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TMI Blog2015 (11) TMI 1268X X X X Extracts X X X X X X X X Extracts X X X X ..... proprietor of two concerns (i) M/s. M.J. Packaging (ii) M/s. M.J. Industries. The appellant is carrying on the business of manufacturing of packing material in these two proprietary concerns. Both the manufacturing units are located at plot no.59, HPSIDC, Baddi, Solan, Himachal Pradesh. As both these manufacturing units are situated in an industrially backward area, the appellant claimed 100% deduction in respect of the profits earned from these units under the provisions of section 80IC of the Income-tax Act, 1961. 2.1 In view of the facts discussed by the Assessing Officer in the assessment order dated 31.12.2010 and relying on various judicial pronouncements, the Assessing Officer held that as per the provisions stipulated in sub-sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer relied on the assessment order for the assessment year 2006-07, framed on identical issue and disallowed the appellant's claim of deduction u/s.80 IC in respect of the proprietary unit of M/s. M.J. Industries." 3. Aggrieved the assessee carried the matter in appeal. The First Appellate Authority granted relief. 4. Aggrieved the Revenue has filed this appeal before us on the following grounds. 1. "Whether Ld. CIT(A) was justified in allowing the profit of both the proprietorship firm shown by the assessee as per books of accounts @ 42.20% and 78.46% which was restricted by the AO @ 50% of such profit as the profit was shown very high for claiming deduction U/S 80IC of I.T.Act. Whereas on the same business line at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ckaging and M/s MJ Industries, which are located in Baddi, Himachal Pradesh, to 50% of the net profit claimed by the assessee. The A.O. restricted the profit by invoking Sub Section 10 of Sec.80(IA) of the Income Tax Act, 1961 (the Act). The reasons given by the A.O. are: (i) The net profit ratio of these proprietary concerns, when compared with the net profit rate of other group concerns located at places, where S.80(IB) incentives are not available, shows great variance. In fact the other two companies which are in the same line of business i.e. M/s MJ Packaging and M/s M.J.Industries have declared net loss of Rs. 3.2 crores and Rs. 1.23 crores respectively. (ii) A total number of 9 employees have been shown in these proprietary conce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... line of business i.e. manufacturing of corrugated boxes, printing & packaging and allied job-work. The net profit in all these businesses is normally the same. However, in the case of the above assessee and the group concerns, this is not the same as is obvious from the details in the table below: Name of the Business Concern Sales (Rs. Lakhs) Net profit (Rs. Lakhs) IN.P./Sales Ratio(%) A.Y. 2008-09 A.Y. 2007-08 A.Y. 2008-09 A.Y. 2007-08 A.Y. 2008-09 A.Y. 2007-08 M/s MJ Enterprises Ltd., PlotNo.49-50-57, HPSIDC. Baddi, Himachal Pradesh. 119.23 343.39 (-)175.74 LOSS (-)302:52 LOSS (-)147 (-)88 M/s M.J. International Pvt.Ltd. 278.31 263.05 (-)79.54 LOSS (-)123.06 LOSS (-)28 (-)47 M/s M.J.. Global Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee on these two proprietary units located in "Baddi" Himachal Pradesh, which is exempt from taxation u/s 80(IB), is abnormal. The net profits declared for the A.Y. 2003-04, 2004-05 and 2005-06 are 56.96%, 51.75% and 52.88% for the A.Y. 2006-07 and 2007-08, the profits shot up to 79.87% and 78.47%. Such abnormal figures in these years is not explained by the assessee. It is well settled that when the assessee claims an exemption, burden lies on it, to prove that he is entitled to exemption. In this case the burden has not been discharged on the issue of quantum of exemption. 9.1. S.80 IA(10) reads as follows. "S.80(IA) (10) Where it appears to the Assessing Officer that, owing to the close connection between the assessee carryin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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