The Deputy Commissioner of Income Tax, Circle-1(1)(1), Vadodara V. Mrs. Cryogas Equipomnet Pvt. Ltd., Vadodara

ITA 1228/AHD/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9727 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 1 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-07-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 18-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Transfer pricing; International transaction; Deemed to accrue or arise in india; Permanent establishment; Question of law; TDS; Set aside
• Section: 143(3); 10AA; 80IB; 195

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI PRAMOD KUMAR, VICE PRESIDENT & MS. MADHUMITA ROY, JUDICIAL MEMBER I.T.A. NOS. 1228 & 2025/AHD/2017 (ASSESSMENT YEARS : 2012-13 & 2013-14) THE DCIT / ACIT, CIRCLE 1(1)(1), VADODARA. VS. M/S. CRYOGAS EQUIPMENT PVT. LTD., A-36, GHANSHYAM NAGAR SOCIETY 2, GIDC ROAD, MANJALPUR, VADODARA390 011. [ PAN NO. AADCC 6489 M ] ( APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI VINOD TANWANI, SR. D.R. REVENUE BY : SHRI MUKUND BAKSHI, A.R. DATE OF HEARING 10.06.2019 DATE OF PRONOUNCEMENT 01.07.2019 O R D E R PER MS. MADHUMITA ROY - JM: BOTH THE INSTANT APPEALS FILED BY THE REVENUE ARE DIRECTED AGAINST THE SEPARATE ORDERS DATED 01.02.2017 & 27.06.2017 PASSE D BY THE COMMISSIONER OF INCOME TAX (APPEALS)-1, VADODARA UNDER SECTION 143( 3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED AS TO THE ACT) AR ISING OUT OF THE ORDER DATED 24.03.2015 & 30.03.2016 PASSED BY THE ITO, WARD 1 (1)(1), VADODARA FOR THE ASSESSMENT YEARS 2012-13 & 2013-14 RESPECTIVELY. SINCE BOTH THE APPEALS RELATE TO THE SAME ASSESSEE, THE SAME ARE HEARD ANALOGOUSLY AND ARE BEING DISPOSED OF BY A COMMON O RDER. ITA NOS.1228 & 2025/AHD/2017 THE DCIT/ACIT VS. M/S. CRYOGAS EQUIPMENT PVT. LTD. ASST.YEARS 2012-13 & 2013-14 - 2 - ITA NO. 1228/AHD/2017 A.Y. 2012-13: 2. THE REVENUE HAS FILED THE FOLLOWING GROUNDS OF A PPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT (APPEALS) ERRED IN DELETING THE DISALLOWANC E OF RS.11,92,955/- MADE ON ACCOUNT OF EXPENSES IN FOREI GN CURRENCY WITHOUT APPRECIATING THE FINDINGS OF ASSESSING OFFI CER IN THE ASSESSMENT ORDER AND IN VIEW OF CIRCULAR NO. 7 OF 2 009 OF THE BOARD, AS HELD IN THE CASE OF SKF BOILERS & DRIERS (P) LTD. (20 12) 343 ITR 385/206 TAXMAN 19/18 TAXMANN . COM / 325 (AAR-NEW DELHI). 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (APPEALS) ERRED IN DELETING THE REDUCTION IN NE T PROFIT OF ELIGIBLE BUSINESS MADE BY THE AO, WITHOUT CORRECTLY APPRECIATING THE FACT THAT WHILE CALCULATING THE EXEMPTION U/S 1 0AA THE REASONABLENESS OF THE PROFITS FROM THE ELIGIBLE BUS INESS IS ALSO TO BE ASCERTAINED AS PER THE PROVISIONS OF SECTION 10A A(9) R.W.S 80IA(10) OF THE IT. ACT, WHICH THE AO HAS TAKEN AS THAT WHICH WAS REASONABLY DEEMED TO HAVE BEEN DERIVED THERE FR OM AFTER COMPARISON WITH THAT OF A SISTER CONCERN, MANUFACTU RING SAME PRODUCT AT THE SAME LOCALITY. 3. THE APPELLANT CRAVES LEAVE TO ADD TO, AMEND OR ALTER THE ABOVE GROUNDS AS MAY BE DEEMED NECESSARY. RELIEF CLAIMED IN APPEAL IT IS PRAYED THAT THE ORDER OF THE CIT (APPEALS) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3. GROUND NO.1 THE REVENUE HAS CHALLENGED THE ORDER PASSED BY THE LEARNED CIT(A) IN DELETING THE DISALLOWANCE OF RS.1 1,92,955/- MADE ON ACCOUNT OF EXPENSES IN FOREIGN CURRENCY WITHOUT APP RECIATING THE FINDINGS OF ASSESSING OFFICER IN THE ASSESSMENT ORDER. ITA NOS.1228 & 2025/AHD/2017 THE DCIT/ACIT VS. M/S. CRYOGAS EQUIPMENT PVT. LTD. ASST.YEARS 2012-13 & 2013-14 - 3 - 4. DURING THE COURSE OF ASSESSMENT PROCEEDING, IT W AS OBSERVED THAT THE ASSESSEE HAS SUBMITTED TOTAL SEVEN 15CA CERTIFI CATES THEREBY MAKING PAYMENT IN FOREIGN CURRENCY, WHERE TDS WAS NOT DEDU CTED. SHOW-CAUSE DATED 24.02.2015, THEREFORE, WAS ISSUED. IN REPLY W HEREOF, THE ASSESSEE SUBMITTED THE COPY OF THE ACCOUNT OF M/S. GASWORLD. COM LTD. WHERE THE ASSESSEE CLAIMED TOTAL EXPENSES OF RS.11,92,955/- D URING THE YEAR UNDER CONSIDERATION. THE ASSESSEE FURTHER SUBMITTED THAT SUCH FORM 15CB BEING THE CA CERTIFICATE DETERMINES THE TAX, IF ANY ON SU BJECT INCOME. PAYMENTS MADE AGAINST IMPORT PURCHASES CONSTITUTES BUSINESS INCOME OF THE OVERSEAS SUPPLIER AND THE SAME IS TAXABLE IN IN DIA IN THE EVENT IF IT IS ATTRIBUTABLE TO THE BUSINESS CONNECTION AND/OR PERM ANENT ESTABLISHMENT IN INDIA IN TERMS OF SECTION 9(1)(I) AND RESPECTIVE DO UBLE TAX AVOIDANCE AGREEMENT. IT WAS FURTHER CONTENDED THAT IN THE ABS ENCE OF ANY INCOME CHARGEABLE TO TAX IN INDIA THERE CANNOT BE ANY APPL ICATION OF SECTION 195 ON THE BASIS OF THE RATIO LAID DOWN IN THE MATTER O F GE INDIA, REPORTED IN 327 ITR 456 (SC). THE ASSESSEE FURTHER SUBMITTED TH AT THE RBI HAS REVISED THE FORM 15CB AND FORM 15CA W.E.F. 01.10.20 13 AND ALSO EXEMPTED CERTAIN CLASS OF PAYMENTS FROM REQUIREMENT OF OBTAINING SUCH CERTIFICATE. TRADE PAYMENTS DO NOT FIND ANY PLACE I N THE SAID LIST WHICH HAS STIRRED THE BANKS TO DEMAND FOR CA CERTIFICATE IN NEW FORM 15CB. IN THAT VIEW OF THE MATTER, ONCE THE CA CERTIFIED T HAT TDS IS NOT APPLICABLE; THE ASSESSEE REMITTED THE FOREX WHICH I N TURN WERE THE BUSINESS TRANSACTION REQUIRED. SUCH CONTENTION OF T HE ASSESSEE WAS NOT FOUND SUITABLE BY THE LEARNED AO. THE LEARNED AO WA S OF THE VIEW THAT ITA NOS.1228 & 2025/AHD/2017 THE DCIT/ACIT VS. M/S. CRYOGAS EQUIPMENT PVT. LTD. ASST.YEARS 2012-13 & 2013-14 - 4 - IN VIEW OF THE PROVISION OF SECTION 5(2)(B) R.W.S. 9(1)(I) THE SAID INCOME IS DEEMED TO ACCRUE OR ARISE IN INDIA AND THEREFORE THE APPELLANT WAS LIABLE TO DEDUCT TAX AT SOURCE AND THE EXPENSES OF RS.11,92,955 WAS DISALLOWED WHICH WAS IN TURN WAS DELETED BY THE LEA RNED CIT(A). HENCE THE REVENUES APPEAL BEFORE US. 5. AT THE TIME OF HEARING OF THE INSTANT APPEAL, TH E LEARNED COUNSEL APPEARING FOR THE ASSESSEE SUBMITTED BEFORE US THAT THE AO WRONGLY DISALLOWED THE PAYMENT MADE BY THE APPELLANT FOR AD VERTISEMENT FEE AND SPONSORSHIP FEE WHEN THE PAYEE DOES NOT HAVE PERMAN ENT ESTABLISHMENT IN INDIA. THE PAYMENT WAS MADE OUTSIDE INDIA AND TH US THE INCOME TO THE FOREIGN PARTIES CANNOT BE DEEMED TO ACCRUE OR ARISE N IN INDIA. HE, THEREFORE RELIED UPON THE JUDGMENT PASSED BY THE LE ARNED CIT(A). IT WAS FURTHER CONTENDED THAT THE ISSUE IS SQUARELY COVERE D BY NUMBER OF JUDGMENTS PASSED BY THE HONBLE APEX COURT IN THE M ATTER OF G. E. INDIA TECHNOLOGY CENTER PVT. LTD. REPORTED IN 327 ITR 456 (SC), TOSHOKU LTD- VS-CIT REPORTED IN 1981 AIR 148 (SC). HOWEVER, THE LEARNED DR RELIED UPON THE ORDER PASSED BY THE LEARNED AO. 6. HEARD THE RESPECTIVE PARTIES, PERUSED THE RELEVA NT MATERIALS AVAILABLE ON RECORD. IT APPEARS FROM THE RECORDS TH AT THE APPELLANT INCURRED EXPENSES PERTAIN TO ADVERTISEMENT AND OTHE R GENERAL BUSINESS PROMOTION THROUGH ENGAGEMENT OF A PARTY IN UK. THE RELEVANT INVOICE RAISED BY THE SAID PARTY WAS ALSO BEFORE THE AUTHOR ITIES BELOW WHEREFROM IT WAS REVEALED THAT THE PARTY DO NOT FALL IN THE N ATURE OF TECHNICAL, ITA NOS.1228 & 2025/AHD/2017 THE DCIT/ACIT VS. M/S. CRYOGAS EQUIPMENT PVT. LTD. ASST.YEARS 2012-13 & 2013-14 - 5 - MANAGERIAL OR CONSULTANCY SERVICES, BUT PURE MARKET ING SERVICE WAS RENDERED BY THE NON-RESIDENT FOR PROMOTION OF BUSIN ESS OF THE APPELLANT OUTSIDE INDIA IN A PARTICULAR SPECIFIED TERRITORY. ACCORDING TO THE ASSESSEE, UNLESS AN AMOUNT CAN BE SAID TO HAVE ACCRUED OR ARI SEN IN INDIA OR DEEMED TO HAVE ACCRUED OR ARISEN IN INDIA, THE PROV ISIONS OF SECTION 195 IS NOT ATTRIBUTED AND CONSEQUENTLY THE PROVISIONS O F SECTION 40(A)(I) IS ALSO NOT APPLICABLE. WE HAVE ALSO CAREFULLY CONSIDERED THE JUDGMENT PASS ED IN THE MATTER OF G. E. INDIA TECHNOLOGY CENTER PVT. LTD. R EPORTED IN 327 ITR 456 (SC) AND TOSHOKU LTD.-VS-CIT REPORTED IN 1981 A IR 148 (SC). RELYING UPON THE SAID JUDGMENTS, WE FIND THAT THE L EARNED CIT(A) DELETED SUCH DISALLOWANCE WITH THE FOLLOWING OBSERV ATION: 10.2. I HAVE CONSIDERED THE APPELLANT'S SUBMISSION AND THE AO'S OBSERVATIONS. THE PAYMENT DISALLOWED BY THE AO HAS BEEN MADE BY THE APPELLANT FOR ADVERTISEMENT FEE AND SPONSORSHIP FEE S AND THE PAYEE DOES NOT HAVE ANY PERMANENT ESTABLISHMENT IN INDIA, THE SERVICES IN RELATION TO SUCH PAYMENTS HAVE BEEN MADE OUTSIDE IN DIA. ACCORDINGLY, THE INCOME IN RELATION TO SUCH PAYMENTS TO THE FORE IGN PARTIES CANNOT BE DEEMED TO HAVE ACCRUED OR ARISEN IN INDIA, THE APPE LLANT HAS RELIED UPON SEVERAL JUDICIAL PRONOUNCEMENTS IN ITS SUBMISS ION AS PER WHICH THE PAYMENTS TO NONRESIDENT FOR RENDERING SERVICES OUTSIDE INDIA IS NOT TAXABLE IN INDIA IN ABSENCE OF ANY PE IN INDIA. THE FACT OF WITHDRAWAL OF CIRCULAR NO.23 DATED 23/07/1969 AND CIRCULAR NO.786 DATED 07/02/2000 BY ISSUING THE CIRCULAR NO.7/2009 DATED 22/10/2009 HAS ALSO BEEN CONSIDERED IN SUCH DECISIONS. HENCE, THE ACTION OF THE AO OF DISALLOWING THESE EXPENSES IS NOT CORRECT AND ACCOR DINGLY SUCH DISALLOWANCES ARE DIRECTED TO BE DELETED. TAKING INTO CONSIDERATION THE ENTIRE ASPECT OF THE MATER, WE FIND WHEN THE PAYEE DOES NOT HAVE ANY PERMANENT ESTABLIS HMENT IN INDIA AND ITA NOS.1228 & 2025/AHD/2017 THE DCIT/ACIT VS. M/S. CRYOGAS EQUIPMENT PVT. LTD. ASST.YEARS 2012-13 & 2013-14 - 6 - WHEN THE PAYMENT WERE MADE OUTSIDE IN INDIA FOR SUC H SERVICES THEN SUCH PAYMENT TO FOREIGN PARTIES OUGHT NOT TO HAVE BEEN C ONSIDERED AS ACCRUED OR ARISEN IN INDIA BY THE LEARNED AO WHICH IS NOT A T PAR WITH THE RATIO LAID DOWN IN THE JUDGMENTS PASSED BY THE HONBLE SU PREME COURT AS DISCUSSED ABOVE. RESPECTFULLY FOLLOWING THE SAME, W E DO NOT FIND ANY INFIRMITY IN DELETING THE SAME BY THE LEARNED CIT(A ) SO AS TO WARRANT INTERFERENCE. WE THUS CONFIRM THE SAME. HENCE, REVE NUES GROUND OF APPEAL IS DISMISSED. 7. GROUND NO.2 THE REVENUE HAS CHALLENGED THE ORDER PASSED BY THE LEARNED CIT(A) IN DELETING THE REDUCTION IN NET PRO FIT OF ELIGIBLE BUSINESS MADE BY THE AO. 8. DURING THE ASSESSMENT PROCEEDING, IT WAS OBSERVE D THAT A GROUP COMPANY M/S IWI CRYOGENIC VAPORISATION SYSTEMS INDI A PVT. LTD. HAVING THE SAME REGISTERED OFFICE AND HAVING MANUFA CTURING UNIT IN THE VICINITY OF THE MANUFACTURING UNIT OF THE APPELLANT WAS ALSO MANUFACTURING AND SELLING THE SIMILAR PRODUCTS IN A DDITION TO TRADING ACTIVITY. IT WAS FURTHER OBSERVED BY THE LEARNED AO THAT ASSESSEE REPORTED MUCH HIGHER NET PROFIT RATIO IN COMPARISON TO THE NET PROFIT REPORTED BY THE SAID GROUP COMPANY. THE SAID GROUP COMPANY WAS NOT QUALIFYING FOR ANY SPECIFIC EXEMPTION/DEDUCTION AND THE NET PROFIT REPORTED WAS VERY LOW IN COMPARISON TO THE NET PROF IT REPORTED BY THE ASSESSEE CLAIMING EXEMPTION OF INCOME U/S 10AA. A S HOW-CAUSE, THEREFORE, DATED 04.03.2015 WAS ISSUED AS TO WHY SU CH NET PROFIT SHOULD ITA NOS.1228 & 2025/AHD/2017 THE DCIT/ACIT VS. M/S. CRYOGAS EQUIPMENT PVT. LTD. ASST.YEARS 2012-13 & 2013-14 - 7 - NOT BE CONSIDERED TO BE TO THE EXTENT OF NET PROFIT OF THE GROUP COMPANY NAMELY M/S. IWI CRYOGENIC VAPORISATION SYSTEMS INDI A PVT. LTD. FOR THE PURPOSE OF COMPUTING EXEMPTION U/S 10AA. THE REPLY RENDERED BY THE ASSESSEE WAS NOT FOUND SUITABLE. THE ASSESSEE HAS N OT OFFERED ANY JUSTIFICATION FOR HIGHER PROFITS REPORTED BY IT IN COMPARISON TO THE PROFITS REPORTED IN THE CASE OF THE SISTER CONCERN AS REPOR TED IS CREDITED RECEIPTS ALSO WHICH ARE ALMOST 50% OF ITS TOTAL TURNOVER AS OBSERVED BY THE LEARNED AO. HE, THEREFORE, CONSIDERED 5% NET PROFIT ARE REASONABLE IN THE CASE OF THE INSTANT ASSESSEE FROM ALLOWABLE BUS INESS FOR THE PURPOSE OF EXEMPTION U/S 10AA WHICH WAS CALCULATED TO RS.21 ,83,472/- AND ADDED TO THE INCOME OF THE ASSESSEE. IN APPEAL, THE SAME WAS DELETED BY THE LEARNED CIT(A) RELYING UPON THE JUDGMENT PASSED BY THE CO-ORDINATE BENCH IN THE MATTER OF PRAMUKH INTERNATIONAL. HENCE THE INSTANT APPEAL BEFORE US. 9. AT THE TIME OF HEARING OF THE INSTANT APPEAL, IT WAS SUBMITTED BY THE LEARNED COUNSEL APPEARING FOR THE ASSESSEE THAT THE CASE IS SQUARELY COVERED BY THE JUDGMENT PASSED BY THE CO-ORDINATE B ENCH IN THE MATTER OF PRAMUKH INTERNATIONAL, SURAT-VS-DEPARTMENT OF IN COME TAX WHICH WAS FOLLOWED BY THE LEARNED CIT(A) WHILE ALLOWING T HE APPEAL PREFERRED BY THE ASSESSEE. HE THUS, RELIED UPON THE ORDER PAS SED BY THE FIRST APPELLATE AUTHORITY. ON THE CONTRARY, THE LEARNED D R FAILED TO CONTROVERT THE CONTENTION MADE BY THE ASSESSEES COUNSEL IN SU PPORT OF HIS CASE. ITA NOS.1228 & 2025/AHD/2017 THE DCIT/ACIT VS. M/S. CRYOGAS EQUIPMENT PVT. LTD. ASST.YEARS 2012-13 & 2013-14 - 8 - 10. HEARD THE RESPECTIVE PARTIES, PERUSED THE RELEV ANT MATERIALS AVAILABLE ON RECORDS. IT APPEARS FROM THE RECORDS T HAT WHILE DELETING DISALLOWANCE MADE BY THE LEARNED AO THE LEARNED CIT (A) OBSERVED AS FOLLOWS: 5.2. I HAVE CONSIDERED THE APPELLANT'S SUBMISSION AND THE AO'S OBSERVATIONS. THE GROUND NO.2 IS RELATED TO THE ADD ITION MADE BY THE AO AS PER PROVISIONS OF SEC.10AA(9) R.W.S 80IA(10). THE AO'S FINDING IS THAT A GROUP COMPANY OF THE APPELLANT COMPANY VIZ. M/S. IWI CRYOGENIC VAPORISATION SYSTEM (I) PVT. LTD. HAS SAME REGISTER ED OFFICE AND IS HAVING MANUFACTURING UNIT IN THE VICINITY OF THE AP PELLANT'S MANUFACTURING UNIT AND IT IS ALSO MANUFACTURING THE SAME TYPE OF PRODUCT. THE AO HAS COMPARED THE APPELLANT'S NET PR OFIT RATIO OF 23.97% WITH THE NET PROFIT RATIO OF 1.82% OF THE SI STER CONCERN AND THEN HAS ARRIVED AT A CONCLUSION THAT THE PROFIT SHOWN B Y THE APPELLANT IS EXCESSIVE AND HAS ACCORDINGLY RESTRICTED THE NET PR OFIT OF THE APPELLANT TO 5% FOR THE PURPOSE OF COMPUTING PROFIT IN RESPEC T OF ELIGIBLE BUSINESS FOR ALLOWING DEDUCTION U/S.10AA. 5.2.1. THE APPELLANT'S CLAIM IS THAT THERE IS NO BU SINESS TRANSACTION BETWEEN THE APPELLANT AND SISTER CONCERN, NEITHER T HERE IS ANY EVIDENCES TO SHOW THAT IT HAS ARRANGED ITS AFFAIRS IN A MANNE R TO INFLATE ITS PROFITS FROM ELIGIBLE BUSINESS. ACCORDINGLY, THE PROVISIONS OF SEC. 10AA(9) ARE NOT APPLICABLE. THE APPELLANT HAS ALSO RELIED UPON CERTAIN DECISIONS OF TRIBUNAL AS REPRODUCED ABOVE. THUS, PRIMARY CONDITI ON IN SEC.10AA(9) R.W.S. 80IA(10) ARE ABSENT IN THE PRESENT CASE. THE DECISION OF JURISDICTIONAL TRIBUNAL IN THE CASE OF M/S, PRAMUKH INTERNATIONAL (SUPRA) IS ALSO APPLICABLE TO THE FACTS OF THIS CAS E. HENCE, THE REDUCTION IN NET PROFIT OF ELIGIBLE BUSINESS MADE BY THE AO B Y INVOKING THIS SECTION IS DIRECTED TO BE DELETED AND THE AO IS DIRECTED TO ALLOW DEDUCTION U/S.10AA ON THE BASIS OF NET PROFIT REFLECTED IN P& L A/C. OF THE APPELLANT COMPANY. WE HAVE ALSO CONSIDERED THE ORDER PASSED BY THE CO- ORDINATE BENCH WHICH WAS BEFORE US. RELEVANT PORTION WHEREOF IS AS FOLLOWS: 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. SOLITARY GRIEVANCE OF THE REVENUE IN THIS A PPEAL IS AGAINST THE ITA NOS.1228 & 2025/AHD/2017 THE DCIT/ACIT VS. M/S. CRYOGAS EQUIPMENT PVT. LTD. ASST.YEARS 2012-13 & 2013-14 - 9 - ACTION OF LD. CIT(A) DELETING THE DISALLOWANCE U/S 10AA OF THE ACT ASST. YEAR 2007-08 AT RS. 1,42,85,423/- ON PROFITS EARNED FROM RUNNING THE UNIT UNDER SEZ. WE FIND THAT REVENUE HAS RAISED TWO GROUNDS WHICH ARE INTER CONNECTED AGAINST THE ORDER OF LD. CIT(A) WHE REIN IT HAS BEEN HELD THAT BOTH THE ALTERNATIVES NAMELY INVOKING OF PROVI SIONS OF SECTION 10AA(9) R.W.S. 80IA(10) OF THE ACT WAS NOT JUSTIFIE D ON THE PART OF ASSESSING OFFICER AND SECONDLY GOODS MANUFACTURED F ROM OUTSIDE LABOURERS ON JOB WORK BASIS ARE ALSO TO BE DEEMED A S MANUFACTURED GOODS BY UNITS RUNNING IN SEZ. WHILE EXAMINING THE FIRST ISSUE WE OBSERVE THAT LD. ASSESSING OFFICER HAS NOT OBJECTED TO THE ELIGIBILITY OF ASSESSEE TOWARDS DEDUCTION U/S 10AA OF THE ACT WHIC H UNDOUBTEDLY PROVES THAT ASSESSEE HAS COMPLIED WITH ALL THE BASI C CONDITIONS REQUIRED FOR CLAIMING DEDUCTION U/S 10AA OF THE ACT. THE ISS UE RAISED IS ONLY TOWARDS THE QUANTUM OF DEDUCTION U/S 10AA OF THE AC T. WE FIND THAT LD. ASSESSING OFFICER GATHERED INFORMATION RELATING TO GROSS PROFIT RATES AND NET PROFIT RATES OF OTHER ASSESSEES ENGAGED IN SIMILAR KIND OF BUSINESS ACTIVITIES RELATING TO MANUFACTURING AND E XPORT OF CUTTING AND POLISHED DIAMONDS AND OBSERVED GREAT VARIATION IN R ELATION TO GP AND NP RATES AS WELL AS OPERATING EXPENDITURE. ON THE B ASIS OF THESE STATISTICS OF LD. ASSESSING OFFICER WAS OF THE BELI EF THAT ASSESSEE INTENTIONALLY TRIED TO SHOW HUGE PROFITS IN ORDER T O FORM CAPITAL AS THE PROFITS ARE DEDUCTIBLE @ 100% FROM THE UNDERTAKING WORKING UNDER SEZ. IT WAS FOR THIS REASON THAT HE INVOKED THE PRO VISIONS OF SECTION 10AA(9) R.W.S. 80IA(10) OF THE ACT AND ACCORDINGLY ESTIMATED THE NP @ 2% OF THE TOTAL TURNOVER AS AGAINST 18.94% DECLARED BY THE ASSESSEE AND CALCULATED THE DEDUCTION U/S 10AA AT RS.16,86,5 90/-. ASST. YEAR 2007-08 7.1 WE FURTHER OBSERVE THAT THER E IS NO IOTA OF EVIDENCE PUT FORTH BY THE REVENUE WHICH INDICATES T HAT BOOK RESULTS ARE DEFECTIVE OR CERTAIN EXPENSES HAVE BEEN INCURRED OU TSIDE THE BOOKS OR EXCESS REVENUE HAS BEEN ACHIEVED FROM THE FOREIGN B UYERS. IT SEEMS THAT LD. ASSESSING OFFICER HAS MADE PRESUMPTION BY APPLY ING RESULTS OF OTHER INDUSTRIES/SISTER CONCERN ON AN ESTIMATE BASIS WITH OUT POINTING OUT ANY DEFECT IN THE BUSINESS TRANSACTION ENTERED BY THE A SSESSEE. 7.2 WE FURTHER FIND THAT IN THE CASE OF CIT VS. SCHMETZ INDIA (P) LTD . (2012) 26 TAXMANN.COM 336 (BOM) HAS HELD AS UNDER : - WITH REGARD TO THE FIRST ISSUE IT IS FOUND THAT THE TRIBUNAL HAS C ONSIDERED THE ENTIRE EVIDENCE AND ON FACTS COME TO THE CONCLUSION THAT T HE PROFITS EARNED BY KANDLA DIVISION OF THE ASSESSEE IS NOT ABNORMALLY H IGH DUE TO ANY ITA NOS.1228 & 2025/AHD/2017 THE DCIT/ACIT VS. M/S. CRYOGAS EQUIPMENT PVT. LTD. ASST.YEARS 2012-13 & 2013-14 - 10 - ARRANGEMENT BETWEEN THE ASSESSEE AND ITS GERMAN PRI NCIPAL. THE TRIBUNAL CORRECTLY HELD THAT EXTRAORDINARY PROFITS CANNOT LEAD TO THE CONCLUSION THAT THIS IS AN ARRANGEMENT BETWEEN THE PARTIES. THIS WOULD PENALIZE EFFICIENT FUNCTIONING. FURTHER, THE AUTHOR ITIES HAVE ALSO RECORDED A FINDING THAT THE INDUSTRIAL SEWING MACHI NE NEEDLES IMPORTED AND TRADED BY THE MUMBAI DIVISION ARE DIFFERENT FRO M THOSE MANUFACTURED AND EXPORTED BY (HE KANDLA DIVISION. C ONSEQUENTLY, THIS ALSO NEGATIVES ANY ARRANGEMENT BETWEEN THE PARTIES TO SHOW EXTRAORDINARY PROFITS IN RESPECT OF ITS KANDLA DIVI SION SO AS TO CLAIM DEDUCTION UNDER SECTION 10A . THESE ARE FINDINGS ONE OF FACT. THE REVENUE HAVE NOT BEEN ABLE TO SHOW THAT THE FINDING S ARE PERVERSE OR ARBITRARY. IN THE CIRCUMSTANCES, ISSUES RAISED BY T HE REVENUE DO NOT RAISE SUBSTANTIAL QUESTIONS OF LAW IN THE INSTANT F ACTS AND ARE, THEREFORE, DISMISSED. [PARA 8] 7.3 WE OBSERVE THAT THE CO-ORDI NATE BENCH, DELHI IN THE CASE OF A.T. KEARNEY INDIA (P) LTD. VS. ADDL . CIT, RANGE-1, NEW DELHI IN IT APPEAL NO.348(DELHI) OF 2013 FOR ASST. YEAR 2009-10 (2014) 50 TAXMANN.COM 26 (DELHI-TRIB) DEALT WITH SIMILAR I SSUE AND WHILE DECIDING THE SAME HAS HELD AS UNDER :- 11. ADVERTING TO THE FACTS OF THE EXTANT CASE, WE F IND THAT THE AO SIMPLY RELIED ON THE TP STUDY REPORT SUBMITTED BY THE ASSE SSEE TO FORM A BEDROCK FOR THE DISALLOWANCE OF THE PART OF THE AMO UNT OF DEDUCTION U/S 10A, WITHOUT FIRSTLY SHOWING THAT THERE EXISTED ANY ARRANGEMENT BETWEEN THE ASSESSEE AND ITS OVERSEAS RELATED PARTY , BY WHICH THE TRANSACTIONS WERE SO ARRANGED AS TO PRODUCE MORE TH AN THE ORDINARY PROFITS IN THE HANDS OF THE ASSESSEE. THE ASST. YEA R 2007-08 ASSESSMENT YEAR UNDER CONSIDERATION IS 2009-10. NEITHER THE PR OVISO TO SUB-SECTION (10) EXISTED AT THAT TIME, NOR SUCH A PROVISO CAN B E APPLIED AS WE ARE DEALING WITH AN INTERNATIONAL TRANSACTION AND NOT S PECIFIED DOMESTIC TRANSACTION. UNDER THESE CIRCUMSTANCES, WE ARE OF T HE CONSIDERED OPINION THAT THE IMPUGNED ORDER UPHOLDING THE INVOC ATION OF SUB-SEC. (10) OF SEC. 80-1A CANNOT BE COUNTENANCED TO THIS E XTENT. ERGO, IT IS HELD THAT THE ID. CIT(A) ERRED IN SUSTAINING THE DISALLO WANCE MADE BY THE ASSESSING OFFICER BY RESTRICTING THE AMOUNT OF DEDU CTION U/S 10 A OF THE ACT TO RS. 2.63 CRORE AS AGAINST RS. 8.22 CRORE CLAIME D BY THE ASSESSEE. THE IMPUGNED ORDER ON THIS ISSUE IS OVERTURNED AND IT IS DIRECTED TO ALLOW DEDUCTION AS CLAIMED. 8. NOW GOING INTO THE ASPECTS RAISED IN SECOND GROU ND AS TO WHETHER ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 10AA FOR GOO DS MANUFACTURED ITA NOS.1228 & 2025/AHD/2017 THE DCIT/ACIT VS. M/S. CRYOGAS EQUIPMENT PVT. LTD. ASST.YEARS 2012-13 & 2013-14 - 11 - FROM OUTSIDE SOURCE ON JOB WORK BASIS BY WAY OF SEN DING RAW MATERIAL FOR CUTTING AND POLISHING AND IN THE CASE OF SEZ, W E FIND THAT THERE ARE SOME PRACTICAL ASPECTS ATTACHED WITH THE SEZ. UNITS OF SPECIAL ECONOMIC ZONE ARE NORMALLY LOCATED LITTLE FAR FROM THE MAIN CITY WHICH HAPPENS TO BE SO IN THE CASE OF ASSESSEE WHERE THE SEZ WAS LOCATED AT 20-22 KMS. AWAY FROM SURAT CITY. IT IS WELL EVIDENT THAT BUSINESS IS GENERALLY CENTRED IN THE MAIN TOWN WITH SKILLED LAB OURERS HAVING THEIR SMALL PLACE OF BUSINESS. IN THE CASE OF SEZ UNITS W HEN THE ENTREPRENEURS COME ACROSS SUCH A SITUATION WHERE THE EXPORT ORDER S HAVE TO BE MET BEFORE A PARTICULAR DEAD LINE AND THE STAFF AVAILAB LE IN THE UNIT MAY NOT BE SUFFICIENT TO COPE UP WITH SUCH A SITUATION, THE N THE ONLY OPTION AVAILABLE WITH THE ASSESSEE IS TO SEND THE RAW MATE RIAL TO OUTSIDE LABOUR PARTIES FOR GETTING THEM MANUFACTURED IN A FINISHED FORM. IT IS ALSO KNOWN THAT THE SEZ IS A CUSTOM BOUND AREA AND EVERY MOVEMENT OF GOODS/ MATERIAL/ASSET HAS TO PASS THROUGH THE CHECK OF OFFICER OF THE CENTRAL EXCISE AND CUSTOMS DEPARTMENT DEPUTED AT TH E GATES AND THE DETAILS OF SUCH GOODS/RAW MATERIAL/ASSET ARE ENTERE D THEREIN. THEREFORE, HAD THERE BEEN ANY VIOLATION OF SEZ RULES THEN SUCH MOVEMENT WOULD HAVE ASST. YEAR 2007-08 BEEN RESTRICTED. FURTHER IN ORDER TO EXAMINE THIS ASPECT THAT WHETHER THE GOODS WHICH ARE MANUFA CTURED ON JOB WORK BASIS ARE COVERED UNDER THE MANUFACTURING ACTIVITIE S. LD. AR HAS RELIED ON THE DECISION OF THE TRIBUNAL (DELHI) IN THE CASE OF RAJIV BHATNAGAR VS. DCIT ITA NO.1026/DEL/2011 WHEREIN SIMILAR ISSUE HAS BEEN DEALT WITH AND WHILE DECIDING THE ISSUE IN FAVOUR OF THE ASSESSEE THE CO- ORDINATE BENCH VIDE ITS ORDER DATED 17.12.2012 HAS OBSERVED AS UNDER :- '12. AFTER HAVING CONSIDERED THE FACTS, MATERIAL ON RECORD AND OTHER RELEVANT DETAILS, WE FIND THAT ALL THE CONDITIONS T O QUALIFY FOR DEDUCTION U/S 80IB OF THE ACT IS FOUND TO HAVE BEEN FULFILLED BY THE ASSESSEE, INASMUCH AS, FIRST CONDITIONS OF EMPLOYING 10 OR MO RE LABOUR WHEN USE OF POWER IS NOT DISPUTED HAS BEEN FULFILLED BECAUSE COURTS HAVE HELD THAT CONTRACT LABOUR ALSO QUALIFIES FOR DEDUCTION AS ENV ISAGED UNDER RELEVANT PROVISIONS AND USEFUL REFERENCE CAN BE MADE BY THE DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. PRITHVIRAJ BHOORCHAND , 280 ITR 94, HEAD NOTES OF WHICH ARE AS UNDER: INDUSTRIAL UNDERTAKING- SPECIAL DEDUCTION UNDER SECTION 801- CONDITION PRECEDENT ITA NOS.1228 & 2025/AHD/2017 THE DCIT/ACIT VS. M/S. CRYOGAS EQUIPMENT PVT. LTD. ASST.YEARS 2012-13 & 2013-14 - 12 - -EMPLOYMENT OF SPECIFIED NUMBER OF EMPLOYEES-WORKER S ENGAGED ON CONTRACT LABOUR BASIS - FINDING THAT ASSESSEE CONTR OLLED THE WORK AND THE MANNER OF DOING IT-WORKERS WERE EMPLOYEES FOR P URPOSES OF SECTION 80-1 -LT. ACT, 1961, S.80-1'. SIMILARLY, IT IS ALSO SETTLED POSITION OF LAW THAT OUTSOURCING OF SOME OF THE PROCESSES WILL NOT DISQUALIFY THE ASSESSEE FROM CLAIMING OR ALLOWING DEDUCTION IF END PRODUCT IS OTHERWISE ELIGIBLE FOR DEDUCTION. SO FAR AS DEDUCTION U/S 80IB OF MANUFACTURING OF CARD BOARD B OXES FROM KRAFT PAPER IS CONCERNED, IT IS SETTLED LAW THAT TRANSFOR MING IN THE CORRUGATED SHEETS AFTER HAVING TRANSFORMED IN THE SHAPE OF A B OX AND THE BOX IS AGAIN IN A FLAT POSITION FOR EASY TRANSPORTATION WH EN FLAT POSITION PAPER CORRUGATED BOXES ARE THE FINAL PRODUCTS WHICH IS EL IGIBLE FOR DEDUCTION AND OUR THIS VIEW CAN BE FORTIFIED BY HON'BLE MADRA S HIGH COURT DECISION IN THE CASE OF CIT VS. M/S ZAINAB TRADING PVT. LTD . IN TAX CASE APPEAL NOS.1204, 1205 & 1206 AND AMP 1207 OF 2010 D ATED 7TH FEBRUARY, 2011 IN WHICH IT HAS BEEN HELD AS UNDER: 'THE REVENUE HAS COME FORWARD WITH THESE APPEALS AN D SEEKS TO RAISE THE FOLLOWING QUESTION OF LAW AS SUBSTANTIAL QUESTI ON OF LAW: & QUOT;E : WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE APPELLATE TRIBUNAL WAS RIGHT IN HOLDING THAT THE ASSESSEE IS ENTITLED TO DEDUCTION U/S 80IB OF THE ACT, TREATING THE PRODUCTION OF COR RUGATED BOXES FROM KRAFT SHEETS AS MANUFACTURE FOR THE PURPOSE OF SECT ION 80IB OF THE ACT, IS VALID? ASST. YEAR 2007-08 2. TO APPRECIATE THE STAND OF THE APPELLANT, IT IS NECESSARY TO REFER TO THE BRIEF FACTS OF THE CASE. THE RESPONDENT/ASSESSEE CO MPANY CLAIMS THAT IT IS ENGAGED IN THE ACTIVITY OF MANUFACTURING OF PAPE R CORRUGATED BOXES AND ON THAT BASIS CLAIMED DEDUCTION UNDER SECTION 80IB OF THE INCOME- TAX ACT, ON THE PROFITS DERIVED IN ITS BUSINESS. AC CORDING TO THE RESPONDENT/ASSESSES, IT PROCURES PAPER CORRUGATED S HEETS OF DIFFERENT SIZES, WHICH IS ITS RAW MATERIAL, PUT THEM INTO THE DESIGNED MACHINES FOR CHISELING THEM AT THE REQUIRED PLACES IN ORDER TO F OLD THOSE SHEETS AND PIN THEM AT THE FOLDED POINTS AND AFTER PINNING AT THE FOLDED POINTS AND AFTER THE SHEET GOT TRANSFORMED IN THE SHAPE OF A B OX, THE BOX IS AGAIN KEPT IN A FLAT POSITION FOR EASY TRANSPORTATION. TH AT FLAT POSITIONED PAPER CORRUGATED BOXES ARE THE FINAL PRODUCTS OF THE RESP ONDENT ASSESSEE. ITA NOS.1228 & 2025/AHD/2017 THE DCIT/ACIT VS. M/S. CRYOGAS EQUIPMENT PVT. LTD. ASST.YEARS 2012-13 & 2013-14 - 13 - 3. ACCORDING TO THE APPELLANT, SINCE THE CORRUGATED SHEET IN THE PROCESS OF BEING FOLDED INTO A BOX, IT HAS NOT LOST ITS ORI GINAL CHARACTERISTICS OF CORRUGATED SHEET, NO MANUFACTURING ACTIVITY HAD TAK EN PLACE AND THEREFORE, THE INGREDIENTS OF SECTION 80IB OF THE ACT, ARE NOT ATTRACTED. 4. THE COMMISSIONER OF INCOME-TAX (APPEALS) HOWEVER DIFFERED FROM THE ASSESSING AUTHORITY AND TOOK THE VIEW THAT THE CORRUGATED SHEETS ONCE ARE SHAPED INTO CORRUGATED BOXES, THAT WOULD A MOUNT TO A 'MANUFACTURING ACTIVITY* AND THEREFORE, THE RESPOND ENT/ASSESSEE WAS ENTITLED FOR DEDUCTION UNDER SECTION 801B OF THE ACT. THE COMMISSIONER OF INCOME- TAX (APPEALS) THEREFORE DIRECTED THE ASS ESSING OFFICER TO ASCERTAIN THE EXACT QUANTUM OF DEDUCTION AFTER MAKI NG PROPER VERIFICATION TO GRANT THE RELIEF. 5. THE TRIBUNAL ALSO TOOK THE SAME VIEW AND HELD TH AT THE CONVERSION OF CORRUGATED SHEETS INTO BOXES WOULD AMOUNT TO 'MANUF ACTURE' HAVING NOTED THE NATURE OF ACTIVITY OF THE RESPONDENT/ASSE SSEE, WHICH DISCLOSE THAT THE PLAIN CORRUGATED SHEETS ARE PUT INTO THE D ESIGNING MACHINE IN ORDER TO CHISEL THEM INTO DIFFERENT SHAPES AND PIN THEM AT THE FOLDED POINTS TO CONVERT THE PLAIN SHEETS INTO CORRUGATED BOXES. 6. WE ARE ALSO CONVINCED THAT SUCH AN ACTIVITY OF T RANSFORMING THE PLAIN CORRUGATED SHEETS INTO A DIFFERENT PRODUCT OF BOXES , THOUGH TO GAIN SPACE FOR TRANSPORTATION, SUCH BOXES ARE KEPT IN A FOLDED POSITION, ONE CANNOT SAY THAT THE BOXES CONTINUE TO RETAIN ITS OR IGINAL CHARACTERISTICS OF CORRUGATED SHEETS. THEREFORE, THERE IS NO SCOPE TO TAKE A DIFFERENT VIEW THAN WHAT HAS BEEN STATED BY THE COMMISSIONER OF INCOME-TAX (APPEALS), AS CONFIRMED BY THE TRIBUNAL. SUCH DETER MINATION CAME TO BE MADE BY BOTH THE AUTHORITIES BASED ON THE FACTS PLA CED BEFORE THEM AND WITH REFERENCE TO WHICH, WE DO NOT FIND ANY SERIOUS LEGAL LACUNA, THERE IS NO SCOPE TO INTERFERE WITH THE SAME, INASMUCH AS THERE IS NO QUESTION OF LAW, MUCH LESS SUBSTANTIAL QUESTION OF LAW INVOL VED. ' ASST. YEAR 2007-08 14. SINCE ALL THE CONDITIONS LAID DOWN UNDER THE RE LEVANT PROVISIONS HAVE BEEN COMPLIED WITH, THEREFORE, WE ARE OF THE V IEW THAT THE ACTION OF THE AUTHORITIES BELOW IN NOT ALLOWING THE CLAIM OF THE ASSESSEE U/S 801B IS UNWARRANTED AND UNCALLED FOR. AS SUCH, WHILE ACC EPTING THE APPEAL OF ITA NOS.1228 & 2025/AHD/2017 THE DCIT/ACIT VS. M/S. CRYOGAS EQUIPMENT PVT. LTD. ASST.YEARS 2012-13 & 2013-14 - 14 - THE ASSESSEE, WE DIRECT TO GRANT DEDUCTION U/S 801B OF THE ACT AS CLAIMED BY THE ASSESSEE.' 9. WE FURTHER OBSERVE THAT LD. AR HAS RELIED ON THE DECISION OF HON. BOMBAY HIGH COURT IN THE CASE OF CIT VS. ANGLO FRENCH DRUG CO.(EASTERN) LTD .191 ITR 0092 (BOM), WHEREIN IT HAS BEEN HELD AS UNDER :- 'IT IS NOT NECESSARY THAT THE MANUFACTURING COMPANY MUST MANUFACTURE THE GOODS BY ITS OWN PLANT AND MACHINERY AT ITS OWN FACTORY. IF, IN SUBSTANCE, THE MANUFACTURING COMPANY HAS EMPLOYED A NOTHER COMPANY FOR GETTING THE GOODS MANUFACTURED BY IT UNDER ITS OWN SUPERVISION OR CONTROL, THE ASSESSEE CAN BE CONSIDERED AS A COMPAN Y ENGAGED IN MANUFACTURING OF GOODS AND, THUS, AN INDUSTRIAL COM PANY. IT IS NOT ABSOLUTELY NECESSARY THAT THE ASSESSEE MUST DEPUTE THE SUPERVISORY STAFF OR EXERCISE DIRECT SUPERVISION OVER THE MANUFACTURI NG PROCESS. IT IS SUFFICIENT IF, ON AN OVERALL VIEW OF THE MATTER, IT IS FOUND THAT IT WAS THE ASSESSEE-COMPANY WHICH WAS THE REAL MANUFACTURER AN D THE ASSESSEE HAD MERELY EMPLOYED THE AGENCY OF SOMEONE ELSE THRO UGH WHOM THE GOODS WERE CAUSED TO BE MANUFACTURED. IT IS ALSO NO T NECESSARY THAT THE ASSESSEE MUST PAY THE WAGES OF THE WORKERS EMPLOYED IN THE MANUFACTURING PROCESS.-- CIT VS. NEO PHARMA PVT. LTD . (1982) 28 CTR (BOM) 223 : (1982) 137 ITR S79 (BOM) : TC24R.210 FO LLOWED.' 10. WE ALSO OBSERVE THAT HON. CALCUTTA HIGH COURT I N THE CASE OF ADDL.CIT VS. A. MUKHERJEE & CO. (P) LTD . 113 ITR 0718 (CAL) HAS HELD AS UNDER :- THE ARGUMENT IS THAT UNLESS AN ASSESSEE OWNS A MANU FACTURING PLANT, HE CANNOT BE A MANUFACTURER AND SIMILARLY UNLESS HE HI MSELF DOES THE BINDING OR PACKING HE CANNOT BE A MANUFACTURER. IN ORDER THAT A PUBLISHER OF BOOKS SHOULD BE A MANUFACTURER OF BOOK S IT IS WHOLLY UNNECESSARY FOR HIM EITHER TO BE AN OWNER OF A PRIN TING PRESS OR TO BE A BOOK-BINDER HIMSELF. A PAPER IS NOT A BOOK, THOUGH IT IS PRINTED ON PAPERS. A PUBLISHER MAY GET THE BOOKS PRINTED FROM ANY PRINTER BUT THE PRINTER IS NOT THE MANUFACTURER BUT A MERE CONTRACT OR. THE FINDINGS OF THE TRIBUNAL CONCLUSIVELY SHOW THAT THE ASSESSEE WA S CARRYING ON THE ACTIVITY OF MANUFACTURING AND ASST. YEAR 2007-08 AL SO OF PROCESSING OF BOOKS WHICH ARE ALSO GOODS.-- CIT VS. CASINO (P) LTD . (1973) 91 ITR 289 ITA NOS.1228 & 2025/AHD/2017 THE DCIT/ACIT VS. M/S. CRYOGAS EQUIPMENT PVT. LTD. ASST.YEARS 2012-13 & 2013-14 - 15 - (KER) : TC24R.272#1 CONCURRED WITH; CIT VS. COMMERCIAL LAWS OF INDIA PVT LTD . (1977) 107 ITR 822 (MAD) : TC24R.246 DISSENTED FR OM. 11. RESPECTFULLY FOLLOWING THE JUDGMENT OF HON. BOM BAY HIGH COURT AND THAT OF CALCUTTA HIGH COURT AND ALSO THE DECISI ON OF THE CO- ORDINATE BENCH AND IN VIEW OF OUR ABOVE DISCUSSION WE ARE OF THE CONSIDERED VIEW THAT ASSESSEE IN THE COURSE OF RUNN ING ITS UNDERTAKING IN SEZ IS ALLOWED TO SEND RAW MATERIAL OUTSIDE THE SEZ AREA FOR GETTING IT IN A FINISHED FORM ON JOB WORK BASIS THROUGH OUT SIDE LABOURERS AND FURTHER THIS ACTIVITY OF GETTING GOODS MANUFACTURED THROUGH OUTSIDE SOURCES IS DULY COVERED UNDER THE MANUFACTURING ACT IVITIES. 12. WE HAVE ALSO COME ACROSS THE ASSESSMENT ORDERS U/S 143(3) OF THE ACT IN THE CASE OF ASSESSEE FOR ASST. YEARS 2008-09 , 2009-10 & 2010-11 AND OBSERVE THAT NO DISALLOWANCE HAS BEEN MADE IN T HE DEDUCTION CLAIMED U/S 10AA OF THE ACT AND GP RATES OF 19.92%, 17.84% AND 16.46% AND NP RATES OF 14.47%, 13.64% AND 13.73% RE SPECTIVELY HAVE BEEN ACCEPTED BY THE ASSESSING OFFICER AND NO PROPO RTIONATE DISALLOWANCE HAS BEEN MADE FOR PROFITS EARNED FROM GOODS MANUFACTURED FROM OUTSIDE SOURCE ON JOB WORK BASIS. 13. SUMMARIZING BOTH THE ISSUES WE ARE OF THE VIEW THAT LD. ASSESSING OFFICER WAS NOT JUSTIFIED IN INVOKING THE PROVISION S OF SECTION 10AA(9) OF THE ACT AS THERE WAS NO MATERIAL EVIDENCE PUT ON RE CORD AND A SPECIFIC FINDING TO WORK OUT THE BASIS TO ESTIMATE REASONABL E PROFITS BY VEHEMENTLY APPLYING NET PROFIT RATE AT 2% AS ASST. YEAR 2007-08 AGAINST 18.94% DECLARED BY THE ASSESSEE WITHOUT APPRECIATIN G THE FACTS THAT BUSINESS HOUSE HAVING A SIMILAR TYPE OF ACTIVITY CA NNOT END UP AT A SIMILAR LEVEL OF GP/NP AS MUCH DEPENDS ON THE BUSIN ESS STRATEGY, QUALITY OF GOODS SOLD, RATES NEGOTIATED WITH THE BU YERS AND OPTIMUM UTILIZATION OF THE RESOURCES INCLUDING THE EMPLOYEE S AND MACHINES. WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDIN G OF LD. CIT(A). WE UPHOLD THE SAME. ACCORDINGLY, GROUND NO.1 IS DISMIS SED. HAVING HEARD THE LEARNED COUNSEL APPEARING FOR THE PARTIES, HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE PARTICULARLY THE JUDGMENT PASSED BY THE CO-ORDINATE BENCH, WE FIND N O INFIRMITY IN THE ORDER PASSED BY THE LEARNED CIT(A) IN DELETING THE REDUCTION IN NET PROFIT ITA NOS.1228 & 2025/AHD/2017 THE DCIT/ACIT VS. M/S. CRYOGAS EQUIPMENT PVT. LTD. ASST.YEARS 2012-13 & 2013-14 - 16 - OF ALLOWABLE BUSINESS AS MADE BY THE LEARNED AO WRO NGLY INVOKING THE PROVISION OF SECTION 10AA(9) R.W.S. 80IA(10) OF THE ACT. WE THUS CONFIRM THE SAME. HENCE, REVENUES GROUND OF APPEAL IS FOUND TO BE DEVOID OF ANY MERIT AND THUS DISMISSED. ITA NO.2025/AHD/2017 FOR A.Y. 2013-14: 11. IN THIS APPEAL ISSUES ARE IDENTICAL TO THAT OF THE ISSUES ALREADY BEEN DEALT WITH BY US IN ITA NO.1228/AHD/2017 FOR A.Y. 2 012-13 AND IN THE ABSENCE OF ANY CHANGED CIRCUMSTANCES THE SAME SHALL APPLY MUTATIS MUTANDIS. HENCE, THE APPEAL PREFERRED BY THE REVENU E IS ALSO DISMISSED. 12. IN THE COMBINED RESULT, BOTH THE REVENUES APPE ALS ARE DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 01 / 0 7 /201 9 SD/- SD/- ( PRAMOD KUMAR) ( MS. MADHUMITA ROY ) VICE PRESIDENT JUDICIAL MEMBER AHMEDABAD; DATED 01/07/2019 PRITI YADAV, SR.PS ITA NOS.1228 & 2025/AHD/2017 THE DCIT/ACIT VS. M/S. CRYOGAS EQUIPMENT PVT. LTD. ASST.YEARS 2012-13 & 2013-14 - 17 - / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. () / THE CIT(A)-1, VADODARA. 5. , ! ', #$%% / DR, ITAT, AHMEDABAD 6. &' () / GUARD FILE. / BY ORDER, //TRUE COPY// / (DY./ASSTT.REGISTRAR) !, #$ / ITAT, AHMEDABAD 1. DATE OF DICTATION 10.06.2019 (DICTATION PAGES 9) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 12.06.2019 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S 14.06.2019 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S. 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER