Income Tax Appellate Tribunal - Chandigarh
Vashisht Alloys, Kala Amb vs Jcit, Yamunanagar on 25 April, 2017
I N T H E I N C O M E T A X AP P EL L AT E T R I BU N A L
D I VI S I O N B EN C H , C H AN D I G A R H
BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER
AND Ms.ANNAPURNA GUPTA, ACCOUNTANT MEMBER
ITA No. 573/CHD/2016
Assessment Year : 2011-12
M/s Vashisht Alloys, Vs The JCIT,
Nahan Road, Yamuna Nagar Range,
Kala Amb, Yamuna Nagar.
( H.P. )
PAN: AAAFV8967F
&
ITA No. 535/CHD/2016
Assessment Year : 2012-13
M/s Vashisht Alloys, Vs The DCIT,
Nahan Road, Circle,
Kala Amb, Yamuna Nagar.
( H.P.)
PAN: AAAFV8967F
(Appellant) (Respondent)
Appellant by : Shri Tej Mohan Singh
Respondent by : Shri Manjit Singh
Date of Hearing : 07.03.2017
Date of Pronouncement : 25.04.2017
O R D E R
PER ANNAPURNA GUPTA,AM Both the appeals relate to the same assessee against orders passed by ld. CIT(Appeals), Panchkula dated 18.04.2016 and CIT (Appeals)-2 Gurgaon dated 03.03.2016 for assessment years 2011-12 and 2012-13 respectively.
2. Since common issue is involved in both the appeals, therefore, both the appeals were heard together and are being disposed off by a consolidated order For 2 the sake of convenience we shall be dealing with the facts in the case of ITA No.573/Chd/2016.
ITA No.573/Chd/2016 A.Y 2011-123. The only issue in the present appeal pertains to disallowance of deduction claimed under section 80IC of Income Tax Act,1961 ( in short 'the Act') on sale of products,to the extent of profits relating to manufacturing which was got done through outside parties.
4. The assessee has raised the following grounds of appeal :
1. That the Ld. Commissioner of Income Tax (Appeals) has erred in law as we as on facts in upholding the addition of Rs.2,53,362/- made by disallowing the deduction u/s 80IC on sale of products got manufactured from others through job work in utter disregard of he explanations rendered which is illegal, arbitrary and unjustified.
2. That the Ld. Commissioner of Income Tax(Appeals) has further erred in sustaining the disallowance of Rs.79,902/- as against Rs.99,878/- made by the Assessing Officer out of car expenses for alleged personal use which is arbitrary and unjustified.
5. Ground No. 2 was not pressed before us and same is, therefore, being treated as dismissed.
6. Ground No. 1 raised by the assessee is against action of CIT (Appeals) in upholding the disallowance made on account of deduction claimed under section 80IC of the Act in relation to the manufacturing got done by outside parties.
37. Brief facts relating to the issue are that the AO noted that the gross total income declared by the assessee for the year included profits & gains of Rs.53,63,479/- from its industrial undertaking at Kala Amb. Against the profit, the deduction of Rs.l 3,40,870/- was claimed u/s 801C of the Act, The A.O. observed that stainless steel ingots produced by the assessee at its factory premises were sent to an associate company, Nahan Ferro Alloys & Chemicals Pvt.
Ltd. (NFA). The steel ingots were rolled into stainless steel flats on job work basis by NF. The stainless steel flats were received back at assessee factory premises for cutting and then sale in the market. The AO found that the deduction included the profit and gains relating to conversion of steel ingots into steel flats on job work basis by the associate company. The AO. raised the query that according to the provisions of section 80IC only the profit and gains of manufacturing activity undertaken by the assessee itself can be considered for deduction. The assessee replied that in view of the economic viability of the process and volume of available in house facility the part process of manufacturing had to be outsourced. The assessee contended that no part of the expenses incurred by the assessee on job work could legally be disallowed. After considering the assessee's reply, the Assessing Officer held that the profit & gains of the manufacturing activities undertaken by the assessee company itself 4 could only be considered as eligible for deduction u/s 80IC. The AO held that the profit of outsourced process was to be deduced by an amount computed @ 2.08% of total job work charges paid/payable to Nahan Ferro Alloys & Chemicals Pvt. Ltd. for the previous year relevant to the A.Y. 2011.12. Thus, 2.08% of Rs.1,12,06,584/-, i.e., of Rs.2,53,362/-was considered as the profit & gains of the assessee not eligible for deduction u/s 80IC of the Act and was added to the income of the assessee.
7.1 During the appellate proceedings, the counsel for the appellant submitted that the Ld. AO misdirected herself in disallowing a sum of Rs. 2,53,362/- being the part of the profit earned by M/s Nahan Ferro Alloys & Chemical Pvt. Ltd, to which a part of the manufacturing process was outsourced on account of the following :
a) There being no specific requirement of having the whole of the manufacturing process in house or any bar on having a part of the manufacturing being outsourced u/s 801C of the Act,
b) The position being continuing for the last so many years and there had been no change in the circumstances of the appellant during the year.
c) The assessee being allowed deduction without any such, restriction by the predecessor(s) of the Ld. AO in earlier years.
d) Inability of the assessee to put up the required manufacturing facilities because of huge capital cost and non availability of sufficient material, to run such facilities at optimum level.5
The assessee further relied on few court judgments related to deduction under section 80IB on outsourced job as cited in its written submission.
8. The CIT (Appeals) after going through the assessee's submission and after analyzing the provisions of Section 80IC of the Act, held that for the purpose of claiming Section 80IC, the entire manufacturing has to be got done by the assessee itself and in any case, the assessee is eligible to claim deduction of profits to the extent relatable to manufacturing got done by it only.
Ld.CIT(A) ,thereafter referred to sub-section(10) of section 80IA of the Act and held that the AO was correct in denying deduction u/s 80IC on the profit component of the manufacturing process not carried out by th assessee.He, therefore, upheld the disallowance made by the Assessing Officer rejecting the contentions raised by the assessee before him.
9. During the course of hearing before us, ld. counsel for the assessee stated that identical issue has been dealt with by the ITAT Chandigarh Bench in the case of M/s Jaiswal Metals Pvt. Ltd. Vs JCIT in ITA 576 & 577/CHD/2016 dated 16.02.2017 wherein the ITAT had held that even if the portion of the manufacturing process was outsourced, it could not be said that the manufacturing was not done by the assessee to that extent and the condition necessary for claiming deduction under section 80IC was only that the assessee 6 was required to manufacture the product. The ld.
counsel for the assessee pointed out that in identical facts and circumstances, the ITAT in the said case had deleted the addition made by the Assessing Officer on account of disallowance of deduction of profits relatable to manufacturing got done by the assessee from outside parties.
9(i) The ld. DR, on the other hand, relied upon the order of CIT (Appeals) but at the same time did not dispute that identical issue had been dealt by the ITAT in the case of M/s Jaiswal Metals Pvt. Ltd. Vs JCIT (supra) and had been adjudicated in the said case in favour of the assessee.
10. We have heard the contentions of both the parties, perused the orders of authorities below and gone through the documents placed before us. The sole issue in the present case relates to disallowance of deduction on eligible profits claimed under section 80IC by the assessee, relatable to the part process of manufacturing being got done by outside parties.The undisputed facts are that the assessee produces stainless steel ingots at its factory premises in Kala Amb and is entitled to deduction of its eligible profits u/s 80IC of the Act.It is also not disputed that all activities involved in the process of manufacturing the ingots are carried out by the assessee except annealing of ingots in a furnace and rolling them to obtain SS Flats,which is got done 7 through its associate company M/s Nahan Ferro Alloys & Chemicals Pvt. Ltd.It is profit component on this process which has been held to be ineligible for deduction u/s 80IC by the Revenue.
11. We have gone through the order of ITAT in the case of M/s Jaiswal Metals Pvt. Ltd. Vs JCIT (supra) and we find that identical issue on identical set of facts has been dealt with by the ITAT in the said case. In the said case also the assessee was manufacturing steel ingots and had outsourced the annealing of ingots and rolling to obtain SS flats to M/s Nahan Ferro Alloys & Chemicals Pvt. Ltd. The AO and CIT(A),in the said case, had held that the assessee was not eligible to claim deduction of profits relating to manufacturing not done by it.The ITAT,while adjudicating the issue, held that Section 80IC of the Act mandates that Undertaking or Enterprises eligible for deductions are those which "manufacture" any article or thing. It further elaborated on the scope and extent of manufacturing activity and after discussing various case laws on the same held that it is not essential for the assessee to carry out the entire manufacturing itself for the purpose of claiming deduction on the profits earned thereon and even if a part of activities were outsourced or for that matter, even if the whole manufacturing activities were outsourced but carried on under the supervision and control of the assessee, it would still tantamount to 8 manufacturing activity being carried out by the assessee itself, making it eligible to claim deduction of profit earned thereon. The ITAT, thereafter applying the said legal proposition to the facts of the case as per which the assessee carried out all the processes involved in the manufacturing of S.S. Flats except one and the final product, in any case, was manufactured by the assessee itself and further that the process outsourced was as per its specification and requirement,held that in such circumstances, the only conclusion which could be drawn was that the product had been "manufactured"by the assessee. It was, therefore, held that in view of the same, there was no question of denying the assessee the benefit of deduction of its eligible profits under section 80IC to any extent at all. The relevant findings of the ITAT at para 14 to 30 of the said order is as under :
"14. Evidently the issue bef ore us relates to the quantum of deduction u/s 80IC qua manuf acturing carried out by the assessee. The relevant provision of section 80IC a l l o wi n g deduction to entities carrying out manuf acturing activity reads as under:
80IC (2) This section applies to any undertaking or enterprise,--
(a ) which has begun or begins to manufacture or produce any article or thing, not being any article or thing specified in the Thirteenth Schedule, or which manufactures or produces any article or thing, not being any article or thing specified in the Thirteenth Schedule and undertakes substantial expansion during the period beginning--9
(i) on the 23rd day of December, 2002 and ending before the 1st day of April, 2012, in any Export Processing Zone or Integrated Infrastructure Development Centre or Industrial Growth Centre or Industrial Estate or Industrial Park or Software Technology Park or Industrial Area or Theme Park, as notified by the Board in accordance with the scheme framed and notified by the Central Government in this regard, in the State of Sikkim; or
(ii) on the 7th day of January, 2003 and ending before the 1st day of April, 2012, in any Export Processing Zone or Integrated Infrastructure Development Centre or Industrial Growth Centre or Industrial Estate or Industrial Park or Software Technology Park or Industrial Area or Theme Park, as notified by the Board in accordance with the scheme framed and notified by the Central Government in this regard, in the State of Himachal Pradesh or the State of Uttaranchal; or
(iii) on the 24th day of December, 1997 and ending before the 1st day of April, 2007, in any Export Processing Zone or Integrated Infrastructure Development Centre or Industrial Growth Centre or Industrial Estate or Industrial Park or Software Techno-logy Park or Industrial Area or Theme Park, as notified by the Board in accordance with the scheme framed and notified by the Central Government in this regard, in any of the North-Eastern States;
(b ) which has begun or begins to manufacture or produce any article or thing, specified in the Fourteenth Schedule or commences any operation specified in that Schedule, or which manufactures or produces any article or thing, specified in the Fourteenth Schedule or commences any operation specified in that Schedule and undertakes substantial expansion during the period beginning--
(i) on the 23rd day of December, 2002 and ending before the 1st day of April, 2012, in the State of Sikkim; or
(ii) on the 7th day of January, 2003 and ending before the 1st day of April, 2012, in the State of Himachal Pradesh or the State of Uttaranchal; or
(iii) on the 24th day of December, 1997 and ending before the 1st day of April, 2007, in any of the North-Eastern States.
1015. Clearly the section mandates that undertakings or enterprises eligible f or deduction a r e t h o s e wh i c h " m a n u f a c t u r e " a n y a r t i c l e o r t h i n g .
16. It is the scope and extent of this manuf acturing activity vis-a-vis the assessee and i t s c o r r e l a t i o n w i t h t h e q u a n t u m o f d e d u c t i o n , wh i c h is the issue in dispute in the present appeal, giving r i s e t o t h e f o l l o wi n g q u e s t i o n wh i c h n e e d s t o b e addressed by us:
" wh e t h e r d e d u c t i o n u / s 8 0 I C i s t o b e a l l o we d only on prof its vis a vis the manuf acturing activity carried out by the assessee, Alternatively, If a part of the manuf acturing activity is outsourced ,does it tantamount to the assessee not carrying out "manuf acturing".
