9911796707
TMI Blog2012 (12) TMI 278X X X X Extracts X X X X X X X X Extracts X X X X ..... s on these transaction as compared to other industries in similar line or if there is no comparable fix reasonable percentage of profit depending upon market condition prevailing in the similar line of industry – matter remanded to AO - ITA No. 1518/HYD/2011 - - - Dated:- 6-6-2012 - SMT. ASHA VIJAYARAGHAVAN, AND SHRI D. KARUNAKARA RAO, JJ. Appellant by : Mr. A.V. Raghuram Respondent by : Mr. M.S. Rao ORDER PER ASHA VIJAYARAGHAVAN, J.M.: This appeal is preferred by the assessee directed against the order of the CIT(A)-V, Hyderabad, passed on 18/07/2011 for the assessment year 2008-09. 2. The appellant is a company engaged in manufacture and sale of bulk drugs and formulations. For the assessment year 2008-09 it filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lants. Further the profit margins of products manufactured at different plants vary significantly. The assessing officer has not accepted the submissions of the company citing provisions of section 80IA(8) which authorizes him to adopt the market value of goods which are transferred from a non eligible unit to a unit which is eligible for deduction. However he has not applied the said provision strictly but arrived at the profit of Dehradun Unit in an irrational way. By doing so he has not appreciated the fact that the Dehradun unit is selling finished marketable product which commands a much higher premium as compared to the other unit. He has not also appreciated the fact that as per provisions of section 80IA(8) that what can be done by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0IC was available. In Mekaguda, bulk drugs and active pharmaceuticals (APIs) are manufactured whereas in Kothur and Dehradun finished dosage of pharmaceutical formulations are made. The Assessing Officer observed that the total turnover of the Dehradun unit was Rs 61,78,23,133/- and the net prof it was Rs 47,80,13,876/- The net profit worked out to 77.37% For the other units excluding Dehradun unit the profit was worked out to only 4.25% of the total sales. Even for the Kothur unit where exactly the same operations were carried out as at Dehradun, the profit margin was much less and at Mekaguda whereas the main work was done, there was actually a loss. Accordingly the assessing officer recalculated the profits and the eligible deductions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing officer may compute such profits and gains on such reasonable basis as he may deem fit. Explanation For the purposes of this sub section market value in relation to any goods or services means the price that such goods or services would ordinarily fetch in the open market. The facts of the case are self evident as it is beyond the law and any probability that the dehradum unit would be giving such exceptional profits while the main unit at Mekaguda kothur and Dehadun account for a total turnover of Rs 159 crores amongst themselves. The active pharmaceuticals ingredients manufactured at Mekaguda unit are transferred to kothur and Dehradun for making the finished formilations. Which means that kothur and Dehradun essentially ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s deduction under section 80IC. An identical issue has been decided by me in the case of the appellant for the asst. year 2007-08 vide order in ITA 274/Dr.c16(1)/CITR(A)V/2009-2010 dated 15.2.2011 Hence the decision outlined in the above order also applies to the current year also. Aggrieved, the assessee is in appeal before us raising the following grounds of appeal:- 1. The order of the learned CIT(A) confirming the order of assessment restricting the deduction u/s 80IC is erroneous both on law and in facts in so far as it is prejudicial to the assessee. 2. The learned CIT(A) erred in holding that the AO has the powers to estimate the profits for the purposes of sec 80 IC in the manner in which he did without appreciating the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpute the eligible profits on a reasonable basis as he deems f it. The facts of the case are self evident that it is unthinkable that the Dehradun unit would be giving such exceptional profits while the main unit at Mekaguda is shown less The assessing officer has pointed out in the assessment order that the assessee has clearly deflated salary expenses raw material expenses etc with respect to Dehradun to artificially inf late the profit. The statements recorded by the assessing officer from two employees of the assessee company clearly shows that expenses had not been booked in Dehradun but booked in other units to artificially shift profits into Dehradun unit. According to the assessing officer the formulations in Mejaguda unit cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
