ITO, Nahan V. Sh. Mela Ram, Sirmour

ITA 1003/CHANDI/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86174 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 03-02-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 14-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Assessee Lawyers: TAPISH GOYAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R. SOOD, ACCOUNTANT MEMBER ITA NOS. 1003 TO 1005/CHD/2014 ASSESSMENT YEARS: 2008-09 TO 2010-2011 THE ITO, VS. SH. MELA RAM NAHAN PROPRIETOR. M/S DEEWAL GRAMUDYOG VILL. OGLI, KALA AMB DISTT. SIRMOUR PAN NO.ABCAPR5484J (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MANJIT SINGH RESPONDENT BY : SHRI. TAPISH GOYAL DATE OF HEARING : 03/02/2015 DATE OF PRONOUNCEMENT : 06/02/2015 ORDER PER T.R.SOOD, A.M. THE APPEAL BY THE REVENUE IS DIRECTED AGAINST THE O RDER DATED 14.08.2014 PASSED BY THE CIT(A) SHIMLA, H.P. 2. IN THESE APPEALS REVENUE HAS RAISED THE IDENTICA L GROUND WHICH IS GIVEN BELOW: 1. ON THE FACTS AND IN THE CIRCUMSTANCES, THE LD. CIT( A) HAS ERRED IN DELETING THE ADDITION OF RS. 20,68,882/- FOR A.Y. 2008-09 (R S. 46,50,767/- FOR A.Y. 2009- 10 & RS. 29,67,372/- FOR A.Y. 2010-11) MADE BY THE A.O. ON ACCOUNT OF DISALLOWANCE U/S 80IC OF THE INCOME TAX ACT, 1961. . 3. AFTER HEARING BOTH THE PARTIES WE FIND THAT IN T HESE CASES ASSESSEE HAD CLAIMED DEDUCTION UNDER SECTION 80IC. THE DEDUCTION WAS DENIED BECAUSE BUSINESS OF MANUFACTURING OF MEHNDI, FACE PACK WAS HELD TO BE NON MANUFACTURING NATURE. 2 4. ON APPEAL THE LD. CIT (A) ALLOWED THE DEDUCTION BY FOLLOWING THE ORDER OF TRIBUNAL IN ASSESSES OWN CASE IN ITA NO. 245 & 246 /CHANDI/2011 FOR THE A.Y 2006- 07 AND 2007-08. 5. BEFORE US LD. CIT(A) RELIED ON THE ORDER OF AO. 6. ON THE OTHER HAND LD. COUNSEL FOR THE ASSESSEE S UBMITTED THAT ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE EARLIER OR DER OF TRIBUNAL. 7. AFTER HEARING BOTH THE PARTIES WE FIND THAT IDEN TICAL ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL IN EARLIER A .Y 2006-07 & 2007-08 IN ITA NO. 245 & 246/CHDANDI/2011, THE RELEVANT ISSUE WAS ADJU DICATED VIDE PARA 8 & 9 WHICH ARE AS UNDER: 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERU SED THE MATERIAL AVAILABLE ON RECORD. IN OUR VIEW THE LD. CIT(A) HAS CORRECTL Y FOLLOWED THE DECISION OF ITAT CHANDIGARH BENCH B IN THE CASE OF M/S INDUS COSME CEUTICALS (SUPRA). WHILE DECIDING THE CASE OF M/S INDUS COSMECEUTICALS (SUPR A) FOR AY 2005-06, THE TRIBUNAL HAS FOLLOWED ITS EARLIER ORDER DATED 25.9. 2008 PASSED IN THE CASE OF M/S INDUS COSMECEUTICALS, SHIMLA V. DCIT, CIRCLE, SHIML A. IN ITA NOS. 874 AND 875/CHD/2007 RELATING TO ASSESSMENT YEARS 2003-04 A ND 2004-05. IN ITA NOS. 874 AND 875/CHD/2007 IN THE CASE OF M/S INDUS COSMECEUT ICALS, SHIMLA V. DCIT, CIRCLE, SHIMLA, THE TRIBUNAL HAS HELD AS UNDER:- EVEN THE AO AT PAGE 7 OF THE ORDER HAS MENTIONED T HAT THE ASSESSEE FIRM IS ENGAGED IN MANUFACTURING OF HERBAL HEENA POWDER AND USED FOLLOWING INGREDIENTS: NAME OF THE RAW MATERIAL PERCENTAGE HEENA 40 BARIUM 25 PPD 10 CITRIC ACID 10 AMLA SHIKAKAI 15 PLANTAGO, BARHMI, ROSE PETALS, PAP, MANGANESE CARBONATGE AND SODIUM SULPHITE IT IS NOT THE CASE THAT THE ASSESSEE IS MERELY GRIN DING AND MIXING RATHER THE RAW MATERIAL IS FIRST COLLECTED, DRIED 'WITH THE USE OF MIXING OF VARIOUS ACIDS AND THEREAFTER GRINDED BY PUTTING THE DEFINITE QUANTITY (IN PERCENTAGE) WITH THE HELP OF VARIOUS SPECIALIZED PERSONS. IF ANY OF THE ITEM IS MIXED IN DISPROPORTIONATE MANNER, THEN THE END PRODUCT MAY BE HARMFUL AND MAY NOT BE USED FOR THE PURPOSE FOR WHICH IT WAS PRODUCED. THE END PRODUCT IS THE RESULT OF MANY TRANSFORMATIONS CARRIED OUT WITH THE HELP OF MANPOW ER AND MACHINES AND IS COMMERCIALLY A DIFFERENT ITEM. ANOTHER POINT-ON THE BASIS OF WHICH THE DEDUCTION WAS DISALLOWED IS THAT THE GROSS TURN OVER IS ABNOR MALLY HIGH, WE ARE OF THE VIEW, THAT THIS PLEA ITSELF CAN NOT BE THE SOLE GROUND FO R DENYING THE DEDUCTION SPECIALLY WHEN THE ISSUE TO BE ADJUDICATED BY US IS WHETHER THE ACTIVITY OF THE ASSESSEE AMOUNTS TO MANUFACTURING OR NOT. THE ANOTH ER POINT MENTIONED BY THE ID ASSESSING OFFICER JS THAT NO CENTRAL EXCISE DUTY HAS BEEN PAID BY THE 3 ASSESSEE ON THE PRODUCT, THEREFORE, IT CANNOT BE SA ID TO BE A MANUFACTURING. WE ARE MAKING IT CLEAR THAT AS PER CENTRAL EXCISE T ARIFF ACT, 1985, EXEMPTION HAS BEEN GRANTED TO CERTAIN GOODS / NEW UNITS IN UT TRANCHAL & HIMACHAL PRADESH (INSERTED BY NOTIFICATION NO. 76/2003 - CE DATED 5. 11.2003 AND SUBSTITUTED BY NOTIFICATION NO.27/2004 - CE DATED 9.7.2004 AND NO. 12/2006 CE' DATED 1.3.2006). EVEN OTHERWISE, THE SMALL SCALE INDUSTRY (SSI UNIT) ARE NOT SUPPOSED TO PAY EXCISE DUTY WHERE THE TURN OVER IS LESS THAN RS. 1.5 CRORES. DURING ARGUMENTS, THE ID COUNSEL FOR THE ASSESSEE CONTENDE D THAT IN VIEW OF THE NOTIFICATION OF THE - CENTRAL GOVERNMENT, CENTRAL E XCISE DUTY IS EVEN OTHERWISE EXEMPTED FROM PAYMENT IN THE BACKWARD STATE SO THAT THE NEW ENTREPRENEURS MAY FEEL ATTRACTION AND NEW UNITS CAN BE SET UP. TH ESE FACTS WERE NOT CONTROVERTED BY THE REVENUE. WE ARE MAKING IT CLEAR THAT BRANDED HEENA POWDER IS AN EXCISABLE ITEM, THEREFORE, THE CLAIM O F DEDUCTION CANNOT BE DENIED TO THE ASSESSEE SOLELY ON THE GROUND THAT NO EXCISE DUTY HAS BEEN PAID. , EVEN OTHERWISE, THE ONLY ISSUE FOR .ADJUDICATION BEFORE US .IS WHETHER THE ASSESSEE IS A MANUFACTURING UNIT OR NOT AND FURTHER WHETHER HER BAL COSMETIC PRODUCTS IS ELIGIBLE FOR DEDUCTION U/S 80 IB OF THE ACT, THEREF ORE, WE RESTRICT OURSELVES TO THIS ISSUE ONLY. 5. THE ID ASSESSING OFFICER DENIED THE DEDUCTION BY PLACING RELIANCE ,UPON THE DECISION IN THE CASE OF CIT VS SACS EAGLES CHIC ORY (241 ITR 319). WE HAVE FOUND THAT THIS CASE WAS DECIDED BY THE HON'BLE MAD RAS HIGH COURT WHEREIN ONLY CHICORY ROOT WERE CONVERTED INTO CHICORY POWDER WHE REAS IN THE PRESENT INDUSTRIAL UNIT, THERE ARE SO MANY ITEMS, WHICH ARE DRIED WITH THE HELP OF VARIOUS ACIDS / OTHER METHODS AND ARE MIXED IN A DEFINITE P ERCENTAGE AND THEREAFTER PUT TO VARIOUS PROCESSES AND THEN GRINDED WITH THE HELP OF MACHINES/AID OF POWER AND THE RESULTANT PRODUCT / END PRODUCT IS COMMERCIALLY KNOWN DIFFERENTLY, THEREFORE, IN OUR HUMBLE OPINION, AFORESAID CASE RE LIED UPON BY THE ID ASSESSING OFFICER AND WELL AS BY THE ID SR. DR MAY NOT HELP T HE REVENUE BEING ON DIFFERENT FACTS. EVEN OTHERWISE, THE MANUFACTURE ,A ND PROCESSING ARE NOT CLEARLY DEMARCATED FIELD. THE TEST OF MANUFACTURE LIES IN T HE ANSWER TO THE QUESTION WHETHER WHAT IS PROCESSED OR PRODUCED AS THE END-PR ODUCT IS COMMERCIALLY KNOWN AS A DIFFERENT PRODUCT FROM THE MATERIALS OUT OF WHICH IT IS SO PRODUCED. THEREFORE, IF THE PRODUCT HAS A DIFFERENT NAME AND IS IDENTIFIED BY THE BUYERS AND SELLERS AS A DIFFERENT PRODUCT AND IS BOUGHT AND SO LD AS A DISTINCT PRODUCT FORM ITS RAW-MATERIALS, ONE CAN SAY THAT IT IS A MANUFAC TURED 'PRODUCT. THERE MAY BE SOME ROOM FOR DEBATE AS TO WHETHER THIS TEST IS FUL LY SATISFIED BY EDIBLES THAT COME AS END-PRODUCTS FROM THE RAW MATERIALS OUT OF WHICH THEY ARE MADE. BUT THE EXPRESSION 'PRODUCE' HAS TO BE TAKEN IN A MORE LIBE RAL SENSE THAN MANUFACTURE. IF THE END-PRODUCT IS DIFFERENT, THAT BY ITSELF WOULD SUFFICE TO MEET THE REQUIREMENT OF 'PRODUCING'. EVEN AN EXCLUS IVE CATERING UNIT OF A HOTEL SUPPLYING EATABLES IN BULK FOR CONSUMPTION BY AIR P ASSENGERS WAS HELD TO BE ELIGIBLE FOR RELIEF BY THE HON'BLE CALCUTTA HIGH CO URT IN CIT VS. EAST INDIA HOTELS LTD (209 ITR 854)(CAL). THE FOLLOWING CASES CAN ALSO BE RELIED UPON: CIT VS, M.R. GOPAL (58 ITR 598)(MAD) TARAI DEVELOPMENT CORPORATION VS. CIT (120 ITR 342) (AII) CIT VS. KANAM LATEX INDUSTRIES LTD (221 ITR 1)(KER. ) CIT VS. TATA LOCOMOTIVE AND ENGG CO LTD (68 ITR 325 )(BOM) ADDL.C'IT VS. A.MUKERJEE.& CO (113 ITR 718)(CAL) CIT VS. DARSHAK LTD (247 ITR 489)(KAR) SHIP SCRAP TRADERS VS. CIT (251 ITR 806)(BOM) CIT VS. PREMIUM TOBACCO PACKERS (284 ITR 222) (MAD) CIT VS. PRABHU DASS KISHORE DASS TOBACCO PRODUCTS ( 154 TAXMAN 404)(GUJ) CIT VS. SHIV OIL & DAL MILLS (153 TAXMAN 27)(AII) CIT VS. JAMAL PHOTO INDS (205 CTR 427)(MAD) IF THE AFORESAID DECISIONS ARE ANALYSED, IT IS SEEN THAT EVEN THE TOBACCO ; CURING, BIDI MANUFACTURING AND CONVERSION OF PLAIN GLASSWAR E INTO DECORATIVE GLASSWARE WERE HELD TO BE AMOUNTING TO MANUFACTURE. EVEN BOOK PUBLISHING AND BOOK BINDING [ADDL CIT VS. A. MUKERJEE & CO 113 ITR 718, (CAL) ] WERE HELD TO BE MANUFACTURING. 4 THERE ARE .CERTAIN DECISIONS WHEREIN IT WAS HELD TH AT THERE IS A NO MANUFACTURING ACTIVITY LIKE PACKING OF TEA (APPEEJAY PVT LTD VS . CIT (77 TAXMAN 208), TYRE RE- TREADING (TAMILNADU STATE TRANSPORT CO LTD VS. CIT - 252 ITR 883) (SC) FOUNDATION WORK (CIT V. N.C. BUDHIRAJA & CO. 204 ITR 412 (SC) PROCESSING OF SHRIMPS (CIT VS. RELISH FOODS 237 ITR 59 (SC), REARING OF CHICKS (CIT VS. VENKTESWARA HATCHERIES PVT LTD 237 ITR 174) (S.C) , CONVERSION OF CHICORY ROOTS INTO CHICORY POWDER (SACS EAGLES CHICORY V. C IT 255 ITR 178 (S.C) ETC 9. RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL (SUPRA) WE HOLD THAT IN THE PRESENT CASE, SINCE THERE IS A SYSTEMATIC ACTIVITY DONE BY THE ASSESSEE IN REACHING TO AN END PRODUCT WHICH IS COMMERCIALLY KNOWN DIFFE RENTLY, THEREFORE, WE HAVE NO HESITATION TO SAY THAT IT IS A MANUFACTURING ACT IVITY. CONSEQUENTLY, WE DISMISS BOTH THE APPEALS OF REVENUE. FOLLOWING THE ABOVE WE DECIDE THIS ISSUE AGAINST TH E REVENUE. 8. IN THE RESULT APPEALS OF THE REVENUE ARE DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 06/02/2015 SD/- SD/- (BHAVNESH SAINI) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 06/02/2015 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR