“Section 35(1)(8)”
The decision most relied on for Section 35(1)(8) is Cadila Healthcare Ltd. v. Addl. CIT (21 Taxmann.com 483), cited in 46 judgments on BharatTax.
Leading authorities on Section 35(1)(8)
When computing profits of an eligible unit for tax incentives, profits attributable to marketing and R&D activities carried out outside the eligible unit should not be demarcated or excluded. The re-computation of deductions under tax holiday sections is justified only when there is an arrangement to earn more than ordinary profits.
A mere substantial profit does not inherently indicate an arrangement to earn profits beyond ordinary levels to abuse tax concessions under Section 80-IA(9) or (10). The Assessing Officer must provide specific evidence of such an arrangement.
An Assessing Officer cannot arbitrarily adjust the profit margin of a specific unit by comparing it to the overall profit margin of the assessee, especially when the units have different business natures and separate books of accounts are maintained.
Disallowance under section 14A of the Income Tax Act is justified when the Assessing Officer records dissatisfaction with the assessee's claim that no expenditure was incurred.
