M/s Chariot International Pvt. Ltd., Bangalore V. DCIT, Bangalore

CO 54/BANG/2010

• Counselvise Citation: [2011] 122 COUNSELVISE.COM (IT) 6096 (ITAT-BANGALORE)
• Duration Of Justice: 7 month(s) 15 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 03-06-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 31-05-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 19-10-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Section: 10B

Judgement Text

PAGE 1 OF 5 ITA NO.1116/BANG/2010 & C.O.NO.54/BANG/2010 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH B BEFORE SHRI N BARATHVAJA SANKAR, VICE PRESIDENT AND SHRI GEORGE GEORGE K, J.M ITA NO.1116/BANG/2010 (ASSESSMENT YEAR 2007-08) THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-11(2), BANGALORE. - APPELLANT VS M/S CHARIOT INTERNATIONAL (P) LTD., 107, AGRAHARA TOWN, NEXT TO I T PARK BACK GATE, WHITE FIELD ROAD, BANGALORE-66. - RESPONDENT C.O.NO.54/BANG/2010 (BY ASSESSEE) REVENUE BY : SHRI HARSHA PRAKASH, CIT-II ASSESSEE BY : SHRI S VENKATESH KUMAR, C.A . ORD ER PER GEORGE GEORGE K : THIS APPEAL INSTITUTED BY THE REVENUE AND THE CROSS OBJECTION FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE CIT(A)-I, BANGALORE DATED 29.07.2010. THE RELEVANT ASSESSMENT YEAR IS 2007-08. 2. THE REVENUE HAS RAISED SIX GROUNDS IN THE GROUN DS OF APPEAL. HOWEVER, ALL THE GROUNDS RELATE TO THE SOL ITARY ISSUE AS TO PAGE 2 OF 5 ITA NO.1116/BANG/2010 & C.O.NO.54/BANG/2010 2 WHETHER THE CIT(A) IS JUSTIFIED IN DIRECTING THE AO TO ALLOW THE ASSESSEES CLAIM OF DEDUCTION U/S 10B OF THE ACT. 3. BRIEF FACTS OF THE CASE ARE AS FOLLOWS:- THE ASSESSEE IS A COMPANY. IT IS ENGAGED IN THE BUSINESS OF MANUFACTURING, TRADING AND EXPORT OF GRANITE SLA BS TILES ETC. FOR THE ASST. YEAR 2007-08, THE ASSESSEE COMPANY FILED I TS RETURN OF INCOME ON 27.10.2007 DECLARING A TOTAL INCOME OF RS .36,875/- AFTER CLAIMING EXEMPTION OF RS.1,03,16,777/- U/S 10B OF T HE I T ACT. THE CASE OF THE ASSESSEE WAS TAKEN UP FOR SCRUTINY BY ISS UANCE OF NOTICE U/S 143(2) OF THE ACT. DURING THE COURSE OF SCRUT INY ASSESSMENT, THE ASSESSEE WAS ASKED TO SUBSTANTIATE ITS CLAIM U/ S 10B OF THE ACT SINCE ACCORDING TO THE AO, THE PROCESS OF CUTTING O F MARBLES/GRANITES AND POLISHING THE SAME DID NOT TAN TAMOUNT MANUFACTURE OF ARTICLE OR THING. THE ASSESSEE GAVE DETAILED SUBMISSION. HOWEVER, THE AO REJECTED THE OBJECTION S RAISED FOR DENYING THE BENEFIT U/S 10B OF THE ACT AND SCRUTINY A SSESSMENT WAS COMPLETED VIDE ORDER DATED 24.12.2009 WHEREIN HE DE NIED DEDUCTION U/S 10B OF THE ACT HOLDING THAT NO MANUFACTURE OR P RODUCTION OF ARTICLE OF THING WAS INVOLVED IN THE ACTIVITIES UND ERTAKEN BY THE ASSESSEE. 4. AGGRIEVED BY THE ASSESSMENT COMPLETED, THE ASSES SEE CARRIED THE MATTER BEFORE THE FIRST APPELLATE AUTHO RITY. PAGE 3 OF 5 ITA NO.1116/BANG/2010 & C.O.NO.54/BANG/2010 3 5. DETAILED WRITTEN SUBMISSIONS WAS FILED BEFORE T HE FIRST APPELLATE AUTHORITY AND THE SAME IS REPRODUCED AT PA GES 3 TO 6 OF THE IMPUGNED ORDER OF THE CIT(A). AFTER MAKING ELABO RATE DISCUSSIONS FROM PARAS 7 TO 7.3, THE CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE. 6. THE REVENUE BEING AGGRIEVED IS IN APPEAL BEFORE US. 7. THE LEARNED DR SUBMITTED THAT THE LEARNED CIT(A ) WAS NOT JUSTIFIED IN DIRECTING THE AO TO ALLOW DEDUCTIO N U/S 10B OF THE ACT AND ALSO HOLDING THAT MANUFACTURE IMPLIES CHANG E BUT FAILED TO APPRECIATE THAT EVERY CHANGE IS NOT A MANUFACTURING ACTIVITY WHICH IS ENTITLED FOR DEDUCTION U/S 10B OF THE ACT. 8. THE LEARNED AR SUPPORTED THE ORDER OF THE FIRST APPELLATE AUTHORITY. IT WAS ALSO STATED BY THE L EARNED AR THAT FOR ASST. YEAR 2006-07, THE ISSUE IS PENDING ADJUDICATIO N BEFORE THE CIT(A). 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. EXPLANATION 4 TO SECTION 10B SAYS FOR THE PURPOSES OF THE SECTION MANUFACTURE OR PRODUCE SH ALL INCLUDE THE CUTTING AND POLISHING OF PRECIOUS AND SEMI PRECIOUS STONES. THIS CLARIFIES THAT STONES PRECIOUS AND SEMI-PRECIOUS EVEN IF ONLY CUT AND POLISHED, CAN BE SAID TO BE HAVE UNDERGONE MANU FACTURING PROCESS. THUS, THE ACT ITSELF RECOGNIZES SUCH ACTI VITIES AS MANUFACTURE. PAGE 4 OF 5 ITA NO.1116/BANG/2010 & C.O.NO.54/BANG/2010 4 9.1 STEPWISE ACTIVITIES UNDERTAKEN BY THE ASSESSEE ARE ELABORATELY DISCUSSED BY THE CIT(A) IN THE IMPUGNED O RDER AT PARA 7.2. WE FIND THAT THESE ACTIVITIES UNDERTAKEN BY TH E ASSESSEE ARE SIMILAR TO THE ACTIVITIES UNDERTAKEN IN THE CASE OF ITO V ARIHANT TILES AND MARBLES P. LTD. (320 ITR 79), WHEREIN THE HONBLE SUPREME COURT, AFTER ELABORATELY CONSIDERING ALL THE PRECEDE NTS ON THE SUBJECTS, HELD THAT SAWING OF MARBLE BLOCKS INTO S LABS AND TILES AND POLISHING AMOUNTS TO MANUFACTURE OR PRODUCTION AND THE ASSESSEE IS ENTITLED TO DEDUCTION U/S 80-IA OF THE ACT. THE R ELEVANT FINDING OF THE HONBLE SUPREME COURT READS AS FOLLOWS:- THIS WAS NOT A CASE OF MERELY CUTTING MARBLE BLOCKS INTO SLABS. THERE WAS THE FURTHER ACTIVITY OF POLISHING AND ULTIMATE CONVERSION OF THE BLOCKS INTO POLISHED SLABS AND TILES. THERE WERE VARIOUS STAGES THROUGH WHICH THE BLOCKS HAD TO GO THROUGH BEFORE THEY BECAME POLISHED SLABS AND TILES. THE ORIGINAL BLOCK DID NOT REMAIN MARBLE BLOCK; IT BECAME A SLAB OR TILE. BLOCKS WERE CONVERTED INTO POLISHED SLABS AND TILES RESULTING IN THE EMERGENCE OF A NEW AND DISTINCT COMMODITY. SUCH AN ACTIVITY WAS SOMETHING BEYOND MANUFACTURE AND BROUGHT A NEW PRODUCT INTO EXISTENCE. 9.2 IN THE INSTANT CASE ALSO GRANITE BLOCKS ARE CU T AND CARRIED TO THE FACTORY PREMISES WHERE THEY ARE CONVERTED INTO SL ABS OF DIFFERENT SIZES AND THEREAFTER, IT UNDERGOES SO MANY PROCESSES INCLUDING POLISHING OF SLABS. THE FINISHED MATERIAL, AFTER UNDERGOING SEVE RAL PROCESSES, IS DISTINCTLY SEPARATE AND COMMERCIALLY DIFFERENT ITEM T HAN THE RAW BLOCKS OF GRANITES. SINCE THE ACTIVITIES UNDERTAKEN BY THE A SSESSEE IN THIS CASE AND PAGE 5 OF 5 ITA NO.1116/BANG/2010 & C.O.NO.54/BANG/2010 5 THAT OF THE CASE ARIHANT TILES AND MARBLES P. LTD. (SUPRA) ARE IDENTICAL, RESPECTFULLY FOLLOWING THE DICTUM LAID DOWN BY THE HO NBLE SUPREME COURT, WE HOLD THAT THE ASSESSEE IS ENTITLED TO BENEFIT OF SECTION 10B OF THE ACT. IN VIEW OF THE ABOVE, WE UPHOLD THE ORDER OF THE CI T(A) AND DIRECT THE AO TO ALLOW THE CLAIM OF THE ASSESSEE U/S 10B OF TH E ACT. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 11. SINCE APPEAL OF THE REVENUE HAS BEEN DISMISSED AND THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE, THE CRO SS OBJECTION RAISED, WHICH IS ONLY SUPPORTING THE ORDER OF THE CIT(A), HA S BECOME ACADEMIC AND THE SAME IS DISMISSED AS INFRUCTUOUS. 12. IN THE RESULT, THE CROSS OBJECTION FILED BY THE ASSESSEE IS DISMISSED. THE ORDER PRONOUNCED ON FRIDAY, THE 3 RD DAY OF JUNE, 2011 AT BANGALORE. SD/- SD/- (N BARATHVAJA SANKAR) (GEORGE GEORGE K) VICE PRESIDENT JUDICIAL MEMBER COPY TO : 1. THE REVENUE 2. THE ASSESSEE 3. THE C IT CONCERNED. 4. THE CIT(A) CONCERNED. 5. DR 6. GF MSP/1/6. BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.