M/s Evergreen Publication India Ltd, Jalandhar V. The Joint Commissioner of Income Tax, Jalandhar

ITA 123/ASR/2016

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0519 (ITAT-AMRITSAR)
• Duration Of Justice: 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 28-06-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 24-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BHAWANI SHANKER
• Assessee Lawyers: RAKESH JAIN
• Section: 80IB; 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. (CAMP AT JALANDHAR) BEFORE SH. A.D. JAIN, JUDICIAL MEMBER AND SH. T.S. KAPOOR, ACCOUNTANT MEMBER ITA NO. ASSESSMENT YEAR: 601(ASR)/2014 2010-11 123(ASR)/2016 2011-12 PAN: AAACE8776A M/S. EVERGREEN PUBLICATIONS (INDIA) LTD; VS. JT. C OMMR. OF INCOME TAX, 40, CHANDAN NAGAR, JALANDHAR. RANGE-IV, JALANDH AR. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. RAKESH JAIN, ADVOCATE RESPONDENT BY: SH. BHAWANI SHANKER, DR DATE OF HEARING: 28/06/2016 DATE OF PRONOUNCEMENT: 13/07/2016 ORDER PER A.D. JAIN, JM: THESE TWO APPEALS FILED BY THE ASSESSEE ARE DIREC TED AGAINST TWO SEPARATE ORDERS OF CIT(A), JALANDHAR, DATED 28.08.2 014 & 09.12.2015 FOR THE ASSESSMENT YEARS 2010-11 & 2011-12. AS THE ISSU ES INVOLVED IN BOTH THE APPEALS ARE IDENTICAL, THEY ARE BEING TAKEN UP BY THIS COMPOSITE ORDER FOR THE SAKE OF CONVENIENCE. HOWEVER, THE FAC TS ARE BEING TAKEN FROM ITA NO.601(ASR)/2014, WHEREIN, THE ASSESSEE HA S RAISED THE FOLLOWING GROUNDS: 1. THAT THE LD. CIT(A), JALANDHAR IS NOT JUSTIFIED IN LAW IN CONFIRMING DISALLOWANCE OF CLAIM OF RS.11552996/- U /S 80- IB OF THE I.T. ACT, 1961 AND HAS FAILED TO APPRECIA TE THE FACTS AND CIRCUMSTANCES OF THE CASE. ITA NOS. 601 & 123(ASR)/2014 & 2016 AYS 2010-11 & 2011-12 2 2. THAT THE LD. CIT(A), JALANDHAR IS NOT JUSTIFIED IN LAW IN CONFIRMING AN ADDITION OF RS.500000/- ON ACCOUNT OF NON MAINTENANCE OF STOCK DETAILS ON PURELY ARBITRARY AN D EXTRANEOUS CONSIDERATIONS AND WITHOUT POINTING OUT ANY SPECIFIC DEFECT IN THE BOOKS OF ACCOUNT AND HAS THU S ERRED IN LAW AS WELL. 3. THAT THE LD. CIT(A), JALANDHAR IS NOT JUSTIFIED IN LAW IN DISALLOWING A SUM OF RS.73,783/- U/S 40(A)(IA) ON TECHNICAL GROUNDS DESPITE CONFIRMATION FROM PAYEE OF COMPLIAN CE OF THE SUBSTANTIVE LAW & HAS THUS ERRED IN LAW & HAS F AILED TO APPRECIATE THE FACTS AND CIRCUMSTANCES OF THE CASE . 4. THAT THE LD. CIT(A), JALANDHAR IS NOT JUSTIFIED IN DISALLOWING A SUM OF RS.150849/- OUT OF FOREIGN TRAVELLING EXPENS ES OF DIRECTORS PURELY ON ARBITRARY BASIS & WITHOUT ANY M ATERIAL AND HAS THUS ERRED IN LAW AND HAS FAILED TO APPRECI ATE THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. APROPOS GROUND NO.1, THE ASSESSEE CONTENDS THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE O F CLAIM OF RS.1,15,52,996/- U/S 80IB OF THE ACT. HERE, IT IS S EEN THAT THE LD. CIT(A) CONFIRMED THE DISALLOWANCE FOLLOWING THE LD. CIT(A )S ORDER FOR THE ASSESSMENT YEARS 2006-07, 2008-09 & 2009-10 AND THE TRIBUNAL ORDER FOR THE A.Y. 2006-07. 3. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT THE MATTER STANDS COVERED IN FAVOUR OF THE ASSESSE E BY THE TRIBUNAL ORDER FOR THE ASSESSMENT YEARS 2008-09 & 2009-10, P ASSED IN ITA NO.237(ASR)/2011 & ITA NO.288(ASR)/2012, BY THE DEL HI BENCH OF THE TRIBUNAL, VIDE ORDER DATED 07.02.2016 (COPY PLACED ON RECORD). 4. THE LD. DR HAS PLACED RELIANCE ON THE IMPUGNED O RDER. ITA NOS. 601 & 123(ASR)/2014 & 2016 AYS 2010-11 & 2011-12 3 5. IN THE TRIBUNAL ORDER DATED 07.02.2016 (SUPRA) F OR THE ASSESSMENT YEARS 2008-09 & 2009-10, THE MATTER REGARDING DISAL LOWANCE UNDER SECTION 80IB HAS BEEN DEALT WITH BY THE TRIBUNAL AN D DECIDED IN FAVOUR OF THE ASSESSEE. IT HAS BEEN HELD AS FOLLOWS: 13 WE HAVE CAREFULLY PERUSED THE DECISION, WHICH IS GENERALLY TO BE FOLLOWED BY US, UNLESS THERE ARE COMPELLING CIRC UMSTANCES, WHICH WARRANTS DEVIATION FROM IT. IT IS IMPORTANT T O DECIDE WHETHER THE ACTIVITY CARRIED OUT BY ASSESSEE OF PUBLISHING OF BOOKS IS MANUFACTURING OR NOT. 14. BRIEFLY STATED THE FACT IS THAT UNDISPUTEDLY TH E ASSESSEE CARRY ON THE FOLLOWING ACTIVITIES IN ITS PUBLICATION BUSI NESS. ASSESSEE COMPANY CARRIED ON MANUFACTURE AND PRODUCT ION OF BOOKS DURING THE PREVIOUS YEAR UNDER REFERENCE AND THERE IS NO DOUBT ABOUT THIS FACT AND THERE IS NO PURCHASE OF FINISHED GOODS OF OUTSIDE CONCERN FROM THE OUTSIDE CONCERN FOR THE PURPOSE OF TRADING BY THE ASSESSEE COMPANY. THE PRO CESS INVOLVED IN MANUFACTURE/PRODUCTION OF PUBLICATIONS AD DETAILED BELOW CONFIRM THE FACT OF MANUFACTURE/ PRODUCTION: 1. STEPS TO FIND OUT PUBLISHING REQUIRED 2. FINDING APPROPRIATE AND SUITABLE AUTHOR 3. GETTING THE MANUSCRIPTS FOR PUBLICATION 4. GETTING PROOFS AND PROOF READING FOR RECTIFICATI ON OF MISTAKES/ ERRORS 5. PREPARING AND DESIGNING OF PROPER LAY OUT OF PAG ES AND DESIGNING OF COVER/ BACK COVER OF THE PUBLICATION 6. PREPARING NEGATIVES AND POSITIVES FOR PRINTING 7. PRINTING 8. SORTING AND STITCHING OF THE PAGES OF THE PUBLIC ATION 9. BINDING OF THE PUBLICATION. 15. WITH EFFECT FROM 1.4.2009, DEFINITION OF MANUFACTUR ING HAS BEEN INSERTED IN THE INCOME TAX ACT. THOUGH THIS PR OVISION APPLIES FROM ASSESSMENT YEAR 2009-10 BUT IT HAS A PERSUASIVE VALUE AS IT DEFINES THE TERM 'MANUFACTUR ING' IN SECTION 2 (29BA) OF THE INCOME TAX ACT AS UNDER: - ''MANUFACTURE', WITH ITS GRAMMATICAL VARIATIONS, ME ANS A CHANGE IN A NON- LIVING PHYSICAL OBJECT OR ARTICLE OR THING, A. RESULTING IN TRANSFORMATION OF THE OBJECT OR AR TICLE OR THING INTO A NEW AND DISTINCT OBJECT OR ARTICLE OR THING HAVING A DIFFERENT NAME, CHARACTER AND USE; OR B. BRINGING INTO EXISTENCE OF A NEW AND DISTINCT O BJECT OR ARTICLE OR THING WITH A DIFFERENT CHEMICAL COMPOSITION OR INTE GRAL STRUCTURE; ITA NOS. 601 & 123(ASR)/2014 & 2016 AYS 2010-11 & 2011-12 4 16. ACCORDING TO THIS DEFINITION IF THERE IS A CHAN GE IN NON-LIVING PHYSICAL OBJECT OR ARTICLE OR THING RESULTING IN TR ANSFORMATION OF OBJECT OR THING OR ARTICLE INTO A NEW AND DISTINCT OBJECT HAVING A DIFFERENT NAME, CHARACTER AND USE OR BRINGING INTO EXISTENCE OF A NEW OBJECT THEN IT AMOUNTS TO MANUFACTURE. ASSESSEE CARRIES OUT PROCESS IS THAT AN IDEA IS CONVERTED INTO MANUSCRIP T AND THEN PRINTED WHICH IS DIFFERENT FROM PAPER, THEN AFTER P ROOFING, RE- PROOFING, EDITING, AND DESIGNING AND THEN PRINTING IT AND AFTER THAT IT IS BOUND TO GIVE IT A LOOK OF THE BOOK IS ALTOGE THER DIFFERENT FROM THE PRINT PAPER AND INK BEING USED. THEREFORE, IT U SED PAPER, INK ETC. AND IF THE PROCESS OF PUBLICATION BRINGS OUT A COMPLETELY NEW THING IN THE FORM OF BOOK OR PUBLICATION, IT HAS DI FFERENT NAME, DIFFERENT CHARACTER AND FOR DIFFERENT CLASS OF CUST OMERS. THEREFORE, THE PROCESS OF THE PUBLISHING OF THE BOOK SATISFIES THE DEFINITION OF MANUFACTURING AS PER THE ACT 17. 7. AS WE HAVE NOTED THAT WE ARE BOUND BY DECISI ON OF THE CO- ORDINATE BENCH RENDERED IN THE CASE OF THE ASSESSEE ITSELF , HOWEVER WE ARE CONSTRAINED TO NOT TO FOLLOW THAT DECISION F OR FOLLOWING REASONS:- A) CIRCULAR NO.347 ISSUED BY THE CBDT DATED 07.07.1 992 HAS CONSIDERED THAT WHETHER A BOOK PUBLISHING COMPANY W HETHER QUALIFIES TO BE TREATED AS COMPANY ENGAGED IN MANUF ACTURING OR PROCESSING OF GOODS WITHIN THE MEANING OF SECTION 1 04(4)(A) OF THE INCOME TAX ACT AS UNDER:- BOOK PUBLISHING COMPANY - WHETHER QUALIFIES TO BE T REATED AS COMPANY ENGAGED IN MANUFACTURE OR PROCESSING OF GOO DS WITHIN THE MEANING OF SECTION 104(4) (A) 1. THE BOARD HAS RECEIVED REPRESENTATIONS THAT COMPAN IES ENGAGED IN PUBLISHING OF BOOKS SHOULD BE TREATED AS INDUSTRIAL COMPANIES FOR THE PURPOSE OF SECTION 104. REFERENCE HAS BEEN MADE IN THIS CONNECTION TO THE DECISIONS OF THE MAD RAS AND CALCUTTA HIGH COURTS IN THE CASES OF CIT V. COMMERCIAL LAWS OF INDIA (P.) LTD. [1977] 107 ITR 822 AND ADDL. CIT V. A. MUKHERJEE & CO. (P.) LTD. [1978] 113 ITR 718, RESPECTIVELY. IN THE MADRAS HIGH COURT DECISION IT HAS BEEN HELD THAT FOLDING A ND STITCHING THE PRINTED SHEETS AND CONVERTING THEM IN TO PARTS OR BOOKS, AS THE CASE MAY BE, CONSTITUTED PROCESSIN G OF GOODS. IN THE CALCUTTA HIGH COURT DECISION IT WAS HELD THA T IT IS WHOLLY UNNECESSARY FOR A PUBLISHER OF BOOKS TO BE AN OWNER OF A PRINTING PRESS OR TO BE HIMSELF A BOOK-BINDER TO BE A MANUFACTURER OF BOOKS. A PUBLISHER MAY GET THE BOOK S PRINTED FROM ANY PRINTER, BUT THE PRINTER IS A MERE CONTRAC TOR AND THE ITA NOS. 601 & 123(ASR)/2014 & 2016 AYS 2010-11 & 2011-12 5 PUBLISHER CARRIES ON THE BUSINESS OF MANUFACTURING AND PROCESSING OF GOODS. B. THE BOARD HAS BEEN ADVISED TO ACCEPT THESE DECIS IONS. IN VIEW THEREOF, BOOK PUBLISHING COMPANIES EVEN THOUGH THEY MAY THEMSELVES NOT BE ENGAGED IN THE PRINTING OR BINDIN G OF BOOKS QUALIFY TO BE TREATED AS INDUSTRIAL COMPANIES FOR T HE PURPOSE OF SECTION 104 AS WELL AS FOR THE CONCESSIONAL TAX TRE ATMENT GIVEN TO INDUSTRIAL COMPANIES. CIRCULAR: NO. 347 [F. NO. 166 /4/81-IT(A-I)], DATED 7-7-1982 WHILE ANSWERING THIS QUESTION CBDT HELD THAT A PUBL ISHER MAY GET THE BOOKS PRINTED FROM ANY PRINTER BUT THE PRINTING IS A MERE CONTRACT AND THE PUBLISHER CARRIES ON THE BUSINESS OF MANUFACTURING AND PROCESSING OF GOODS AND IN THAT C IRCULAR AFTER CONSIDERING THE DECISION OF HON'BLE MADRAS HI GH COURT AND CALCUTTA HIGH COURT IN THE CASE OF CIT VS. COMMERCI AL LAWS OF INDIA PVT. LTD. 107 ITR 822 AND ADDITIONAL CIT VS. A MUKHERJEE AND COMPANY LTD. 113 ITR 718 THE CBDT HAS ACCEPTED THAT BOOK- PUBLISHING COMPANIES EVEN THOUGH THEY MAY HIMSELF N OT ENGAGED IN PRINTING OR BINDING OF BOOKS ARE TREATED AS INDU STRIAL COMPANY FOR THE PURPOSE OF SECTION 104 AS WELL AS FOR THE C ONCESSIONAL TAX TREATMENT GIVEN TO THE INDUSTRIAL COMPANIES. IN THI S CIRCULAR CBDT HAS INTERPRETED THAT A PUBLISHER OF A BOOKS IS MANU FACTURE OF BOOKS. HOWEVER, THE PROVISIONS OF SECTION 104 OF TH E ACT ARE NOT ON STATUTE BUT THE CIRCULAR LAYS DOWN THAT THE PUBLISH ER IS A MANUFACTURER BASED ON JUDICIAL PRECEDENTS AVAILABLE . THOSE CIRCULARS ARE BINDING ON LOWER AUTHORITIES. AS THIS CIRCULAR HAS NOT BEEN CONSIDERED OR PUT BEFORE THE BENCH DURING THE COURSE OF HEARING FOR THE ASSESSMENT YEAR 2006-07 AND THEREFO RE IN IGNORANCE OF THAT DECISION THE COORDINATE BENCH HAS DECIDED THAT THE ASSESSEE, PUBLISHER IS NOT A MANUFACTURER OF TH E PRODUCT. B) HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. DELHI PRESS PATRA PRAKASHAN LTD ITR NO.49-50/ 1996 ITA NO.151/2 002, 302/2002 AND 480/2005 WHERE THE ASSESSEE IS ENGAGED IN THE PRINTING AND PUBLISHING OF NEWSPAPER AND PERIODICAL S AS HELD THAT THE ASSESSEE IS CARRYING ON ACTIVITY OF MANUFACTURI NG AND WHETHER THE PRINTERS ARE