Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
 
 
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
 
 
 
 
Popular Search: ACCOUNTING STANDARDS :: VAT RATES :: VAT Audit :: cpt :: list of goods taxed at 4% :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: TDS :: form 3cd :: TAX RATES - GOODS TAXABLE @ 4% :: ARTICLES ON INPUT TAX CREDIT IN VAT :: due date for vat payment :: ACCOUNTING STANDARD :: Central Excise rule to resale the machines to a new company :: empanelment :: articles on VAT and GST in India
 
 
From the Courts »
  Micro Spacematrix Solution P Ltd vs. ITO (ITAT Delhi)
 Micro Spacematrix Solution P Ltd vs. ITO (ITAT Delhi)
 CIT vs. Greenfield Hotels & Estates Pvt. Ltd (Bombay High Court)
 IndiaBulls Financial Services Ltd vs. DCIT (Delhi High Court)
 Maharao Bhim Singh of Kota vs. CIT (Supreme Court)
 Ravneet Takhar Vs. Commissioner Of Income Tax Ix And Ors.
 Jaiprakash Associates Ltd. Vs. Commissioner Of Income Tax
 Formula One World Championship Limited Vs. Commissioner Of Income Tax, International Taxation-3 And Anr.
 Commissioner Of Income Tax International Taxation-3 Delhi Vs. Formula One World Championship Ltd. And Anr.
 Reliance Communications Ltd vs. DDIT (ITAT Mumbai)
  Sushila Devi vs. CIT (Delhi High Court)

COMMISSIONER OF INCOME TAX Vs. M/S DELHI PRESS PATRA PRAKASHAN
June, 01st 2013
                 THE HIGH COURT OF DELHI AT NEW DELHI

%                                            Judgment delivered on: 31.05.2013

+                ITA 1732/2006

COMMISSIONER OF INCOME TAX                                            ....Appellant
                                   versus

M/S DELHI PRESS PATRA PRAKASHAN                                       ....Respondent

                 ITA 1733/2006

COMMISSIONER OF INCOME TAX                                            ..... Appellant
                                   versus
M/S DELHI PRESS PATRA PRAKASHAN                                       ..... Respondent

                  ITA 1734/2006
COMMISSIONER OF INCOME TAX                                            ..... Appellant
                                   versus
M/S DELHI PRESS PATRA PRAKASHAN                                       ..... Respondent

                  ITA 451/2010
COMMISSIONER OF INCOME TAX-IV                                         ..... Appellant
                                   versus
M/S DELHI PRESS PATRA PRAKASHAN LTD                                   ..... Respondent

                 ITA 779/2010

COMMISSIONER OF INCOME TAX-IV                                         ..... Appellant
                                   versus
M/S DELHI PRESS PATRA PRAKASHAN LTD                                   ..... Respondent

Advocates who appeared in this case:
For the Appellant       : Mr N.P. Sahni.
For the Respondent      : Mr O.P. Dua, Sr. Adv. with Ms Babita



ITA Nos. 1732-34/2006, 451/2010 & 779/2010                                   Page 1 of 16
CORAM:-
HON'BLE MR JUSTICE BADAR DURREZ AHMED
HON'BLE MR JUSTICE VIBHU BAKHRU
                                             JUDGMENT
VIBHU BAKHRU, J

1.      These are appeals which have been preferred by the revenue under Section
260A of the Income Tax Act, 1961 (hereinafter referred to as the "Act"). Appeal
Nos. ITA 1732/2006, 1733/2006 & 1734/2006, are against a common order dated
24.03.2006 passed by the Income Tax Appellate Tribunal with respect to the
deduction available to the assessee under section 80-IA of the Act in relation to
assessment years 1998-99, 1997-98, & 1999-2000 respectively. Appeal Nos. ITA
451/2010 & 779/2010 are with respect to deduction available to the assessee
under section 80-IB of the Act in relation to the assessment years 2004-05 &
2003-04 respectively.


2.      The controversy involved in all the five appeals is regarding computation
of profits derived from an industrial undertaking owned by the assessee, which
are eligible for deduction under section 80-IA or 80-IB of the Act as the case may
be and thus, all the appeals have been heard together.





