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TMI Blog2019 (12) TMI 602X X X X Extracts X X X X X X X X Extracts X X X X ..... rder. Accordingly all the grounds of appeal are dismissed. - ITA No. 512/Del/2017 - - - Dated:- 11-11-2019 - SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER AND SHRI K.N.CHARY, JUDICIAL MEMBER For the Appellant : None For the Respondent : Ms. Rinku Singh, Sr. DR ORDER PER PRASHANT MAHARISHI, A. M. 1. This appeal is filed by the assessee against the order of the ld CIT(A)-19, New Delhi dated 02.11.2016 for the AY 2008-09. 2. The assessee has raised the following grounds of appeal:- 1. That the Learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in upholding the order of assessment framed under section 143(3) of The Income Tax Act, 1961 (The Act) holding that the transfer of goods from Noida to Baddi was not at an arm s length price and warranted application of section 80 IA (8) resulting in reduction of profits of Baddi unit by ₹ 1,39,85,181/-. 2. That the Learned Commissioner of Income Tax (Appeals) has erred both the law and on facts in upholding action of the Assessing Officer in rejecting the certificates issued by the practicing Cost Accountant as per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into reduction of profits of Baddi Unit by ₹ 63,23,700/6. That the Learned Commissioner of Income Tax (Appeals) has grossly erred both in law and on facts in upholding the order of assessment as assessment had been framed in complete violation of the principles of natural justice and thus such an order of assessment was vitiated both on fact and in law and hence was liable to be quashed. 7. That the adverse findings recorded by the learned Commissioner of Income Tax ( PP ) Addl. Commissioner of the Income Tax are perverse and have been recorded without appreciating the submissions made and die evidences/material produced on record and hence such adverse findings are vitiated and deserves to be deleted. 8. That in the circumstances in the case and in law, the impugned order passed by the learned commissioner of Income tax ( Appeals) upholding the order of the assessment passed b, the Add, commissioner of income tax is based on assumptions/ presumptions , whims and fancies, conjectures, surmises, preconceived notions and incorrect application of law and therefore liable to be quashed. 9. The appellant craves to leave, add, delete or modi, any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing officer rejected the explanation of the assessee and found that there is a disproportionate allocation of expenditure as the turnover of baddi unit is Thrice but the expenses allocated are disproportionate. He further noted that raw material is transferred by Noida unit to baddi unit in semi finished items such as sole uppers at cost plus 10 % mark up basis which is not the market price. Material is transferred at cost and in case of Semi finished goods where the value addition cost-plus markup as per excise rule is charged. He further noted that no quality control cost and research and development cost has been shown, and no administrative over head has been shown in some cases. Based on this he reached at conclusion that there is a wrong allocation of salaries, wages, marketing expenses etc. He noted that the gross profit ratio of 55.28 percentage and net profit ratio of 12.84 percent in case of Baddi unit has been shown in comparison to the gross profit ratio of 51% and net profit ratio of -4.35% in case of Noida Unit . This is the reason that manufacturing cost of baddi unit is 7.4% of sales vis a vis 24% of Noida Unit. Therefore he invoked the provisions of subsection 8 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. Despite notice to the assessee none appeared and therefore the issues are decided on the merits of the case as per information available on record. 7. The learned departmental representative vehemently supported the orders of the lower authorities. 8. Assessee has raised in fact 9 grounds of appeal with respect to the reduction of the profits of the unit by INR 13985181/ . The learned CIT A considered the certificates produced by the assessee with respect to the cost accounting method followed by the assessee as per the Excise law for transfer of goods . Assessee claimed that assessing officer should have accepted the same. The learned CIT appeal noted that the certificate shows the total cost of material consumed, direct expenses and salaries, direct expenses and wages etc. In profit thereon the mark up of 10% was made. He noted that the certificates do not have any mention in respect of quantitative details of material consumed as to how the material cost has been calculated. Further the certificates also did not show how the allocation of administrative overheads relating to the production activity has been made. He further noted that in some of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the complete verification of the various items of the profit and loss account the learned CIT A has worked out reduction of profits of Baddi unit by ₹ 13985181/ . He further noted that the transfer of goods from Noida to Baddi Unit was not at arm s-length and warranted applications of the provisions of section 80 IA (8) and therefore there should be an adjustment in profit of INR 13985181/-. According to us the learned CIT A has considered all the aspects of the computation of the eligible income for deduction u/s 80IC of the act. The learned CIT A has given the detailed reason with respect to the allocation of the cartage expenses and diesel and oil expenses amounting to INR 2 786033/ towards the Badddi unit from the Noida unit. He also considered the allocation of the depreciation of the corporate office as common cost. He further examined the claim of the assessee with respect to the allocation of the manufacturing expenses between the 2 units with respect to the transfer of goods which resulted into reduction of the profits of the eligible unit. As Such he has considered all the arguments of the assessee with respect to the determination of the eligible profit. Thu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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