17. W e f i n d t h a t C o u r t s i n a n u mb e r o f c a s e s h a v e b e e n s e i z e d wi t h t h e i s s u e o f a l l o wa b i l i t y o f deduction u/s 80I/IB, wh i c h g r a n t d e d u c t i o n o f prof its derived f rom manuf acturing any article or t h i n g , wh e n t h e a s s e s s e e o u t s o u r c e d p a r t o r wh o l e of the manuf acturing process. Af ter considering the f acts of each case, the courts ruled that it is not essential f or the assessee to carry out the entire manuf acturing activity itself , for the purpose of claiming deduction on the profits earned thereon and even if a part of the activ ity is outsourced or f or t h a t m a t t e r e v e n i f t h e wh o l e m a n u f a c t u r i n g a c t i v i t y is outsourced, but carried on under the supervision and control of the assessee, it wo u l d still tantamount to manuf acturing being carried out by the assessee itself , making it eligible to claim deduction of profits earned thereon.
1118. In the case of A d d . C IT V s . A . M u k h e r j e e & C o . ( P ) L t d . , 1 1 3 IT R 7 1 8 , ( C a l ) t h e H o n ' b l e H i g h Court upheld the f indings of the Tribunal which we r e a s f o l l o ws :
"T he assessee is a publisher of books. The assessee' job is to get the manuscript f or publication, hit upon a suitable f ormat f or the b o o k , g e t i t p r i n t e d a s p e r i t s r e q u i r e me n t s u n d e r i t s s u p e r v i s i o n , g e t t h e b o o k b o u n d af t e r suitable changes and then put out the publication f or sale. In all these activities, the assessee has to play an active role by co- ordinating its activities in a business-like manner. All these activities dovetail into one another and the stage f rom the acquis ition of the manuscript right up to the publication is o n e i n t e g r a t e d a c t i v i t y wh i c h t a n t a m o u n t s t o a manuf acturing or processing activity in the l i g h t o f t h e p r i n c i p l e s l a i d d o wn b y t h e G u j a r a t High Court in the case of Ajay Printery P.Ltd. [ 1 9 6 5 ] 5 8 IT R 8 1 1 a n d b y t h e M a d r a s H i g h C o u r t i n t h e c a s e o f M . R . G o p a l [ 1 9 6 5 ] 5 8 IT R 598 as stated above. It is no doubt true that the a s s e s s e e d o e s n o t h a v e i t s o wn p r i n t i n g p r e s s . T h a t , h o we v e r , r e a l l y d o e s n o t m a k e a n y mater ial d if f erence. The assessee's activity cannot be called purely a trading activity. A t r a d e r m e r e l y p u r c h a s e s t h e g o o d s wh i c h h a v e already been manuf actured by others and then s e l l s t h e m. In this case, the assessee gets the books printed to suit its r e q u i r e me n t s and under its active supervision and guidance. E v e n af t e r t h e p r i n t i n g i s o v e r , t h e a s s e s s e e h a s t o g e t t h e b o o k s b o u n d wh i c h i n v o l v e s a considerable amount of processing. In other wo r d s it purchases paper and other printing 12 materials and ultimately manuf actures or processes publications for sale. The business that the assessee is doing can, theref ore, be c a l l e d a m a n u f ac t u r e a c t i v i t y . "
T h e H i g h C o u r t u p h e l d t h e f i n d i n g s a s f o l l o ws :
"The f indings of the Tribunal in our opinion conclusively show that the assessee wa s carrying on the activity of manuf acturing and also of processing of Books wh i c h are also Goods"
19. In the case of CIT Vs. Neo Pharma P. Ltd., 1 3 7 IT R 8 7 9 ( B o m ) o n t h e q u e s t i o n b e f o r e t h e C o u r t , wh e t h e r t h e a s s e s s e e c o m p a n y w a s a m a n u f a c t u r i n g co mp any, entitled to rebate at high rate, The H o n ' b l e C o u r t h e l d a s f o l l o ws :
"In the present case, although the plant and machinery emp loyed for the purpose of manuf acture belonged to Pharmed and the s e r v i c e s o f c e r t a i n e m p l o y e e s t o P h a r me d we r e also utilised in that process, the manuf acturing a c t i v i t y wa s r e a l l y t h a t o f t h e a s s e s s e e . I t wa s t h e a s s e s s e e wh i c h p a i d t h e h i r e c h a r g e s f o r the machinery and the plant. It wa s the a s s e s s e e wh i c h p u r c h a s e d t h e r a w m a t e r i a l s and the packing mater ials. T he employees of P h a r me d c a r r i e d o u t t h e m a n u f a c t u r e o f d r u g s and pharmaceuticals under the direct technical s u p e r v i s i o n o f t h e e x p e r t s t af f e m p l o y e d b y t h e a s s e s s e e a n d t h e p r o d u c t s m a n u f a c t u r e d we r e of the quality prescribed by the assessee. The risk f or the entire operation was that of the a s s e s s e e . I n v i e w o f t h i s , we f a i l t o s e e h o w i t c a n b e s a i d t h a t i t wa s n o t t h e a s s e s s e e b u t 13 P h a r me d wh i c h m a n u f a c t u r e d t h e s a i d d r u g s and pharmaceuticals, the goods in question."
20. In the case of CIT Vs. Indian Resins & P o l y me r s ( 1 9 9 8 ) 2 3 5 IT R 5 ( K e r ) , t h e a s s e s s e e w a s engaged in business of export of cashe w kernels a n d s h e l l o i l . T h e a s s e s s e e p u r c h a s e d c a s h e wn u t s and entrusted to a third party for processing. Similarly' roasting and dehusking of cashew kernels was got done f rom a third party under assessee's o wn s u p e r v i s i o n . O n t h e s e f ac t s , i t wa s h e l d t h a t a s s e s s e e wa s a n i n d u s t r i a l u n d e r t a k i n g e n t i t l e d t o special deductions under section 80HH.
21. In the case of CIT Vs. Anglo French Drug Co. (Eastern) Ltd. (1991) 191 IT R 92 (Bom), the H o n ' b l e B o mb a y H i g h C o u r t h a s h e l d t h a t it is not necessary that the manuf acturing activity should undertaken by the assessee itself . The assessee can e mploy another co mp any to manuf acture goods under its supervision and control and the assessee wa s held to be an industrial undertaking.
22. A l l t h e a b o v e d e c i s i o n s we r e r e l i e d u p o n b y t h e M u mb a i B e n c h o f t h e I . T . A . T . i n t h e c a s e o f P.L. Patel Vs. ITO (supra), relied upon by the Ld. A . R . b e f o r e u s , a n d i t wa s h e l d i n t h a t c a s e b y t h e Tribunal, that it is not necessary that the assessee should carry out all the manufacturing operations itself to be entitled f or benef its of deduction u/s 80I.
23. Applying the above legal proposition to the f a c t s i n t h e p r e s e n t c a s e we f i n d t h a t t h e a s s e s s e e is a manuf acturer of SS f lats and all the process i n v o l v e d i n m a n u f a c t u r i n g o f S S f l a t s we r e c a r r i e d out at the assessee's premises/undertaking at Kala 14 A mb , e x c e p t f o r c o n v e r s i o n o f i n g o t s i n t o f l a t s w h i c h the assessee outsourced to another co mp any i.e. Nahan Ferro Alloys & Chemicals Private Limited, since it did not have the required inf rastructure for the same. Undeniably all the activities undertaken in the order stated above resulted in the manuf acture of SS Flats and thus constitute one integrated activity wh i c h tantamounts to manuf acturing activity. T hough the assessee does not carry out one process involved in the entire process of manuf acturing, but the assessee also cannot be termed carrying out trading activity. Undeniably, the f inal product manuf actured i.e. SS f l a t s , wa s m a n u f a c t u r e d b y t h e a s s e s s e e i t s e l f f o r sale in the market and the process outsourced to Nahan Ferro Alloys & Chemicals Private Limited w a s a s p e r i t s s p e c if i c a t i o n a n d r e q u i r e me n t since it is not denied that the r i s k a s s o c i a t e d wi t h t h e s a l e o f t h e f i n a l p r o d u c t wa s wi t h t h e a s s e s s e e a n d t h e a s s e s s e e wa s r e s p o n s i b l e f o r t h e s a l e o f t h e s a me . F u r t h e r , we f i n d , t h a t i t i s n o t t h e R e v e n u e s c a s e t h a t t h e o u t s o u r c e d a c t i v i t y wa s n o t u n d e r t h e supervision and control of the assessee. Theref ore, clearly, the entire manuf acturing ac tiv ity of SS f lats was under the supervision and control of the a s s e s s e e i t s e l f a n d t o o k p l a c e e i t h e r i n i t s o wn premises or wa s outsourced as per its o wn specif ication. Theref ore, in view of the decisions of various High Courts on the issue, it can be said w i t h o u t a n y h e s i t a t i o n t h a t i t wa s t h e a s s e s s e e wh o was indulging in the manuf acturing of SS f lats. We may add that it is not the case of the Revenue that t h e a s s e s s e e wa s b u y i n g S S f l a t s f r o m a n o u t s i d e party and then selling it. Theref ore, for the af o r e s a i d reasons, we hold that the assessee undertook the manuf acturing of SS f lats and was 15 entitled to claim deduction on entire prof its earned from the same.
24. We may add that the section does not q u a l i f y t h e wo r d " m a n u f a c t u r e " b y p r e c e d i n g i t w i t h t h e wo r d " wh o l l y " o r a n y s u c h a d j e c t i v e . A bare reading of the provisions of section 80IC of the Act reveals that the only condition required f or claiming deduction is that the eligible undertaking should be involved in manuf acturing activity. Theref ore, the m e a n i n g a n d p u r p o r t o f s e c t i o n wo u l d h a v e t o b e gathered f rom a literal interpretation of the same, wh i c h i s t h e b a s i c r u l e o f i n t e r p r e t a t i o n , a n d t h e r e is no reason to read more than what is stated in the section or go to the intent behind introducing the s e c t i o n wh e n t h e r e i s n o a m b i g u i t y i n t h e s a me . T h e Hon,ble Apex Court in the case of Padmasundar a Rao (Decd.) & Others Vs. State of T amil Nadu & O t h e r s h e l d a s f o l l o ws :
"The court cannot read anything into statutory provision wh i c h is plain and unambiguous. A statute is the edict of the Legislature. The language employed in a
statute is the determinative f actor of legislative intent. The f irst and primary rule of construction is that the intention of the l e g i s l a t i o n m u s t b e f o u n d i n t h e wo r d s u s e d b y the Legislature itself .
The court only interprets the law and cannot legislate. If a provision of law is misused and subjected to the abuse of the proves of l a w, it is for the Legislature to amend, mo d i f y or repeal it, if d e e me d necessary. Legislative casus omissus cannot
be supplied by judicial interpretative process."
1625. For the above stated reason, the assessee was only required to "manuf acture" SS Flats to be e l i g i b l e t o c l a i m d e d u c t i o n u / s 8 0 I C , wh i c h s i n c e we have already held so above,the assessee was entitled to claim deduction of entire prof its earned on the same u/s 80IC of the Act. For the said reason also we are not in a g r e e me n t wi t h the contention of the Ld. DR that the prof its should be apportioned to dif f erent activities involved in manuf acturing of a product and deduction u/s 80IC t h e r e af t e r b e r e s t r i c t e d t o p r o f i t s o n m a n u f a c t u r i n g carried out by the assessee only
26. It is pertinent to point out that wh i l e a l l o wi n g d e d u c t i o n o n p a r t o f t h e p r o f i t s e a r n e d b y the assessee, the Revenue admits that the assessee is involved in manuf acturing activity. Also a d m i t t e d l y t h e a s s e s s e e h a s b e e n a l l o we d d e d u c t i o n of entire prof its in earlier years in identical set of f acts. The Ld.DR has not controverted this fact contended by the Ld Counsel for the assessee. Theref ore also there is no reason to restrict the deduction to the extent of manuf acturing activity carried out by th e assessee in the impugned year.
27. Ld.DR has also relied upon the f indings of t h e L d . C IT ( A p p e a l s ) , wh o we f i n d h a s applied the provisions of section 80 IA(10) to the f acts of the c a s e a n d s t a t e d t h a t s i n c e t h e j o b wo r k wa s g o t done by the assessee through its associate concern, t h e p r o v i s i o n s o f 8 0 I A ( 1 0 ) we r e a t t r a c t e d i n t h e p r e s e n t c a s e a n d i n v i e w o f t h e s a me h e d e n i e d d e d u c t i o n o f p r o f i t s t o t h e e x t e n t o f wo r k g o t d o n e through the associate concern.
28. This interpretation of the provisions of section 80IA(10), we hold, is grossly incorrect.
17S e c t i o n 8 0 I A ( 1 0 ) d e a l s wi t h t h e s i t u a t i o n wh e r e b y v i r t u e o f t h e a r r a n g e me n t i n b u s i n e s s t r a n s a c t i o n s by the appellant wi t h any other person for any r e a s o n p r o v i d e s m o r e t h a n t h e o r d i n a r y p r o f i t wh i c h might be expected to arise f rom the eligible business of the appellant. In such c i r c u ms t a n c e s the assessing off icer has been given the p o we r to estimate the reasonable prof its in such cases and allo w deduction to that extent only. The provision of section 80IA (10) is to check the tendency of eligible units to inf late their prof its by entering into transactions with related concerns or closely connected concerns in such a manner so as to resort t o s h o wi n g u n r e a s o n a b l y h i g h e r p r o f i t s i n t h e i r o w n businesses and claim hundred percent deduction of t h e s a me u n d e r t h e p r o v i s i o n s o f t h e A c t . I n t h e present c i r c u ms t a n c e we f ind that the case is e x a c t l y t h e o p p o s i t e . T h e L d . C I T ( A p p e a l s ) we f i n d h a s s t a t e d t h a t b y g e t t i n g t h e wo r k d o n e b y i t s associate concern a part of the prof its have been s i p h o n e d o f f t o t h e a s s o c i a t e c o n c e r n wh i c h m a y also have claimed deduction under section 80IC on t h e s a me . H a v i n g s a i d s o i t i s e v i d e n t t h a t in the case of the assessee the prof its have been reduced to that extent. The prof its having been reduced to t h a t e x t e n t , b e i n g t h e f i n d i n g o f t h e C IT ( A p p e a l s ) i n the present case, section 80IA(10) has no appl icability at all since as stated above it applies t o c a s e s wh e r e t h e p r o f i t s a p p e a r t o b e i n f l a t e d o n account of transactions entered into wi t h an associate concern. Even o t h e r wi s e for the applicability of section 80IA(10) it has to be d e mo n s t r a t e d that there wa s an arrangement b e t we e n the t wo parties wh i c h resulted in the inf lation of prof its in the case of the assessee. In the absence of both the conditions specif ied under s e c t i o n 8 0 I A ( 1 0 ) we h o l d t h a t t h e s a i d p r o v i s i o n o f 18 h a s b e e n i n c o r r e c t l y a p p l i e d b y t h e L d . C IT ( A p p e a l s ) to the f acts of the case and the addition made by applying the same is theref ore grossly incorrect.
29. I n v i e w o f t h e a b o v e , we h o l d t h a t t h e m a n u f a c t u r i n g o f S S F l a t s wa s c a r r i e d o u t b y t h e assessee and thus it wa s entitled to claim deduction of entire prof its earned on the same u/s 80IC of the Act. We, theref ore, delete the d i s a l l o wa n c e of deduction of Rs.4,26,970/- on account of the manuf acturing process outsourced by the assessee .
30. The appeal of the assessee, theref ore, s t a n d s a l l o we d . "
12. Since the facts in the present case are identical to that in the case of M/s Jaiswal Metals Pvt. Ltd. Vs JCIT (supra), the decision rendered therein squarely applies to the present case also, following which we hold that the assessee is entitled to deduction of its entire eligible profits under section 80IC of the Act. The addition, therefore, made amounting to Rs.2,53,362/-is directed to be deleted. Ground of appeal No. 1 raised by the assessee is, therefore, allowed.
13. The appeal of the assessee is partly allowed.ITA No. 535/CHD/2016
14. The assessee in the present appeal has raised following grounds :
1. That the Ld. Commissioner of Income Tax (Appeals) has erred in law as we as on facts in upholding the addition of Rs.3,15,175/- made by disallowing the deduction u/s 80IC on sale of products got manufactured from others through job work in utter disregard of the explanations rendered which is illegal, arbitrary and unjustified.19
2. That the Ld. Commissioner of Income Tax(Appeals) has further erred in upholding the disallowance of Rs.89,563/- out of car expenses for alleged personal use which is arbitrary and unjustified.
15. At the outset, it is stated that ground No. 2 was not pressed before us and the same is therefore to be treated as dismissed.
16. On ground No. 1, issues and facts are identical to that in ground No. 1 of ITA 573/CHD/2016. Therefore, decision rendered in that case would apply mutatis-
mutandis in this case also.
17. In the result, appeal is partly allowed.
18. In the result, both appeals are partly allowed.
Order pronounced in the Open Court.
Sd/- Sd/-
(BHAVNESH SAINI) ( ANNAPURNA GUPTA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 25th April, 2017.
'Poonam'
Copy to:
1. The Appellant
2. The Respondent
3. The CIT(A)
4. The CIT,DR
Assistant Registrar,
ITAT/CHD
20