9911796707
TMI Blog2015 (2) TMI 278X X X X Extracts X X X X X X X X Extracts X X X X ..... he case the Ld. CIT(A) has erred in deleting the addition amounting to Rs. 8,99,961/- made by the AO by disallowing deduction u/s 80IC claimed by the assessee on Unit-III. 4. Whether on facts and circumstances of the case the ld. CIT(A) Panaji has erred in allowing deduction u/s 80IC claimed by the assessee on Unit-III on the ground that the activity undertaken is manufacturing in nature." 2. Ground nos. 1 & 5 since general in nature are not reproduced. 3. Ground nos. 2 & 3 relate to re-computation of the deduction claimed by the Assessee u/s 80IB in respect of Unit-II and u/s 80IC in respect of Unit-III. Since common issue of claim of deduction under both these sections is involved, both these grounds are being disposed off by this comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as around 6% profit while Unit-III has 11% profit. Transportation of the flakes is done from Goa to Himachal Pradesh for Unit-III for which huge transportation cost has to be incurred. When the Assessee was asked to explain the reason for such high profit, it was explained that inter-unit transfers are done at raw material + manufacturing overheads and a profit margin of 10% as required under the Central Excise Act, 1944 for raising invoice. The AO was not satisfied with the explanation of the Assessee as inter-unit transfers should have been done at market price as per provisions of Sec. 80A(6), 80IA(7) to 80IA(12). As per provisions of Sec. 80IA the AO is authorised to compute profits and gains on such reasonable basis as he deems it. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee even though the case was adjourned from time to time. We, therefore, decided to dispose off the appeal after hearing the ld. DR. We noted that the Assessee before the CIT(A) has not disputed the power of AO for re-computation of profit and also the fact that in respect of inter-unit transfer, market value has to be taken into account while computing the profit of eligible unit as has been laid down u/s 80IA(7) to (12). We noted that the Assessee has taken the contention before CIT(A) that the realizable value of the powder coating is more than the realizable value of the resin but we noted that in respect of this contention, no evidence or material has been brought on record or referred to before the CIT(A). The other contention taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... established by the Assessee has undertaken manufacturing activity or not. The AO was of the opinion that the activity of Unit-III does not come within the purview of manufacture. According to him, this unit has small grinding unit and is fully dependent on Unit-I & II for manufacture of coating powder. The finished product of flakes are transferred to Unit-III which only grinds them into powder and it does not involve any manufacturing activity. The Assessee submitted that the flakes are raw material and not marketable in the present form. Fumed Silica is added to the flakes to ensure that the mixture repels moisture. The AO was not satisfied and relying on the decision of the Hon'ble Supreme Court in the case of Sacs Eagles Chicori vs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onversion of Flakes to coating powder shall amount to manufacturing or not. In this regard the appellant presented a flow-chart displaying the manufacturing process. Flakes are added with fumed silica to repel moisture. Then the particle size is maintained as per requirement. The semi-finished product has to pass through "Powder Spray Equipment" and Hot air oven and at the end, depending on the requirement of the customer for metallic or mat finish, adequate pigments are added using Blender. And most importantly, the A.O. has also not denied the fact that the raw material can not be marketed independently and the finished product only is marketable and therefore it can not be said that the raw material and finished product are one and the s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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