S. 80IB Expenditure incurred by a unit cannot be reallocated to another unit merely because the profits were significantly higher

Whether the expenditure incurred by a unit can be reallocated to another unit engaged in job work and claiming deduction u/s 80IA and 80IB, as the case may be, merely because the profits were significantly higher than profits earned by the assessee from other units.

In the instant case, the assessee being an industrial undertaking engaged in the business of publication and printing of newspapers and periodicals. The AO has reallocated the expenses incurred by a unit engaged in publishing to a unit engaged in printing work merely on the contention that the profits were inflated and the printing unit charged a lower amount for the work assigned. The Hon’ble High Court held that, since there is no material to support the view that the job work charges charged by printing Unit were not at market rates. Thus, expenses related to the printing work carried on by the printing unit are liable to be deducted from the job charges to arrive at the profits eligible for deduction under Section 80-IA or 80-IB of the Act, as the case may be.