Appeal Details
Counselvise Citation
[2011] 122 COUNSELVISE.COM (IT) 6126 (ITAT-CHENNAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
9 month(s) 23 day(s)
Appellant
Respondent
Appeal Type
Cross Objection
Pronouncement Date
22-06-2011
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
D
Next Hearing Date
22-06-2011
Assessment Year
2003-2004
Appeal Filed On
30-08-2010
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL CHENNAI BENCH D : CHENNAI [BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER] I.T.A NOS. 970 TO 972/MDS/2010 ASSESSMENT YEARS : 2001-02, 2003-4 AND 2004 -05 THE INCOME-TAX OFFICER COMPANY WARD I(1) CHENNAI VS M/S AMMAN GRANITES EXP. PVT. LTD M.G. COLONY, HARUR 636 903 DHARMAPURI DIST. [PAN AAACA4104E] (APPELLANT) (RESPONDENT) C.O. NOS. 90 TO 92/MDS/2010 ASSESSMENT YEARS : 2001-02, 2003-4 AND 2004 -05 M/S AMMAN GRANITES EXP. PVT. LTD M.G. COLONY, HARUR 636 903 DHARMAPURI DIST. VS THE INCOME-TAX OFFICER COMPANY WARD I(1) CHENNAI (APPELLANT) (RESPONDENT) DEPARTMENT BY : SHRI ANIRUDH RAI, CIT ASSESSEE BY : SHRI RAJAVELU O R D E R PER BENCH: THE ABOVE CAPTIONED APPEALS FILED BY THE REVENU E AND THE CROSS OBJECTIONS FILED BY THE ASSESSEE ARE IN RELAT ION TO TWO COMMON ITA 970 TO 972/10 & CO 90 TO 92/10 :- 2 -: ISSUES, ONE REGARDING DEDUCTION U/S 10B OF THE ACT AND THE OTHER REGARDING RATE OF DEPRECIATION ON ELECTRICAL FITTIN GS. THEREFORE, FOR THE SAKE OF CONVENIENCE AND BREVITY, WE PROCEED TO DECI DE THEM ALL SIMULTANEOUSLY BY A COMMON ORDER. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY DOING THE BUSINESS OF GRANITE MONUMENTS AS A 100% EXPORT ORIENTED UNIT[EOU]. THE ASSESSEE HAS CLAIMED EXEMP TION U/S 10B AND DEPRECIATION ON ELECTRICAL FITTINGS. THE ASSESSING OFFICER DID NOT ALLOW DEDUCTION IN COMPUTING THE ELIGIBLE PROFIT U/S 10B. THE ASSESSEE EXPLAINED VARIOUS STAGES OF PROCESS CARRIED OUT IN THE CONVERSION OF GRANITE BLOCKS AS RAW MATERIAL TO MONUMENTS AS FINI SHED GOODS. THE CLAIM OF THE ASSESSEE IS THAT SECTION 10B(2) PROVID ES THAT AN ENTITY BEING 100% EOU AND MANUFACTURES/PRODUCES ANY ARTICL E OR THING IS ELIGIBLE FOR EXEMPTION U/S 10B. THE ASSESSEE ALSO REFERRED TO EXPLANATION(III) TO SUB-SECTION 7 OF SECTION 10B WH ERE THE TERM MANUFACTURE INCLUDES (A) ANY PROCESS OR (B) ASSEM BLING OR (C) RECORDING OF PROGRAMMES ON ANY DISC, TAPE, PERFORAT ED MEDIA OR ANY OTHER INFORMATION STORAGE DEVICE. AFTER CONSIDERIN G THE CONTENTION OF THE ASSESSEE, THE ASSESSING OFFICER HAS OBSERVED TH AT THE ASSESSEE IS ENGAGED IN THE CONVERSION OF GRANITE BLOCK INTO GRA NITE SLABS AND U/S 10B, THIS EXEMPTION IS AVAILABLE SPECIFICALLY IN CA SE OF MANUFACTURE/ ITA 970 TO 972/10 & CO 90 TO 92/10 :- 3 -: PRODUCTION OF AN ARTICLE OR THING. HE HAS REFERRED TO THE DEFINITION OF THE TERM MANUFACTURE CONTAINED IN EXPLANATION (I II) TO SUB-SECTION 7 OF SECTION 10B WHICH ALSO INCLUDES PROCESSING. T HE ASSESSING OFFICER HAS FINALLY HELD THAT THE PROCESS OF CUTTING AND PO LISHING OF GRANITE BLOCKS CARRIED ON BY THE ASSESSEE WAS TREATED AS M ANUFACTURE FOR THE PURPOSE OF AVAILING EXEMPTION U/S 10B, SPECIFICALLY UPTO ASSESSMENT YEAR 2000-01. AN AMENDMENT WAS BROUGHT INTO THE AC T THROUGH FINANCE ACT, 2000 WITH EFFECT FROM 1.4.2001 WHEREBY CLAUSE (III) UNDER EXPLANATION 7 OF SECTION 10B HAS BEEN OMITTED AND T HIS CLAIM HAS BEEN RESTRICTED TO MANUFACTURE ONLY. ACCORDING TO TH E ASSESSING OFFICER, ALTHOUGH THE ASSESSEE HAS DESCRIBED VARIOUS STEPS T AKEN BY IT LIKE SIZING AND POLISHING, THE FACT REMAINS THAT THE FIN ISHED PRODUCT DOES NOT UNDERGO ANY PROCESS OTHER THAN CUTTING AND POLI SHING. THUS, ACCORDING TO HIM, NO MANUFACTURE OR PRODUCTION IS A CTUALLY INVOLVED IN THIS CASE. HE HAS OPINED THAT THE NEWLY ADDED EXPLA NATION EXTENDS THE DEFINITION OF THE WORD MANUFACTURE/PRODUCTION TO CUTTING AND POLISHING OF PRECIOUS AND SEMI-PRECIOUS STONES, SUC H AS DIAMONDS, GEMS ETC. HE HAS ALSO OBSERVED THAT THE WORD MANUF ACTURE DOES NOT INCLUDE PROCESS. AS THE WORD PROCESS NOW RELA TES TO ELECTRICAL MODE AND IT CANNOT BE APPLICABLE FOR OTHER ARTICLES. W ITH REFERENCE TO COPIES OF SALE BILLS FURNISHED BY THE ASSESSEE, THE ASSESS ING OFFICER HAS ITA 970 TO 972/10 & CO 90 TO 92/10 :- 4 -: MENTIONED THAT THE DESCRIPTION AS GRANITE MEMORIAL S ALL POLISHED/GRANITE MONUMENTS, HE HAS CONCLUDED THAT THE FINISHED PRODUCT BEARS A DESCRIPTION NOT DIFFERENT FROM THE COMMON GRANITE SLAB. FINALLY, HE HAS CONCLUDED THAT THE ACTIVITY OF THE ASSESSEE- COMPANY DOES NOT TANTAMOUNT TO MANUFACTURE AS REQ UIRED UNDER SECTION 10B. BUT IN FIRST APPEAL, THE ASSESSEE WA S SUCCESSFUL IN GETTING THE DESIRED RELIEF ON THE BASIS OF THE RAT IO DECIDENDI OF THE DECISION OF HON'BLE APEX COURT RENDERED IN THE CASE OF ARIHANT TILES & MARBLES(P) LTD. VS ITO(2009) 32 DTR, DATED 2.12.200 9. NOW, THE REVENUE IS AGGRIEVED. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND H AVE CAREFULLY PERUSED THE ENTIRE MATERIAL AVAILABLE ON RECORD. THERE IS NO DISPUTE WITH REGARD TO THE PROCESSES INVOLVED IN ASSESSEES CASE. BY A SERIES OF MANUFACTURING PROCESS, THE LARGE ROUGH GRANITE B LOCKS ARE SAWN, CUT AND MADE INTO DIFFERENT MONUMENTS AND SLABS AS PER THE BUYERS DESIGN AND SIZE. UNDENIABLY, THE MONUMENTS MADE AR E IN DIFFERENT VARIETIES LIKE, CLOSE BOOK SHAPED, OPEN BOOK, CROSS , HEART SHAPED, OGEE SHAPED, SERPENTINE, VASE, BALL SHAPE AND BASE AND H EAD STONES OF VARYING SHAPES AND DESIGN. OBVIOUSLY, THE SURFACE, SIDES AND CURVES ARE POLISHED USING DIFFERENT MANUFACTURING PROCESSE S OF AUTO POLISHING, ITA 970 TO 972/10 & CO 90 TO 92/10 :- 5 -: HAND POLISHING, CURVE POLISHING, CHAMFERING ETC. T HE FINISHED ARTICLES OR PRODUCTS THAT EMERGE AFTER UNDERGOING VARIOUS MA NUFACTURING PROCESSES ARE DEFINITELY DISTINCT MONUMENTS OF A NE W SHAPE, DESIGN, DIFFERENT SIZE AND POLISHING TEXTURE. THE HON'BLE APEX COURT IN THE CASE OF ARIHANT TILES & MARBLES(P) LTD (SUPRA) HAS HELD THAT CONVERSION OF MARBLE BLOCKS INTO POLISHED SLABS AND TILES CONS TITUTES MANUFACTURE OR PRODUCTION AS IT RESULTS IN EMERGENCE OF A NEW AND DISTINCT COMMODITY AND, THEREFORE, ASSESSEES UNDERTAKING SUC H ACTIVITY ARE ENTITLED TO THE BENEFIT OF SECTION 80-IA. 4. THIS DECISION HAS BEEN FOLLOWED BY VARIOUS HIGH CO URTS AND TRIBUNALS THEREAFTER. INCIDENTALLY, WE MAY MENTION ED THAT THE DECISION OF ARIHANT TILES & MARBLES(P) LTD WAS AUTHORED (PRO POSED) BY ONE OF US [JM] WHICH WAS REVERSED BY THE THIRD MEMBER AGAI NST THE ASSESSEE, BUT THEREAFTER REVERSED BY THE HON'BLE RA JASTHAN HIGH COURT AND CONFIRMED BY THE HON'BLE SUPREME COURT. THUS, CONVERSION OF MARBLE SLABS INTO POLISHED SLABS AND TILES TANTAMOU NTS TO MANUFACTURE/PRODUCTION AS IT RESULTS IN EMERGENCE OF A NEW AND DISTINCT COMMODITY AND THUS, THE ASSESSEE IS ENTITL ED TO THE BENEFIT OF SECTION 10B. THE INSERTION OF EXPLANATION 4 TO SEC TION 10B DID NOT MAKE ANY DIFFERENCE BECAUSE THERE IS NO AMENDMENT I N THE PROVISIONS ITA 970 TO 972/10 & CO 90 TO 92/10 :- 6 -: OF SECTION 10B AND IT IS ONLY BY WAY OF EXPLANATION THAT THE PROVISION IS ADDED. THIS EXPLANATION CLEARLY USES THE EXPRESS ION FOR THE PURPOSE OF THIS SECTION, MANUFACTURE OR PRODUCE SHALL IN CLUDE CUTTING AND POLISHING OF PRECIOUS AND SEMI-PRECIOUS STONES . THUS, AN INCLUSIVE EXPRESSION HAS BEEN ADDED, AND THEREFORE, BY NO STR ETCH OF IMAGINATION IT CAN BE LIMITED TO THE AFORESAID ACT IVITY ALONE. THERE ARE NUMEROUS JUDGMENTS IN WHICH IT HAS BEEN CONSISTENTL Y HELD THAT THE WORD PRODUCTION IS WIDER IN ITS SCOPE AS COMPARED TO THE WORD MANUFACTURE. THE PARLIAMENT IN ITS WISDOM HAS TAK EN NOTE OF THE GROUND REALITY AND HAS AMENDED THE PROVISION OF THE INCOME-TAX ACT, 1961 BY INSERTING SECTION 2(29BA) VIDE FINANCE ACT , 2009 WITH EFFECT FROM 1.4.2009. IN THE CASE OF ARIHANT TILES & MARB LES(P) LTD, THE DECISIONS OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS LUCKY MINMAT P. LTD, 245 ITR 830(SC) AND CIT VS N.C.BUD HARAJA & CO., 204 ITR 427, HAVE BEEN DISCUSSED IN DETAIL. THUS, IN OUR CONSIDERED OPINION, THE ISSUE INVOLVED IN ALL THE THREE APPEAL S STAND COVERED IN FAVOUR OF THE ASSESSEE. THEREFORE, ON THIS MAIN IS SUE, THE APPEALS OF THE REVENUE STAND DISMISSED. 5. ONE MORE COMMON ISSUE REGARDING ALLOWANCE OF DEP RECIATION @ 25% ON ELECTRICAL FITTINGS HAS BEEN CHALLENGED. THE ASSESSEE HAS ITA 970 TO 972/10 & CO 90 TO 92/10 :- 7 -: CLAIMED DEPRECIATION ON ELECTRICAL FITTINGS @ 25%. THE ASSESSING OFFICER HAS RESTRICTED THE CLAIM TO 15% AS AGAINST THE CLAIM OF 25% MADE BY THE ASSESSEE UNDER THE BLOCK OF MACHINERY . THE REASONS FOR DOING SO HAVE BEEN STATED THAT THE VERY NAME FIT TINGS SUGGESTS THAT THIS TERM SHOULD HAVE BEEN CLUBBED ALONGWITH FURNIT URE AND FITTINGS ELIGIBLE FOR DEPRECIATION OF 15% ONLY. THUS, HE HA S ADDED THE REMAINING PORTION OF THE CLAIM OF DEPRECIATION IN E ACH YEAR TO THE TOTAL INCOME OF THE ASSESSEE. THE LD. CIT(A) HAS ALLOWED THE RATE OF 25% BY HOLDING THAT THE WORD FITTINGS WILL NOT DETERM INE THE BLOCK OF ASSETS. 6. AFTER HEARING BOTH SIDES, WE ARE ALSO OF THE OPINIO N THAT THE WORD FITTINGS WILL NOT DETERMINE THE BLOCK OF ASS ETS, HENCE, THE ASSESSEE IS ENTITLED TO DEPRECIATION @ 25%. THE ELE CTRICAL FITTINGS INCLUDE THE ELECTRICAL MOTORS, PANEL BOARD ETC. FOR RUNNING THE MACHINERIES WHICH WILL FALL UNDER THE ELECTRICAL MA CHINERIES AND WOULD BE ELIGIBLE FOR 25% DEPRECIATION. WE DO NOT FIND A NY INFIRMITY IN THE LD. CIT(A)S FINDING AND HENCE, CONFIRM THE SAME. 7. THE CROSS OBJECTIONS ARE FILED SIMPLY IN SUPPORT OF THE LD. CIT(A)S ORDERS AND IN VIEW OF OUR ORDER IN REVENUE S APPEALS, THE CROSS OBJECTIONS HAVE BECOME INFRUCTUOUS, HENCE DIS MISSED. ITA 970 TO 972/10 & CO 90 TO 92/10 :- 8 -: 8. IN THE RESULT, THE APPEALS BY THE REVENUE AND T HE CROSS OBJECTIONS BY THE ASSESSEE STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22.6.2011. SD/- SD/- (DR. O.K. NARAYANAN) VICE-PRESIDENT (HARI OM MARATHA) JUDICIAL MEMBER DATED: 22 ND JUNE, 2011 RD COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR
