he gave a relief of Rs. 3,55,622. 3. Before us the Learned Authorised Representative argued that distribution of free samples is not unusual and abnormal. Disallowance of entire claim is illogical and unreasonable. It was the liability of the assessee -company and not of the Warrant Pharma, the distributing agent and sister concern of the assessee. Further, accounts of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for fresh adjudication. This ground is allowed for statistical purposes. 6. Second issue is about staff welfare expenses of Rs. 6,250. The CIT(A) confirmed the addition on the ground that it is totally unsupported and no bill or details was furnished either before him or before the Assessing Officer. Even before us, no details of these expenses have furnished. Hence, we decline to interfere. This ground is therefore rejected. 7. The next ground is about payment of professional fee of Rs. 10,000 for valuing the fixed asset for taking loan. The assessee had in fact paid Rs. 30,000 to M/s. Dalal Consultant Engg. The assessee bifurcated it partly into Revenue and party capital, and two-third of expenditure was treated as capital. The Assessing Officer disallowed the rest one-third on the ground that the difference of treatment between the two parts was not substantiated. The CIT(A) also confirmed the addition, treating entire sum as capital expenditure, and finding that no explanation or the basis of apportionment was offered by the appellant. Before us, the Learned AR tried to distinguish the apportionment on the ground that a part of expenditure belonged to sister concern, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ving job charges. According to learned . counsel, the profits which are entitled for deduction under section 80-IA are the one which are derived from manufacturing of any article or thing from an industrial undertaking. The requirement of section 80-IA is that the profit and gains should be derived from any business of an industrial undertaking. It is not necessary the manufacturing activity should relate to own products and assessee will not be entitled for deduction if it carries out manufacturing activity in relation to goods of others. In other words, according to learned counsel, the assessee would be entitled to deduction under section 80-IA irrespective of the fact, whether it produces own goods or goods belonging to others, that is produces goods on job charges. For this he relied on the decision in CIT v. Kantilal Chhotalal [2000] 246 ITR 439 1 (Bom.) and CIT v. K.K. Doshi Co. [2000] 245 ITR 849 2 (Bom.). According to learned counsel such deduction was not disallowed in earlier years and also in subsequent years. It was only this year the Assessing Officer has disallowed the claim. 11. On the other hand, learned Departmental Representative was of the view t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r thing. . . . 14. Thus, it is clear that profit and gains should be from the business of the industrial undertaking and that industrial undertaking should manufacture or produce any article or thing. The direct nexus of profits and gains in section is with any business and not with manufacture or production of any article or thing . Clause ( 3 ) of sub-section (2) does not say that the assessee would be entitled for deduction under this section if he produces or manufactures article or things exclusively belonging to it. There is no such condition laid down in this clause that only that industrial undertaking which manufactures or produces its own article or thing would be entitled for deduction under section 80-IA. The words any business is associated with words derived from . The expression derived from has definite meaning and it should be confined to the word with which it is associated. Thus, if an industrial undertaking which produces or manufactures any article or things and carries out any business there from any deriving profit from such business then it is entitled for deduction. Both these conditions are satisfied in the present case. The assessee is manufac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o an agreement with Dabur according to which Dabur was to get its products manufactured by the assessee under the technical know-how and in the trade name of Dabur. Dabur was to arrange the necessary business and bank guarantee for the assessee for the manufacture and sale of products on the terms and conditions as provided in the agreement. Under the terms and conditions of the agreement, the technology, material procurement, quality control including selection of machinery shall be as per the approval of Dabur. Dabur had organised term loans and working capital from bankers and its associate concerns and also extended corporate guarantee to the respective bankers for extending financial assistance to the assessee. On the other hand, the assessee was under business compulsion to place deposits with Dabur and its associate concerns. The assessee had paid interest on the loan and other credit facilities extended by the bank and associates of Dabur. As the assessee was under business compulsion to have security deposit with Dabur and its associates, it earned interest income on such deposits. The assessee claimed deduction under section 80-IA in respect of interest income earned by i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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