M/s Jeevan Diescls and Electricals Ltd, Kolkata V. D.C.I.T Cir - 2,kolkata., Kolkata

CO 48/KOL/2013

• Counselvise Citation: [2016] 123 COUNSELVISE.COM (IT) 2187 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 9 month(s) 12 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 18-02-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 06-05-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUJIT DAS JCIT SRDR
• Assessee Lawyers: S M SURANA
• Section: 143(3); 80IB; 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A KOLKATA BEFORE SHRI N.V.VASUSDEVAN, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO. 806 / KOL / 2013 & CROSS OBJECTION NO.48/KOL/2013 (A/O ITA NO. 806/KOL/2013) ASSESSMENT YEAR :2009-10 DCIT, CIRCLE-2, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 M/S JEEVAN DIESELS & ELECTDRICALS, 17, G.C. AVENUE, KOLKATA-700 013 V/S . V/S . M/S JEEVAN DIESELS & ELECTRICALS, 17, G.C. AVENUE, KOLKATA-700013 [ PAN NO.AAACJ7338 ] DCIT, CIRCLE-2, AAYAKAR BHAWAN, P7, CHOWRINGHEE SQUARE, KOLKATA-069 /APPELLANT .. / RESPONDENT /BY ASSESSEE SHRI S.M. SURANA, ADVOCATE /BY RESPONDENT SHRI SUJIT DAS, JCIT, SR-DR /DATE OF HEARING 02-02-2016 ! /DATE OF PRONOUNCEMENT 18-02-2016 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY REVENUE AND CROSS OBJECTION (CO) BY ASSESSEE ARE ARISING OUT OF ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-I, KOLKATA IN APPEAL NO.1083/CIT(A)-I/C-2/11-12 DATED 19.01.2013. ASSESSMENT WAS FRAMED BY DCIT, CIRCLE-2, KOLKATA U/S 143(3) OF THE INCOME TAX ACT, 1961 ITA NO.806/KOL/2013 & CO.48/KOL/2013 A.Y. 2009 -10 DCIT, CIR-2, KOL. V. M/S JEEVAN DIESELS & ELECTR ICALS PA GE 2 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORD ER DATED 24.12.2011 FOR ASSESSMENT YEAR 2009-10. FIRST WE TAKE UP REVENUES APPEAL . 2. REVENUE HAS RAISED FOLLOWING GROUNDS:- 1. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF T HE CASE THE LD. CIT(A)-I, KOLKATA HAS ERRED IN DELETING THE DISALLO WANCE U/S. 80 IB TO THE EXTENT OF RS.11,02,777/- ALTHOUGH THE ASSESSEE HAD NO INFRASTRUCTURES TO SUPPORT ITS MANUFACTURING ACTIVITY IN RESPECT O F ITS UNIT AT DADAR, SILVASSA? 2. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF TH E CASE THE LD. CIT(A)-I, KOLKATA HAS ERRED IN DELETING THE DISALLO WANCE U/S. 10B TO THE EXTENT OF RS.61,23,963/- ALTHOUGH THE ASSESSEE HAD NO INFRASTRUCTURES TO SUPPORT ITS MANUFACTURING ACTIVITY IN RESPECT O F ITS TWO UNITS AT PONDICHERRY, SPECIAL ECONOMIC ZONE? 3. FIRST ISSUE RAISED IN GROUND NO.1 IS THAT LD. CI T(A) ERRED IN DELETING THE DISALLOWANCE MADE U/S. 80IB OF THE ACT. 3.1 BRIEFLY STATED FACTS ARE THAT ASSESSEE IS A LIM ITED COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING OF DIESEL GENERATING SETS AND ACCESSORIES. IT HAS MANUFACTURING UNITS AT DADRA, SILVASSA & PONDIC HERRY AT SPECIAL ECONOMIC ZONE (SEZ FOR SHORT). THE ASSESSEE HAS CLA IMED A DEDUCTION OF RS.11,02,777/- U/S. 80IB OF THE ACT. DURING THE COU RSE OF ASSESSMENT PROCEEDINGS ASSESSING OFFICER OBJECTED ON THE CLAIM MADE UNDER SECTION 80IB OF THE ACT BY THE ASSESSEE ON THE GROUND THAT THERE WAS NO MANUFACTURING ACTIVITIES CARRIED OUT BY ASSESSEE AND WHICH IS PER QUISITE FOR CLAIMING THE DEDUCTION U/S 80IB OF THE ACT. ACCORDINGLY, AO SOUG HT CLARIFICATION FROM ASSESSEE REGARDING THE CLAIM MADE BY THE ASSESSEE B Y ISSUING A NOTICE. IN COMPLIANCE THERETO ASSESSEE SUBMITTED THAT THERE IS ASSEMBLING PLANT WHERE COMPONENTS LIKE ENGINE, ALTERNATOR, BASE PLACE, FUE L TANK, CONTROL PANEL, ARE ASSEMBLED AND AS A RESULT A NEW PRODUCT EMERGES WHI CH IS CALLED AS A DIESEL GENERATING SET (FOR SHORT DG SET). THE NEW PRODUCT DG SET HAS DIFFERENT NAME AND FUNCTION. BESIDES THE ABOVE, ASSESSEE ALSO SUBMITTED THE CENTRAL EXCISE REGISTRATION IN SUPPORT OF ITS CLAIM FOR CAR RYING OUT ITS MANUFACTURING ITA NO.806/KOL/2013 & CO.48/KOL/2013 A.Y. 2009 -10 DCIT, CIR-2, KOL. V. M/S JEEVAN DIESELS & ELECTR ICALS PA GE 3 ACTIVITY IN THE FACTORY LOCATED AT SEZ. HOWEVER, AO DISREGARDED THE SAID CLAIM OF ASSESSEE ON THE GROUND THAT THE COMPONENT USED I N MAKING THE GENERATOR SETS CAN BE SOLD IN THE OPEN MARKET. THEREFORE, THE ACTIVITY OF ASSEMBLING THE DIFFERENT COMPONENTS FOR MAKING THE GENERATOR SETS DOES NOT AMOUNT TO MANUFACTURE. BESIDES, THE ABOVE, AO ALSO OBSERVED T HAT THE EXCISE REGISTRATION IS NOT A DECIDING DOCUMENT TO ENSURE W HETHER THERE IS A MANUFACTURING ACTIVITY OR NOT. 4. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A) AND SUBMITTED THAT THE ACTIVITY OF MAKING GENERATOR SET S HAS BEEN ACCEPTED AS MANUFACTURING UNIT AT SEZ IN EARLIER YEAR AND SUBSE QUENT YEAR ALSO RELEVANT TO THE YEAR UNDER CONSIDERATION. LD. CIT(A) AFTER CONS IDERING THE SUBMISSION MADE BY ASSESSEE DELETED THE DISALLOWANCE MADE BY A O BY OBSERVING AS UNDER:- SIMILARLY, ASSESSEE CLAIMED DEDUCTION U/S. 80IB IN RESPECT OF UNIT AT SILVASSA FOR RS.11,02,777/- BY FILING FORM NO. 10CC B. THE A/R RELIED UPON THE CASE OF DELHI HIGH COURT REPORTED IN 341 I TR (518) TO SUPPORT HIS CONTENTION THAT THE DG SET AS THE FINAL PRODUCT WAS DISTINCT IN NAME, CHARACTER AND FUNCTION FROM THE COMPONENT USED AND ACCORDINGLY IT WOULD AMOUNT TO MANUFACTURING ACTIVITY. KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES AND THE PASTE HISTORY OF THE CASE THE GROUND NO. 2, 3,4 AND 5 ARE ALLOWED. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) REVENUE IS IN APPEAL BEFORE US. SHRI S.M. SURANA, LD. AUTHORIZED REPRESENTATIVE APP EARING ON BEHALF OF ASSESSEE AND SHRI SUJIT DAS, LD. DEPARTMENTAL REPRE SENTATIVE APPEARING ON BEHALF OF REVENUE. 