S. 80IA: In absence of separate books, AO entitled to estimate eligible profits

Arisudana Spinning Mills Ltd vs. CIT (Supreme Court)

The assessee manufactured yarn and also sold raw wool, wool waste and textile and knitting cloth. It claimed a deduction of 30% in respect of the profits of the “manufacturing activity”. As the assessee had not maintained accounts for manufacture of yarn actually produced as a part of industrial undertaking, the AO worked out the manufacturing account giving a bifurcation in terms of quantity of raw wool produced. The assessee challenged the preparation of separate trading account by the AO in respect of manufacturing and trading activities. The CIT(A) upheld the assessee’s claim though the Tribunal and High Court upheld the AO’s stand. On appeal by the assessee to the Supreme Court, HELD dismissing the appeal: