Commissioner Of Income Tax v. M/S Delhi Press Patra Prakashan

THE HIGH COURT OF DELHI AT NEW DELHI % Judgment delivered on: 31.05.2013 +ITA 1732/2006 COMMISSIONER OF INCOME TAX versus ....Appellant M/S DELHI PRESS PATRA PRAKASHAN .…Respondent ITA 1733/2006 COMMISSIONER OF INCOME TAXversusM/S DELHI PRESS PATRA PRAKASHANITA 1734/2006COMMISSIONER OF INCOME TAXversus M/S DELHI PRESS PATRA PRAKASHAN ITA 451/2010 COMMISSIONER OF INCOME TAX-IVversus M/S DELHI PRESS PATRA PRAKASHAN LTD ..... Appellant..... Respondent..... Appellant..... Respondent..... Appellant ..... Respondent ITA 779/2010 COMMISSIONER OF INCOME TAX-IV versus M/S DELHI PRESS PATRA PRAKASHAN LTD ..... Appellant..... 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 CORAM:-HON’BLE MR JUSTICE BADAR DURREZ AHMEDHON’BLE MR JUSTICE VIBHU BAKHRU JUDGMENT VIBHU BAKHRU, J 1.These are appeals which have been preferred by the revenue under Section260A of the Income Tax Act, 1961 (hereinafter referred to as the “Act”). AppealNos. ITA 1732/2006, 1733/2006 & 1734/2006, are against a common order dated24.03.2006 passed by the Income Tax Appellate Tribunal with respect to thededuction available to the assessee under section 80-IA of the Act in relation toassessment years 1998-99, 1997-98, & 1999-2000 respectively. Appeal Nos. ITA451/2010 & 779/2010 are with respect to deduction available to the assesseeunder 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 computationof profits derived from an industrial undertaking owned by the assessee, whichare eligible for deduction under section 80-IA or 80-IB of the Act as the case maybe and thus, all the appeals have been heard together. 3.The assessee is engaged in the business of publication and printing ofnewspapers and periodicals. The assessee company was established in 1973 andcarried on its publication business. Subsequently, the assessee established twoother undertakings at Sahibabad (Uttar Pradesh), namely Unit Nos. 2 & 3. UnitNos. 2 & 3 were involved exclusively in printing. In the year 1994, the assesseeestablished another undertaking at Faridabad, namely Unit no. 4. Unit no. 4 wasestablished by importing plant and machinery from United States of America andGermany 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 used for any other purpose prior to their use in unit no. 4. No part of themachinery or equipment of Unit No. 4 was acquired by transfer from any of theother units of the assessee. 4.During the previous year, relevant to the assessment year 1997-98, theassessee carried on printing work on job work basis for Unit no. 1 as well as forother entities. The assessee charged 77 paise per sheet as printing charges forprinting work done for Indian Express Newspapers Ltd. and 70 paise per sheetfor printing done for Unit no. 1. It is not in dispute that Indian ExpressNewspapers Ltd. is an independent entity unconnected with the assessee and thetransactions entered into between the assessee and Indian Express NewspapersLtd. was on arms length basis. The assessee maintained separate books ofaccounts for Unit no. 4. Unit no. 4 did not purchase any paper but was suppliedpaper by Unit no. 1 or other entities for whom the Unit carried on printingactivity. Unit no. 4 only purchased ink and certain other consumables which wereutilized for carrying on the printing activity. 5.The assessee claimed deduction under Section 80-IA of the Act withrespect to the profits and gains derived from Unit no. 4 as the same qualified as anew industrial undertaking for the purpose of Section 80-IA of the Act. TheAssessing Officer examined the profit and loss account of the assessee as a wholeas well as the statement of profits for Unit no. 4. It was found that whereasassessee had earned a profit margin of 62.31% in respect of Unit no. 4, theoverall margin of the assessee was only 9.92%. The Assessing Officer concludedthat this represented a serious inconsistency in drawing up the accounts. Onfurther examination, the Assessing Officer found that the profit and loss accountsfor Unit no. 4 neither disclosed any expense on account of paper consumed norrevenues from advertisements, which were received by the assessee. The 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 AssessingOfficer applied the gross profit margin as disclosed by the assessee’sconsolidated 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 jobwork basis for unit no. 1 was ` 6,49,55,985/-, the profit on the same wascomputed by the Assessing Officer at ` 64,95,598/-. The profit margin, asdisclosed 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 wasaccepted. The assessee had claimed profit of ` 5,00,57,879 as profits eligible fordeduction under Section 80-IA of the Act in its return and the deduction availableunder 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 theassessee, the Assessing Officer calculated the deduction available under Section80-IA of the Act at Rs.49,93,661/-. 6.The assessee preferred an appeal before the CIT (Appeals) against theassessment order dated 15.03.2000. It was contended by the assessee that in thefacts of the case, there was no occasion for the Assessing Officer to apply theprovisions of Section 80-IA(8) of the Act. Section 80-IA(8) of the Act would beapplicable only where goods were transferred from an eligible business to anyother business of the assessee and the consideration recorded was not at marketvalues. In the present case, admittedly Unit no. 4 was charging higher rate forprinting from third parties than what was being charged from Unit no. 1. In thesecircumstances, there would be no plausible reason to further reduce the profitmargin. The reduction in the eligible profits from unit no. 4, by the AssessingOfficer, was contested by the assessee as being without any basis. 7.The CIT (Appeals) allowed the appeal of the assessee vide its order dated31.01.2001 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 byunit no. 4 on account of the following reasons:- a) the speed of the machineries installed in unit no. 4 were 100times faster than the machines installed in unit no. 1;times faster than the machines installed in unit no. 1; b) the rate of wages payable by unit no. 4 were also lower as theworkers were new appointees.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 anyinstance of the assessee inflating the profits either by charging higher rates orsuppressing expenditure and in absence of any such instance of manipulation, theAssessing Officer was not correct in re-computing the profits on the basis ofestimation. a) the speed of the machineries installed in unit no. 4 were 100times faster than the machines installed in unit no. 1;times faster than the machines installed in unit no. 1; b) the rate of wages payable by unit no. 4 were also lower as theworkers were new appointees.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 anyinstance of the assessee inflating the profits either by charging higher rates orsuppressing expenditure and in absence of any such instance of manipulation, theAssessing Officer was not correct in re-computing the profits on the basis ofestimation. 9.In respect of the subsequent assessment year 1998-99, the assessee filed itsreturn 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 inprinting on job work basis and deduction under Section 80-IA of the Act was notavailable with respect to industrial undertaking carrying on its business on jobwork basis as the conditions under Section 80-IA(2) of the Act were not fulfilledby Unit no. 4. The Assessing Officer further held that even assuming that theprofits 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 and unit no. 4 were intermixed and, therefore, all expenses of the assessee wererequired to be taken into account while determining the profits of Unit no. 4. TheAssessing Officer rejected the contention of the assessee that Unit no. 4 wascarrying on job work for Unit no. 1 for which, it was paid charges at rates whichwere comparable to the market rate for such job work. It was contended by theassessee that since revenue earned by unit no. 4 was only job work charges, thecost of raw material or other expenses could not be deducted from the revenueearned by Unit no. 4 as such expenses were not incurred by Unit no. 4. TheAssessing Officer rejected this contention by holding that in the event Unit no. 4was treated as carrying on job work then the benefit of Section 80-IA of the Actwas not available to the unit and if the benefit of Section 80-IA of the Act was tobe allowed then the same could only be on recomputed profits after taking intoaccount expenses incurred by Unit No. 4. The Assessing Officer re-computed theprofits derived from Unit no. 4 by reallocating the expenditure incurred by theassessee. 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 wascomputed 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 theCIT (Appeals). The CIT (Appeals) allowed the appeal of the assessee vide itsorder dated 23.08.2001.The CIT (Appeals) held that the issues raised weresimilar to those that were considered in his order dated 13.01.2001 in respect ofthe 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 alsosimilar. 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 assessee. The assessment order dated 20.03.2002 was carried in appeal by theassessee and the same was allowed by CIT (Appeals) by its order dated28.06.2002. 11.The facts in relation to the subsequent assessment year 1999-00 are alsosimilar. 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 assessee. The assessment order dated 20.03.2002 was carried in appeal by theassessee and the same was allowed by CIT (Appeals) by its order dated28.06.2002. 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, whichwere disposed of by the Tribunal by its order dated 24.03.2006. The only groundurged by the revenue while contesting the orders passed by CIT (Appeals) waswith regard to allowing the deduction under Section 80-IA of the Act to theassessee on the basis of the book results of Unit no. 4. The Tribunal held that thenature of business of Unit no. 1 & Unit no. 4 of the assessee were entirelydifferent and there was no justifiable reason for the Assessing Officer to comparethe profit margin of the two units. The Tribunal further noted that the assesseehad maintained separate books in respect of unit no. 4 and no material or specificdefects had been pointed out by the Assessing Officer in the said books whichwere produced before him for verification during the course of the assessmentproceedings. The Tribunal accepted the view of the assessee that the expenditureon marketing and distribution of the publications was required to be done by thepublishing house i.e. Unit no. 1 only and the printing business of unit no. 4 wasentitled to receive job work charges only. The profit margin shown by theassessee with respect to Unit no. 4 was much higher than the profit margin shownin respect of other units. The Tribunal held that profits could not be re-computedmerely on the basis that the profit margin of Unit no. 4 was higher and speciallywhere 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 and loss account prepared by the assessee with respect to Unit no. 4 was rejectedby the Assessing Officer on the ground that the assessee had shown huge profits.The Assessing Officer thus reallocated the expenses and re-computed the profitsof 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 ofthe Act. The Assessing Officer held that no deduction under section 80-IB of theAct 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 inthe costs incurred by Unit no. 4. The Assessing Officer relied on the provision ofsection 80-IB(5), 80-IB(8) and 80-IB(10) of the Act to hold that the accountsrelating to Unit no. 4 were required to be drawn up as if the income from theeligible business was the only business and thus expenses incurred by theassessee in packaging and forwarding as well as for purchase of paper wererequired to be allocated to Unit No. 4. 14.The assessee preferred an appeal before the CIT (Appeals) which wasallowed by CIT (Appeals) vide its order dated 27.06.2006. The Departmentpreferred an appeal before the Tribunal, inter alia, challenging the order of theCIT (Appeals) in directing the Assessing Officer to allow the deduction underSection 80-I of the Act. The Tribunal found that the issues raised in the appealwith regard to deduction under Section 80-IB of the Act were settled in favour ofthe assessee by its earlier decisions and rejected the appeal. 14.The assessee preferred an appeal before the CIT (Appeals) which wasallowed by CIT (Appeals) vide its order dated 27.06.2006. The Departmentpreferred an appeal before the Tribunal, inter alia, challenging the order of theCIT (Appeals) in directing the Assessing Officer to allow the deduction underSection 80-I of the Act. The Tribunal found that the issues raised in the appealwith regard to deduction under Section 80-IB of the Act were settled in favour ofthe 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 theAssessing officer reallocated the expenses and re-computed the profits of Unitno. 4 and rejected the profit and loss account prepared by the assessee withrespect to Unit no. 4 on the ground that the assessee had shown huge profits. The Assessing officer disallowed the deduction of ` 2,35,58,698/-, claimed by theassessee under Section 80-IB of the Act, on the ground that the cost of the rawmaterial and forwarding charges were not considered while calculating the profitsof Unit no. 4. The assessee preferred an appeal before the CIT (Appeals) whichwas allowed by CIT (Appeals) by his order dated 31.10.2007. The appealpreferred by the Revenue, before the Tribunal, inter alia, challenging the order ofthe CIT (Appeals) was dismissed on the ground that the issues raised in theappeal with regard to deduction under Section 80-IB of the Act were settled infavour of the assessee by his earlier decisions. 16.This Court admitted the following questions for consideration in respect ofITA Nos.1732/2006, 1733/2006 and 1734/2006 in relation to the assessmentyears 1998-1999, 1997-98 and 1999-2000 respectively. 1.WhetherITATwascorrectindirectingtheAssessing Officer to allow deduction under Section80-IA of the Act of the Act to the assessee only onthe book results of Unit No.4 i.e. the printing house?2.Whether ITAT was correct in law in allowingdeduction under Section 80-IA of the Act to theassessee on the profits of printing house withoutconsideringtheexpenditureincurredbythepublishing house on raw material as well asmarketinganddistributionincurredbythepublishing house? 17.In ITA No.779/2010, the following question of law was framed:- Whether the ITAT was correct in law and on facts inholding that the assessee was entitled to deductionunder Section 80-IB of the Act relying on the ordersof earlier years? 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 inholding that the assessee was entitled under Section80-IB of the Act of the Income Tax Act relying onthe order of earlier years?holding that the assessee was entitled under Section80-IB of the Act of the Income Tax Act relying onthe order of earlier years? 2.Whether the order of the Income Tax AppellateTribunal, which is a final fact finding authority, isnot vitiated in law as it has not gone through thefacts properly and just reproduced and relied uponthe order of the CIT(A) without appreciating thematerial on record for making additions?Tribunal, which is a final fact finding authority, isnot vitiated in law as it has not gone through thefacts properly and just reproduced and relied uponthe order of the CIT(A) without appreciating thematerial on record for making additions? 2.Whether the order of the Income Tax AppellateTribunal, which is a final fact finding authority, isnot vitiated in law as it has not gone through thefacts properly and just reproduced and relied uponthe order of the CIT(A) without appreciating thematerial on record for making additions?Tribunal, which is a final fact finding authority, isnot vitiated in law as it has not gone through thefacts properly and just reproduced and relied uponthe order of the CIT(A) without appreciating thematerial 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 structuredits business. The assessee was established in 1973 and is engaged in the businessof printing and publishing various magazines, namely, Alive, Women’s Era,Sarita, Greh Shobha, Champak etc. The assessee has its office situated at NewDelhi which is engaged exclusively in publishing business. This undertaking hasbeen referred to as Unit no.1. Unit no.1 is a publishing house where blue printsand the content of various magazines in the portfolio of the assessee are preparedor arranged. Unit no.1 is described as a publishing house as it is engaged in thebusiness of publishing.The publishing house arranges for articles to bepublished in the magazines from various authors, artists and photographers andincurs expenses for procuring such material. Unit No.1 also incurs expenditurefor advertisement and publicity of magazines and other periodicals in itsportfolio. The assessee has claimed that all such expenses relate directly to thepublishing house as they are exclusively for the business of publishing. Receiptsfrom sale of magazines and income from advertisements published in themagazines relate to the publishing business and are accounted for as income ofUnit no.1. The assessee has also been allotted a quota for paper by Government of India and on the basis of such allocation Unit no.1 imports paper. The paperimported by the assessee cannot be sold and is for exclusive use of the assessee.The assessee has also established three other undertakings, which carry onprinting activity through highly sophisticated machines. The said undertakings,namely, Unit nos.2, 3 & 4 are described as printing houses. In the presentappeals, 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 forestablishing this unit which is housed in a new building situated at Faridabad(Haryana). Unit No.4 is involved exclusively in carrying on printing activity. Theplant 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 printedthereon to Unit no.4. On the basis of material supplied by Unit no.1, the Unit no.4prints magazines which are then bound and dispatched to subscribers and otherpersons as per the instructions of Unit no.1. The entire expense for running ofmachinery including labour, electricity, ink and other consumables utilized in theprinting activity carried out in Unit no.4 is accounted for separately in the booksof Unit No.4 which are separately maintained. 21.Unit No.4 also carries printing activity of job work on behalf of thepersons, other than Unit no.1, who are unconnected with the assessee. The sourceof revenue for Unit No.4 are job work charges which are received for carrying onprinting activity. During the period relevant to the assessment years 1997-98 and1999-2000, Unit No.4 charged 77 paise per sheet from third parties and 70 paiseper 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 theexpenses that are required to be allocated to Unit No.4 for the purposes of 21.Unit No.4 also carries printing activity of job work on behalf of thepersons, other than Unit no.1, who are unconnected with the assessee. The sourceof revenue for Unit No.4 are job work charges which are received for carrying onprinting activity. During the period relevant to the assessment years 1997-98 and1999-2000, Unit No.4 charged 77 paise per sheet from third parties and 70 paiseper 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 theexpenses that are required to be allocated to Unit No.4 for the purposes of determining the profits of Unit No.4 which are eligible for deduction underSection 80-IA or 80-IB of the Act as the case may be. During the assessmentyears 1997-1998, 1998-1999 and 1999-2000, the assessee claimed deductionunder 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 theprofits of the assessee from Unit No.4 were required to be recomputed.Therelevant extracts from Section 80-IA of the Act are quoted below:- “Section 80-IA. - Deduction in respect of profits and gains fromindustrial undertakings, etc., in certain cases.- (1) Where the grosstotal income of an assessee includes any profits and gains derivedfrom any business of an industrial undertaking or a hotel or operationof a ship or developing, maintaining and operating any infrastructurefacility…………. to which this section applies, there shall, inaccordance with an subject to the provisions of this section, beallowed, in computing the total income of the assessee, a deductionfrom such profits and gains of an amount equal to the percentagespecified in sub-section (5) and for such number of assessment yearsas is specified in sub-section (6).” xxxxxxxxxxxxxxxxxxxx "(7)Notwithstanding anything contained in any other provision ofthis Act, the profits and gains of an eligible business to which theprovisions of sub-section (1) apply shall, for the purposes ofdetermining the quantum of deduction under sub-section (5) for theassessment year immediately succeeding the initial assessment yearor any subsequent assessment year, be computed as if such eligiblebusiness were the only source of income of the assessee during theprevious year relevant to the initial assessment year and to everysubsequent assessment year up to and including the assessment yearfor which the determination is to be made." xxxxx xxxxxxxxxxxxxxx "(9)Where any goods held for the purposes of the eligiblebusiness are transferred to any other business carried on by the assessee, or where any goods held for the purposes of any otherbusiness carried on by the assessee are transferred to the eligiblebusiness and, in either case, the consideration, if any, for suchtransfer as recorded in the accounts of the eligible business does notcorrespond to the market value of such goods as on the date of thetransfer, then, for the purposes of the deduction under this section,the profits and gains of such eligible business shall be computed as ifthe transfer, in either case, had been made at the market value ofsuch goods as on that date : Provided that where, in the opinion of the Assessing Officer, thecomputation of the profits and gains of the eligible business in themanner hereinbefore specified presents exceptional difficulties, theAssessing Officer may compute such profits and gains on suchreasonable basis as he may deem fit. Explanation : In this sub-section, "market value", in relation to anygoods, means the price that such goods would ordinarily fetch onsale in the open market.” Provided that where, in the opinion of the Assessing Officer, thecomputation of the profits and gains of the eligible business in themanner hereinbefore specified presents exceptional difficulties, theAssessing Officer may compute such profits and gains on suchreasonable basis as he may deem fit. Explanation : In this sub-section, "market value", in relation to anygoods, means the price that such goods would ordinarily fetch onsale in the open market.” “(10) Where it appears to the Assessing Officer that, owing to theclose connection between the assessee carrying on the eligiblebusiness to which this section applies and any other person, or forany other reason, the course of business between them is so arrangedthat the business transacted between them produces to the assesseemore than the ordinary profits which might be expected to arise insuch eligible business, the Assessing Officer shall, in computing theprofits and gains of such eligible business for the purposes of thededuction under this section, take the amount of profits as may bereasonably deemed to have been derived therefrom.” xxxxxxxxxx xxxxxxxxxx 23.Section 80-IA was substituted by section 80-IA and section 80-IB byFinance Act, 1999 w.e.f. 01.04.2000. The assessee has claimed deduction underSection 80-IB of the Act for the period relevant to the assessment year 2003-2004and 2004-2005. 24.It is not in dispute that the assessee has maintained separate books ofaccounts for Unit No.4 and the only issued to be addressed is whether theexpenses allocated to Unit No.1 are to be taken into account for determining theeligible profits from Unit No.1. The Assessing Officer relied on the provisions ofSection 80-IA(9) of the Act and Section 80-IA(10) of the Act to come to aconclusion 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 otherexpenses 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 businessmust be computed as if the legible business was the only source of income for theassessee. The ownership of newsprint, paper and other materials supplied bypublishing houses to Unit No.4 for carrying on printing activity continue to vestwith publishing houses. In cases where Unit No.4 carries on printing activity forother entities, the paper would not belong to the assessee, the paper as well as therights on the content being printed in Unit No.4 would vest with other entities. Inthe case of the printing being done by Unit No.4 on behalf of Unit No.1, thepaper would belong to the assessee but the costs of which are liable to be borneexclusively 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 UnitNo.1 were comparable to the market rates. It is a matter of record that during theperiod relevant to the assessment years 1997-1998 and 1999-2000 Unit No.4 wascharging 77 paise per sheet for printing work done for third parties and 70 paiseper sheet for printing done for Unit No.1. The Assessing Officer has also notfound 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 closeconnection between the assessee carrying on eligible business and any other 25.It is not in dispute that the printing charges charged by Unit No.4 to UnitNo.1 were comparable to the market rates. It is a matter of record that during theperiod relevant to the assessment years 1997-1998 and 1999-2000 Unit No.4 wascharging 77 paise per sheet for printing work done for third parties and 70 paiseper sheet for printing done for Unit No.1. The Assessing Officer has also notfound 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 closeconnection between the assessee carrying on eligible business and any other person, the affairs of the assessee with respect to the eligible business are soarranged as to give rise to higher profits to the assessee. In such cases, theAssessing Officer is required to compute the amount of profits as may bereasonably derived from the eligible business. Section 80-IA(9) of the Act dealswith situations where goods held for the purposes of eligible business aretransferred to another business carried on by the assessee and the consideration atwhich such transfer is recorded is not the market value. In such cases theAssessing Officer is required to determine the profits of the eligible undertakingby taking into account the market value of goods transacted between thebusinesses carried on by the assessee. 26.In the present case, there is no material to support the view that the jobwork charges charged by Unit No.4 from Unit No.1 were not at market rates. Weare agreement with the view taken by the Tribunal that in absence of any defector manipulation found by the Assessing Officer in the books maintained for UnitNo.4 and in absence of any material to indicate that the amount charged by UnitNo.4 from Unit No.1 was not at comparable market rates, it would not be openfor the revenue to disregard the profits of Unit No.4 as disclosed by the assesseeonly on the basis that the profits were significantly higher than profits earned bythe assessee from other undertakings. 27.Given the fact that Unit No.4 carries on job work of printing only, theexpenses attributable to Unit No.1 which relate to the publishing business cannotbe allocated to Unit No.4. Only those expenses which relate to the printing workcarried on by the assessee in Unit No.4 are liable to be deducted from the jobcharges to arrive at the profits eligible for deduction under Section 80-IA of theAct or 80-IB of the Act as the case may be. 28.The facts relevant to the assessment year 2003-2004 and 2004-2005 aresimilar to the facts in the earlier assessment years. Our attention has not beendrawn on any material change that has occurred in this period which wouldjustify a view, different from the one taken in respect of the earlier assessmentyears. Thus, in our view, the Tribunal was correct in relying upon the orderspassed in the preceding years for disposing of the appeals relating to theassessment year 2004-2005. 29.We, accordingly, hold that the CIT (Appeals) and the Tribunal werecorrect in holding that the assessee was entitled to deduction under Section 80-IAof the Act and 80-IB of the Act on the book profits of Unit No.4 as disclosed bythe assessee. 30.We answer the questions raised in ITA Nos.1732/2006, 1733/2006 and1734/2006 in the affirmative and in favour of the assessee. 31.The question framed in ITA No.779/2010 and the first question framed inITA No.451/2010 is also answered in the affirmative and in favour of theassessee. The second question in ITA No.451/2010 is answered in the negativeand in favour of the assessee. No orders as to costs. VIBHU BAKHRU, J BADAR DURREZ AHMED, J MAY 31, 2013RK/MK