3.      The assessee is engaged in the business of publication and printing of
newspapers and periodicals. The assessee company was established in 1973 and
carried on its publication business. Subsequently, the assessee established two
other undertakings at Sahibabad (Uttar Pradesh), namely Unit Nos. 2 & 3. Unit
Nos. 2 & 3 were involved exclusively in printing. In the year 1994, the assessee
established another undertaking at Faridabad, namely Unit no. 4. Unit no. 4 was
established by importing plant and machinery from United States of America and
Germany and the ancillary equipment was procured in India. The plant,
machinery and equipment used for setting up Unit no. 4 were new and were not



ITA Nos. 1732-34/2006, 451/2010 & 779/2010                           Page 2 of 16
used for any other purpose prior to their use in unit no. 4. No part of the
machinery or equipment of Unit No. 4 was acquired by transfer from any of the
other units of the assessee.


4.      During the previous year, relevant to the assessment year 1997-98, the
assessee carried on printing work on job work basis for Unit no. 1 as well as for
other entities. The assessee charged 77 paise per sheet as printing charges for
printing work done for Indian Express Newspapers Ltd. and 70 paise per sheet
for printing done for Unit no. 1. It is not in dispute that Indian Express
Newspapers Ltd. is an independent entity unconnected with the assessee and the
transactions entered into between the assessee and Indian Express Newspapers
Ltd. was on arms length basis. The assessee maintained separate books of
accounts for Unit no. 4. Unit no. 4 did not purchase any paper but was supplied
paper by Unit no. 1 or other entities for whom the Unit carried on printing
activity. Unit no. 4 only purchased ink and certain other consumables which were
utilized for carrying on the printing activity.


5.      The assessee claimed deduction under Section 80-IA of the Act with
respect to the profits and gains derived from Unit no. 4 as the same qualified as a
new industrial undertaking for the purpose of Section 80-IA of the Act. The
Assessing Officer examined the profit and loss account of the assessee as a whole
as well as the statement of profits for Unit no. 4. It was found that whereas
assessee had earned a profit margin of 62.31% in respect of Unit no. 4, the
overall margin of the assessee was only 9.92%. The Assessing Officer concluded
that this represented a serious inconsistency in drawing up the accounts. On
further examination, the Assessing Officer found that the profit and loss accounts
for Unit no. 4 neither disclosed any expense on account of paper consumed nor
revenues from advertisements, which were received by the assessee. The




ITA Nos. 1732-34/2006, 451/2010 & 779/2010                            Page 3 of 16
Assessing Officer relied on the provisions of Section 80-IA(8) of the Act and 80-
IA(10) of the Act to conclude that the profit and loss account relating to Unit no.
4 was required to be recast and the profits to be recomputed. The Assessing
Officer applied the gross profit margin as disclosed by the assessee's
consolidated profit and loss account, (i.e., 10%) to the job work done by Unit no.
4 for Unit no. 1. Since the printing charges for work done by unit no. 4 on job
work basis for unit no. 1 was ` 6,49,55,985/-, the profit on the same was
computed by the Assessing Officer at ` 64,95,598/-. The profit margin, as
disclosed by the assessee, in the stand alone profit and loss account of Unit no. 4,
with respect to job work done by Unit no. 4 for persons other than Unit no. 1 was
accepted. The assessee had claimed profit of ` 5,00,57,879 as profits eligible for
deduction under Section 80-IA of the Act in its return and the deduction available
under Section 80-IA of the Act was calculated @ 30% of the eligible profits at
` 1,50,17,363/-. Against the deduction of ` 1,50,17,363/- as claimed by the
assessee, the Assessing Officer calculated the deduction available under Section
80-IA of the Act at Rs.49,93,661/-.


6.      The assessee preferred an appeal before the CIT (Appeals) against the
assessment order dated 15.03.2000. It was contended by the assessee that in the
facts of the case, there was no occasion for the Assessing Officer to apply the
provisions of Section 80-IA(8) of the Act. Section 80-IA(8) of the Act would be
applicable only where goods were transferred from an eligible business to any
other business of the assessee and the consideration recorded was not at market
values. In the present case, admittedly Unit no. 4 was charging higher rate for
printing from third parties than what was being charged from Unit no. 1. In these
circumstances, there would be no plausible reason to further reduce the profit
margin. The reduction in the eligible profits from unit no. 4, by the Assessing
Officer, was contested by the assessee as being without any basis.



ITA Nos. 1732-34/2006, 451/2010 & 779/2010                            Page 4 of 16
7.      The CIT (Appeals) allowed the appeal of the assessee vide its order dated
31.01.2001 while noticing that the assessee had explained the reasons for unit no.
4 having a higher profit margin. The assessee justified a higher rate of profit by
unit no. 4 on account of the following reasons:-


       a) the speed of the machineries installed in unit no. 4 were 100
            times faster than the machines installed in unit no. 1;
       b) the rate of wages payable by unit no. 4 were also lower as the
            workers were new appointees.
       c) minimum consumption of power, ink and other consumable
            items.


8.      The CIT (Appeals) held that the Assessing Officer had not pointed out any
instance of the assessee inflating the profits either by charging higher rates or
suppressing expenditure and in absence of any such instance of manipulation, the
Assessing Officer was not correct in re-computing the profits on the basis of
estimation.


9.      In respect of the subsequent assessment year 1998-99, the assessee filed its
return of income showing profit of ` 6,56,09,074/- claiming a deduction of `
1,96,82,772/- @ 30% of the eligible profits in terms of Section 80-IA of the Act.
The Assessing Officer held that the Unit no. 4 of the assessee was engaged in
printing on job work basis and deduction under Section 80-IA of the Act was not
available with respect to industrial undertaking carrying on its business on job
work basis as the conditions under Section 80-IA(2) of the Act were not fulfilled
by Unit no. 4. The Assessing Officer further held that even assuming that the
profits of unit no. 4 were eligible for deduction under Section 80-IA of the Act,
the same were inflated. The Assessing Officer held that the business of unit no. 1




ITA Nos. 1732-34/2006, 451/2010 & 779/2010                             Page 5 of 16
and unit no. 4 were intermixed and, therefore, all expenses of the assessee were
required to be taken into account while determining the profits of Unit no. 4. The
Assessing Officer rejected the contention of the assessee that Unit no. 4 was
carrying on job work for Unit no. 1 for which, it was paid charges at rates which
were comparable to the market rate for such job work. It was contended by the
assessee that since revenue earned by unit no. 4 was only job work charges, the
cost of raw material or other expenses could not be deducted from the revenue
earned by Unit no. 4 as such expenses were not incurred by Unit no. 4. The
Assessing Officer rejected this contention by holding that in the event Unit no. 4
was treated as carrying on job work then the benefit of Section 80-IA of the Act
was not available to the unit and if the benefit of Section 80-IA of the Act was to
be allowed then the same could only be on recomputed profits after taking into
account expenses incurred by Unit No. 4. The Assessing Officer re-computed the
profits derived from Unit no. 4 by reallocating the expenditure incurred by the
assessee. The Assessing Officer computed the eligible profits from unit no. 4 at `
4,61,15,101/- and allowed a deduction @ 30% on the said profits which was
computed at ` 1,38,34,530/- and passed the assessment order dated 28.02.2001.


10.     The assessee challenged the assessment order dated 28.02.2001 before the
CIT (Appeals). The CIT (Appeals) allowed the appeal of the assessee vide its
order dated 23.08.2001. The CIT (Appeals) held that the issues raised were
similar to those that were considered in his order dated 13.01.2001 in respect of
the earlier assessment year-A.Y. 1997-98 and following the earlier decision, CIT
(Appeals) allowed the appeal of the assessee.


11.     The facts in relation to the subsequent assessment year 1999-00 are also
similar. The profits declared by the assessee with respect to unit no. 4 were re-
computed by the Assessing Officer by reallocating the expenses incurred by the




ITA Nos. 1732-34/2006, 451/2010 & 779/2010                            Page 6 of 16
assessee. The assessment order dated 20.03.2002 was carried in appeal by the
assessee and the same was allowed by CIT (Appeals) by its order dated
28.06.2002.


12.     Appeals were before the Tribunal in respect of the order passed by the CIT
(Appeals) in respect of the assessment years 1997-98, 1998-99 & 1999-00, which
were disposed of by the Tribunal by its order dated 24.03.2006. The only ground
urged by the revenue while contesting the orders passed by CIT (Appeals) was
with regard to allowing the deduction under Section 80-IA of the Act to the
assessee on the basis of the book results of Unit no. 4. The Tribunal held that the
nature of business of Unit no. 1 & Unit no. 4 of the assessee were entirely
different and there was no justifiable reason for the Assessing Officer to compare
the profit margin of the two units. The Tribunal further noted that the assessee
had maintained separate books in respect of unit no. 4 and no material or specific
defects had been pointed out by the Assessing Officer in the said books which
were produced before him for verification during the course of the assessment
proceedings. The Tribunal accepted the view of the assessee that the expenditure
on marketing and distribution of the publications was required to be done by the
publishing house i.e. Unit no. 1 only and the printing business of unit no. 4 was
entitled to receive job work charges only. The profit margin shown by the
assessee with respect to Unit no. 4 was much higher than the profit margin shown
in respect of other units. The Tribunal held that profits could not be re-computed
merely on the basis that the profit margin of Unit no. 4 was higher and specially
where no defects had been pointed out in the accounts produced by the assessee.
The Tribunal, thus, dismissed the appeal filed on behalf of the revenue.


13.     Similar issues have arisen with respect to the assessment year 2003-04.
The Assessing Officer passed an assessment order dated 24.03.2006. The profit




ITA Nos. 1732-34/2006, 451/2010 & 779/2010                            Page 7 of 16
and loss account prepared by the assessee with respect to Unit no. 4 was rejected
by the Assessing Officer on the ground that the assessee had shown huge profits.
The Assessing Officer thus reallocated the expenses and re-computed the profits
of Unit no. 4 which were eligible for deduction under Section 80-IB of the Act.
The assessee had claimed a deduction of ` 1,70,95,714/- under section 80-IB of
the Act. The Assessing Officer held that no deduction under section 80-IB of the
Act would be available to the assessee, as there would be no profits in Unit No. 4,
if the cost of paper and packaging and forwarding charges were also included in
the costs incurred by Unit no. 4. The Assessing Officer relied on the provision of
section 80-IB(5), 80-IB(8) and 80-IB(10) of the Act to hold that the accounts
relating to Unit no. 4 were required to be drawn up as if the income from the
eligible business was the only business and thus expenses incurred by the
assessee in packaging and forwarding as well as for purchase of paper were
required to be allocated to Unit No. 4.


14.     The assessee preferred an appeal before the CIT (Appeals) which was
allowed by CIT (Appeals) vide its order dated 27.06.2006. The Department
preferred an appeal before the Tribunal, inter alia, challenging the order of the
CIT (Appeals) in directing the Assessing Officer to allow the deduction under
Section 80-I of the Act. The Tribunal found that the issues raised in the appeal
with regard to deduction under Section 80-IB of the Act were settled in favour of
the assessee by its earlier decisions and rejected the appeal.


15.     The facts in relation to assessment year 2004-05 are also almost identical.
The Assessing officer passed the assessment order dated 15.12.2006 wherein the
Assessing officer reallocated the expenses and re-computed the profits of Unit
no. 4 and rejected the profit and loss account prepared by the assessee with
respect to Unit no. 4 on the ground that the assessee had shown huge profits. The




ITA Nos. 1732-34/2006, 451/2010 & 779/2010                            Page 8 of 16
Assessing officer disallowed the deduction of ` 2,35,58,698/-, claimed by the
assessee under Section 80-IB of the Act, on the ground that the cost of the raw
material and forwarding charges were not considered while calculating the profits
of Unit no. 4. The assessee preferred an appeal before the CIT (Appeals) which
was allowed by CIT (Appeals) by his order dated 31.10.2007. The appeal
preferred by the Revenue, before the Tribunal, inter alia, challenging the order of
the CIT (Appeals) was dismissed on the ground that the issues raised in the
appeal with regard to deduction under Section 80-IB of the Act were settled in
favour of the assessee by his earlier decisions.





16.     This Court admitted the following questions for consideration in respect of
ITA Nos.1732/2006, 1733/2006 and 1734/2006 in relation to the assessment
years 1998-1999, 1997-98 and 1999-2000 respectively.


               1.         Whether ITAT was correct in directing the
                          Assessing Officer to allow deduction under Section
                          80-IA of the Act of the Act to the assessee only on
                          the book results of Unit No.4 i.e. the printing house?

                 2.       Whether ITAT was correct in law in allowing
                          deduction under Section 80-IA of the Act to the
                          assessee on the profits of printing house without
                          considering the expenditure incurred by the
                          publishing house on raw material as well as
                          marketing and distribution incurred by the
                          publishing house?

17.     In ITA No.779/2010, the following question of law was framed:-


                          Whether the ITAT was correct in law and on facts in
                          holding that the assessee was entitled to deduction
                          under Section 80-IB of the Act relying on the orders
                          of earlier years?




ITA Nos. 1732-34/2006, 451/2010 & 779/2010                                 Page 9 of 16
18.     In ITA No.451/2010, the following two questions of law were framed:-

               1.         Whether the ITAT was correct in law and on facts in
                          holding that the assessee was entitled under Section
                          80-IB of the Act of the Income Tax Act relying on
                          the order of earlier years?

               2.         Whether the order of the Income Tax Appellate
                          Tribunal, which is a final fact finding authority, is
                          not vitiated in law as it has not gone through the
                          facts properly and just reproduced and relied upon
                          the order of the CIT(A) without appreciating the
                          material on record for making additions?

19.     Before proceeding to address the controversy raised in the present appeals,
it would be necessary to examine the manner in which the assessee has structured
its business. The assessee was established in 1973 and is engaged in the business
of printing and publishing various magazines, namely, Alive, Women's Era,
Sarita, Greh Shobha, Champak etc. The assessee has its office situated at New
Delhi which is engaged exclusively in publishing business. This undertaking has
been referred to as Unit no.1. Unit no.1 is a publishing house where blue prints
and the content of various magazines in the portfolio of the assessee are prepared
or arranged. Unit no.1 is described as a publishing house as it is engaged in the
business of publishing.             The publishing house arranges for articles to be
published in the magazines from various authors, artists and photographers and
incurs expenses for procuring such material. Unit No.1 also incurs expenditure
for advertisement and publicity of magazines and other periodicals in its
portfolio. The assessee has claimed that all such expenses relate directly to the
publishing house as they are exclusively for the business of publishing. Receipts
from sale of magazines and income from advertisements published in the
magazines relate to the publishing business and are accounted for as income of
Unit no.1. The assessee has also been allotted a quota for paper by Government



ITA Nos. 1732-34/2006, 451/2010 & 779/2010                                Page 10 of 16
of India and on the basis of such allocation Unit no.1 imports paper. The paper
imported by the assessee cannot be sold and is for exclusive use of the assessee.
The assessee has also established three other undertakings, which carry on
printing activity through highly sophisticated machines. The said undertakings,
namely, Unit nos.2, 3 & 4 are described as printing houses. In the present
appeals, we are concerned only with Unit no.4 which was set up in the year 1994.
Technologically advanced printing machines were imported by the assessee for
establishing this unit which is housed in a new building situated at Faridabad
(Haryana). Unit No.4 is involved exclusively in carrying on printing activity. The
plant and machinery of Unit No.4 is capable of printing 40,000 sheets per hour.


20.     Unit no.1 forwards the paper as well as the content that is to be printed
thereon to Unit no.4. On the basis of material supplied by Unit no.1, the Unit no.4
prints magazines which are then bound and dispatched to subscribers and other
persons as per the instructions of Unit no.1. The entire expense for running of
machinery including labour, electricity, ink and other consumables utilized in the
printing activity carried out in Unit no.4 is accounted for separately in the books
of Unit No.4 which are separately maintained.


21.     Unit No.4 also carries printing activity of job work on behalf of the
persons, other than Unit no.1, who are unconnected with the assessee. The source
of revenue for Unit No.4 are job work charges which are received for carrying on
printing activity. During the period relevant to the assessment years 1997-98 and
1999-2000, Unit No.4 charged 77 paise per sheet from third parties and 70 paise
per sheet from Unit No.1 for the job work carried on in Unit No.4.


22.     The controversy that has been raised in the present appeals is regarding the
expenses that are required to be allocated to Unit No.4 for the purposes of




ITA Nos. 1732-34/2006, 451/2010 & 779/2010                             Page 11 of 16
determining the profits of Unit No.4 which are eligible for deduction under
Section 80-IA or 80-IB of the Act as the case may be. During the assessment
years 1997-1998, 1998-1999 and 1999-2000, the assessee claimed deduction
under Section 80-IA of the Act. The Assessing Officer relying on Section 80-
IA(8) of the Act, 80-IA(9) of the Act and 80-IA(10) of the Act held that the
profits of the assessee from Unit No.4 were required to be recomputed. The
relevant extracts from Section 80-IA of the Act are quoted below:-


        "Section 80-IA. - Deduction in respect of profits and gains from
        industrial undertakings, etc., in certain cases.- (1) Where the gross
        total income of an assessee includes any profits and gains derived
        from any business of an industrial undertaking or a hotel or operation
        of a ship or developing, maintaining and operating any infrastructure
        facility............. to which this section applies, there shall, in
        accordance with an subject to the provisions of this section, be
        allowed, in computing the total income of the assessee, a deduction
        from such profits and gains of an amount equal to the percentage
        specified in sub-section (5) and for such number of assessment years
        as is specified in sub-section (6)."

                          xxxxx              xxxxx   xxxxx     xxxxx

        "(7) Notwithstanding anything contained in any other provision of
        this Act, the profits and gains of an eligible business to which the
        provisions of sub-section (1) apply shall, for the purposes of
        determining the quantum of deduction under sub-section (5) for the
        assessment year immediately succeeding the initial assessment year
        or any subsequent assessment year, be computed as if such eligible
        business were the only source of income of the assessee during the
        previous year relevant to the initial assessment year and to every
        subsequent assessment year up to and including the assessment year
        for which the determination is to be made."

                          xxxxx              xxxxx   xxxxx     xxxxx

        "(9) Where any goods held for the purposes of the eligible
        business are transferred to any other business carried on by the



ITA Nos. 1732-34/2006, 451/2010 & 779/2010                             Page 12 of 16
        assessee, or where any goods held for the purposes of any other
        business carried on by the assessee are transferred to the eligible
        business and, in either case, the consideration, if any, for such
        transfer as recorded in the accounts of the eligible business does not
        correspond to the market value of such goods as on the date of the
        transfer, then, for the purposes of the deduction under this section,
        the profits and gains of such eligible business shall be computed as if
        the transfer, in either case, had been made at the market value of
        such goods as on that date :

        Provided that where, in the opinion of the Assessing Officer, the
        computation of the profits and gains of the eligible business in the
        manner hereinbefore specified presents exceptional difficulties, the
        Assessing Officer may compute such profits and gains on such
        reasonable basis as he may deem fit.

        Explanation : In this sub-section, "market value", in relation to any
        goods, means the price that such goods would ordinarily fetch on
        sale in the open market."

                          xxxxx              xxxxx   xxxxx      xxxxx

        "(10) Where it appears to the Assessing Officer that, owing to the
        close connection between the assessee carrying on the eligible
        business to which this section applies and any other person, or for
        any other reason, the course of business between them is so arranged
        that the business transacted between them produces to the assessee
        more than the ordinary profits which might be expected to arise in
        such eligible business, the Assessing Officer shall, in computing the
        profits and gains of such eligible business for the purposes of the
        deduction under this section, take the amount of profits as may be
        reasonably deemed to have been derived therefrom."

                          xxxxx              xxxxx   xxxxx      xxxxx

23.     Section 80-IA was substituted by section 80-IA and section 80-IB by
Finance Act, 1999 w.e.f. 01.04.2000. The assessee has claimed deduction under
Section 80-IB of the Act for the period relevant to the assessment year 2003-2004
and 2004-2005.



ITA Nos. 1732-34/2006, 451/2010 & 779/2010                              Page 13 of 16
24.     It is not in dispute that the assessee has maintained separate books of
accounts for Unit No.4 and the only issued to be addressed is whether the
expenses allocated to Unit No.1 are to be taken into account for determining the
eligible profits from Unit No.1. The Assessing Officer relied on the provisions of
Section 80-IA(9) of the Act and Section 80-IA(10) of the Act to come to a
conclusion that the profits attributable to Unit No.4 were liable to be recomputed.
The Assessing Officer held that the expenses relating to cost of paper and other
expenses were liable to be allocated to Unit No.4 also, inasmuch as, in his view,
Section 80-IA(7) of the Act required that the profits from the eligible business
must be computed as if the legible business was the only source of income for the
assessee. The ownership of newsprint, paper and other materials supplied by
publishing houses to Unit No.4 for carrying on printing activity continue to vest
with publishing houses. In cases where Unit No.4 carries on printing activity for
other entities, the paper would not belong to the assessee, the paper as well as the
rights on the content being printed in Unit No.4 would vest with other entities. In
the case of the printing being done by Unit No.4 on behalf of Unit No.1, the
paper would belong to the assessee but the costs of which are liable to be borne
exclusively by the publishing business i.e. Unit No.1.


25.     It is not in dispute that the printing charges charged by Unit No.4 to Unit
No.1 were comparable to the market rates. It is a matter of record that during the
period relevant to the assessment years 1997-1998 and 1999-2000 Unit No.4 was
charging 77 paise per sheet for printing work done for third parties and 70 paise
per sheet for printing done for Unit No.1. The Assessing Officer has also not
found any manipulation or defect in the separate books maintained for Unit No.4.
Section 80-IA(10) of the Act makes it mandatory for the Assessing Officer to re-
compute the profits from eligible business in cases where on account of close
connection between the assessee carrying on eligible business and any other



ITA Nos. 1732-34/2006, 451/2010 & 779/2010                            Page 14 of 16
person, the affairs of the assessee with respect to the eligible business are so
arranged as to give rise to higher profits to the assessee. In such cases, the
Assessing Officer is required to compute the amount of profits as may be
reasonably derived from the eligible business. Section 80-IA(9) of the Act deals
with situations where goods held for the purposes of eligible business are
transferred to another business carried on by the assessee and the consideration at
which such transfer is recorded is not the market value. In such cases the
Assessing Officer is required to determine the profits of the eligible undertaking
by taking into account the market value of goods transacted between the
businesses carried on by the assessee.


26.     In the present case, there is no material to support the view that the job
work charges charged by Unit No.4 from Unit No.1 were not at market rates. We
are agreement with the view taken by the Tribunal that in absence of any defect
or manipulation found by the Assessing Officer in the books maintained for Unit
No.4 and in absence of any material to indicate that the amount charged by Unit
No.4 from Unit No.1 was not at comparable market rates, it would not be open
for the revenue to disregard the profits of Unit No.4 as disclosed by the assessee
only on the basis that the profits were significantly higher than profits earned by
the assessee from other undertakings.


27.     Given the fact that Unit No.4 carries on job work of printing only, the
expenses attributable to Unit No.1 which relate to the publishing business cannot
be allocated to Unit No.4. Only those expenses which relate to the printing work
carried on by the assessee in Unit No.4 are liable to be deducted from the job
charges to arrive at the profits eligible for deduction under Section 80-IA of the
Act or 80-IB of the Act as the case may be.




ITA Nos. 1732-34/2006, 451/2010 & 779/2010                            Page 15 of 16
28.     The facts relevant to the assessment year 2003-2004 and 2004-2005 are
similar to the facts in the earlier assessment years. Our attention has not been
drawn on any material change that has occurred in this period which would
justify a view, different from the one taken in respect of the earlier assessment
years. Thus, in our view, the Tribunal was correct in relying upon the orders
passed in the preceding years for disposing of the appeals relating to the
assessment year 2004-2005.


29.     We, accordingly, hold that the CIT (Appeals) and the Tribunal were
correct in holding that the assessee was entitled to deduction under Section 80-IA
of the Act and 80-IB of the Act on the book profits of Unit No.4 as disclosed by
the assessee.


30.     We answer the questions raised in ITA Nos.1732/2006, 1733/2006 and
1734/2006 in the affirmative and in favour of the assessee.


31.     The question framed in ITA No.779/2010 and the first question framed in
ITA No.451/2010 is also answered in the affirmative and in favour of the
assessee. The second question in ITA No.451/2010 is answered in the negative
and in favour of the assessee. No orders as to costs.



                                                 VIBHU BAKHRU, J


                                                 BADAR DURREZ AHMED, J

MAY 31, 2013
RK/MK




ITA Nos. 1732-34/2006, 451/2010 & 779/2010                           Page 16 of 16
 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2016 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Organic SEO Outsourcing Organic Search Engine Optimization Outsourcing Organic Website SEO Organic SEO India Website SEO India Organic Search Engine Optimization India Organic Internet SEO India Organic Web

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions