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Income Tax Appellate Tribunal, MUMBAI BENCH “I”, MUMBAI
Before: SHRI G.S. PANNU & SHRI RAM LAL NEGIDr. Annie Besant Road, Worli,
The captioned appeal by the Revenue is directed against the order of CIT(A)-12, Mumbai dated 11.03.2014, pertaining to the Assessment Year 2001-02, which in turn has arisen from the order passed by the Assessing Officer dated 28.01.2013 under section 143(3) r.w.s. 254 of the Income Tax Act, 1961 (in short „the Act‟).
In its appeal, the Revenue has raised the following Grounds of appeal :
“1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in allowing the excess claim of deduction u/s 80-IB
2 M/s. Indian Aluminium Co. Ltd. of the Act, in respect of Belgaum unit without appreciating the fact that the assessee failed to substantiate its claim of such a high net profit rate of 37.14% in Belgaum unit against the global net profit rate of 10.3% of global turnover, despite this claim of abnormally high net profit with regard to unit on which deduction u/s 80-IB is being claimed, being against the prevailing economic scenario and ground reality.
2. The appellant prays that the order of the Ld. CIT(A) on the above ground be set aside to the file of the AO or confirm the order of the AO.”
The respondent-assessee is a company incorporated under the provisions of the Companies Act, 1956 and is, inter-alia, engaged in the business of manufacture of Aluminium and allied products. The assessee-company has multiple manufacturing units at different locations which are individually eligible for deduction u/s. 80IA and/or 80IB of the Act. The dispute in the captioned proceedings essentially revolves around the assessee‟s claim for deduction u/s. 80IB of the Act in relation to its manufacturing unit located at Belgaum, Karnataka. The said unit of the assessee is engaged in manufacturing of speciality Alumina and insofar as its entitlement for claim of deduction u/s. 80IB of the Act is concerned, there is no dispute between the assessee and the Revenue. The dispute hinges around the quantification of deduction allowable u/s. 80IB of the Act. The Assessing Officer allowed the deduction u/s. 80IB of the Act by taking the global net profit rate at 10.30% as against the net profit of 37.14% declared by the assessee with respect to the Belgaum unit. In this manner the claim of deduction with respect to the Belgaum unit has been restricted by the Assessing Officer to Rs.1,80,01,850/- as against Rs.6,24,88,799/- claimed in the return of income.
It is to be noted that the impugned proceedings are as a result of the order of the Tribunal dated 12.10.2011 passed in ITA No.
3 M/s. Indian Aluminium Co. Ltd.
1373/K/2009 wherein the assessment originally finalized by the Assessing Officer u/s. 143(3) dated 29.3.2004 had come up for consideration, wherein assessee‟s claim of deductions u/s. 80IA and 80IB were modified by the Assessing Officer in relation to various units, viz., Belgaum unit, Kalwa unit and Belur unit. The Tribunal had set aside the matter with certain directions to the Assessing Officer and the impugned order has been passed by the Assessing Officer as a consequence of such directions of the Tribunal. Notably, with respect to the Belur and Kalwa units, the claim of assessee for deduction u/s. 80IB of the Act as made in the original return of income has been accepted. It is only in relation to the Belgaum unit that the Assessing Officer reiterated his original position of scaling down the claim of deduction to Rs.1,80,01,850/- as against the returned claim of Rs. 6,24,88,799/-. The CIT(A), however, has set aside the action of the Assessing Officer by noticing that adoption of net profit @ 10.3% for Belgaum unit and thereafter quantifying the deduction u/s. 80IB of the Act accordingly, was arbitrary and without any cogent reasoning. The CIT(A) has further recorded a finding that the respondent-assessee had filed the profitability statement of the units, basis of allocation of indirect expenditure, copies of annual accounts and other details and the Assessing Officer did not bring on record any incriminating evidence to suggest that the profit declared by the assessee in respect of the Belgaum unit was incorrect. For the said reasons, the claim of the assessee for deduction u/s. 80IB of the Act has been allowed in consonance with the claim made by the assessee originally in the return of income. Against such a decision of the CIT(A), the Revenue is in appeal before us.
4 M/s. Indian Aluminium Co. Ltd.
At the time of hearing, in the background of the findings recorded by the CIT(A), when the matter was put across to the learned Departmental Representative (in short „the DR‟), he has not brought out any cogent material or evidence in order to negate the stand of the CIT(A). Ostensibly, the only stand made out by the Revenue, which is manifested in the order of the Assessing Officer, is that the net profit of the Belgaum unit was 37.14% as against the global net profit rate of 10.30% declared by the assessee. In our considered opinion, the variation in the net profit rate of a single unit vis-à-vis the global net profit rate of the assessee, can at best be an indicator to further verify the required facts, but such variation by itself cannot form the basis of rejecting the higher net profit of the particular unit, especially in the absence of any incriminating material to suggest that the profit of the unit is otherwise incorrect. In the present case, the CIT(A) has advanced more than one argument, which are based on the appreciation of factual affairs, to point out that no error could be found in the level of net profit declared by the assessee in the Belgaum unit. The CIT(A) has pointed out that in the Belgaum unit, assessee was engaged in the production of chemical products made of speciality Alumina which is quite different from the manufacturing activity of other two units viz. Belur and Kalwa units, and therefore, the level of profits in the two activities could not be compared. The CIT(A) also noticed that in the case of the other two units viz. Belur and Kalwa units, where the Assessing Officer has accepted the returned claim of the assessee for deduction u/s. 80IB of the Act, the assessee had declared net profits higher than the global net profit. Therefore, under these circumstances the CIT(A) has concluded that rejection of the declared net profit rate in the case of the Belgaum unit is arbitrary.
5 M/s. Indian Aluminium Co. Ltd.
The learned representative for the assessee has defended the order of the CIT(A), and pointed out that similar approach has been approved by the Hon'ble Delhi High Court in the case of CIT v Delhi Press Patra Prakashan in dated 31.5.2013, a copy of which has been placed on record.
Having considered the entire conspectus of facts and circumstances of the case, in our view, the Assessing Officer could not have re-worked the net profit of the Belgaum unit and reduce the quantum of deduction u/s. 80IB of the Act merely because the declared net profit of the unit was higher than the average rate of profit of other units of the assessee. Notably, on facts, we find no reason to interfere with the finding of the CIT(A) that there was no incriminating material brought out by the Assessing Officer to show that the declared net profit of the Belgaum unit suffered from any defects. Accordingly, the order of the CIT(A) is hereby affirmed and the Revenue fails in its appeal.
Resultantly, the appeal of the Revenue is dismissed.
Order pronounced in the open court on 29th February, 2016.