5. WE HAVE HEARD BOTH THE RIVAL PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. BEFORE US LD. DR RELIED ON THE ORDER OF AO WHEREAS LD. AR RELIED ON THE ORDER OF LD. CIT(A). FROM THE AFOR ESAID DISCUSSION, WE FIND THAT AO HAS DISALLOWED THE CLAIM OF ASSESSEE U/S. 8 0IB OF THE ACT ON THE GROUND THAT ASSESSEE IS NOT ENGAGED IN MANUFACTURIN G ACTIVITY AS REQUIRED FOR ITA NO.806/KOL/2013 & CO.48/KOL/2013 A.Y. 2009 -10 DCIT, CIR-2, KOL. V. M/S JEEVAN DIESELS & ELECTR ICALS PA GE 4 CLAIMING THE DEDUCTION U/S 80IB OF THE ACT. HOWEVER WE UNDERSTAND THAT THE PROCESS OF ASSEMBLING OF DIFFERENT COMPONENTS LIKE COUPLING AND ALIGNING WITH THE ENGINE AND ALTERNATOR REQUIRES GREAT SKILL AND TECHNICAL EXPERTISE. IN THE PROCESS OF ASSEMBLING VARIOUS COMPONENTS WHICH ARE HAVING DIFFERENT NAME AND FUNCTION ARE BROUGHT TOGETHER AND AS A RESULT O F ASSEMBLING IT BECOMES NEW PRODUCT WHICH HAS A DISTINCT NAME AND FUNCTION. HOWEVER THIS ENTIRE PROCESS OF ASSEMBLING REQUIRES LOT OF TECHNICAL AND ENGINEERING EXPERTISE. THEREFORE, WE HOLD THAT THIS ACTIVITY OF ASSEMBLING AMOUNTS TO A MANUFACTURING ACTIVITY. WE ALSO FIND THAT THE ISSUE IS COVERED BY THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT V. JACKSON ENGINEERS LTD. IN ITA NO. 251 OF 2008 DATED 23.12.2009, WHERE THE HON'BLE DELHI HIGH COU RT EXACTLY ON SIMILAR ACTIVITY HAS REGARDED AS MANUFACTURING ACTIVITY AND IN THE PRESENT CASE ALSO ASSESSEE WAS MANUFACTURING THE DIESEL GENERATING SE TS WHERE ASSESSEE- COMPANY ASSEMBLES DIESEL GENERATING SETS. SEVERAL C OMPONENTS GO IN RELATION TO THE MAKING OF DIESEL GENERATING SETS AN D SOME OF THE MAJOR COMPONENTS ARE ENGINE, ALTERNATOR, ENGINE INSTRUMEN T PANEL, BASE PLACE, FUEL TANK, CONTROL PANEL, BATTERY, MEASURING INSTRUMENT S AND GAUGES, RADIATOR, SILENCER AND OTHER COMPONENTS. THE RELEVANT EXTRACT OF THE HON'BLE HIGH COURTS IS REPRODUCED BELOW:- 4. INSOFAR AS OPERATION/ACTIVITY UNDERTAKEN BY THE ASSESSEE IS CONCERNED, WHICH IS DESCRIBED IN DETAIL ABOVE, IT I S A FINDING OF FACT WHICH HAS ARRIVED AT AND IT CANNOT BE DISPUTED. SUC H AN ACTIVITY WOULD AMOUNT TO MANUFACTURE. WHEN WE APPLY THE PRINCIPLES LAID DOWN IN VARIOUS JUDGMENTS EXPLAINING WHAT AMOUNTS TO MANUFACTURE ACTIVITY ON THE AFORESAID FACT, IRRESISTIBLY CONCLUSION WOUL D BE THAT IT WOULD BE TREATED AS MANUFACTURE ACTIVITY . IN THE CASE OF ASSESSEE ITSELF, THIS ISSUE STANDS DECIDED IN ITS FAVOUR BY THE JUDGMENT OF THIS COURT DECIDING ON 11.08.2009 IN ITA NO. 149 OF 2001 AND OTHER CONN ECTED CASES. RELEVANT PORTION OF THAT JUDGMENT READS AS UNDER: 6. SUBMISSIONS BEFORE US REMAIN THE SAME. WE ARE O F THE OPINION THAT THE CASE IS DIRECTLY COVERED BY THE JU DGMENT OF THE APEX COURT IN ASPINWALL & CO. LTD. V. COMMISSIONER OF INCOME TAX, ERANAKULAM, (2001) 7 SCC 525. IN THAT CASE THE ASSESSEE WAS ENGAGED, INTER ALIA, IN CURING OF COFFEE FOR WH ICH IT HAD INSTALLED COFFEE-CURING PLANTS. IT HAD CLAIMED INVE STMENT ALLOWANCE UNDER SECTION 32-A OF THE INCOME TAX ACT WHICH ITA NO.806/KOL/2013 & CO.48/KOL/2013 A.Y. 2009 -10 DCIT, CIR-2, KOL. V. M/S JEEVAN DIESELS & ELECTR ICALS PA GE 5 DEPENDED UPON THE ISSUE AS TO WHETHER THE PROCESS O F CURING THE COFFEE WOULD AMOUNT TO MANUFACTURING OR PRODUCTION ACTIVITY. ANSWERING THE QUESTION IN THE AFFIRMATIVE, IN FAVOU R OF THE ASSESSEE, THE COURT EXPLAINED THE EXPRESSION MANUF ACTURE AS UNDER:- 13. THE WORD MANUFACTURE HAS NOT BEEN DEFINED IN THE ACT. IN THE ABSENCE OF A DEFINITION OF THE WORDS MANUFACTURE IT HAS TO BE GIVEN A MEANING AS IS UNDERSTOOD IN COMMON PARLANCE. IT IS TO BE UNDERSTO OD AS MEANING THE PRODUCTION OF ARTICLES FOR USE FROM RAW OR PREPARED MATERIALS BY GIVING SUCH MATERIALS NEW FOR MS, QUALITIES OR COMBINATIONS WHETHER BY HAND LABOUR OR MACHINES. IF THE CHANGE MADE IN THE ARTICLE RESULTS IN A NEW AND DIFFERENT ARTICLE THEN IT WOULD AMOUNT TO A MANUFACTURING ACTIVITY. 14. THIS COURT WHILE DETERMINING AS TO WHAT WOULD A MOUNT TO A MANUFACTURING ACTIVITY, HELD IN CST V. PIO FOOD PACKETS, 1980 SUPP. SCC 174 THAT THE TEST FOR DETERMINATION WHETHER MANUFACTURE CAN BE SAID TO HA VE TAKEN PLACE IS WHETHER THE COMMODITY WHICH IS SUBJE CTED TO THE PROCESS OF MANUFACTURE CAN NO LONGER BE REGARDE D AS THE ORIGINAL COMMODITY, BUT IS RECOGNIZED IN THE TR ADE AS A NEW AND DISTINCT COMMODITY. IT WAS OBSERVED: (SCC P . 176 PARA 5). COMMONLY MANUFACTURE IS THE END RESULT OF ONE OR MORE PROCESSES THROUGH WHICH THE ORIGINAL COMMODITY IS MADE TO PASS. THE NATURE AND EXTENT OF PROCESSING MAY VARY FROM ONE CASE TO ANOTHER, AND INDEED THERE MAY BE SEVERAL STAGES OF PROCESSING AND PERHAPS A DIFFERENT KIND OF PROCESSING AT EACH STAGE. WITH EACH PROCESS SUFFERED, THE ORIGINAL COMMODITY EXPERIENCES A CHANGE. BUT IT IS ONLY WHEN THE CHANGE, OR A SERIES OF CHANGES TAKE THE COMMODITY TO THE POINT WHERE COMMERCIALLY IT CAN NO LONGER BE REGARDED AS THE ORIGINAL COMMODITY BUT INSTEAD IS RECOGNIZED AS A NEW AND DISTINCT ARTICLE THAT A MANUFACTURE CAN BE SAID TO TAKE PLACE. 15. ADVERTING TO FACTS OF THE PRESENT CASE, THE ASS ESSEE AFTER PLUCKING OR RECEIVING THE RAW COFFEE BERRIES MAKES IT UNDERGO NINE PROCESSES TO GIVE IT THE SHAPE OF COFF EE BEANS. THE NET PRODUCT IS ABSOLUTELY DIFFERENT AND SEPARATE FROM THE INPUT. THE CHANGE MADE IN THE ARTICLE IN A NEW AND ITA NO.806/KOL/2013 & CO.48/KOL/2013 A.Y. 2009 -10 DCIT, CIR-2, KOL. V. M/S JEEVAN DIESELS & ELECTR ICALS PA GE 6 DIFFERENT ARTICLE WHICH IS RECOGNIZED IN THE TRADE AS A NEW AND DISTINCT COMMODITY. THE COFFEE BEANS HAVE AN INDEPENDENT IDENTITY DISTINCT FROM RAW MATERIAL FRO M WHICH IT WAS MANUFACTURED. A DISTINCT CHANGE COMES ABOUT IN THE FINISHED PRODUCT. 7. WHEN WE APPLY THE AFORESAID PRINCIPLE ON THE FAC TS OF THE PRESENT CASE, THE IRREFUTABLE CONCLUSION WOULD BE THAT THE RESPONDENT COMPANY IS INDULGING IN MANUFACTURING ACTIVITY. WE, THUS, ANSWER THE QUESTION FORMULATED IN FAVOUR OF THE ASSESSEE AND UPHOLD THE VIEW OF THE TRIBUNAL ON THIS ASPECT. FROM THE ABOVE DECISION OF HON'BLE DELHI HIGH COURT , IN OUR OPINION, THAT IN THE PRESENT CASE, ASSEMBLING OF DIFFERENT PRODUCTS WHICH ARE GIVING RISE TO A NEW PRODUCT AND WHICH HAS BECOME A NEW NAME IN THE MARKET AND FUNCTION WILL BE REGARDED AS MANUFACTURING ACTIVITY. RELYI NG ON THE ABOVE CASE (SUPRA) AND TOTALITY OF THE FACTS OF THE CASE, WE D O NOT FIND ANY REASON TO INTERFERE IN THE ORDER PASSED BY LD. CIT(A). HENCE THIS GROUND OF REVENUES APPEAL IS DISMISSED. 6. COMING TO NEXT GROUND RAISED BY REVENUE IS THAT LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF 61,23,963/- U/S. 10B OF THE ACT. THE ASSESSEE CLAIMED THE DEDUCTION U/S. 10B OF THE ACT BUT SAME WAS DISALLOWED BY ASSESSING OFFICER ON THE SAME REASONI NG AS ELABORATED IN GROUND NO.1 OF REVENUES APPEAL I.E., NO MANUFACTUR ING ACTIVITY WAS CARRIED OUT BY ASSESSEE, HOWEVER, LD. CIT(A) ALLOWED THIS G ROUND OF ASSESSEE. 7. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) REVE NUE IS IN APPEAL. 8. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PART IES AND PERUSED THE MATERIALS AVAILABLE ON RECORD AND TAKING A CONSISTE NT VIEW OF OUR DECISION AS DEPICTED IN GROUND NO.1 OF REVENUES APPEAL IN PARA -5 OF THIS ORDER, WE DISMISS THE GROUND RAISED BY REVENUE. ITA NO.806/KOL/2013 & CO.48/KOL/2013 A.Y. 2009 -10 DCIT, CIR-2, KOL. V. M/S JEEVAN DIESELS & ELECTR ICALS PA GE 7 COMING TO ASSESSEES C.O. NO. 48/KOL/2013 9. THE GROUNDS RAISED BY ASSESSEE IN ITS CO ARE SUP PORTIVE TO THE ORDER OF LD. CIT(A). SINCE WE HAVE ALREADY DISMISSED THE REV ENUES APPEAL, SO, ASSESSEES CO HAS BECOME INFRUCTUS AND HENCE WE DIS MISS ASSESSEES CO AS INFRUCTUS. 10. IN THE RESULT, REVENUES APPEAL IS DISMISSED AND TH AT OF ASSESSEES CO IS DISMISSED AS INFRUCTUS. ORDER PRONOUNCED IN THE OPEN COURT 18/ 02/2016 SD/- SD/- (N.V.VASUDEVAN) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP '#$- 18 / 02 /201 6 / COPY OF ORDER FORWARDED TO:- 1. /ASSESSEE-M/S KEEVAN DIESELS & ELECTRICALS, 17, G.C . AVENUE, KOLKATA-13 2. / REVENUE-DCIT, CIRCLE-2, AAYAKAR BHAWAN, P7, CHOW RINGHEE SQR. KOLKATA-69 3.#,#-. / / CONCERNED CIT KOLKATA 4. /- / CIT (A) KOLKATA 5.2 3455-., -.!, / DR, ITAT, KOLKATA 6.489:; / GUARD FILE. BY ORDER/ , /TRUE COPY/ /# -.!,