M/S. SADANAND TEXTURISERS PVT. LTD, MUMBAI V. THE ITO 4(3)(4), MUMBAI

ITA 1067/MUM/2008

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75868 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 1 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2002-2003
• Appeal Filed On: 13-02-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: SUBODH L RATNAPARKHI
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'J' BENCH, MUMBAI BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ITA NO. 1067/MUM/2008 (ASSESSMENT YEAR: 2002-03) M/S. SADANAND TEX T URISERS PVT. LTD. 436/15, OPP. TO AJAY NAGAR, KHADIPAR ROAD, NEAR SHIVAJI CHOWK, BHIWANDI MUMBAI-421 308. VS. INCOME TAX OFFICER WARD 4(3)(4) AAYAKAR BHAVAN, M.K. ROAD NEAR SHIVAJI CHOWK BHIWANDI MUMBAI-421 308. (APPELLANT) (RESPONDENT) P ERM ANENT ACCOUNT N O. : AAFCS 7369 N ASSESSEE BY : SHRI SUBODH L. RATNAPARKHI REVENUE BY : SHRI MAURYA PRATAP DATE OF HEARING : 12/03/2014 DATE OF PRONOUNCEMENT : 21/03/2014 O R D E R PER VIJAY PAL RAO, JUDICIAL MEMBER: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 27.11.2007 OF CIT(A) FOR THE ASSESSMENT YEAR 2002-0 3. THE ASSESSEE HAS RAISED A SOLITARY GROUND IN THE APPEAL WHICH READS AS UNDER :- ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF AS SESSING OFFICER IN DENYING THE DEDUCTION U/S. 80IB BY NOT ACCEPTING TW ISTING & TEXTURISING AS MANUFACTURING ACTIVITY, REASONS ASSI GNED BY HIM FOR DOING THE SAME ARE WRONG AND INSUFFICIENT. ITA NO.1067/M/08 AY:02-03 2 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CONVE RSION OF POLYESTER YARN INTO TEXTURISED YARN. AO NOTED THAT THE ASSESS EE HAS SHOWN PURCHASE OF POLYESTER YARN AND THE SAME WAS SENT TO ITS SISTER CONCERN FOR CONVERTING IT INTO TEXTURISED YARN. THE ASSESSE E PAID A SUM OF RS.58,86,600/- ON ACCOUNT OF JOB-WORK CHARGES TO IT S SISTER CONCERN. AO NOTED THAT THE ASSESSEE HAS SHOWN TOTAL CONSUMPTION OF ELECTRICITY DURING THE YEAR AT RS.22,031/- ONLY, AND DURING THE ENTIRE YEAR TOTAL PAYMENT ON ACCOUNT OF WAGE STOOD AT RS .1,01,869/- AND SALARY AT RS.1,20,000/-. THUS AO HELD THAT THE ASSESSEE HAS NOT CARRIED OUT ANY MANUFACTURING ACTIVITY BY ITSELF AND FURTHER, THE A SSESSEE HAS NOT FULFILLED THE CONDITION OF MINIMUM 10 WORKERS FOR C LAIMING DEDUCTION U/S. 80IB. ACCORDINGLY, AO HAS DENIED CLAIM OF DEDU CTION U/S. 80IB ON THREE REASONS VIZ. (I) THE CONVERSION OF POLYESTER YARN INTO TEXTURISED YARN WAS NOT CONSIDERED AS MANUFACTURING ACTIVITY AND TH E DECISION OF THIS TRIBUNAL IN THE CASE OF EMPTEE POLY YARNS PVT. LTD. WAS NOT ACCEPTED BY THE REVENUE AND APPEAL FILED BEFORE THE HON'BLE HIG H COURT, (II) THE ASSESSEE HAS NOT GOT MANUFACTURING DONE IN ITS OWN FACTORY PREMISES, (III) THE PRINCIPLE CONDITION OF HAVING MINIMUM 10 WORKERS WAS NOT SATISFIED. ON APPEAL CIT(A) CONFIRMED THE ACTION OF ASSESSING OFFICER. 3. BEFORE US, THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS SUBMITTED THAT ON THE ISSUE OF TWISTING AND TEXTURI SING OF POLYESTER YARN BEING TREATED AS MANUFACTURING /PRODUCTION HAS BEEN DECIDED FINALLY BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. EMPTEE POLY YARN (P) LTD. (320 ITR 665) AND THEREFORE, THE ACTIVITY OF TWISTING AND TEXTUR ISING OF POLYESTER YARN HAS BEEN CONSIDERED AS MANUFACTURING ACTIVITY ENTITLED FOR DEDUCTION U/S. 80IA. THE LD. AR HAS POINTED OUT THA T IN THE CASE OF ASSESSEE, ONLY TEXTURISING WORK WAS GOT DONE ON JOB -WORK-BASIS FROM THE SISTER CONCERN AND THEREAFTER THE TWISTING WORK HAS BEEN DONE BY THE ASSESSEE AT ITS OWN FACTORY PREMISES. HE HAS REFERR ED THE DECISION OF THIS TRIBUNAL IN THE CASE OF SUNRISE METAL INDUSTRIES VS. INCOME TAX OFFICER ITA NO.1067/M/08 AY:02-03 3 (89 ITD 568) SUBMITTED THAT THE TRIBUNAL HELD THAT IF PART OF A CTIVITY IS PERFORMED BY THE ASSESSEE AT ITS OWN PREMISES THEN THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S. 80IA. . THE LD. AUTHORI ZED REPRESENTATIVE RELIED ON THE FOLLOWING DECISIONS :- 1. CIT VS. PENWALT INDIA LTD. (196 ITR 813)(BOM.) 2. SHAH ORIGINALS VS. ASTT. /ADDL. COMMISSIONER OF IN COME TAX (19 SOT 568)(MUM) AND 3. CIT VS. ELGI ULTRA INDUSTRIES LTD. 25 TAXMAN.COM 5 61 (MAD.) 4. AS FAR AS THE ISSUE OF EMPLOYMENT OF 10 WORKERS IS CONCERNED THE LD. AR SUBMITTED THAT TOTAL EXPENDITURE ON EMPLOYE ES WAS RS.2,21,869/- WHICH WAS SUFFICIENT FOR EMPLOYING 10 WORKERS IN FY 2001-02. ON THE OTHER HAND THE LD. DR HAS SUBMITTED THAT AO AS WELL AS CIT(A) HAS RECORDED THE FACT THAT THE ENTIRE WORK WAS GOT DONE ON JOB-WORK BASIS FROM THE SISTER CONCERN AND NO MANUFACTURING ACTIVI TY HAS BEEN UNDERTAKEN BY THE ASSESSEE IN ITS OWN FACTORY. HE H AS FURTHER SUBMITTED THAT THE ASSESSEE HAS FAILED TO PRODUCE ANY RECORD TO SHOW THAT 10 WORKERS WERE EMPLOYED BY THE ASSESSEE . HE HAS REFE RRED THE FINDINGS OF ASSESSING OFFICER AND CIT(A) AND SUBMITTED THAT THE PAYMENT OF WAGES OF RS.1,01,869/- DOES NOT INDICATE THAT THE ASSESSEE H AS EMPLOYED MINIMUM 10 WORKERS. FURTHER, THE ELECTRICITY CONSUM PTION DURING THE YEAR WAS ONLY RS.22,031/- WHICH GOES TO SHOW THAT T HE ASSESSEE HAS NOT CARRIED OUT ANY ACTIVITY OF MANUFACTURING IN ITS FA CTORY. HE HAS RELIED UPON THE ORDERS OF AUTHORITIES BELOW. 5. HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD WE NOTE THAT THE ASSESSEE HAS AD MITTED THE FACT THAT HE HAS GOT THE JOB-WORK DONE FROM ITS SISTER CONCER N NAMELY M/S. MAHENDRA TEXTURISING AND TWISTING PVT. LTD. WE FURT HER NOTE THAT THIS ISSUE OF PART WORK GOT DONE FROM SISTER CONCERN AND PART WORK RELATING TO TWISTING THE YARN IS PERFORMED BY THE ASSESSEE IN I TS OWN FACTORY WAS NEVER BROUGHT BEFORE THE AUTHORITIES BELOW AND THER EFORE, THERE IS NO ITA NO.1067/M/08 AY:02-03 4 FINDING ON THIS CLAIM OF ASSESSEE. ON PRINCIPLE, IT IS NOW SETTLED BY THE HON'BLE SUPREME COURT THAT TWISTING AND TEXTURISING OF YARN CONSTITUTE MANUFACTURING AND THEREFORE, THE DEDUCTION U/S. 80I A IS ALLOWABLE. WE FURTHER NOTE THAT IN CASE WHERE PART OF THE MANUFAC TURING ACTIVITY IS CARRIED ON BY ASSESSEE, THE DEDUCTION U/S.80IA CANN OT BE DENIED. HOWEVER, THIS FACT THAT PART OF THE MANUFACTURING A CTIVITY NAMELY TWISTING OF YARN HAS BEEN PERFORMED BY THE ASSESSEE IN ITS O WN FACTORY CANT BE DECIDED CONCLUSIVELY AS IT WAS NOT EXAMINED BY THE AUTHORITIES BELOW. FURTHER, IT BECOMES IRRELEVANT AS THE ASSESSEE FAIL S TO FULFILL THE CONDITION OF MINIMUM 10 WORKERS. 6. AS REGARDS, THE CONDITION OF MINIMUM 10 WORKERS BEING EMPLOYED BY THE ASSESSEE IS CONCERNED, WE NOTE THAT THE ASSE SSEE HAD NOT PRODUCED ANY DOCUMENT IN SUPPORT OF ITS CLAIM AND T OOK THE PLEA THAT THE FACTORY BUILDING WAS FLOODED AND ALL THE DOCUME NTS GOT DESTROYED IN THE FLOOD. EVEN IN CASE OF DESTRUCTION OF THE DOCUM ENTS THE ONUS IS ON THE ASSESSEE TO PROVE THAT MINIMUM 10 WORKERS WERE EMPLOYED DURING THE RELEVANT YEAR TO SATISFY THE CONDITION U/S. 80I B. APART FROM TAKING A PLEA THAT THE DOCUMENTS ARE DAMAGED IN FLOOD ASSESS EE HAS NOT PRODUCED ANY EVIDENCE TO SHOW THAT MINIMUM 10 WORKE RS WERE EMPLOYED. FURTHER WAGES PAID BY THE ASSESSEE OF RS. 1,01,869/- IS NOT SUFFICIENT TO PAY THE MINIMUM WAGES TO 10 WORKERS D URING THE YEAR. THE ASSESSEE TOOK THE STAND THAT THE SALARY PAID TO THE EMPLOYEES SHOULD BE CONSIDERED FOR COUNTING MINIMUM WORKERS EMPLOYED BY THE ASSESSEE BUT IN THE ABSENCE OF RELEVANT DETAILS IT CANNOT BE ACC EPTED. MOREOVER THE SALARY AND WAGES ARE SOWN BY THE ASSESSEE UNDER DIF FERENT HEADS AND IN NORMAL ACCOUNTING PRACTICE THE SALARY IS SHOWN IN R ESPECT OF THE PAYMENT MADE TO THE EMPLOYEES OTHER THAN WORKERS IN THE FAC TORY. THEREFORE, IF THE SALARY IS PAID TO THE SUPERVISORY AND OTHER OFF ICIAL STAFF, SAME CANNOT BE TREATED AS PAYMENT TO THE WORKERS. IN THE FACTS AND CIRCUMSTANCES OF ITA NO.1067/M/08 AY:02-03 5 THE CASE WE ARE OF THE VIEW THAT THE ASSESSEE FAILE D TO PROVE THAT MINIMUM 10 WORKERS WERE ENGAGED TO SATISFY THE COND ITION PROVIDED U/S. 80IB. ACCORDINGLY, WE NOT FIND ANY REASON TO INTERF ERE WITH THE ORDERS OF AUTHORITIES BELOW. 7. IN THE RESULT APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST MARCH, 2014. SD/- SD/- (N.K. BILLAIYA) ACCOUNTANT MEMBER (VIJAY PAL RAO ) JUDICIAL MEMBER MUMBAI, DATED: 21/03/2014. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.