ITO, Jaipur V. SMT RANJANA JOHARI, Jaipur

ITA 1111/JPR/2010

• Counselvise Citation: 111123114 RSA 2010
• Duration Of Justice: 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-07-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 02-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VIKAS RAJVANS HI
• Keywords: Business income; Additional evidence
• Section: 43B; 142(1); 10AA; 133A; 10B; 27; 148

Judgement Text

1 ITA 1111(6)-10 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH A JAIPUR. ( BEFORE SHRI R.K. GUPTA AND SHRI N.L. KALRA ) ITA NO. 1111, 1112 & 1113/JP/2010 ASSTT. YEAR : 2004-05, 05-06 & 06-07. THE INCOME-TAX OFFICER, VS. SMT. RANJANA JOHARI, PROP. WARD 6(2), M/S.GLOBAL ART EXPORTS, JAIPUR. S-249,MAHAVEER NAGAR, TONK ROAD, JAIPUR. (APPELLANT) (RESPONDENT) C.O. NOS. 10, 11 & 12/JP/2011 (ARISING OUT OF ITA NOS. 1111, 1112 & 1113/JP/20 10) ASSTT. YEARS : 2004-05, 05-06 & 06-07. SMT. RANJANA JOHARI, VS. THE INCOME-TAX OFFICER , JAIPUR. WARD 6(2), JAIPUR. (CROSS OBJECTOR) (RESPONDENT) APPELLANT BY : SHRI SUNIL MATHUR RESPONDENT BY : SHRI VIKAS RAJVANS HI ORDER DATED : 14/07/2010. PER SHRI R.K. GUPTA, JM. THESE ARE THREE APPEALS BY DEPARTMENT AND THREE CR OSS OBJECTIONS BY ASSESSEE RELATING TO ASSESSMENT YEARS 2004-05, 05-06 AND 06- 07. 2. IN THE CROSS OBJECTIONS FILED BY ASSESSEE, THE A SSESSEE HAS CHALLENGED THE CONFIRMING THE REOPENING BY ISSUING NOTICE UNDER SE CTION 148 AND CONFIRMING THE DISALLOWANCE ON ACCOUNT OF CAPITAL INTRODUCED AND C HARITY EXPENSES AND ALSO DISALLOWANCE 2 OF TELEPHONE EXPENSES ETC. WERE NOT PRESSED BY THE LD. COUNSEL OF THE ASSESSEE DURING THE COURSE OF HEARING OF APPEAL FOR ALL THE THREE YEARS . THEREFORE, CROSS OBJECTIONS ARE DISMISSED AS NOT PRESSED. 3. NOW WE WILL TAKE UP THE APPEALS OF THE DEPARTMEN T. 4. THE DEPARTMENT IS OBJECTING IN DELETING THE ADDI TION MADE BY AO ON ACCOUNT OF DISALLOWANCE OF EXEMPTION UNDER SECTION 10BA AND DE LETING THE ADDITION MADE BY AO ON ACCOUNT OF BELATED DEPOSIT OF EMPLOYEES CONTRIBUTIO N. 5. THE LD. CIT (A) DELETED THE ADDITION MADE BY AO BY ALLOWING EXEMPTION UNDER SECTION 10BA AT RS. 29,97,074/-, AT RS. 99,02,240/- AND RS. 1,28,77,176/- RESPECTIVELY FOR ALL THE YEARS. THE LD. CIT (A) DELETED THE DISALLO WANCE OF RS. 15,049/- AND RS. 31,274/- MADE BY AO ON ACCOUNT OF BELATED DEPOSIT OF EMPLOYE ES CONTRIBUTION RESPECTIVELY FOR ASSESSMENT YEARS 2004-05 AND 05-06. NO SUCH GROUND IS INVOLVED FOR ASSESSMENT YEAR 2006-07. SINCE FACTS ARE SIMILAR FOR ALL THE THREE YEARS, THEREFORE, THE FACTS INVOLVED IN A.Y. 2004-05 WILL BE DISCUSSED AND THE OUTCOME OF T HE SAME WILL BE APPLICABLE FOR ALL THE THREE YEARS. 5.1. THE LD. CIT (A) HAS ALSO DISPOSED OFF THIS GRO UND FOR ALL THE THREE YEARS TOGETHER. 6. ON PERUSAL OF ASSESSMENT ORDER FOR ALL THE THREE AS SESSMENT YEARS IT IS SEEN THAT THE ASSESSEE HAS CLAIMED 100% EXEMPTION U/S 10BA OF I.T. ACT AND IN THIS RESPECT A DETAILED SHOW CAUSE LETTER WAS ISSUED ALONG WITH NO TICES U/S 143(2) AND 142(1) DATED 27.11.2008 FOR ALL THE 3 ASSESSMENT YEARS. THE OPER ATING PART OF THE SHOW CAUSE LETTER WAS REPRODUCED IN THE BODY OF ASSESSMENT ORDER FOR ALL THE THREE ASSESSMENT YEARS. THEREAFTER, ON 5.12.2008 THE LD. A/R OF THE ASSESSE E HAS FURNISHED THE REPLY TO THE SHOW CAUSE NOTICE WHICH IS REPRODUCED BY THE ASSESSING O FFICER IN THE BODY OF ASSESSMENT ORDER 3 FOR ALL THE THREE ASSESSMENT YEARS. HOWEVER, THE AF ORESAID REPLY / EXPLANATION WERE NOT CONSIDERED SATISFACTORY FOR SIMILAR REASONS GIVEN B Y ASSESSING OFFICER IN THE ASSESSMENT ORDER PASSED FOR ALL THE THREE ASSESSMENT YEARS. AC CORDING TO AO, AS PER RAJASTHAN HIGH COURT JUDGMENT IN THE CASE OF CIT V/S LUCKY MINERAL S PVT. LTD. THERE WERE CERTAIN TESTS FOR AN ACTIVITY TO QUALIFY FOR BEING TERMED AS MANU FACTURING. ON THIS ISSUE, THE AO HAD ALSO REFERRED CERTAIN OTHER JUDICIAL DECISIONS AS D ISCUSSED IN THE BODY OF ASSESSMENT ORDER AND HAS GIVEN A FINDING THAT THE BUSINESS ACTIVITY CARRIED ON BY THE ASSESSEE CANNOT BE REGARDED AS A MANUFACTURING PROCESS AND THE ASSESSE E IS BASICALLY ENGAGED IN PURCHASING READYMADE FURNITURE WHICH IS EXPORTED AFTER HAVING DONE SOME POLISHING WORK OR AT THE MAXIMUM SOME FINISHING WORK AND THEN PACKING. ACCOR DING TO AO FOR THE A.Y. 2004-05 93.23% PURCHASES WERE AGAINST FORM NO. 17B AND SUCH PURCHASES IN A.Y. 2005-06 AND IN A.Y. 2006-07 THESE WERE 86% WHICH IS READYMADE M ERCHANDISE. ACCORDING TO AO FROM THE BILLS OF PURCHASES IT IS CLEAR THAT PRIMAR ILY THE ASSESSEE HAS MADE PURCHASES OF READYMADE FURNITURE LIKE DINING TABLES, COFFEE TABL ES, CHAIRS, T.V. CABINETS, CORNER TABLES, BEDS, SITE TABLES, SOFA SET AND OTHER UTILITY FURNI TURE ITEMS. BESIDES THAT THERE WERE FEW PURCHASES OF HARDWARE AND RELATED ITEMS WHICH WERE 0.36% IN A.Y. 2004-05, 0.92% IN A.Y. 2005-06 AND 0.12% IN A.Y. 2006-07. THE POLISHI NG MATERIAL PURCHASED WAS 0.85%, 1.37% AND 1.6% IN A.Y. 2004-05, 2005-06 AND 2006-07 RESPECTIVELY. THESE FACTS INDICATE THAT THE ASSESSEE WAS ENGAGED IN PURCHASIN G READYMADE FURNITURE WHICH IS EXPORTED BY HER AFTER SOME POLISHING AND PACKING. S IMILAR FACTS WERE ALSO NOTICED DURING THE COURSE OF SURVEY PROCEEDINGS EARLIER IN THIS CA SE FOR 14.2.2006. WITH THIS DISCUSSION THE AO HAS DISALLOWED THE EXEMPTION CLAIMED U/S 10B A OF I.T. ACT FOR ALL THE THREE ASSESSMENT YEARS. 4 7. ASSESSEE PREFERRED APPEAL BEFORE LD. CIT (A) FOR ALL THE THREE YEARS CHALLENGING THE ACTION OF THE AO DENYING EXEMPTION CLAIMED UNDE R SECTION 10BA OF THE ACT. DETAILED WRITTEN SUBMISSIONS WERE FILED BEFORE LD. CIT (A)WHICH HAS BEEN RECORDED BY LD. CIT (A) AT PAGES 19 TO 29 ARE AGAIN REPRODUCED IN T HE FOLLOWING MANNER :- THE ASSESSEE THE ASSESSEE HAS CLAIMED DEDUCTIO N U/S 10BA IN THE INCOME TAX RETURN FOR THE A.Y. 2004-05 AND ALSO QUA LIFIES FOR CLAIMING THIS SECTION. (COPY OF INCOME TAX RETURN, AUDITED BALANCE SHEET, P&L A/C, ALONG WITH AUDIT REPORT FOR THE A.Y. 2004-05 VIDE P.B. NO. 87 TO 107 ) AS PER SECTION 10BA WHICH HAS SPECIAL PROVISION IN RESPECT OF EXPORT OF ELIGIBLE ARTICLES OR THINGS AND AS PER ACT IF ANY UNDERTAKING IS CLAIMING U/S 10A OR 10B, THEY ARE NO T ENTITLED TO CLAIM U/S 10BA, THIS SECTION WAS INSERTED BY TAX LAW (AMENDMENT 200 3) W.E.F. 01.04.2004 WITH THE CONDITION THAT NO DEDUCTION UNDER THIS SECTION SHAL L BE ALLOWED TO ANY UNDERTAKING FOR ANY A.Y. FROM BEGINNING ON 1 ST DAY OF APRIL 2010 HENCE DEDUCTION IN THIS SECTION INSERTED BY TAXATION LAWS (AMENDMENT ACT) 2003 W.E. F. 01.04.2004 TO 01.04.2010 . AS PER SECTION 10BA (2), THE CONDITIONS WHICH ARE T HE UNDERTAKING WHICH IS ELIGIBLE FOR CLAIMING THE DEDUCTION ARE AS FOLLOWS: (A) IT MANUFACTURES OR PRODUCES THE ELIGIBLE ARTIC LES OR THINGS WITHOUT THE USE OF IMPORTED RAW MATERIAL; ELIGIBLE ARTICLE MEANS ALL HAND MADE ARTICLES OR THINGS, WHICH ARE OF ARTISTIC VALUE AND WHICH REQUIRES THE USE OF WOOD AS THE MAI N RAW MATERIAL. AS SUBMITTED THAT THE BUSINESS OF THE ASSESSEE IS E XPORT OF WOODEN HANDICRAFT ITEM HAVING ARTISTIC VALUE WITH AN ANTIQUE LOOK. AS IT I S A WELL KNOWN FACT THAT WOOD IS THE ONLY RAW MATERIAL FOR MANUFACTURING WOODEN HAND ICRAFT ITEMS. HOWEVER, OTHER RAW MATERIALS SUCH AS POLISH, STONES, BRASS, IRON, ETC. ARE USED FOR MAKING IT AN ARTISTIC ITEM. SINCE GROOVING, BRASS WORK , INLAY W ORK, METAL WORK, CARVING, STUDDING WORK, STONE WORK AND OTHER RELATED PROCESS CANNOT BE CARRIED OUT WITH THE HELP OF MACHINES (SINCE BEING A METICULOUS WOR K) IT INVOLVES THOUGHT, PERSONAL SKILLS AND CONSTRUCTIVE POWER TO MANUFACTU RE THE PRODUCT IS OF ARTISTIC NATURE. THE ASSESSEE HAS SUBMITTED THE EXPLANATION THAT THE GOODS MANUFACTURED OR PRODUCED BY THE ASSESSEE ARE ELIGIBLE ARTICLE OR TH INGS HAVING THE ARTISTIC VALUE AND IN THIS REGARD THE EXPLANATION WAS THAT WEBSITE DIC TIONARY DEFINES HAVING ARTISTIC AS OF OR PERTAINING TO ART OR ARTICLES, CONFIRMING OR CONFORMABLE TO THE PRINCIPLES OF ART CAREFULLY EXECUTED, SENSITIVE TO ART WHEN A MAN WHOSE WORK INVOLVES THOUGHT, SKILL AND CONSTRUCTIVE POWER, PRO DUCES A MODEL, THE PRODUCT IS OF ARTISTIC NATURE. 5 THE HEAVY RELIANCE MUST NOT BE PLACED BY THE REVENU E ON THE DECISION OF KWAL PRO EXPORTS BECAUSE THERE IS SPECIFIC DEFINITION OF ELIGIBLE A RTICLES U/S 10BA WHICH IS NOT THE CASE U/S 10B WITH WHICH KWAL PRO EXPORTS WAS CONCERNED. THEREFORE THE SAID DECISION CAN NOT APPLY BEING TOT ALLY DISTINGUISHABLE. AS IT WAS ALSO STATED IN THE CASE OF GOVERDHAN PRASAD SINGHAL VS. THE I.T.O., WARD 6 (1) JAIPUR VIDE ITA NO. 964/JP/2007 FOR THE A.Y. 2003-04, 200/ JP/2008 FOR THE A.Y. 2004-05 & ITA NO. 797/JP/2008 & 1000/JP/2008 FOR A. Y. 2005-06 VOL-XL/TAX WORLD/175. THE ASSESSEE IS MANUFACTURING THE ELIGIBLE ARTICLE S E.G. ALL HANDMADE ARTICLES OR USEFUL THINGS WHICH ARE OF ARTISTIC VALUE AND WHICH REQUIRE THE WOOD THAT ARE USED FOR RAW MATERIAL, HENCE ASSESSEE QUALIFIES THE FIRS T CONDITION. NO IMPORTED RAW MATERIAL WAS USED BY THE ASSESSEE AND ALL THE PROCE SSES CARRIED ON WERE OF MANUFACTURING ACTIVITY. (B) IT IS NOT FORMED BY THE SPLITTING UP OR THE REC ONSTRUCTION, OF A BUSINESS ALREADY IN THE EXISTENCE. THE ASSESSEE STARTED FIRST TIME NEW UNDERTAKING AND STARTED THE MANUFACTURING W.E.F. 05.11.2003 AS PER COPY OF S.S.I. PERMANENT R EGISTRATION CERTIFICATE BY DISTRICT INDUSTRIAL CENTER, UDYOG BHAWAN, JAIPUR ON DATED 09.11.2005 (COPY OF SSI REGISTRATION IS ALREADY ENCLOSED FOR VERIFICATI ON VIDE P.B. NO.85) AND THE FACTS IS ALSO VERIFIED FROM THE SALES TAX REGISTRATION NO . W.E.F. 27.06.2003 (P.B .NO 86)AND REGISTRATION CUM MEMBERSHIP CERTIFICATE FROM EXPORT PROMOTION COUNCIL FOR HANDICRAFTS, NEW DEHLI.VIDE P.B. NO. 84). HENCE FROM ALL THE DOCUMENTS IT IS APTLY PROVED THAT THE YEAR OF ESTABLISHMENT OF BUSI NESS IS 2003. THEREFORE, THE CONTENTION OF THE LD. A.O. IS WRONG THAT THE UNIT IS FORMED BY THE SPLITTING UP OR THE RECONSTRUCTION, OF A BUSINESS ALREADY IN THE EX ISTENCE. (C ) IT IS NOT FORMED BY THE TRANSFER TO A NEW BUSI NESS OF MACHINERY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE. SINCE ASSESSEE HAS STARTED A NEW UNDERTAKING AS DES CRIBED IN ABOVE POINT (B) AND ASSESSEE PURCHASED ALL NEW PLANT & MACHINERY FOR MA NUFACTURING PROCESS & DURING THE ASSESSMENT YEAR 2004-05 ASSESSEE PURCHAS ED ALL NEW PLANT & MACHINERY OF RS. 382154/-. THE LIST OF PLANT & MACH INERY AND PHOTOCOPY OF BILLS ALREADY FURNISHED TO LD. A.O. FOR VERIFICATION (COP Y OF BILLS VIDE P.B. NO.125 TO 138). THE MAIN MACHINERY IS HAND TOOLS, GRINDER, SA NDING MACHINE & DRILL MACHINE REQUIRED FOR WOODEN HANDICRAFT ARTISTIC WOR K. (D) NINETY PERCENT OR MORE OF ITS SALE DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR ARE BY WAY OF EXPORTS OF THE ELIGIB LE ARTICLES OR THING; AS MENTIONED IN SECTION 10BA OF THE INCOME TAX ACT 1961, NINETY PERCENT OR MORE OF ITS SALE DURING THE RELEVANT YEAR SHOULD BE BY WAY OF EXPORTS OF THE ELIGIBLE ARTICLES OR THINGS. DURING THE YEAR ALSO T HE ASSESSEE HAS EXPORTED 99.40% 6 SALE OUT OF TOTAL TURNOVER BY WAY OF ELIGIBLE ARTIC LES OR THINGS. HENCE KEEPING THE SAME IN MIND, THE ABOVE SAID CONDITION OF SEC. 10BA OF THE INCOME TAX ACT 1961 IS FULFILLED BY THE ASSESSEE. (E) IT EMPLOYS TWENTY OR MORE WORKERS DURING THE PREVIO US YEAR IN THE PROCESS OF MANUFACTURE OR PRODUCTION. SECTION10BA OF THE INCOME TAX ACT 1961 SPECIFIES TH AT THE ASSESSEE EMPLOYS TWENTY OR MORE WORKERS DURING THE PREVIOUS YEAR IN THE PROCESS OF MANUFACTURE OR PRODUCTION. AS PER THE WAGES REGISTER SO PRODUCED B EFORE THE LD .A.O. TOTAL OWN WORKERS DURING THE RELEVANT YEAR WERE AROUND 30. HO WEVER TOTAL WORKERS EMPLOYED THROUGH CONTRACTOR TO WHOM JOB CHARGES PAID WERE AR OUND 150 DURING THE YEAR. AS IT WAS HELD IN THE CASE OF SHRI GOVERDHAN PRASAD SINGH AL VS. THE I.T.O., WARD 6 (1) JAIPUR THAT THE WORKERS TO BE EMPLOYED MORE THAN A STIPULATED FIGURE IN MANUFACTURING PROCESS AND DO NOT MAKE ANY DISTINCTION WITH REFERE NCE TO THEIR DESIGNATION. THERE ARE VARIOUS OTHER KARIGARS EMPLOYED BY THE APPELLAN T (APART FROM THOSE MENTIONED IN WAGES REGISTER), AND TO WHOM PAYMENTS ARE BEING MAD E ON PIECE RATE BASIS. SUCH KARIGARS ARE EQUALLY EMPLOYED BY THE APPELLANT. THE REFORE, THE ASSESSEE EMPLOYED MORE THAN 20 WORKERS DURING THE YEAR. LABOUR & WAGE S REGISTER OF OWN LABOUR IS ALREADY PRESENTED TO LD. A.O. FOR VERIFICATION (LET TER DATED 17.11.2008 VIDE POINT NO. 1 PRODUCED ON DATED 18.11.2008.ALONG WITH COPIES OF A TTENDANCE & WAGES REGISTER IS ENCLOSED HEREWITH VIDE P.B. NO 108 TO 124 ) HENCE ALL THE CONDITION OF SECTION 10BA OF THE INCO ME TAX ACT 1961 ARE ALREADY FULFILLED BY THE ASSESSEE IN THE CASE. THE LD. A.O. HAS MENTIONED VIDE POINT NO. 1.2 AT PA GE NO. 6 OF ORDER THAT GOODS ARE EXPORTED WITHOUT CONDUCTING ANY MANUFACTURING A CTIVITY ON THEM AND EXPORTED IN THE SAME SHAPE AS THEY WERE PURCHASED. THIS CONTENTION IS WRONG AS UNIT IS HAVING NEW PLAN T & MACHINERY AND ENGAGED PROPER OWN LABOUR AND WORKERS ON JOB CHARGES BASIS FOR DOING VARIOUS MANUFACTURING ACTIVITIES THROUGH HAND CUTTING, TOOL S AND DONE VARIOUS MANUFACTURING PROCESS SUCH AS SIZING, SHAPING, GROO VING, MAKING MODIFICATION, FINISHING, POLISHING AS PER THE DISTINCT EXPORT ORD ERS & QUALITY. THE ASSESSEE IS A SSI UNIT AND ALSO REGISTERED AS MANUFACTURED EXPORT ER IN SALE TAX DEPARTMENT & EXPORT PROMOTION COUNCIL. (COPY OF CERTIFICATE ENCL OSED VIDE PAGE NO. 84 TO 86 FOR VERIFICATION). TO SUBSTANTIATE OUR CLAIM AS MANUFACTURING CONCERN WE ARE REPRODUCING LAND MARK JUDGMENT AND DEFINITION OF MANUFACTURE:- 7 MANUFACTURE EXPLANATION (III) TO SECTION 10A I.T. ACT, 1961 (PR IOR TO 1-4-2001) EXPLANATION (III) TO SECTION 10B I.T. ACT, 1961 (PR IOR TO 1-4-2001) IN THE CONTEXT OF SPECIAL PROVISIONS UN RESPECT OF NEWLY ESTABLISHED INDUSTRIAL UNDERTAKING IN FREE TRADE ZONES (S. 10A) AND IN RESPECT OF 100% EXPORT ORIENTED UNDERTAKINGS (S. 10BHE EXPRESSION INCLUDES ANY (A) PROCESS, OR (B) ASSEMBLING, OR (C) RECORDING OF PROGRAMMES ON ANY DISC, TAPE, PERFORAT ED MEDIA OR OTHER INFORMATION DEVICE. EXPLANATION 1(III) TO SECTION 10AA I.T.ACT, 1961 (I NSERTED BY SECTION 27 READ WITH SECOND SCHEDULE TO SEZA) IN THE CONTEXT OF SPECIAL PROVISIONS FOR GRANT OF D EDUCTIONS IN RESPECT OF ANY NEWLY ESTABLISHED UNITS IN ANY SPECIAL ECONOMIC ZONES, TH E EXPRESSION MEANS SHALL HAVE THE SAME MEANING AS ASSIGNED TO IT IN CL AUSE (R) OF SECTION 2 OF THE SPECIAL ECONOMIC ZONES ACT, 2005. SECTION 2 (R) OF SEZA STATES AS FOLLOWS ( R) MANUFACTURE MEANS TO MAKE, PRODUCE, FABRIC ATE, ASSEMBLE, PROCESS OR BRING INTO EXISTENCE , BY HAND OR BY MACHINE, A NEW PRODU CT HAVING A DISTINCTIVE NAME, CHARACTER OR USE AND SHALL INCLUDE PROCESSES SUCH AS REFRIGERATION , CUTTING, POLISHING, BLENDING, REPAIR, REMAKING RE-ENGINEERING AND INCLU DES AGRICULTURE, AQUACULTURE, ANIMAL HUSBANDRY, FLORICULTURE, HORTICULTURE, PISCI CULTURE, POULTRY, SERICULTURE, VITICULTURE AND MINING. MANUFACTURE OR PRODUCE EXPLANATION (4) TO SECTION 10A I.T.ACT, 1961 [INSERTED BY FA 2003 W.E.F. 1-4-2004] IN THE CONTEXT OF SPECIAL PROVISIONS IN REST OF NEW LY ESTABLISHED UNDERTAKING IN FREE TRADE ZONES, ETC., THE EXPRESSION SHALL INCLUDE THE CUTTING AND POLISHING OF PRECIOUS AND SEMI PRECIOUS STONES. IN RAJASTHAN STATE CHEMICALS CASE, HONBLE SUPREME COURT EMPHATICALLY OBSERVED THAT ANY PROCESS IS A MANUFACTURING PROCESS WHEN IT BRIN GS OUT A COMPLETE TRANSFORMATION FOR THE WHOLE COMPONENT SO AS TO PRODUCE A COMMERCIALLY DIFFERENT ARTICLE OR COMMODITY. BUT THAT PROCESS ITSELF MAY CONSIST OF SEVERAL PROC ESSES WHICH MAY OR MAY NOT BRING ABOUT ANY CHANGE AT EVERY INTERMEDIATE STAGE. BUT T HE ACTIVITIES OR THE OPERATIONS MAY BE SO INTEGRALLY CONNECTED THAT THE FINAL RESULT IS TH E PRODUCTION OF A COMMERCIALLY ARTICLE. THEREFORE, THE SUPREME COURT HELD THAT ANY ACTIVITY OR OPERATION WHICH IS THE ESSENTIAL 8 REQUIREMENT AND IS SO RELATED TO THE FURTHER OPERAT IONS FOR THE END RESULT WOULD ALSO BE A PROCESS IN OR IN RELATION TO THE MANUFACTURE. ASSEMBLY OF VARIOUS PARTS: WHETHER AMOUNTS TO MANUF ACTURE WHERE THE MERE ASSEMBLING OF PARTS AND COMPONENTS B RINGS INTO EXISTENCE A PRODUCT WITH A DISTINCTIVE NAME, CHARACTER OR USE, SUCH AN ASSE MBLING WOULD AMOUNT TO MANUFACTURE. THE RULINGS IN THE FOLLOWING CASES CLEARLY POINT TO THIS PROPOSITION IN LAW NARNE TULEMAN MANUFACTURERS PVT. LTD. V. CCE 1988 38 ELT 566 (SC); TISCO LTD. V. U.O.I. 1988 33 ELT 297 (PAT); IGE INDIA LTD. V. CCE 1991 5 3 ELT 461 (TRIB); PRESSURE COOKER AND APPLIANCES LTD. V. CCE 1989 28 ELT 566 (TRIB) U NICORN INDUSTRIES V. CCE 1990 50 ELT 279 (TRIB). THE ASSESSEE IS ALSO ASSEMBLING WOO DEN LEGS AND TABLE TOPS ETC, WHICH IS SQUARELY COVERED AS MANUFACTURE. MANUFACTURE: WHEN CAN BE SAID TO BE ON BEHALF OF AN OTHER EARLIER THE SUPREME COURT HAD IN SHREE AGENCIES V. S.K. BHATACHARJEE & OTHERS 1977 ELT J 68 (SC) CONSIDERED A SOMEWHAT SIMILAR QUESTIO N. IN THIS CASE, SHREE AGENCIES, A FIRM DEALING IN TEXTILE GOODS USED TO SUPPLY COTTON YARN TO SEVERAL POWER LOOM UNITS FOR CONVERSION INTO FABRIC ON JOB CHARGE BASIS. ALTHOUG H, SHREE AGENCY CONTENDED THAT YARN WAS SOLD TO THOSE POWER LOOMS & THAT IT PURCHASED F ABRICS BACK FROM THEM, THE DEPARTMENT COULD BRING ON RECORDS, DOCUMENTARY EVID ENCE OF AN APPARENT SALE AND PURCHASE WHICH WERE FABRICATED BY THE ASSESSEE. ACC ORDINGLY, THE SUPREME COURT CONCLUDED THAT IT WAS SHREE AGENCY AND NOT THE POWE R LOOM UNITS WHICH SHOULD BE REGARDED AS MANUFACTURER OF FABRICS. MANUFACTURE [SEC.2 (F)] OF CENTRAL EXCISE ACT 1944 MANUFACTURE INCLUDE ANY PROCESS- INCIDENTAL OR ANCILLARY TO THE COMPLETION OF THE MA NUFACTURED PRODUCT; WHICH IS SPECIFIED IN RELATION TO ANY GOOD IN, THE SECTION OR CHAPTER NOTES OF THE FIRST SCHEDULE TO THE CENTRAL EXCISE TARIFF ACT,1985 AS A MOUNTING TO MANUFACTURE( DEEMED MANUFACTURE); OR WHICH, IN RELATION TO THE GOODS SPECIFIED IN THE TH IRD SCHEDULE, INVOLVES PACKING OR REPACKING OF SUCH GOODS IN A UNIT CONTAINER OR LABE LING OR RE-LABELING OF CONTAINERS INCLUDING THE DECLARATION OR ALTERATION OF RETAIL S ALE PRICE ON IT OR ADOPTION OF ANY OTHER TREATMENT ON THE GOOD TO RENDER THE PRODUCT MARKETA BLE TO THE CONSUMER( DEEMED MANUFACTURE), AND THE WORD MANUFACTURER SHALL BE CONSTRUCTED AC CORDINGLY AND SHALL INCLUDE NOT ONLY A PERSON WHO EMPLOYS HIRED LABOUR IN THE PRODUCTI ON OR MANUFACTURE OF EXCISABLE GOODS, BUT ALSO ANY PERSON WHO ENGAGES IN THEIR PRODUCTION OR MANUFACTURE ON HIS OWN ACCOUNT. 9 FOLLOWING PROCESSES ARE TREATED TO BE DEEMED MANUFA CTURE: AS PER SECTION 2(F)(III) OF THE CENTRAL EXCISE ACT , 1944 PROVIDES THAT THE FOLLOWING PROCESSES, WHICH ARE PROVIDED IN RELATION TO THE GO ODS SPECIFIED IN THE THIRD SCHEDULE, WILL ALSO AMOUNT TO DEEMED MANUFACTURE- PACKING OR REPACKING OF SUCH GOODS IN A UNIT CONTAI NER OR LABELING OR RE-LABELLING OF CONTAINERS INCLUDING DE CLERATION OR ALTERATION OF RETAIL SALE PRICE ON IT, OR ADOPTION OF ANY OTHER TREATMENT ON THE GOODS TO REN DER THE PRODUCT MARKETABLE TO THE CONSUMER. THERE IS NO WARRANT FOR THE CONSTRUCTION OF THE WORD `MANUFACTURE' ONLY TO MEAN A PROCESS BY WHICH THE RAW MATERIAL IS CONVERT ED INTO AN ALTOGETHER NEW ARTICLE. IT HAS BEEN GIVEN A VERY WIDE AND EXTENDED MEANING, AND AS STATED ABOVE, THE MEANING OF THE WORD `MANUFACTURE' WOULD NATURALLY T AKE IN THE PRESENT DAY CONTEXT ANY PROCESS CARRIED ON BY MACHINERY WHICH ULTIMATEL Y MAKES RAW MATERIAL USABLE OR MARKETABLE OR READY FOR FURTHER MECHANICAL OPERATIO N.--VIDE ASWATHANARAYANA, Y. & ORS. V. DY. CTO & ORS. (1964) 15 STC 795 (AP). COMMONLY, MANUFACTURE IS THE END RESULT OF ONE OR M ORE 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 S EVERAL STAGES OF PROCESSING AND PERHAPS A DIFFERENT KIND OF PROCESSING AT EACH STAG E. 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 C OMMERCIALLY IT CAN NO LONGER BE REGARDED AS THE ORIGINAL COMMODITY BUT RECOGNIZED A S A NEW AND DISTINCT ARTICLE THAT A MANUFACTURE CAN BE SAID TO TAKE PLACE. WHERE THERE IS NO ESSENTIAL DIFFERENCE IN IDENTITY BETWEEN THE ORIGINAL COMMODITY AND THE PRO CESSED ARTICLE IT IS NOT POSSIBLE TO SAY THAT ONE COMMODITY HAS BEEN CONSUMED IN THE MAN UFACTURE OF ANOTHER. ALTHOUGH IT HAS UNDERGONE A DEGREE OF PROCESSING, IT MUST BE REGARDED AS STILL RETAINING ITS ORIGINAL IDENTITY. ON THIS PRINCIPLE, IT WAS HELD IN THE CASE OF KORES INDIA LTD. VS. CCE 2004 (174) ELT 7 (SC) BY THE HONBLE SUPREME COURT THAT THE AC TIVITY OF CUTTING OF JUMBO ROLLS INTO TYPEWRITER/ TELEX ROLLS WAS HELD TO BE MANUFAC TURING BECAUSE THE JUMBO ROLLS AS SUCH COULD NOT USED AS RIBBONS IN TYPEWRITER. AS PH YSICAL CHARACTERISTICS OF JUMBO ROLLS AND ITS SHORTER VERSION IN THE FORM OF TYPEWR ITER AND TELEX ROLL MAY HAVE THE SAME PHYSICAL PROPERTIES BUT ON THE BASIS OF DIFFERENT U SE AS A MARKETABLE COMMODITY AND AFTER BEING CUT, THE SAME CAN NOT BE USED FOR THE P URPOSE FOR WHICH IT COULD BE USED IN ORIGINAL SHAPE, THE SAME ACTIVITY WAS HELD TO BE MA NUFACTURE. 10 IN THE CONTINUANCE OF THE ABOVE ASPECT, IT IS PERT INENT TO NOTE THAT A NUMBER OF PROCESSES AND ACTIVITIES ARE REQUIRED TO BE CARRIED BEFORE THE PRODUCT IS SOLD /EXPORTED. THE VARIOUS ACTIVITIES CARRIED OUT BY T HE APPELLANT, ARE AS UNDER:- (I) FIRSTLY, THE APPELLANT PURCHASES WOOD, SEMI FINISHE D MATERIAL WHICH REQUIRES FURTHER WOOD AND OTHER WORK OF BEAUTIFICAT ION AND OF ARTISTIC VALUE. THERE APART, THE OTHER RAW MATERIAL, THE WO ODEN OUT OF WHICH IS THE MAIN, AND OTHERS I.E. GRASS, NAILS ETC. ARE PURCHAS ED. (II) THEREAFTER VARIOUS OTHER ITEMS ARE ADDED DEPENDING UPON THE DESIGNS, SIZE, QUALITY OF THE SUBJECTED ITEM TO BE EXPORTED, (III) AFTER PURCHASING THE SEMI FINISHED GOODS AND RAW MA TERIAL, AS STATED ABOVE, THE VERY FIRST STEP IS TO ASSEMBLE THE SAME, IF SO REQUIRED. SOME TIME THE SEMI FINISHED FURNITURE IS REQUIRED TO BE GIVEN FURTHER SHAPE AS PER THE DESIRED EXPORTABLE DESIGNS. (IV) THEREAFTER, PUNCHING IS DONE BY HAMMERING NAILS BY HAND. IT IS PURE LABOUR WORK WHICH CAN BE DONE BY EXPERTS ONLY. IT M AY BE NOTED THAT THE NAILS ARE OF SPECIAL TYPE HAVING ARTISTIC AND ANTIQ UE LOOK. (V) FITTING OF BRASS AND IRON ITEMS AGAIN WITH A VIEW T O GIVE ARTISTIC AND ANTIQUE LOOK. (VI) FILLING AND FILING WITH A VIEW TO SMOOTHEN THE SURF ACE. (VII) SANDING (VIII) CARVING WITH A VIEW TO BRING THE ARTISTIC VALUE AND TO SHOW THAT THESE ARE ANTIQUE ITEMS, (IX) AND LASTLY POLISHING (X) THEREAFTER, VARIOUS WOODEN ITEMS ARE FITTED ACCORDI NG TO THE NEED AND DESIGN OF THE EXPORTABLE WOODEN ARTICLE, I.E. WOODE N MOULDING IS FITTED INLAY IS DONE. LOOKING TO THE VARIOUS ACTIVITIES CARRIED OUT BY TH E APPELLANT AND AS MENTIONED HEREINABOVE, IT IS TO BE NOTED THAT WHAT THE APPELL ANT PURCHASED, ULTIMATELY RESULTED INTO AN ALTOGETHER DIFFERENT COMMODITY BEI NG RECOGNIZED BY THE COMMERCIAL WORLD I.E. THE IMPORTER OUTSIDE INDIA, W HO WERE KEEN TO IMPORT EVEN AT A MUCH HIGHER PRICE THAN WHAT THE APPELLANT INCURRE D HERE. ADMITTEDLY, THERE HAS BEEN A SUBSTANTIAL VALUE ADDITION. WE HAVE ALREADY FURNISHED VARIOUS PHOTOGRAPHS TO THE LD. A.O. SHOWING THAT THERE HAS BEEN VARIOUS TYPES OF ADDITIONS MADE BY THE APPELLANT AFTER THE PURCHASE OF THE RAW MATERIA L, WHICH WAS IN THE SHAPE OF SOMETIME PURE WOOD, SOMETIME IN SEMI-FINISHED/PARTL Y MADE UP FROM E.G. TABLE TOP ONLY WITHOUT LEGS, ARTISTIC DESIGNS, BRASS FITT INGS, INLAY CARVING ETC. WHICH BRINGS A BEAUTY TO THE SUBJECTED ARTICLES OR THING. THE AUTHORITIES BELOW VAGUELY ALLEGED THAT THE APPELLANT PURCHASED THE FURNITURE AND EXPORTED IN THE SAME CONDITION. THE AUTHORITIES BELOW DID NOT APPLY THEI R MIND TO THIS IMPORTANT ASPECTS THAT IT IS NOT THE NAME, WHICH WAS IMPORTANT, WHAT WAS IMPORTANT WAS WHETHER THE SUBJECTED FURNITURE WERE HAND MADE ARTICLES OF WOOD HAVING ARTISTIC VALUE. WHAT 11 THE APPELLANT DID WAS THE ADDITION OF WOOD AND THE ARTISTIC VALUE AND FOR THIS SOLE REASON, THE APPELLANT WAS ABLE TO HAVE A SUBSTANTIA L AMOUNT OF EXPORT TURNOVER. IT WAS ALSO HELD IN THE INCOME TAX APPELLATE TRIBU NAL JAIPUR BENCH A JAIPUR INCOME TAX OFFICER VS. GOVERDHAN PRASAD SINGHAL JAI PUR VIDE ITA NO. 964/JP/2007 FOR THE A.Y. 2003-04, 200/JP/2008 FOR T HE A.Y. 2004-05 & ITA NO. 797/JP/2008 & 1000/JP/2008 FOR A.Y. 2005-06 THAT VARIOUS ACTIVITIES CARRIED OUT BY THE APPELLANT AND AS MENT IONED HEREINABOVE, THE TRIBUNAL WAS SATISFIED THAT WHAT THE APPELLANT PURC HASED, ULTIMATELY RESULTED INTO AN ALTOGETHER DIFFERENT COMMODITY BEING RECOGN IZED BY THE COMMERCIAL WORLD I.E. THE IMPORTER OUTSIDE INDIA, WHO WERE KEEN TO I MPORT EVEN AT A MUCH HIGHER PRICE THAN WHAT THE APPELLANT INCURRED HERE. ADMITTEDLY, THERE HAS BEEN A SUBSTANTIAL VALUE ADDITION DURING SUCH MANUFACTUR ING PROCESSES CARRIED ON BY THE APPELLANT. HENCE THE SAME IS COVERED UNDER T HE DEFINITION OF MANUFACTURING AS DEFINED BY VARIOUS ACTS MENTIONED ABOVE. THEREFORE, IN THE CIRCUMSTANCES AND FACTS OF THE CASE, IT WAS HELD THAT THE ASSESSEE HAS FULFILLED ALL THE CONDITIONS U/S 10BA (2) OF THE ACT AND THEREFORE, HE IS ENTITLED DEDUCTION U/S 10BA OF THE ACT. MOREOVER THE BUSINESS OF THE ASSESSEE IS TO EXPORT WOODEN HANDICRAFTS HAVING ARTISTIC VALUE. OUT OF THE TOTAL SALES OF THE ASSES SEE APPROXIMATELY 99.4% IS EXPORT SALES. THE PROVISIONS CONTAINED IN SECTION 10BA ARE SPECIAL PROVISIONS TO ENCOURAGE THE EXPORT OF WOODEN HANDICRAFTS ARTICLES WHICH HAVE BEEN INTRODUCED UNDER SPECIAL CIRCUMSTANCES. THESE PROVISIONS PLAY A MAJOR ROLE FOR PROMOTING ECONOMIC GROWTH AND HENCE SHOULD BE CONSTRUCTED LIB ERALLY. IN SUCH CIRCUMSTANCES AND FACTS OF THE CASE WHEN THE PROVIS IONS CONTAINED IN SECTION 10BA ARE SPECIAL PROVISIONS TO ENCOURAGE THE EXPORT OF WOODEN HANDICRAFTS ARTICLES WHICH CONFER BENEFIT ON THE ASSESSEE AND S UCH PROVISIONS SHOULD BE SO INTERPRETED AND THE WORDS USED THEREIN SHOULD BE AS SIGNED SUCH MEANINGS AS WOULD BE ENABLE THE ASSESSEE TO SECURE THE BENEFIT INTENDED TO BE GIVEN BY LEGISLATURE TO THE ASSESSEE AND WHERE THERE ARE TWO POSSIBLE INTERPRETATION OF A TAXING PROVISION THE ONE WHICH IS FAVORABLE TO THE ASSESSEE SHOULD BE PREFERRED AS DECIDED BY HONBLE SUPREME COURT OF INDIA IN THE CA SE OF MYSORE MINERALS LIMITED V. CIT, 239 ITR 775. THE CASE OF ASSESSEE A LSO FIND SUPPORT FROM THE DECISION OF HONBLE SUPREME COURT OF INDIA IN THE C ASE OF BAJAJ TEMPO LTD. V. CIT, 196 ITR 188 WHERE IT HAS BEEN HELD THAT A PROV ISION IN A TAXING STATUE GRANTING INCENTIVES FOR PROMOTING GROWTH AND DEVELO PMENT SHOULD BE CONSTRUED LIBERALLY AND SINCE A PROVISION FOR PROMOTING ECONO MIC GROWTH HAS TO BE INTERPRETED LIBERALLY, THE RESTRICTION ON IT TWO HA S TO BE CONSTRUED SO AS TO ADVANCE THE OBJECTIVE OF THE PROVISION AND NOT FRUSTRATE IT . THEREFORE, IN THE CIRCUMSTANCES 12 AND THE FACTS OF THE CASE AND THE DECISION OF THE V ARIOUS COURTS OF LAW MENTIONED HEREINBEFORE, WE FIND THAT THE ASSESSEE HAS NOT VIO LATED THE CONDITION LAID DOWN U/S 10BA OF THE ACT. THE ASSESSEE LASTLY SUBMITS THAT IT IS WELL-SETTLE D PRINCIPLE THAT WHEN THE PROVISIONS OF LAW ARE ENACTED TO PROVIDE CERTAIN DE DUCTIONS AND EXEMPTIONS TO THE ASSESSEE AND TO ENCOURAGE CERTAIN TRADE OR INDUSTRY OR FOR ACHIEVING ANY NATIONAL OBJECTIVE, SUCH AS EARNING OF FOREIGN EXCHANGE AND PROMOTION OF EXPORTS AS IN THIS CASE, THE LANGUAGE OF THE STATUE SHOULD BE INTERPRE TED LIBERALLY AND IN THE FAVOUR OF THE ASSESSEE. THIS VIEW IS SUPPORTED BY THE FOLLOWI NG CASE: (A) BAJAJ TEMPO LTD. V. CIT (1992) 196 ITR 188 (SC) (B) CIT V. STRABOORD MANUFACTURING CO. LTD. (1989) 177 ITR 431 (SC) (C) UDDEERESWARA MINING INDUSTRIES V. CIT (1993) 114 CT R (KARN 361); (D) CIT V. MAHANI OIL INDUSTRIES (P.) LTD. (1992) 193 I TR 620 (KARN) (E) CBDT V. ADITYA V. BIRLA (1988) 170 ITR 137 (SC); (F) CIT V. U.P. COOPERATIVE FADERATION LTD. (1989) 176 ITR 435 (SC) EVEN IT IS HELD THAT MORE THAN ONE VIEW IS LEGALLY POSSIBLE, THE VIEW WHICH IS FAVORABLE TO THE TAXPAYERS MUST BE ADOPTED. SUCH A VIEW IS JUSTIFIED BY THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF CI T V. VEGETABLE PRODUCTS LTD. (1973) 88 ITR 192 (SC) FOLLOWED BY RAJASTHAN HIGH C OURT IN VARIOUS CASES, SUCH AS THE JUDGMENT IN THE CASE OF CIT V. MULTI METALS LTD. (1991) 188 ITR 151 (RAJ). IN THE JUDGMENT THE HON'BLE COURT HAS ALSO STATED T HAT 'IT IS NOW A WELL-SETTLED PRINCIPLE OF LAW THAT ALTHOUGH THE EXEMPTION PROVIS IONS ARE TO BE CONSTRUED STRICTLY AS REGARDS THE APPLICABILITY THEREOF TO TH E CASE OF THE ASSESSEE ONCE IT IS FOUND THAT THE SAME IS APPLICABLE, THE SAME ARE REQ UIRED TO BE INTERPRETED LIBERALLY'. REFERENCE TO TATA IRON & STEEL CO. LTD. V. STATE OF JHARKHAND (2005) 4 RC 641, GOVERNMENT OF INDIA V. INDIA TOBACCO ASSOCI ATION (2005) 5 RC 379 AND CCE V. HIRA CEMENT (2006) 6 RC 219 SHOULD BE MADE. HENCE, THE CONTENTION OF THE LD. A.O. IS WRONG AND THEREFORE THE ASSESSEE SATISFIES ALL THE CONDITIONS OF SEC. 10BA OF THE INCOME TAX A CT 1961 AND HENCE THE PROFITS OF THE ASSESSEE FROM THE EXPORT BUSINESS SH ALL BE COMPLETELY EXEMPTED. THERE ARE VARIOUS WRONG ALLEGATIONS ON THE ASSESSEE GIVEN POINT NO. 1.2, 1.2.1 TO 1.2.5, 1.3, 1.4, 1.5, 1.6, 1.7 & 1.8 GIVEN IN THE B ODY OF ORDER VIDE PAGE NO. 6 TO 8 OF THE ORDER AGAINST WHICH ASSESSEE HAS VERY APTLY REPLIED ALL THE WRONG ALLEGATION ON 05.12.2008 ALSO REPRODUCED IN THE BODY OF ORDER OF THE LD. A.O. AT PAGE NO. 8 TO 20. THE REPLIES OF THE ALLEGATIONS ARE AGAIN GIV EN IN THIS SUBMISSION AS FOLLOWS:- 13 1.2.1 THE ASSESSEE STARTED ITS BUSINESS IN THE MONTH OF S EPTEMBER 2003 & ALSO MADE FIRST SALE ON 03.09.2003 BUT THERE WERE ONLY T OTAL 3 SALES BILLS WHICH WERE EXPORTED ON 03.09.2003, 04.09.2003 & 10.09.2003 VID E BILL NO. 1001 OF RS. 301655.20, BILL NO. 1002 OF RS. 433513.50, & BILL N O. 1003 OF RS. 968266 AND OTHER SALES FROM BILL NO. 1004 TO 1044 WERE ISSUED FROM 14.11.2003 TO 31.03.2004. AS THE ASSESSEE STARTED MANUFACTURING F ROM 05.11.2003, IF WE EXCLUDE THESE 3 SALE OUT OF TOTAL SALES EVEN THAN T OTAL EXPORT SALE IS 93.56% I.E. MORE THAN 90% OF TOTAL TURNOVER, HENCE THE UNIT QUA LIFIES AND COVERED UNDER MANUFACTURING ACTIVITY VIDE SECTION 10BA (2) (A) OF THE I.T. ACT.1961. 1.2.2 IN THE PARA 1.2.1, WE HAVE ALREADY MENTIONED THAT ONLY 3 EXPORT SALES BILLS WERE NOT OUT OF THE MANUFACTURING ACTIVITY AS SALE WAS MADE ON 03.09.2003, 04.09.2003 & 10.09.2003 AND UNIT STARTED MANUFACTUR ING W.E.F. 05.11.2003, HENCE ALL EXPENSES STARTED W.E.F. 04.11.2003. HENCE MANUFACTURING EXPENSES WERE STARTED FROM 04.11.2003 AS MENTIONED BY THE LD . A.O. THE LD. A.O. HAS MENTIONED THAT MANUFACTURING EXPEN SES WERE ONLY 0.36% OF THE TOTAL TURNOVER WHICH IS DISPROPORTIONATELY LOW. IN THIS REGARD WE WANT TO STATE THAT ONLY MANUFACTURING EXPENSES IS NOT ONLY THE EXPENSES DEBITED UNDER THIS HEAD BUT THERE ARE VARIOUS OTHER DIRECT EXPENS ES LIKE PURCHASE OF RAW MATERIAL, SEMI FINISHED (CONSUMPTION), FREIGHT, ELE CTRICITY EXPENSES, FUEL, WAGES, CONSUMABLES, POLISH EXPENSES, FACTORY RENT, SHIPPIN G EXPENSES ETC. HENCE TOTAL DIRECT EXPENSES ARE RS. 2,35,62,072/- WHICH IS 80.7 3% OF THE TOTAL SALE WHICH IS JUSTIFIABLE, HENCE TOTAL DIRECT EXPENSES TOWARDS MA NUFACTURING AS A WHOLE IS MORE THAN 0.36%. 1.2.3 AS WE HAVE ALSO MENTIONED IN PARA NO. 1.2.1 THAT FI RST 3 BILLS WERE OF TRADING ACTIVITY BEFORE THE COMMENCEMENT OF MANUFAC TURING ACTIVITIES AND THEREAFTER MANUFACTURING COMMENCED ON 05.11.2003, A FTER THAT MANUFACTURING, FIRST SALE WAS MADE ON 14.11.2003, HENCE THE FIRST PURCHASES OF POLISH MATERIAL WAS ON 31. 10.2003OF RS. 390/- IS CORRECT & NEXT PU RCHASES WAS RS. 1290/- ON 03.11.2003 IS ALSO CORRECT. DURING THE YEAR TOTAL P OLISH EXPENSES IS RS. 245109/- BUT THERE WAS OTHER POLISH MATERIAL WHICH WAS PURCH ASED AGAINST FORM D OF RS. 3,08,898 AS PER LIST ENCLOSED WHICH WAS SHOWN IN TH E HEAD PURCHASE D FORM, HENCE TOTAL PURCHASE OF POLISH MATERIAL IS RS. 5,54 ,007 WHICH IS 1.90% OF THE TOTAL SALE THAT IS PROPORTIONALLY OF SALES AND JUST IFIED. (LIST OF POLISH MATERIAL UNDER THE HEAD PURCHASES FORM D IS ENCLOSED VIDE P. B. NO. 140 TO 141) THE LD. A.O. HAS MENTIONED THAT HARDWARE ITEMS WERE PURCHASED ON DATED 26.03.2004 OF RS. 2895/-WITH A LOW AMOUNT, WHICH IS NOT CORREC T. THE ASSESSEE WAS REGULARLY PURCHASING HARDWARE CONSUMABLE ITEMS WHICH WERE INC LUDED IN THE CONSUMABLE STORE A/C OF RS. 30693/- AND RS 1,92,167.35 IS PERTAINING TO PURCHASE OF HARDWARE ITEMS WHICH IS INCLUDED IN THE PURCHASES AGAINST FORM D. (LIST OF HARDWARE ITEMS UNDER THE HEAD PURCHASES FORM D IS ENCLOSED VIDE P.B. NO. 142 TO 144 ) . HENCE ALL HARDWARE & CONSUMABLE ITEMS WERE PURCHASED THROUGH OUT THE YEA R, SINCE THAN STARTING THE 14 MANUFACTURING ACTIVITY. HENCE TOTAL HARDWARE ITEMS & CONSUMABLES ITEMS ARE OF RS. 2,22,860.35 WHICH IS JUSTIFIED FOR CONDUCTING MANUF ACTURING ACTIVITY. 1.2.4 THE WOOD WAS PURCHASED BY WAY OF SEMI FINISHED FOR M SUCH AS LEGS OF TABLE AND SEMI FINISHED WOODEN ARTICLES OR THING WH ICH CAN BE EVIDENT FROM THE TRADING & MANUFACTURING ACCOUNT. ALL ARTICLES OR TH INGS PURCHASE WERE HAVING WOOD AS A BASIC RAW MATERIAL ON WHICH SOME MANUFACT URING PROCESS WERE CARRIED OUT BY THE VENDOR OF THE ASSESSEE AS PER TH E DISTINCT ARTISTIC DESIGN, SHAPE, STYLE, AND EXPORT ORDER GIVEN THE ASSESSEE. THE FINAL CHECKING, GROOVING, BRASS WORK, METAL WORK, RUBBING, POLISHING, ASSEMBL ING WORK CARRIED OUT BY THE ASSESSEE IN HER FACTORY. HENCE MANUFACTURING ACTIVI TY WAS CARRIED OUT IN THE FACTORY PREMISES OF THE ASSESSEE WHERE THE USE OF W OOD WAS MAIN INGREDIENT. 1.3 TOTAL PURCHASES, AS PER FORM 17B WAS RS. 2,29,81,04 4/- OUT OF WHICH CLOSING STOCK WAS RS. 50,45,600/-. HENCE GOODS PURCHASED AN D CONSUMED ON FORM 17B WAS RS. 1,79,35,444/- I.E. 72.76% OF TOTAL PURCHASE S NOT THE 93.23% AS STATED BY THE LD. A.O. AS PER RULE 23 (1) (B) OF THE RST ACT A DEALER, WHO CLAIMS EXEMPTION FROM TAX ON SALE OF GOOD TO ANOTHER DEALE R ON THE GROUND THAT THE SALE OF SUCH GOODS IS A SALE IN THE COURSE OF EXPORT OF THOSE GOODS OUT OF THE TERRITORY OF INDIA WITHIN THE MEANING OF SUB SECTION (3) OF S ECTION 5 OF THE CENTRAL SALE TAX ACT 1956 (ACT NO. 74 OF 1956), SHALL FURNISH T O HIS ASSESSING AUTHORITY A DECLARATION IN FORM ST 17B, DULLY FILLED IN AND SIG NED BY THE EXPORTER. AS PER RULE 23 (1) (B), THE MAIN FOCUS IS ON THE GOODS THA T THESE GOODS SHOULD BE EXPORTED OUT OF TERRITORY OF INDIA. THE RULES DOES NOT PROHIBIT TO THE EXPORTER FOR FURTHER PROCESSING, FINISHING, RUBBING, REPAIRING, SIZING, SHAPING, ARTISTIC HANDCRAFTING, POLISHING, BRASS WORK, METAL WORK, IR ON WORK, STONE WORK, GLASS WORK & PACKING, SET WISE ASSEMBLING, ENGRAVING, STU DDING ETC. ALL THIS WORK IS CARRIED OUT THROUGH OWN WORKERS & VARIOUS OTHER CON TRACTOR LABOUR & ON JOB WORK, HARDWARE, PACKING MATERIAL & METAL ARE USED I N THE PROCESS. HENCE GOOD ARE NOT EXPORTED AS SUCH BUT LOT OF PRODUCTION PROC ESS IS CARRIED OUT IN THE FACTORY OF THE ASSESSEE WITH THE HELP OF HAND TOOLS AND MAC HINERY SO THAT ALL HAND MADE ARTICLES OR THINGS WHICH ARE OF ARTISTIC VALUE AND WHICH REQUIRES USE OF WOOD AS MAIN RAW MATERIAL ARE ULTIMATELY EXPORTED. THE CONV ERTIBLE FOREX IS RECEIVED WITH IN THE TIME PRESCRIBED BY RBI THROUGH BANKS, H ENCE RULE 23 (1) (B) OF RST ACT. WHICH PRESCRIBED FORM NO 17B IS JUST LIKE THE EXPLANATION OF CLAUSE (D) OF THE SECTION 10BA WHICH INSISTED EXPORT OUT OF TERRI TORY OF INDIA THROUGH CUSTOMS CLEARANCE . THE EACH & EVERY EXPORT OF THE ASSESSEE GOES OUT OF THE TERRITORY OF THE INDIA THROUGH CUSTOM CLEARANCE AS PER THE COPY OF SALES BILLS IS ALREADY SUBMITTED BEFORE THE LD. A.O. AS IT IS JUDICIALLY HELD BY HONBLE INCOME TAX APPE LLATE TRIBUNAL, JAIPUR BENCH, JAIPUR IN THE CASE OF SHRI GOVERDHAN PRASAD SINGHAL VS. THE I.T.O. WARD 6 (1), JAIPUR VIDE ITA NO. 964/JP/2007 FOR THE A.Y. 2 003-04, 200/JP/2008 FOR THE A.Y. 2004-05 & ITA NO. 797/JP/2008 & 1000/JP/2008 F OR A.Y. 2005-06 (WHICH IS 15 SIMILAR TO OUR CASE) THAT ONLY ON THE BASIS OF PURC HASES FROM FORM 17B, IT CAN NOT BE SAID THAT THE ASSESSEE HAS NOT DONE ANY MANUFACT URING ACTIVITY BECAUSE AS PER RULE 23 (1) (B), THERE IS NO PROHIBITION ON THE BUY ER EXPORTER DEBARRING IT FROM MAKING CHANGES IN THE PRODUCTS TO BE EXPORTED AND T HERE IS NO WARRANT TO DRAW ADVERSE INFERENCE SIMPLY BECAUSE OF THE FACTS THAT PURCHASES WERE MADE AGAINST SALE TAX 17B FALL. THE TOTALITY OF FACTS AND CIRCUM STANCES AND IN VIEW OF THE FACTUAL POSITIONS AND EVIDENCES, IT WAS HELD THAT THE ASSES SEE WAS ENGAGED IN THE MANUFACTURING AND PRODUCTION OF THE ELIGIBLE ARTICL E UNDER THE PROVISIONS OF SECTION 10BA AND HENCE THE ASSESSEE IS FULLY ENTITLED TO GE T THE DEDUCTION. THE ASSESSEE TAKES PART IN THE INTERNATIONAL EXHIBI TION OF HANDICRAFT EXPORT FROM EXPORT PROMOTION COUNCIL OF HANDICRAFTS (EPCH) IS O RGANIZED IN DELHI & NOIDA BY THE GOVERNMENT OF INDIA TO PROMOTE HANDICRAFTS I N INDIA. ASSESSEE ALWAYS TAKES PART IN SUCH EXHIBITION IN INDIA AS WELL AS I N ABROAD DUE TO THIS EXHIBITION THERE HAS BEEN GOOD CONTACTS WITH FOREIGN BUYERS BU SINESS AND FOR BUSINESS PROMOTION. THE FOREIGN BUYERS GIVE ORDER WITH THEIR SPECIAL SIZE, DESIGN OF VARIOUS WOODEN ARTISTIC HANDMADE OR USEFUL THINGS AS WHICH ARE OF ARTISTIC VALUE AND WHICH ARE MADE OF WOOD AS A MAIN RAW MATERIAL SUCH AS USEFUL TABLES, CHAIRS, BED SIDE, T.V. CABINETS, ALMIRAH, PICTURE FRAME, WOODEN ARTISTIC PARTITION ETC. THE ORDER IS GIVEN BY SUCH FOREIGN BUYERS WITH SPECIFIC TYPE, SIZE, DESIGN, & SPECIFIC NUMBER. THE RAW MATERIAL REQUIRED TO FULFILL THE OR DER IS PURCHASED AND PROCURED IN SEMI-FINISHED FORM AS PER THE SIZE, DESIGN, TYPE APPROVED BY THE EXPORTER. SUCH ORDER IS ALSO REQUIRED TO BE COMPLETED IN A FIX TIM E FRAME SO SOME PROCESS IS CONDUCTED OUTSIDE OF THE FACTORY. THE OTHER UNITS D ID SAME MANUFACTURING PROCESS ON BEHALF OF US SO THAT TIMELY GOODS CAN BE MANUFAC TURED TO FULFILL THE EXPORT OBLIGATION. ALL THE GOODS PROCURED, WERE NEVER FINI SHED AND EXPORTED AS SUCH, WHEREAS ALL GOODS ARE TRANSPORTED TO THE FACTORY IN THE KNOCKED DOWN POSITION, PROPER ASSEMBLING, SETTING, SIZING, COLORING, POLIS HING, & PACKING IS DONE BY THE ASSESSEES LABOUR IN THE FACTORY PREMISES. THE FACT ORY LABOUR ALSO DOES ARTISTIC WORK SUCH AS GROOVING, BRASS, METAL WORK. CARVING, STUDDING WORK, STONE WORK AT ASSESSEES FACTORY PREMISES. THE GOODS FINISHED AT FACTORY OF ARTISTIC USEFUL VALUE BECAUSE IN THE EXPORT MARKET, INDIA HAS TO COMPETE WITH OTHER COUNTRIES LIKE CHINA, THAILAND, MALAYSIA AND ARTISTIC ACCURACY, SI ZING, POLISHING, & STRICT QUALITY CONTROL IS REQUIRED TO ACHIEVE EXPORT TURNOVER IN T HE COMPETITIVE WORLD, HENCE THE ASSESSEE USED HAND TOOLS AND MACHINERIES TO INCREAS E THE FURTHER ARTISTIC VALUE OF THE SEMI FINISHED PRODUCT MADE OF THE WOOD. THE GOV ERNMENT OF INDIA IS ALSO CONSIDERING THIS ACTIVITY UNDER THE EXPORT PROMOTIO N COUNCIL FOR HANDICRAFT (AS PER CERTIFICATE ENCLOSED SPONSORED BY MINISTRY OF T EXTILES, GOVERNMENT OF INDIA ON DATED 17.12.2004 VIDE P.B. NO. 84). IN VIEW OF THIS SINCE EXPORT IS DONE AS PER THE DIF FERENT TYPE OF DESIGN AND VARIOUS DISTINCT EXPORT ORDERS. HENCE IT CAN NOT BE SAID TH AT THE ASSESSEE IS PRIMARILY DEALING IN READYMADE FURNITURE. THE ASSESSEE HAS DO NE SOME ACTIVITIES OUTSIDE THE FACTORY PREMISES AND THE REASONS FOR JUSTIFYING THI S FACT ARE AS FOLLOWS: 16 1. NO SEASONING PLANT CAN BE INSTALLED:- THE MANUFACTURING UNIT IS SITUATED IN NO POLLUTION ZONE, DUE TO THIS, THE ASSESSEE CAN NOT INSTALL THE SEASONING PLANT IN THAT AREA, WHICH IS A INITIAL AND BASIC PROCESS OF MANU FACTURING. SO PROCESS IS DONE FROM OUTSIDE. 2. NO PERMISSION FOR SPECIFIC MACHINERY (AARA MACHI NE):- THE UNIT IS SITUATED IN NO POLLUTION ZONE, THEREFORE NO ARRA MACHINE IS PER MITTED TO BE INSTALLED AND USED IN THAT AREA TO PERFORM THE SPECIFIC REQUIREMENT OF ORDER RECEIVED FROM BUYERS. SO PROCESS IS DONE FROM OUTSIDE. 3. VERY BIG SPACE REQUIRED:- THE SPACE IS REQUIRED FOR PRIMARY AND VERY BASIC PROCESSING IS NOT AVAILABLE IN JAIPUR CITY AND THER EFORE THE UNIT HAS NO OPTION BUT TO PERFORM THE PRIMARY PROCESSING OUTSIDE THE AREA AND GET THE SEMI FINISHED PRODUCE AND FULLY FINISHED HERE AT FACTORY PREMISES AT JAIPUR. 4. LACK OF SKILLED LABOUR :- THERE IS ABSENCE OF SKILLED LABOUR OUTSIDE JAIPUR FOR EXPORT QUALITY CHECKER, THEREFORE TO COMPLETE THE M ANUFACTURING PROCESS AFTER BASIC PROCESSING, AVAILABILITY OF SKILLED LABOUR MA KE IT POSSIBLE TO COMPLETE THE REQUIREMENT OF HIGH EXPORT QUALITY MATERIAL. 5. AVAILABILITY OF FAVORABLE FACILITIES IN JAIPUR:- THERE ARE SEVERAL FACILITIES IN JAIPUR REGARDING EXPORT. FOR THE INTIMATION OF CONT AINER DEPOT FOR CONTAINER AND STUFFING, INLAND CONTAINER DEPOT AVAILABLE IN JAIPU R. CUSTOM DEPARTMENT PROVIDES FACILITIES IN EXPORT BY SENDING AN INSPECTOR FOR ST UFFING AND TO CHECK THE CONTAINERS ACCORDING TO INVOICES AND PACKING LIST. THESE FACIL ITIES KEEP AWAY FROM THE FUNCTIONAL DELAY PROBLEMS IN COMPLETING THE DEMAND OF BUYERS. HENCE FINISHING AND PACKING ,FORWARDING IS DONE AT JAIPUR . IT IS PERTINENT TO NOTE THAT ON BEHALF OF THE IMPOR TER PARTY, A CHECKER INSPECTS REGULARLY THE QUALITY OF THE PRODUCE AND ENSURING T HE QUALITY CONTROL SYSTEM OF THE PRODUCTS MANUFACTURED IN THE FACTORY PREMISES. ULTIMATELY INTENTION OF THE EXPORTER IS TO EXPORT T HE PRODUCT AFTER MANUFACTURING AND THE FINISHED GOODS. AFTER TAKING THE BROADER VI EW IN RESPECT OF THIS FACT, ASSESSEE HAS USED THE WOOD IN THE FORM OF BASIC SEM I FINISHED RAW MATERIAL AND AFTER PROCESSING ON THEM, IT WAS EXPORTED OUT OF TE RRITORY OF INDIA. HENCE THE CONTENTION OF THE LD. A.O. THAT ASSESSEE IS DEALING IN READYMADE FURNITURE IS NOT CORRECT. 1.4 DURING THE YEAR WAGES PAYMENT OF OUR OWN LABOUR WA S RS. 2,81,898/- & JOB CHARGES TO THE CONTRACT LABOUR WAS PAID OF RS. 4,68 ,905/- WHICH IS 2.57% OF TOTAL TURNOVER NOT 0.96% AS STATED BY LD. A.O. IT IS PERT INENT TO NOTE THAT IT IS NOT ONLY THE WAGES BUT LOT OF OTHER EXPENSES SUCH AS RAW MAT ERIAL, PURCHASES OF FINISHED GOODS, ELECTRICITY EXP., FACTORY RENT, PACKING MATE RIAL, SHIPPING EXPENSES, FUEL CHARGES, CONSUMABLES STORE ETC. TO ACHIEVE THE DESI RE EXPORT AND THIS IS THE FIRST 17 YEAR OF THE OPERATION OF THE FIRM AND THE UNIT EMPL OYED MORE THAN 20 WORKERS DURING THE PREVIOUS YEAR IN THE PROCESS OF MANUFACT URING AS PER SECTION 10BA (2) (E) OF I.T. ACT 1961. HENCE WAGES EXPENSES ARE JUST IFIED. 1.5 THERE ARE ALWAYS JOB WORKER EMPLOYED THROUGH LABO UR CONTRACTOR ALSO REMAIN IN THE FACTORY AS THEY HAVE TO DO ARTISTIC W ORK. THEY ALSO TAKE PART IN THE PRODUCTION PROCESS & ALWAYS REMAIN IN THE FACTORY P REMISES SO THAT THE DESIRED EXPORT QUALITY CAN BE PRODUCED. DURING THE YEAR TOT AL JOB WORK CHARGES OF RS.4,68,905/- (DETAILS OF WHICH IS ALREADY GIVEN TO THE LD. A.O. VIDE POINT NO. 8 OF OUR REPLY SUBMITTED ON 18.11.2008 HEREWITH ENCLO SED VIDE P.B. NO. 108). HENCE JOB WORK EXPENSES ARE JUSTIFIED. 1.6 SURVEY U/S 133A OF THE INCOME TAX ACT 1961 WAS COND UCTED OF THE ASSESSEE AT THE FACTORY PREMISES AND NO ADVERSE FINDING WAS FOU ND BY THE THEN ADDL. COMMISSIONER OF INCOME TAX, HENCE NO PHYSICAL INVEN TORY WAS TAKEN AT THE FACTORY AND NO ADVANCE TAX (CHEQUE) WAS DEMANDED FR OM THE ASSESSEE DURING THE SURVEY PROCEEDING. ONLY STATEMENTS WERE RECORDED OF THE MR. RAMA KANT JOHRI, WHICH WERE STILL NOT PROVIDED TO THE ASSESSEE IN SP ITE OF VARIOUS REMINDERS.(COPIES OF VARIOUS LETTERS FOR THE COPIES OF THE STATEMENTS OF RAMAKANT JOHARI ENCLOSED HEREWITH VIDE P.B. NO. 50 TO 53) HENCE THE SURVEY T EAM WAS SATISFIED WITH THE CLAIMING OF THE EXEMPTION U/S 10BA OF THE INCOME TA X ACT 1961. THE UNIT IS DOING ALL MANUFACTURING ACTIVITIES AS M ENTIONED IN PARA NO. 1.2 & 1.3 ABOVE, HENCE FOR THE SAKE OF REPETITION, ALL MANUFA CTURING ACTIVITIES CARRIED ON BY THE ASSESSEE ARE NOT AGAIN MENTIONED HERE IN REPLY OF THIS POINT. THE LD. A.O. HAS ALSO MENTIONED THERE WERE PLANT & MACHINERY BEING USED FOR SOME ACTIVITY WHEREAS THE ELIGIBLE GOODS FOR CLAIMI NG EXEMPTION U/S10BA SHOULD BE HAND MADE ARTICLES OR THINGS. THE CONTENTION OF TH E LD. A.O. IS NOT CORRECT THAT PLANT & MACHINERY SHOULD NOT BE USED AND ELIGIBLE GOODS S HOULD BE 100% HAND MADE ARTICLES OR THING. PLEASE REFER POINT NO. (C ) OF S ECTION 10BA OF THE ACT WHICH CLEARLY STATES THAT UNDERTAKING IS NOT FORMED BY THE TRANSF ER OF NEW BUSINESS OF MACHINERY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE, IT MEANS ONL Y NEW PLANT & MACHINERY SHOULD BE USED AND OLD P &M PREVIOUSLY USED SHOULD NOT BE USED . HENCE THERE IS NO BAR IN USING NEW PLANT & MACHINERY AS ITSELF PROVIDED IN T HE SECTION 10BA OF THE ACT. (COPY OF LEDGER ACCOUNT OF PLANT & MACHINERY IS ENC LOSED VIDE P.B.NO,125 TO 138) THE LD. ASSESSING OFFICER HAS ALLEGED THAT MOST OF THE WORK HAS BEEN DONE WITH THE HELP OF MACHINERIES, WHICH IS A MISCONCEPTION. IN FACT THE ROLE OF MACHINERY IS ONLY TO PREPARE WOOD PURCHASED BY THE APPELLANT WIT H A VIEW TO MAKE TO FIT FOR FURTHER STEPS NOTHING BUT A PREPARATORY STAGE, BEFORE HAND WORK IS COMMENCED. THE MACHINE WORK IS CONFINED TO SEASONING OF WOOD WHICH NORMAL LY CONTAIN MOISTURE, THICKNESS PLANNING AND CUTTING, FINISHING, SHAPING ETC. 18 AS IT IS ALSO HELD BY HONBLE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCH, JAIPUR IN THE CASE OF SHRI GOVERDHAN PRASAD SINGHAL VS. THE I.T.O., WARD 6 (1) JAIPUR, VIDE ITA NO. 964/JP/2007 FOR THE A.Y. 2003- 04, 200/JP/2008 FOR THE A.Y. 2004-05 & ITA NO. 797/JP/2008 & 1000/JP/2008 FOR A. Y. 2005-06 THAT THE TRIBUNAL AGREED WITH THE CONTENTION OF THE ASSESSEE THAT THE USE OF THE MACHINERY IS ONLY TO PREPARE THE WOOD PURCHASED BY THE APPELLANT WITH A VIEW TO MAKE IT FIT FOR FURTHER TECHNICAL STEPS TO BE CARRIED OUT BY THE AR TISIONS. IT IS A PREPARATORY STAGE BEFORE HANDWORK IS COMMENCED. THEREFORE THE EXPENDI TURE INCURRED OF NEGLIGIBLE SHARE OUT OF MANUFACTURING COST AND SATISFIED THAT THE APPELLANT WAS ENGAGED IN THE MANUFACTURING AND PRODUCTION OF ELIGIBLE ART ICLES UNDER THE PROVISIONS OF SECTION 10BA OF THE INCOME TAX ACT, 1961 IT IS PERTINENT TO NOTE THAT ALL PANT & MACHINERY ARE VERY FEW, THEY ARE JUST, HAND CUTTER, GRINDER, DRILL MACHINE, SANDING MACHINE, RO UTER MACHINE, HAMMER AND VARIOUS HAND TOOL. ALL THESE MACHINERIES ARE USED BY HAND O NLY AND USED FOR CUTTING, SHAPING, FINISHING THE WOOD AND MANUFACTURED ONLY THROUGH TH E USES OF THE MACHINERY. HENCE PRODUCT MANUFACTURED BY THE USE OF THESE MACHINERIE S ARE HAND MADE AND THEY ARE NOT ONLY MACHINERY MANUFACTURED. HENCE THE DEDUCTION CLAIMED U/S 10BA BY THE ASSESS EE IS CORRECT. 1.7 THE CONTENTION OF THE LD. A.O. IS THAT THE ASSESSEE HAS PURCHASED SEMI FINISHED GOODS FROM THE ART PALACE WHO MANUFACTURED ARTICLES WITH THE HELP OF POWER MACHINE BUT THE ORDER IS GIVEN BY THE ASSESSEE AS P ER SPECIFIC ORDER OF THE FOREIGN BUYERS WITH SPECIFIC TYPE, SIZE, DESIGN, & SPECIFIC NUMBER. THE RAW MATERIAL REQUIRED TO FULFILL THE ORDER IS PURCHASED AND PROC URED IN SEMI FINISHED FORM AS PER THE SIZE, DESIGN, TYPE APPROVED BY THE EXPORTER. SU CH ORDER IS ALSO REQUIRED TO BE COMPLETED IN A FIX TIME FRAME SO SOME PROCESS IS CO NDUCTED OUTSIDE OF THE FACTORY. THE OTHER UNITS DID SAME MANUFACTURING PROCESS ON B EHALF OF US SO THAT TIMELY GOODS CAN BE MANUFACTURED TO FULFILL THE EXPORT OBL IGATION. ALL THE GOODS PROCURED , WERE NEVER FINISHED AND EXPORTED AS SUCH, WHEREAS ALL GOODS ARE TRANSPORTED TO THE FACTORY IN THE KNOCKED OUT POSITION, PROPER ASS EMBLING, SETTING, SIZING, COLOURING, POLISHING, & PACKING IS DONE BY THE ASSE SSEES LABOUR IN THE FACTORY PREMISES. THE FACTORY LABOUR ALSO DOES GROOVING, BR ASS, METAL WORK. CARVING, STUDDING WORK, STONE WORK AT ASSESSEES FACTORY PRE MISES. IT IS PERTINENT TO NOTE THAT ALL PANT & MACHINERY ARE VERY FEW, THEY ARE JU ST, HAND CUTTER, GRINDER, DRILL MACHINE, SANDING MACHINE, ROUTER MACHINE, HAMMER AN D VARIOUS HAND TOOL. ALL THESE MACHINERIES ARE USED BY HAND ONLY AND USED FO R CUTTING, SHAPING, FINISHING THE WOOD AND MANUFACTURED ONLY THROUGH THE USES OF THE MACHINERY. HENCE PRODUCT MANUFACTURED BY THE USE OF THESE MACHINERIE S ARE HAND MADE AND THEY ARE NOT ONLY MACHINERY MANUFACTURED AS IT IS ALREADY ME NTIONED THAT USE OF MACHINERY IS TO MAKE THE MATERIAL FIT FOR FURTHER PROCESSING. 19 1.8 THE LD. A.O. HAS DISALLOWED THE CLAIM U/S 10BA OF THE I.T. ACT, 1961 OF RS. 29,97,074/- & ADDED BACK IN THE INCOME OF THE ASSES SEE, WHICH IS NOT CORRECT IN VIEW OF THE FACT MENTIONED IN VARIOUS REPLIES TO LD . A.O. BUT FOR THE CONCLUSION AND CLAIMING MENTIONED GENUINE EXEMPTION AS AN ELIG IBLE UNIT U/S 10BA OF THE ACT. WE ARE PRESENTING OUR SIDE AS FOLLOWS: 1. THE ASSESSEE IS MANUFACTURING THE ELIGIBLE ARTI CLES E.G. ALL HANDMADE ARTICLES OR USEFUL THINGS WHICH ARE OF ARTISTIC VAL UE AND WHICH REQUIRE THE WOOD THAT ARE USED FOR RAW MATERIAL, HENCE ASSESSEE QUALIFIES THE FIRST CONDITION. NO IMPORTED RAW MATERIAL WAS USED BY THE ASSESSEE. 2. THE ASSESSEE IS A NEW UNDERTAKING AND STARTED T HE MANUFACTURING W.E.F. 05.11.2003 AS CERTIFIED BY DISTRICT INDUSTRIAL CENT ER, UDYOG BHAWAN, JAIPUR ON DATED 09.11.2005 (COPY OF SSI REGISTRATION IS EN CLOSED FOR VIDE PAGE NO. 85 AND COPY OF LEDGER ACCOUNT OF FUEL EXP SHOWING DG R ENT PAID AND PRODUCTION STARTED FROM 05.11.2003 VIDE P.B. NO. 139) 3. THE ASSESSEE PURCHASED ALL NEW PLANT & MACHINE RY FOR MANUFACTURING PROCESS & DURING THE YEAR ASSESSEE PURCHASED PLANT & MACHINERY OF RS. 382154/-. (THE LIST OF PLANT & MACHINERY AND PHOTOC OPY OF BILLS FURNISHED HEREWITH VIDE P.B. NO. 125 TO 138 ) THE MAIN MACHIN ERY IS HAND TOOLS, GRINDER, SANDING MACHINE & DRILL MACHINE REQUIRED F OR WOODEN HANDICRAFT ARTISTIC WORK. 4. AS MENTIONED IN SECTION 10BA OF THE INCOME TAX ACT 1961, NINETY PERCENT OR MORE OF ITS SALE DURING THE RELEVANT YEA R SHOULD BE BY WAY OF EXPORTS OF THE ELIGIBLE ARTICLES OR THINGS. DURING THE YEAR ALSO THE ASSESSEE HAS EXPORTED 99.40% SALE OUT OF TOTAL TURNOVER BY WAY O F ELIGIBLE ARTICLES OR THINGS. HENCE KEEPING THE SAME IN MIND, THE ABOVE S AID CONDITION OF SEC. 10BA OF THE INCOME TAX ACT 1961 IS FULFILLED BY THE ASSESSEE. 5. TOTAL OWN WORKERS DURING THE RELEVANT YEAR WERE AROUND 30. HOWEVER TOTAL WORKERS EMPLOYED THROUGH CONTRACTOR TO WHOM J OB CHARGES PAID WERE AROUND 150 DURING THE YEAR. LABOUR & WAGES REGISTER OF OWN LABOUR IS ALREADY PRESENTED TO LD. A.O.(LETTER DATED 17.11.20 08 VIDE POINT NO. 1 PRODUCED ON DATED 18.11.2008. VIDE PAGE NO. 108 TO 124) HENCE THE CONDITION OF SECTION 10BA OF THE INCOME T AX ACT 1961 ARE FULFILLED BY THE ASSESSEE IN THIS CASE. THE ONLY ASSESSEE IS CLA IMING BENEFIT OF THE SECTION 10 BA AND NO VENDER OR SUPPLIER IS TAKING DEDUCTION OF SECTION 10 BA, HENCE ASSESSEE IS FULFILLING ALL THE CONDITIONS AS PRESCR IBED, SO EXEMPTION U/S 10 BA IS ALLOWED AS CORRECTLY CLAIMED. 20 IN ASSESSMENT ORDER, VARIOUS CASE LAWS REFERRED BY THE LD. A.O. REGARDING MANUFACTURING ARE EITHER NOT RELEVANT TO OUR CASE O R HAS BEEN OVERRULED BY THE SUBSEQUENT DECISIONS OF APEX COURTS OR RATHER I N FAVOUR OF ASSESSEE. THE LD A.O. HAS REFERRED THE CASE OF COMMISSIONER O F INCOME TAX VS. LUCKY MINERALS PVT. LTD. 226 ITR 245 AND LUCKY MINMAT PVT . LTD. VS. COMMISSIONER OF INCOME TAX 245 ITR 830, POLAR MARMO AGGOLERATES LTD. [1994] 73 ELT 536 (RAJ) AND REFERRED VARIOUS DECISIONS OF THE COURT T HAT CONVERSION OF MARBLE BLOCKS INTO MARBLE SLABS/TILES BY SAWING DOES NOT INVOLVE MANUFACTURING PROCESS AND MINING OF LIMESTONE AND MARBLE AND CUTTING THE SAME COULD NOT BE CONSIDERED AS MANUFACTURING. HE AHS ALSO REFERRED VARIOUS DECISIO NS OF COURTS ON ABOVE SAME MATTER:- 1. D.B. CIVIL WRIT PETITION NO. 1654 OF 1982 AMRUTSHE ELE V. UNION OF INDIA 2. D.B. CIVIL WRIT PETITION NO. 869 OF 1992 JAIN MARB LES V. UNION OF INDIA 3. S.B. CIVIL WRIT PETITION NO. 869 OF 1983--- KASAT E NTERPRISES V. UNION OF INDIA 4. S.B. CIVIL WRIT PETITION NO. 479 OF 1985 J.S. MAR BLES V. UNION OF INDIA THE LD. A.O HAS ALSO REFERRED SOME OTHER CASES TAKI NG THE SIMILAR VIEW THAT THE ACTIVITIES CARRIED OUT BY THE ASSESSEE TO CONVERT THE MARBLE BLOCK INTO MARBLE SLABS/ TILES DOES NOT COME INTO A AMBIT OF MANUFACTURE. THE CASES REFERRED WERE: - COLLECTOR OF CENTRAL EXCISE V. FINE MARBLES AND MIN ERALS PVT. LTD. [1985] 22 ELT 128 - SANGMERMER INDIA PVT. LTD. V. COLLECTOR, CENTRAL EX CISE [1989] 42 ELT 725 (TRIBUNAL) - ASSOCIATED STONE INDUSTRIES (KOTA) LTD. V. COLLECTO R OF CENTRAL EXCISE [1992] 60 ELT 639 - ASSOCIATED STONE INDUSTRIES (KOTA) LTD. V. COLLECTO R OF CENTRAL EXCISE [1992] ELT 639 - COLLECTOR, CENTRAL EXCISE V. FINE MARBLES [1985] 2 ELT 128 IN REFERENCE TO THE ABOVE CASES, IT IS PERTINENT TO NOTE THAT THE ABOVE CASES ARE SUPERSEDED BY THE CASE M/S ARIHANT MARBLE TILES PVT . LTD. VS. ITO (2007) VIDE 211 CTR 0169 ASSESSMENT YEAR 2000-01 & 2001-02 BY T HE HONBLE RAJASTHAN HIGH COURT AS THE HONBLE COURT HELD THAT PROCESS O F CUTTING AND SAWING OR SIZING OR POLISHING OF MARBLE BLOCK INTO SLABS AND TILES WHICH RESULTS IN MAKING 21 RAW MARBLE USABLE AMOUNTS TO MANUFACTURE. THEREFORE CONVERSION OF MARBLE BLOCKS INTO SLABS AND TILES AMOUNTS TO MANUFACTURE OF THING OR ARTICLE. MARBLES BLOCKS AS A MINERAL PRODUCED FROM THE EARTH BY ITSE LF IS NOT USABLE FOR ANY PURPOSE, THEREFORE, TO MAKE IT USABLE, VARIOUS PROC ESSES WHICH COULD BE APPLIED TO BRING IT TO THAT STAGE, WOULD AMOUNT TO MANUFACTURI NG/ PRODUCTION. HENCE THE CONTENTION OF THE LD. A.O. AS MENTIONED IN THE CASE OF LUCKY MINMAT PVT. LTD. VIDE ITA NO. 245 ITR 830 THAT THE ACTIVITIES CARRIE D OUT BY THE ASSESSEE IN THE INSTANT CASE DOES NOT TANTAMOUNT TO MANUFACTURING. THE ONLY ARGUMENT BEFORE THE SUPREME COURT IN THE CASE OF LUCKY MINMAT PVT. LTD VIDE ITA NO. 245 ITR 830 WAS THAT THE HIGH COURT JUDGEMENT IN THE CASE OF BE ST CHEMICAL HAS WRONGLY BEEN DISTINGUISHED THAT CONTENTION HAS BEEN REJECTE D BY THE SUPREME COURT. THE SUPREME COURT IS NOT EXAMINING ISSUE ABOUT THE FACT IN ABOVE MENTIONED CASE WHETHER THE BUSINESS OF MINING OF LIME STONE AND MA RBLE BLOCKS, THEREAFTER CUTTING AND SIZING THE SAME BEFORE IT IS SOLD IN THE MARKET IS MANUFACTURING OR PRODUCTION, AS THE CASE MAY BE. APPARENTLY IN THE EARLIER DECISION OF THE SUPREME C OURT IN CHOWGLE AND CO. (P) LTD. V. UNION OF INDIA ORS. (1981) 47 STC 124 (SC) IN WHICH THE ACTIVITY OF MINING HELD TO RESULT IN PRODUCTION OF GOODS, AND T HE LATER JUDGMENT OF SUPREME COURT IN CIT V. SESA GOA LTD.(2004) 192 CTR (SC) 57 7 WITH THE EQUAL STRENGTH OF JUDGES CONSTITUTING THE BENCH HAD TAKEN DIFFEREN T VIEW BY EXAMINING THE ISSUE DIRECTLY IN THE PROCESS OF AFFIRMING THE AFOREMENTI ONED JUDGMENT OF KARNATAKA HIGH COURT IN MYSORE MINERALS CASE, WHEREIN THE AC TIVITY OF CONVERTING THE MARBLE BLOCK WHICH IS NOT USABLE AS SUCH, INTO SLAB S AND POLISHING THEM AND MAKING IT MARKETABLE COMMODITY WAS HELD TO BE MANUF ACTURING ACTIVITY. THEREFORE, IT IS CONCLUDED THAT THE LEGISLATIVE INT ENT EMANATING FROM THE INCOME TAX ACT AND THE RULES FRAMED THERE UNDER AND THE JU DGMENT OF KARNATAKA HIGH COURT AS AFFIRMED BY THE SUPREME COURT MAKES IT CLE AR THAT PROCESS OF CUTTINGS AND SAWING OR SIZING OR POLISHING OF MARBLE BLOCKS INTO SLABS AND TILES WHICH RESULTS IN MAKING RAW MARBLES USABLE AMOUNTS TO MAN UFACTURE. APART FROM THAT MINING OF MARBLE BLOCK FROM MINES ITSELF AMOUNTS TO PRODUCTION. THEREFORE THE CITATION OF THE ABOVE CASES BY THE LD . A.O. HAVE NO MORE RELEVANCE AS THE DECISION OF THE HONBLE HIGH COURT SUPERSEDE D THE ABOVE REFERRED CASES AS STATED BY THE LD. A.O. (THE COPIES OF CASES ENCLOS ED VIDE PAGE BOOK NO 175 TO 184) 22 THE LD. A.O. HAS REFERRED THE CASE OF DEPUTY CST V. PIO FOOD PACKERS [1982] 46 STC 63, 65 [1980] SUPP. SCC 174 THE SUPREME COURT CONSIDERED THE MEANING THE WORD MANUFACTURE. MANUFACTURE IS AN E ND RESULT OF ONE OR MORE PROCESSES THROUGH WHICH THE ORIGINAL COMMODITY IS M ADE TO PASS. THE NATURE AND EXTENT OF PROCESSING MAY VARY FROM ONE CASE TO ANOT HER, AND INDEED THERE MAY BE SEVERAL STAGES OF PROCESSING AND PERHAPS A DIFFEREN T KIND OF PROCESSING AT EACH STAGE. WHEN A 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 OF RECOGNIZED AND DISTINCT ARTICLE THAT A M ANUFACTURE CAN BE SAID TO TAKE PLACE. IN THE REFERENCE OF THE ABOVE DEFINITION, IN THE AS SESSEES CASE ALSO, A NEW PRODUCT HAS BEEN EMERGED AS A RESULT OF PROCESSING WHICH IS COMMERCIALLY KNOWN TO THE MARKET. HENCE, THE ABOVE CASE REFERRED IS RATHER IN FAVOUR OF ASSESSEES CASE AS ASSESSEE IS FULFILLING THE ABOVE SAID CONDITIONS. A S ALREADY DEALT & DECIDED IN THE CASE OF GOVERDHAN PRASAD SINGHAL VS. THE I.T.O., WA RD 6 (1) JAIPUR BY HONBLE ITAT JAIPUR IN FAVOUR OF ASSESSEE STATING THAT RAW MATERIAL IN HAND AFTER UNDERGOING ONE OR MORE ACTIVITIES ONE OR MORE, MUS T REACH TO A POINT WHERE IT CAN NO LONGER BE REGARDED AS THE ORIGINAL COMMODITY BUT RECOGNIZED AS A NEW AND DISTINCT ARTICLE. AS IT WAS HELD IN THE CASE OF AO V/S M/S WORLD WIDE STONES, KOTA (2008) 1 15 TTJ 613 (JP), WHEREIN THE CASE OF SAND STONE CONVERTED INTO TILES AND SLATS, WAS TREATED AS MANUFACTURING/PRODUCTION. THE LD. A.O. HAS REFERRED ANOTHER CASE UNION OF INDIA V. DELHI CLOTH AND GENERAL MILLS [1997] ELT (J) 199 AND SOUTH BIHAR SU GAR MILLS V. UNION OF INDIA [1978] ELT (J) 3 WHERE IT WAS OBSERVED THAT MANUFACTURE IMPLIES A C HANGE, EVERY CHANGE OF AN ARTICLE IS THE RESULT OF TREATME NT, LABOUR, OR MANIPULATION IN ORDER TO MAKE A CHANGE AMOUNT TO MANUFACTURE. SOM ETHING MORE IS NECESSARY AND THAT SOMETHING MORE IS SUCH TRANSFORMATION OF A PRODUCTION AS BRINGS INTO EXISTENCE A NEW AND DIFFERENT ARTICLE HAVING DISTIN CT NAME, CHARACTER OR USE. BUT IN OUR CASE THE ASSESSEES PRODUCTION AFTER SO MUCH VALUE ADDITION & TRANSFORMATION IS ALTOGETHER A NEW ARTISTIC HANDICR AFT ITEM WITH DISTINCT CHARACTER & USE. IT IS OBVIOUS THING THAT MANUFACTURE PROCESS IS CARRIED OUT AS A RESULT OF LABOUR, TREATMENT OR MANIPULATION AS PER CUSTOMERS ORDERS. ASSESSEE MANUFACTURES THE ARTICLES OR THINGS IN A ARTISTIC A ND ANTIQUE LOOK BY THE USE OF ABOVE TO MAKE THE ORDERS COMPLETED BY THE FOREIGN B UYERS AND TO MAKE ULTIMATE PRODUCT ALTOGETHER DIFFERENT AS RECOGNIZED BY THE C OMMERCIAL WORLD. 23 THE LD. A.O. ALSO RELIED UPON THE CASE OF EMPIRE INDUSTRIES V. UNION OF INDIA [1986] 162 ITR 846 {SC}, WHICH STATES THAT SOME THING ELSE IS A DIFFERENT COMMERCIAL COMMODITY HAVING ITS DISTINCT CHARACTER, USE, AND NAME AND COMMERCIALLY KNOWN AS SUCH. IN OTHER WORDS, IF BY A PPLICATION OF LABOUR AND SKILL THE COMMODITY IS TRANSFERRED TO THE EXTENT THAT IT IS COMMERCIALLY KNOWN DIFFERENTLY, IT WILL SUFFICE TO SAY THAT MANUFACTUR E HAS TAKEN PLACE. THE MOMENT THERE IS A TRANSFORMATION INTO A NEW COMMODITY HAVI NG ITS OWN CHARACTER, USE, AND NAME WHETHER AS A RESULT OF ONE PROCESS OR SEVERAL PROCESSES MANUFACTURE TAKES PLACE. IT IS PERTINENT TO NOTE THAT IN THE CASE OF THE ASS ESSEE WITH THE HELP OF LABOUR, MANIPULATION AND AFTER BEING PROCESSED ON THEM A PR ODUCT IS EMERGED WITH COMMERCIALLY KNOWN PRODUCT IN THE MARKET WITH DISTI NCT USE, NAME & IDENTITY. THEREFORE, THE GENERAL DEFINITIONS OF MANUFACTURING WHICH ARE GIVEN BY THE LD. A.O. IN THE ASSESSMENT ORDER ARE SQUARELY FULFILLED BY THE ASSESSEE AND THEY ARE BASIC STEPS TO PRODUCE THE ARTICLE OR THING. HENCE, THE LD. A.O. CANNOT MAKE ALLEGATION ON THE ASSESSEE THAT IT IS NOT A MANUFAC TURING UNIT RATHER IT PASSES THROUGH A VERY BASIC PROCESS OF MANUFACTURING PROCE SS BASED ON ABOVE MENTIONED STEPS AND PRODUCE THE ELIGIBLE ARTICLE OR THINGS. THE ASSESSEE FOLLOWS THE VARIOUS STEPS TO PRODUCE T HE ELIGIBLE ARTICLES OR THINGS. THERE HAS BEEN VARIOUS PROCESS OF MANUFACTURING OF ARTISTIC HANDICRAFT SUCH AS TABLE TOPS AND TABLE LEGS ARE PURCHASED IN RAW FORM THEREAFTER VARIOUS PROCESS ARE DONE AS BELOW MENTIONED. A CHART SHARING THE VALUE ADDITION THROUGH VARIOUS PROCESSES IS ENCLOSED BY AN EXAMPLE. FIRSTLY, THE APPELLANT PURCHASES WOOD, SEMI FINISHE D MATERIAL WHICH REQUIRES FURTHER WOOD AND OTHER WORK OF BEAUTIFICATION AND O F ARTISTIC VALUE. THERE APART, THE OTHER RAW MATERIAL, THE WOODEN OUT OF WHICH IS THE MAIN, AND OTHERS I.E. GRASS, NAILS ETC. ARE PURCHASED, THEREAFTER VARIOUS OTHER ITEMS ARE ADDED DEPENDING UPON THE DESIGNS, SIZE, QUALITY OF THE SUBJECTED ITEM TO BE EXPORTED, AFTER PURCHASING THE SEMI FINISHED GOODS AND RAW MATERIAL, AS STATED ABO VE, THE VERY FIRST STEP IS TO ASSEMBLE THE SAME, IF SO REQUIRED. SOME TIME THE S EMI FINISHED FURNITURE IS REQUIRED TO BE GIVEN FURTHER SHAPE AS PER THE DESIR ED EXPORTABLE DESIGNS. THEREAFTER, PUNCHING IS DONE BY HAMMERING NAILS BY HAND. IT IS PURE LABOUR WORK WHICH CAN BE DONE BY EXPERTS ONLY. IT MAY BE NOTED THAT THE NAILS ARE OF SPECIAL TYPE HAVING ARTISTIC AND ANTIQUE LOOK. FITTING OF B RASS AND IRON ITEMS AGAIN WITH A VIEW TO GIVE ARTISTIC AND ANTIQUE LOOK, FILING WITH A VIEW TO SMOOTHEN THE SURFACE, SANDING, CARVING WITH A VIEW TO BRING THE ARTISTIC VALUE AND TO SHOW THAT THESE ARE ANTIQUE ITEMS, AND LASTLY POLISHING, THEREAFTER, VA RIOUS WOODEN ITEMS ARE FITTED ACCORDING TO THE NEED AND DESIGN OF THE EXPORTABLE WOODEN ARTICLE, I.E. WOODEN MOULDING IS FITTED INLAY IS DONE. HENCE THE FINAL P RODUCT EMERGED WITH A DISTINCT CHARACTER OR USE. THEREFORE THE FACTS ON WHICH THE ABOVE CASES CITED BY THE LD. A.O. ARE RATHER IN FAVOUR OF THE ASSESSEE AND ASSES SEE CARRIED OUT THE ALL STEPS FOR BEING MANUFACTURE THE ELIGIBLE ARTICLE OR THING WHI CH COMES INTO THE AMBIT OF 24 MANUFACTURE FOR CLAIMING THE DEDUCTION OF SECTION 1 0BA OF THE INCOME TAX ACT, 1961. THEREFORE, IN ASSESSEES CASE ALSO THERE IS A TRANS FORMATION INTO A NEW COMMODITY HAVING ITS OWN CHARACTER, USE, AND NAME WHETHER AS A RESULT OF SEVERAL PROCESSES MANUFACTURE TAKES PLACE. THE DETAILED REPLY OF FULFILLING THE ALL BASIC COND ITIONS U/S 10BA HAS ALREADY GIVEN IN EARLIER PARAS AND ALL ALLEGATIONS OF LD. A .O. HAS PROPERLY REPLIED AND DEALT AT THE TIME OF ASSESSMENT. HENCE, THE LD. A.O. HAS WRONGLY DISALLOWED THE GEN UINE CLAIM U/S 10BA OF RS. 29,97,074/- WHICH IS NOT CORRECT IN VIEW OF THE FAC T MENTIONED AS ABOVE. HENCE GENUINE EXEMPTION AS AN ELIGIBLE UNIT U/S 10BA OF T HE ACT IS PRAYED. 8. THE LD. CIT (A) AFTER CONSIDERING THE SUBMISSION S AND THE ORDER OF THE AO FOUND THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER S ECTION 10BA. THE VARIOUS OBJECTIONS ON WHICH THE DEDUCTION WAS DENIED BY THE AO WERE TAKEN INTO CONSIDERATION BY LD. CIT (A) AND THEREAFTER THE FACTS OF THE CASE ALONG WITH THE CONTENTION OF THE ASSESSEE AND VARIOUS CASE LAWS ON BEHALF OF THE ASSESSEE AND ALSO VARIOU S DECISIONS CONSIDERED BY THE AO WERE TAKEN INTO CONSIDERATION BY THE LD. CIT (A) AND THE LD. CIT (A) HELD THAT THE DEDUCTION CLAIMED BY THE ASSESSEE IS ALLOWABLE. 8.1. CERTAIN ADDITIONAL EVIDENCES ALONG WITH THE AF FIDAVITS OF 16 PERSONS WERE FILED BEFORE LD. CIT (A) FROM WHOM THE UNFINISHED HANDICR AFT MATERIAL WAS PURCHASED WERE FILED AND IT WAS REQUESTED THAT THE SAME SHOULD BE ADMITTED IN VIEW OF RULE 46A OF IT RULES. THE LD. CIT (A) SENT THE ADDITIONAL EVIDENC ES ALONG WITH COPY OF REQUEST LETTER TO THE AO VIDE LETTER DATED 15.5.2009 WITH A REQUEST T O SUBMIT HIS REPORT REGARDING ADMISSIBILITY OF ADDITIONAL EVIDENCES AND ALSO DIRE CTED TO EXAMINE THE AFFIDAVITS BY ISSUING SUMMONS TO THESE PARTIES IN ORDER TO EXAMIN E THAT WHETHER PURCHASES SHOWN WERE OF ONLY FINISHED GOODS OR THE ASSESSEE HAS PURCHASE D SKELETON FOR MANUFACTURING 25 HANDMADE AND ARTISTIC ARTICLES OR THINGS. AFTER COL LECTING THE EVIDENCE, THE AO WAS REQUIRED TO CONFRONT THE SAME TO THE ASSESSEE AND T O SUBMIT HIS EXAMINATION REPORT. IN RESPONSE TO THAT THE AO VIDE HIS REPORT DATED 16.2. 2010 REPORTED THAT THE EXEMPTION CLAIMED UNDER SECTION10BA OF THE ACT WAS DISALLOWED FOR A NUMBER OF REASONS AND ON THE BASIS OF THREAD BEAR ANALYSIS OF THE MODUS OPERANDI OF THE ASSESSEE AND ALSO STATED THAT THE ASSESSMENT WAS COMPLETED AFTER PROVIDING SUFFICIENT OPPORTUNITY TO THE ASSESSEE. ACCORDING TO THE AO, THE ADDITIONAL EVIDENCES FURNI SHED WHICH WERE SOME AFFIDAVITS HARDLY HAVE ANY BEARING UPON THE ISSUE OF DISALLOWA NCE OF EXEMPTION CLAIMED UNDER SECTION 10BA AND THE ASSESSEE HAS NOT CITED ANY REA SONS WHICH PREVENTED HER FROM FURNISHING THE EVIDENCE AT THE ASSESSMENT STAGE AND IN THIS MANNER HE HAS OBJECTED THE ADMISSION OF ADDITIONAL EVIDENCE. THEREAFTER, AFTER CONSIDERING THE REMAND REPORT, THE AO WAS AGAIN REQUESTED TO FURNISH THAT WHETHER ONLY FI NISHED GOODS HAVE BEEN PURCHASED OR ONLY SKELETON HAS BEEN PURCHASED FOR MANUFACTURING HANDMADE ARTICLES OR THINGS WHICH ARE OF ARTISTIC VALUE FOR WHICH COPIES OF AFFIDAVI TS FURNISHED BY DIFFERENT PERSONS WERE SENT TO HIM. SINCE NO SUCH ENQUIRY WAS CARRIED OUT BY THE AO AS DIRECTED, THEREFORE, HE WAS AGAIN REQUESTED TO MAKE NECESSARY ENQUIRY AND T O SEND THE REPORT AFTER GIVING OPPORTUNITY TO THE ASSESSEE. IN THE MEANWHILE COUNT ER COMMENTS WERE ALSO FILED ON BEHALF OF THE ASSESSEE WHICH WERE ALSO SENT TO THE AO FOR HIS COMMENTS. THEREAFTER, THE AO RECORDED THE STATEMENTSOF12 PERSONS AND VIDE HIS RE PORT DATED 21.5.2010 FORWARDED BY ADDITIONAL CIT JAIPUR VIDE LETTER DATED 28.5.2010 W HICH WAS RECEIVED IN THE OFFICE OF LD. CIT (A). COPIES OF THE SAME WERE GIVEN TO THE LD. A/R FOR HIS COMMENTS AND COMMENTS WERE ALSO FILED. THESE FACTS IN RESPECT TO FURNISHI NG ADDITIONAL EVIDENCES AND REPLY OF THE AO HAVE BEEN DISCUSSED BY LD. CIT (A) AT PAGES 34 T O 41 OF HIS ORDER. THEREAFTER, LD. 26 CIT (A) EXAMINED THE ISSUE IN THE LIGHT OF SUBMISSI ONS, REMAND REPORT OF THE AO AND OTHER MATERIAL ON RECORD FOUND THAT ASSESSEE IS ELI GIBLE FOR EXEMPTION UNDER SECTION 10BA. THE LD. CIT (A) FURTHER FOUND THAT THE ISSUE SQUARELY COVERED BY THE DECISION OF JODHPUR BENCH OF THE TRIBUNAL IN THE CASE OF KWAL P RO EXPORTS VS. ITO DECIDED IN ITA NO. 543/JU/2007 AND OTHERS. THE LD. CIT (A) FURTHE R NOTED THAT SIMILAR ISSUE HAS BEEN DECIDED IN THE CASE OF MANGALAM ARTS IN ITA NO. 815 /JP/2007 DATED 26.6.2008 BY THE JAIPUR BENCH. ACCORDINGLY, HE ALLOWED THE DEDUCTIO N CLAIMED UNDER SECTION 10BA FOR ALL THE THREE YEARS. THE FINDING OF LD. CIT (A) HAVE BE EN RECORDED AT PAGES 41 TO 44 OF HIS ORDER ARE AS UNDER :- I HAVE CONSIDERED FACTS OF THE CASE AND ARGUMENT S TAKEN BY SH. RAJVANSHI QUITE CAREFULLY. I HAVE ALSO CONSIDERED T HE REPORT SUBMITTED BY ASSESSING OFFICER ALONGWITH COPIES OF STATEMENT REC ORDED FOR SUPPLIERS AND CONTRACTORS IN RESPECT OF AFFIDAVITS FURNISHED BY T HE APPELLANT DURING THE COURSE OF APPELLANT PROCEEDINGS AND FURTHER COUNTER COMMENTS GIVEN BY THE APPELLANT AND HER AR FROM TIME TO TIME. CONSIDE RING THE FACT THAT THE FIRST NOTICE U/S 143(2) AND 142(1) ALONGWITH SHOW C AUSE WAS ISSUED ON 27.11.2008 AND THE ASSESSMENT ORDER WERE PASSED IN ALL THESE 3 CASES ON 12.12.2008. THE ISSUE WHICH WAS TO BE DECIDED THAT WHETHER THE APPELLANT HAS PURCHASED READYMADE FURNITURE OR HAD PURCHASED WOOD / SKELTON FOR FINISHING / HANDMADE AND ARTISTIC WORK. THIS WAS PO SSIBLE ONLY AFTER EXAMINING THE VARIOUS PERSONS INVOLVED IN THE SUPPL Y OF MATERIAL TO THE APPELLANT IN ALL THE 3 A.YRS. AND AFTER EXAMINING T HE CONTRACTORS WHO HAS DONE WORK FOR THE APPELLANT. HOWEVER, IT IS A FACT THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THIS EXERCISE HAS NOT BEEN C ARRIED OUT AND UNDER THESE CIRCUMSTANCES IN MY CONSIDERED VIEW THIS IS A CASE TO ADMIT ADDITIONAL EVIDENCE UNDER RULE 46A(1)(B)(C)&(D) OF I.T. RULES, 1962 AND ACCORDINGLY THE ADDITIONAL EVIDENCE FURNISHED BY TH E APPELLANT DURING THE COURSE OF APPELLATE PROCEEDINGS ARE HEREBY ADMITTED INSPITE OF OBJECTION 27 MADE BY ASSESSING OFFICER. AFTER GOING THROUGH THE STATEMENT RECORDED OF VARIOUS SUPPLIERS BY THE ASSESSING OFFICER AS WELL AS OF VARIOUS CONTRACTORS WHO HAS DONE JOB WORK FOR THE APPELLANT IT IS NOTIC ED THAT THEY HAVE CONFIRMED TO HAVE SUPPLIED NOT THE READYMADE MATERI AL BUT FURNITURE IN SKELTON CONDITIONS AS PER SPECIFIC ORDER RECEIVED F ROM THE APPELLANT. THE VARIOUS CONTRACTORS HAVE ALSO CONFIRMED THAT THEY H AVE DONE ARTISTIC HAND WORK ON SUCH FURNITURE AS PER DIRECTION OF THE APPE LLANT. EVEN THE ASSESSING OFFICER IN HIS REPORT DATED 21.5.2010 HAS REPORTED THAT THE VARIOUS PERSONS WERE RECEIVING WRITTEN / ORAL ORDERS FROM T HE APPELLANT AND AS DESIRED BY THE APPELLANT REQUISITE DESIGNING AND CA RVING WORK WAS CARRIED OUT BY THEM FOR WHICH IN MOST OF THE CASES THE PAYM ENT WAS RECEIVED BY ACCOUNT PAYEE CHEQUE / DRAFT. THE AO HAD ALSO REPOR TED IN THE SAID REPORT DATED 21.5.2010 THAT MOST OF THE PERSONS ARE ASSESS ED TO TAX, HAVING PAN AND THE STATEMENT GIVEN IS IN AGREEMENT WITH BOOKS OF ACCOUNTS AND RETURN OF INCOME FURNISHED BY THEM. FROM THESE STATEMENTS IT IS CLEAR THAT WHATEVER ITEMS WERE PURCHASED BY THE APPELLANT AFTE R CARRYING OUT CERTAIN WORK IT RESULTED INTO A DIFFERENT COMMODITY BEING R ECOGNIZED BY THE COMMERCIAL WORLD I.E. THE IMPORTER OUTSIDE INDIA AN D FROM THE POINT OF VIEW OF APPELLANT THERE IS SUBSTANTIAL VALUE ADDITI ON. THE BUSINESS OF THE ASSESSEE IS TO EXPORT WOODEN HANDICRAFT HAVING ARTI STIC VALUE AND OF TOTAL SALES OF THE ASSESSEE APPROXIMATELY 99% IS THE EXPO RT SALE. UNDER SIMILAR FACTS HONBLE ITAT JAIPUR BENCH IN CASE OF ITO V/S GOVERDHAN PRASHAD SINGHAL IN ITA NO. 964/JP/2007 FOR A.Y. 2003-04, IN ITA NO. 200/JP/2008 FOR A.Y. 2004-05 AND IN ITA NO. 797/JP/ 2008 AND IN ITA NO. 1000/JP/2008 FOR A.Y. 2005-06 HAS HELD THAT WHA T THE APPELLANT PURCHASED ULTIMATELY RESULTED INTO AND ALL TOGETHER DIFFERENT COMMODITY BEING RECOGNIZED BY THE COMMERCIAL WORLD AND HENCE THE WORK WAS COVERED UNDER THE DEFINITION OF MANUFACTURING AS DE FINED BY VARIOUS ACTS. IT IS SEEN THAT VARIOUS CONDITIONS SPECIFIED U/S 10 BA ARE FULFILLED AND AO COULD NOT PROVE THAT ANY OF THE CONDITION AS SPECIF IED U/S 10BA WAS NOT FULFILLED. FURTHER, HONBLE ITAT JODHPUR BENCH IN T HE CASE OF KWAL PRO 28 EXPORTS V/S ITO JODHPUR IN ITA NO. 545, 543, 544/JU /2007 AND IN ITA NO. 415/JU/2008 HAS GIVEN A FINDING THAT THE VARIOU S STEPS UNDERTAKEN BY THE ASSESSEE ON SEMI FINISHED GOODS GAVE THEM A COM MERCIAL LOOK MAKING THE ARTICLE COMPLETELY DISTINCT IN CHARACTER AND ME RELY BECAUSE SOME JOB WORK HAS BEEN GOT DONE FROM OUTSIDE COULD NOT TAKE AWAY THE ASSESSEE FROM THE SCOPE AND MEANING OF MANUFACTURING OF ARTI CLE OR PRODUCT EVEN THOUGH THE ORIGINAL MATERIAL DID NOT LOOSE ITS IDEN TITY COMPLETELY YET A DIFFERENT COMMERCIAL COMMODITY HAS BEEN BROUGHT INT O EXISTENCE BY THE ASSESSEE AND THAT THE END PRODUCT SO PRODUCED BEING DIFFERENT AND DISTINCT BOTH IN CHARACTER AND USE AS WELL. HONBLE ITAT HAS FURTHER OBSERVED THAT THE INCENTIVE PROVISIONS LIKE S. 10B REQUIRES TO BE CONSTRUED LIBERALLY. ITAT JAIPUR BENCH IN ANOTHER CASE OF DCIT CIRCLE-5, JAIPUR V/S M/S MANGLAM ARTS IN ITA NO. 815/JP/2007 DT. 20.6.2008 H AS HELD THAT IN SIMILAR CIRCUMSTANCES WHEN CONDITIONS SPECIFIED U/S 10BA ARE FULFILLED THE CIT (A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE OF DEDUCTION CLAIMED U/S 10BA OF I.T. ACT. ON THE COMBINED READING OF AV AILABLE JUDICIAL DECISIONS WHICH ARE DISCUSSED IN THIS ORDER AND AFT ER GOING THROUGH THE STATEMENT RECORDED BY THE ASSESSING OFFICER AFTER S UBMITTING THE AFFIDAVITS OF THE SUPPLIERS AND CONTRACTORS IN MY CONSIDERED V IEW THE APPELLANT HAS FULFILLED THE VARIOUS CONDITIONS AS SPECIFIED U/S 1 0BA OF I.T.ACT AND THE AO IS DIRECTED TO ALLOW THE EXEMPTION CLAIMED U/S 1 0BA BY THE APPELLANT. WITH THIS DISCUSSION THE RELEVANT GROUND OF APPEAL FOR ALL THE 3 A.YRS. IS HEREBY ALLOWED. 9. NOW THE DEPARTMENT IS IN APPEAL HERE BEFORE THE TRIBUNAL FOR ALL THE THREE YEARS. 10. THE LD. CIT D/R WHO APPEARED BEFORE THE TRIBUNA L FIRSTLY SUPPORTED THE ORDER OF AO AS WELL AS THE REMAND REPORT SENT BY THE AO. IT WAS FURTHER SUBMITTED THAT ASSESSEE IS DOING SOME WORK OF PROCESSING ONLY AND THEREAFTER T HE SAME IS SOLD OUT IN THE SAME SHAPE. NO SUBSTANTIAL ACTIVITY OF MANUFACTURING HAS BEEN DONE BY THE ASSESSEE AS ONLY 1% 29 OF LABOUR EXPENSES HAS BEEN SHOWN BY ASSESSEE ON AL L THE MANUFACTURING ACTIVITY DONE BY HIM. THEREFORE, IT IS AMPLY PROVED THAT ASSESSEE IS NOT A MANUFACTURER. THEREFORE, THE EXEMPTION UNDER SECTION 10BA WAS RIGHTLY DISALLOWED BY THE AO. SOME PORTIONS OF THE ORDER OF AO AS WELL AS REMAND REPORT WAS READ BY LD . CIT D/R. 11. ON THE OTHER HAND, LD. COUNSEL OF THE ASSESSEE STRONGLY PLACED RELIANCE ON THE ORDER OF LD. CIT (A). IT WAS FURTHER SUBMITTED THA T IT WAS INCORRECT THAT ASSESSEE HAS SHOWN ONLY 1% OF LABOUR EXPENSES. 1% EXPENSES INCUR RED ON LABOUR IS ONLY ON THOSE LABOUR FROM WHOM THE WORK WAS GOT DONE FROM OUTSIDE LABOURERS. THE ASSESSEE HAS ITS OWN LABOUR AND PREMISES WHERE ALL MANUFACTURING ACT IVITIES ARE DONE AND WAS WAGES EXPENSES HAVE BEEN SHOWN ON THIS ACCOUNT. IT WAS F URTHER SUBMITTED THAT THIS ASPECT WAS EXAMINED BY LD. CIT (A) THOROUGHLY. BESIDES THAT, THE LD. CIT (A) EXAMINED ALL THE DETAILS AND HAVE SEEN PHYSICALLY THE RAW MATERIAL O F UNFINISHED, .PURCHASED BY THE ASSESSEE AND WORK DONE BY THE ASSESSEE AND THEREAFT ER ONLY LD. CIT (A) HAS ALLOWED THE CLAIM OF DEDUCTION UNDER SECTION 10BA. ON IDENTICAL FACTS, THE TRIBUNAL IN CASE OF MANGALAM ARTS HAVE ALLOWED THE EXEMPTION UNDER SECT ION 10BA. THEREFORE, FOR THIS REASON ALSO THE LD. CIT (A) WAS JUSTIFIED IN ALLOWI NG THE CLAIM OF ASSESSEE. ATTENTION OF THE BENCH WAS DRAWN ON VARIOUS EVIDENCES SHOWING TH E PHOTO COPIES OF THE MATERIAL PURCHASED AND SHOWING THE PHOTOS OF FINAL PRODUCT M ANUFACTURED BY THE ASSESSEE. IT WAS SUBMITTED FOR EXAMPLE THAT FOR MANUFACTURING A TABL E, ONLY A TOP IS PURCHASED WHICH TOO IN A SKELETON SHAPE. THEREAFTER LEGS OF THE TABLE A RE MADE BY ASSESSEE ON WHICH TABLE TOP IS FITTED. ALL THE CURVING WORK AS DESIRED BY THE C USTOMER HAS BEEN DONE BY THE ASSESSEE. THEREAFTER FINISHING OF THE TABLE HAS BEEN DONE BY THE ASSESSEE. SIMILARLY, IN CASE OF ALL ITEMS THE ASSESSEE HAS DONE MAJOR ACTIVITY OF MANUF ACTURING TO BRING THE ARTICLE IN A NEW 30 AND FINISHED SHAPE. THEREFORE, IT CANNOT BE SAID TH AT ASSESSEE IS MERELY A PROCESSOR AND NO SUBSTANTIAL WORK HAS BEEN DONE BY THE ASSESSEE. AT TENTION OF THE BENCH WAS DRAWN ON COPY OF AFFIDAVITS PLACED IN THE PAPER BOOK WHICH W ERE FILED BEFORE LD. CIT (A) AND THEY WERE SENT TO THE AO TO EXAMINE THE SAME. THE AO CAL LED THE PARTIES, STATEMENTS OF THOSE PARTIES WERE RECORDED AND THOSE PARTIES HAVE CATEGO RICALLY ADMITTED THAT THEY HAVE SUPPLIED ONLY SKELETON OF THE ITEMS AND NOT THE FIN ISHED MATERIAL. WHATEVER THE MAJOR ACTIVITY OF CARVING, FITTING OR FINISHING WAS TO BE DONE, THAT WAS DONE BY THE ASSESSEE IN ITS OWN PREMISES. THE AFFIDAVITS FILED BY THOSE PARTIE S WERE NOT FOUND INCORRECT AS 12 PARTIES APPEARED AND EXPLAINED BY ADMITTING THE FACTUAL ASP ECTS THAT THEY HAVE SUPPLIED ONLY RAW MATERIAL. ACCORDINGLY, IT WAS REQUESTED THAT ORDER OF LD. CIT (A) IS LIABLE TO BE CONFIRMED. 12. WE HAVE HEARD RIVAL SUBMISSIONS AND CONSIDERED THEM CAREFULLY. WE HAVE ALSO PERUSED VARIOUS EVIDENCES FILED BEFORE LD. CIT (A) IN SUPPORT OF THE CASE OF THE ASSESSEE AND ALSO THE DETAILED WRITTEN SUBMISSIONS PLACED ON RECORD ALONG WITH THE SUBMISSIONS OF LD. CIT D/R. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING ALL OTHER MATERIALS, WE FIND THAT LD. CIT (A) WAS JUSTIFIED IN HOLDING THAT ASSE SSEE IS ELIGIBLE FOR DEDUCTION CLAIMED UNDER SECTION 10BA OF THE ACT FOR ALL THE THREE YEA RS. FACTS AND SUBMISSIONS HAVE BEEN DISCUSSED BY LD. CIT (A) IN DETAIL. THE OBJECTION OF THE AO RAISED IN HIS ASSESSMENT ORDER AS WELL AS IN HIS REMAND REPORT WERE ALSO TAK EN INTO CONSIDERATION BY LD. CIT (A) AND THEREAFTER LD. CIT (A) HAS ARRIVED AT THE CONCL USION THAT ASSESSEE IS NOT MERELY A PROCESSOR BUT HAS DONE SUBSTANTIAL ACTIVITY OF MANU FACTURING THE HANDICRAFT GOODS AND, THEREFORE, THE ASSESSEE IS ENTITLED FOR DEDUCTION U NDER SECTION 10BA OF THE ACT. THE MAIN PLANK OF ARGUMENT OF LD. CIT D/R IS THAT ASSESSEE I S SIMPLY A PROCESSOR AS HE HAS INCURRED ONLY 1% OF THE TOTAL TURNOVER AS LABOUR EXPENSES. THIS IS NOT CORRECT. 1% LABOUR EXPENSES 31 ARE INCURRED ON PRIVATE LABOURER ENGAGED BY THE ASS ESSEE ON JOB WORK GOT DONE BY THE ASSESSEE, OTHERWISE THE ASSESSEE HAS ITS OWN MANUFA CTURING PREMISES WHERE PERMANENT EMPLOYEES ARE EMPLOYED AND IF THIS EXPENDITURE IS T AKEN INTO CONSIDERATION THEN IT IS NOT 1% BUT IT IS SUBSTANTIAL EXPENDITURE. THIS ASPECT HAS ALSO BEEN EXAMINED BY THE LD. CIT (A) AND FOUND THAT THE ASSESSEE HAS INCURRED SUBSTA NTIAL EXPENDITURE ON ITS MANUFACTURING ACTIVITY. STATEMENTS OF12 PERSONS WERE RECORDED BY AO DURING REMAND PROCEEDINGS AND THOSE PERSONS HAVE CATEGORICALLY STATED THAT THEY S OLD UNFINISHED GOODS TO THE ASSESSEE AND MAJOR PORTION OF WORK ON THOSE GOODS HAVE BEEN DONE BY THE ASSESSEE ITSELF IN THEIR PREMISES. NEITHER THE FACTS NARRATED BY THE SUPPLIE R WERE FOUND INCORRECT NOR THERE WAS ANY OTHER EVIDENCE TO HOLD THAT THE ASSESSEE IS ONL Y DOING MANUFACTURING PROCESS. ON SIMILAR FACTS, THE TRIBUNAL IN CASE OF MANGALAM ART S IN ITA NO. 815/JP/2007 DATED 20.6.2008 HAS HELD THAT THE ASSESSEE IS ENTITLED FO R DEDUCTION UNDER SECTION 10BA. THE LD. CIT (A) HAS ALSO TAKEN THIS CASE INTO CONSIDERATION AND FOUND THAT FACTS ARE SIMILAR. THEREFORE, IN OUR CONSIDERED VIEW AND IN VIEW OF RU LE OF CONSISTENCY, THE LD. CIT (A) WAS JUSTIFIED IN HOLDING THAT ASSESSEE IS ENTITLED FOR DEDUCTION UNDER SECTION 10BA OF THE ACT. NEITHER ANY FRESH MATERIAL WAS BROUGHT ON RECORD BY LD. CIT D/R NOR THE FINDINGS OF LD. CIT (A) COULD BE CONTROVERTED BY PLACING POSITIVE M ATERIAL, THEREFORE, FOR THIS REASON ALSO, WE ARE OF THE VIEW THAT ORDER OF LD. CIT (A) IS LIABLE TO BE CONFIRMED FOR ALL THE THREE YEARS. ACCORDINGLY, WE CONFIRM THE FINDING OF LD. C IT (A) IN THIS REGARD FOR ALL THE THREE YEARS. 13. NEXT ISSUE FOR ASSESSMENT YEARS 2004-05 AND 05- 06 IS AGAINST DELETING THE ADDITION MADE ON ACCOUNT OF BELATED DEPOSIT OF EMPLOYEES CON TRIBUTION. 32 14. THE LD. CIT (A) DELETED THE DISALLOWANCE BY OBS ERVING THAT PAYMENTS HAVE BEEN MADE BEFORE THE DUE DATE FOR FILING OF THE RETURN A ND ON SIMILAR FACTS IN CASE OF REKHA SINGH DECIDED IN ITA NO. 570/JP/09 DATED 26.2.2010 THE TRIBUNAL HAS ALLOWED THE ISSUE IN FAVOUR OF THE ASSESSEE. 15. THIS ISSUE HAS BEEN PUT TO REST BY THE HONBLE SUPREME COURT IN CASE OF VINAY CEMENT LTD., 313 ITR 1 (ST.) WHEREIN IT IS HELD THA T IF THE PAYMENTS ON ACCOUNT OF PROVIDENT FUND AND ESI CONTRIBUTION HAS BEEN DEPOSI TED BEFORE THE DUE DATE FOR FILING THE RETURN THEN NO DISALLOWANCE IS TO BE MADE UNDER SEC TION 43B OF THE ACT. ACCORDINGLY WE CONFIRM THE FINDING OF LD. CIT (A) ON THIS ISSUE AL SO FOR BOTH THE YEARS. 16. IN THE RESULT, APPEALS OF THE DEPARTMENT AND CR OSS OBJECTIONS OF THE ASSESSEE ARE DISMISSED. 17. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 14 .07.2011. SD/- SD/- ( N.L. KALRA ) ( R.K. GUPTA ) ACCOUNTANT MEMBER JUDICIAL MEMBER JAIPUR, D/- COPY FORWARDED TO :- THE ITO, WARD 6(2), JAIPUR. SMT. RANJANA JOHARI, JAIPUR. THE CIT (A) THE CIT THE D/R GUARD FILE (ITA NOS. 1111(6)/JP/2010) BY ORDER, AR ITAT JAIPUR.