Industrial undertaking: Deduction u/s. 80-IA/80-IB: Computation: A.Ys. 1997-98 to 1999-00, 2003-04 and 2004-05: Assessee printing and publishing magazines: Four units: One unit doing job work of printing for publishing unit: Expenses attributable to publishing unit not to be allocated to printing unit for computation of the amount deductible u/s. 80-IA/80-IB:

The assessee was engaged in the business of printing and publishing magazines. It had four units. One unit was doing the job work of printing for the publishing unit. The assessee had maintained separate accounts in respect of which deduction u/s. 80-IA/80-IB was claimed. Relying on sections 80-IA(8), (9) and (10), the Assessing Officer held that profits of the printing unit are required to be recomputed by allocating to the printing unit the expenses relating to the cost of paper and other expenses of the publishing unit inasmuch as section 80-IA(7) requires that the profits from the eligible business must be computed as if the eligible business was the only source of income for the assessee. Accordingly, he recomputed the profits of the printing unit and the amount deductible u/s. 80-IA/80-IB. The Commissioner (Appeals) and the Tribunal allowed the assessee’s claim.

On appeal by the Revenue, the Delhi High Court upheld the decision of the Tribunal and held as under:

“i) There was no material to support the view that the job work charges charged by the printing units from the publishing unit were not at market rates. In the absence of any defect or manipulation found by the Assessing Officer in the books maintained for the printing unit and in the absence of any material to indicate that the amounts charged by the printing unit from the publishing unit was not at comparable market rates, it would not be open for the Revenue to disregard the profits of the printing unit as disclosed by the assessee only on the basis that the profits were significantly higher than the profits earned by the assessee from other undertakings.

ii) The printing unit carried on job work of printing only and the expenses attributable to the publishing unit which relate to the publishing business could not be allocated to the printing unit. Only those expenses which related to the printing work carried on by the assessee in the printing unit were liable to be deducted from the job charges to arrive at the profits eligible for deduction u/s. 80-IA/80-IB, as the case may be.”