9911796707
TMI Blog2014 (6) TMI 910X X X X Extracts X X X X X X X X Extracts X X X X ..... n of various expenses which was accepted by the assessee before the CIT(A). Further, the Assessing Officer has also given reasons showing that profits in exempt unit have been inflated. In Section 80IA(10), it is clearly provided that if Assessing Officer has reasons that the business has been so arranged to show inflated profits in eligible unit then Assessing Officer has power to recompute the profits of such eligible unit. As seen from the sale invoice there is definitely a reason to believe that assessee has inflated the profits in eligible unit because the same product is being sold form both the units for almost identical price. In this background, we set aside the order of CIT(A) and restore that of Assessing Officer - Decided in favour of revenue. - ITA No. 1026/Chd/2013 - - - Dated:- 19-6-2014 - SHRI T.R. SOOD, ACCOUNTANT MEMBER AND Ms. SUSHMA CHOWLA, JUDICIAL MEMBER For the Appellant : Shri Akhilesh Gupta For the Respondent: S/Shri Ravi Shankar B.N. Monga O R D E R PER T.R. SOOD, A.M This appeal is directed against the order dated 21.8.2013 of the Ld CIT(A), Chandigarh. 2. In this appeal the Revenue has raised the following grounds: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24225 2409 Telephone Trunk- calls 112093 2323 Bank Charges Interest 82006 205 Accounting Charges 65100 Legal Professional 76300 25000 Rent 117100 Sales Promotion Business 645284 85000 Advertisement Publicity 29854 Bad Debts 96656 Freight Outwards, Loading Unloading 31000 48804 Service Tax 322 Interest-others 78 Rebate Discount 51626 Auditor Remuneration 30000 Repair Maintenance 87595 113892 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t as comparative to B.M. Packaging, Mohali, hence the costing at B.M. Machines, Baddi is less than as comparative to B.M. Machines, Baddi is less than as comparative to B.M. Packaging , Mohali which is also one of the reason for the variation in the Gross Profit Rates and Net Profit Rates. As regards, the variation of expenses of the B.M. Packaging, Mohali and B.M. Machines, Baddi, the main reasons for such variation is the period of operation of such units. As the B.M. Machines, Baddi has started in the F.Y. 2009-10 only, and in such financial year, the unit was in operation for three months only, while the B.M. Packaging, Mohali was in operation for the full year. Hence, the expenses for the three months in the case of the B.M. Machines, Baddi cannot be comparing with the expenses for the full financial year in the case of the B.M. Packaging, Mohali. 4. Both these contentions raised in the above reply were not found correct and the Assessing Officer analyzed these contentions vide para 9(i) (ii) and the relevant portions are as under: 9 (i) In the first para, the main contention given by the assessee justifying the variation in G.P. and N.P. Rates of both the units i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ates for a whole year. If a unit operates for three months in a year its expenses can be less than the unit operating throughout the year, but than the same would then also held true in the case of its production and sales. Hence, this contention of the assessee is also devoid of merits and can not be accepted as working for only three months in a year does in no way increase the productivity and efficiency of a unit. 5. The Assessing Officer also observed that Baddi unit was new where new machinery has been installed and therefore in the in the initial years the expenses would be more. Moreover unit was away from other places of business, therefore even the administrative expenses are little more. She also observed that units in the hilly area require more expenses due to lack of proper infrastructure, difficult terrain and lack of availability of skilled workers. However, in case of assessee profit shown at Baddi was almost four times higher than Mohali area. In the above background it was further observed that nature of business in both the units was identical because both the units were manufacturing packaging, labeling and packing machines. Therefore the products manufactur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the head purchases consumables , it is seen that the Assessing Officer has made the reallocation in respect of the exempt and non-exempt units in the ratio of the sales declared in the respective units. The Ld. Counsel has argued that reallocation in respect of purchases cannot be made and I am entirely in agreement with the argument of the Ld. Counsel, since most of the purchases in respect of both the units are made from the same sources (it has been duly mentioned by Assessing Officer herself in para 10(iii) of the assessment order) and the Assessing Officer has not pointed out any discrepancy in the purchase bills or even in the sale bills. The profits and gains of the eligible business for the purposes of deduction u/s 80IC can be recomputed as provided in section 80IC(7) read with section 80IA(10) of the Act. This means that reallocation of purchases between exempt and non-exempt unit cannot be done except as provided in section 80IA(10) of the Act and certainly not without pointing out specific discrepancy in this regard. Hence, it is held that the addition of ₹ 50,19,196/- on account of reallocation of purchases has wrongly been made by the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s is arranged so as to inflate profits of an eligible unit, then the Assessing Officer has the power to compute the profits of eligible unit on reasonable basis. Admittedly, in the case before us, the purchases are made from the common sources. Some of the customers are also common. The products manufactured by the assessee are also common. Even majority of the expenditure is also common and in fact the assessee has already conceded before the Ld. CIT(A) that expenses were not properly allocated and has accepted the reallocation of expenditure. In addition to these facts, the assessee has shown net profit rate of 12.66% on sales of ₹ 3.36 crores in Mohali unit whereas on turn over of ₹ 1.53 crores, the net profit is 57.95% at Baddi unit which is very high. During the course of hearing, we had asked the assessee to file copy of the invoices to find out if the products were of so called better technology were sold at a higher price and sale invoices for both the units were field on 22.5.2014. 13. The Assessing Officer in para 9 analyzed the reasons again before him for higher profits at Baddi units. The first point mentioned is that according to Assessing Officer, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Soap Wrapping Machine- MDT-13K Change Parts 01 01 600000.00 20000.00 7 05.12.2009 M/s Patanjali Ayurved Ltd. Soap Wrapping Machine- MDT-13K 04 625000.00 14. In Baddi unit also out of total 16 sales during the year, in six cases the assessee has sold the same machinery i.e. Soap Wrapping Machine MDK-13K and the details in few cases is as under:- Sl. No. Date of Sale Name of Customer Product Number of Product Rate per Product (in Rs.) 1. 17.01.2010 M/s Jyothy Laboratories Ltd.- II Soap Packing Machine- MDT- 13K 02 594044.55 2 24.02.2010 International Traders Soap Wrapping Machine- MDT-13 K 01 579208.00 3 24.02.2010 Precision Machinists Soap Wrapping Machne- MDT- 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