ELIGIBLE FOR DEDUCTION U/S 80 I OF THE ACT OR NOT AS UNDER :- '50. THE NEXT ASPECT WHICH HAS BEEN ADDRESSED AT LENGTH BY THE COUNSEL FOR THE PARTIES IS WHETHER UNIT NOS. 2 & 3 WOULD FULFILL THE CONDITIONS AS SPECIFIED IN SECTION 80-I(2)(III) OF THE ACT. IT HAS BEEN CONTENDED ON BEHALF OF THE REVENUE THAT PRINTING DOES NOT ALTER THE CHARAC TER OF RAW MATERIALS AND CANNOT CONSTITUTE MANUFACTURE. IT HAS BEEN FURTHER CONTENDED THAT AS THE PRINTED MATERIAL WHICH RESULTS FROM THE ACTIVITIES CARRIED ON IN UNIT NOS. 2 ITA NOS. 601 & 123(ASR)/2014 & 2016 AYS 2010-11 & 2011-12 6 AND 3 IS ALSO NOT KNOWN TO THE MARKET AS A DISTINCT PRODUCT AS THE SAME CANNOT BE DEALT WITH WITHOUT SUBJECTING THE PRINTED MATERIAL TO A BINDING PROCESS WHICH IS NOT CARRIED ON BY UNIT NOS. 2 & 3. 51. MR SAHNI HAS RELIED STRONGLY ON THE DECISION OF THE SUPREME COURT IN THE CASE OF DELHI CLOTH & GENERAL MILLS (SUPRA) IN SUPPORT OF HIS CONTENTION. WE DO NOT THINK THAT THE DECISION IS OF MUCH ASSIST ANCE IN THE FACTS OF THE PRESENT CASE. IN THAT CASE, THE RESPONDENTS WERE EN GAGED IN MANUFACTURING 'VANASPATI' AND HAD CHALLENGED THE LE VY OF EXCISE DUTY ON THE MANUFACTURE OF VANASPATI FROM RAW OIL. THE EXCI SE AUTHORITIES HAD LEVIED EXCISE ON MANUFACTURE OF VANASPATI AS 'VEGET ABLE NON-ESSENTIAL, OILS, ALL SORTS OR IN RELATION TO THE MANUFACTURE O F WHICH ANY PROCESS IS ORDINARILY CARRIED ON WITH THE AID OF POWER'. THE C OURT EXAMINED THE PROCESSES CARRIED ON IN CONVERSION OF RAW OILS TO V ANASPATI AND HELD THAT THE SAME DO NOT AMOUNT TO MANUFACTURE. THE COURT HE LD THAT THE WORD MANUFACTURE IS UNDERSTOOD TO MEAN BRINGING INTO EXI STENCE A NEW SUBSTANCE. THE COURT DREW A DISTINCTION BETWEEN PRO CESSING AND MANUFACTURING AND HELD THAT WHEREAS MANUFACTURE IMP LIED A CHANGE, EVERY CHANGE COULD NOT BE CONSTRUED AS MANUFACTURE. THE RELEVANT EXTRACT FROM THE SAID DECISION IN THE CASE OF DELHI CLOTH & GENERAL MILLS (SUPRA) IS QUOTED BELOW:- 'ACCORDING TO THE LEARNED COUNSEL 'MANUFACTURE' IS COMPLETE AS SOON AS BY THE APPLICATION OF ONE OR MORE PROCESSES, THE RAW M ATERIAL UNDERGOES SOME CHANGE. TO SAY THIS IS TO EQUATE 'PROCESSING' TO 'M ANUFACTURE 'AND FOR THIS WE CAN FIND NO WARRANT IN LAW. THE WORD 'MANUFACTUR E' USED AS A VERB IS GENERALLY UNDERSTOOD TO MEAN AS 'BRINGING INTO EXIS TENCE A NEW SUBSTANCE AND DOES NOT MEAN MERELY 'TO PRODUCE SOM E CHANGE IN A SUBSTANCE', HOWEVER, MINOR IN CONSEQUENCE THE CHANG E MAY BE. THIS DISTINCTION IS WELL BROUGHT ABOUT IN A PASSAGE THUS QUOTED IN PERMANENT EDITION OF WORDS AND PHRASE. VOL. 26 FROM AN AMERIC AN JUDGMENT. THE PASSAGE RUNS THUS'- 'MANUFACTURE' IMPLIES A CHANGE BUT EVERY CHANGE IS NOT MANUFACTURE AND YET EVERY CHANGE OF AN ARTICLE IS THE RESULT OF TREATMENT, LABOUR AND MANIPULATION. BUT SOMETHING M ORE IS NECESSARY AND THERE MUST BE TRANSFORMATION; A NEW AND DIFFERENT A RTICLE MUST EMERGE HAVING A DISTINCTIVE NAME, CHARACTER OR USE. 52. IN THE PRESENT CASE, UNIT NOS. 2 & 3 ARE ENGAG ED IN PRINTING. THE RAW MATERIALS USED ARE PAPER, INK AND OTHER CONSUMA BLES WHICH ARE COMPLETELY DISTINCT FROM THE PRINTED PAPER THAT RES ULTS FROM THE ACTIVITY ON IN UNIT NOS. 2 & 3. 53. WE ARE UNABLE TO ACCEPT THE CONTENTION THAT TH E PRINTING DOES NOT ALTER THE CHARACTER OF THE PAPER USED AND THERE IS NO DISTINCTION BETWEEN THE RAW PAPER AND THE RESULTANT PRODUCT. THE PURPOS E AND USAGE OF A BLANK PAPER IS COMPLETELY DIFFERENT FROM THE USE AN D PURPOSE OF A PRINTED MAGAZINE OR PERIODICAL. ONCE THE BLANK PAPER UNDERG OES A PROCESS OF PRINTING, THE CHARACTER OF BLANK PAPER CHANGES COMP LETELY AND THE CONTENT OF THE PRINTED MATERIAL NOW BECOMES THE IDENTITY OF A PRINTED PAPER. NO ONE CAN SAY THAT BLANK PAPER AND PRINTED ARTICLE ARE ON E AND THE SAME AND IN ITA NOS. 601 & 123(ASR)/2014 & 2016 AYS 2010-11 & 2011-12 7 OUR OPINION IT CAN HARDLY BE SAID THAT PRINTING CAR RIED OUT IN AN INDUSTRIAL UNDERTAKING WOULD NOT AMOUNT TO MANUFACTURING. A PR INTED MAGAZINE OR PERIODICAL EVEN IF IT IS NOT BOUND HAS A DEFINITE I DENTITY AND ITS USAGE IS COMPLETELY DIFFERENT FROM A BLANK PAPER ON WHICH IT IS PRINTED.' C) IT HAS BEEN HELD BY HONOURABLE DELHI HIGH COURT IN REPLIKA PRESS PRIVATE LIMITED & ANR V DCIT[DATE OF DECISION : 5 TH AUGUST, 2013 W.P.(C) 7452/2010] WHILE CONSIDERING DEDUCTION U/S 10B OF THE INCOME TAX ACT AS UNDER:- '15. SECTION 10B APPLIES TO 100% EXPORT ORIENTED UN DERTAKING ENGAGED IN EXPORT OF ARTICLES, THINGS OR COMPUTER S OFTWARE FOR A PERIOD OF TEN CONSECUTIVE ASSESSMENT YEARS BEGINNIN G FROM THE YEAR IN WHICH THE UNDERTAKING BEGINS TO MANUFACTURE OR P RODUCE ARTICLES, THINGS OR COMPUTER SOFTWARE. THE WORDS 'ARTICLES' A ND 'THINGS' ARE WIDE AND BY NO STRETCH, IT CAN BE SAID THAT THE PET ITIONER DOES NOT PRODUCE AN ARTICLE OR A THING. AFTER RECEIPT OF MAN USCRIPTS FROM ABROAD, THE PETITIONER HAS TO DO TYPE SETTING, MAKE /PROCESS/PRINT ON PAPER AND THEN BIND PRINTED PAGES INTO BOOKS. THUS, A NEW PRODUCT, DISTINCT AND SEPARATE FROM THE BARE MANUSCRIPTS TAK ES SHAPE AND GETS A PHYSICAL SHAPE IN FORM OF BOOKS. BOOKS ARE A N ARTICLE OR A THING AND THE PROCESS INVOLVED IS CERTAINLY PRODUCT ION, IF NOT MANUFACTURE.' D. FURTHER, HONOURABLE DELHI HIGH COURT HAS HELD IN TH E CASE OF CIT V KIRAN KAPOOR [ DECIDED ON : 19.01.2015 ITA NO.13/2015 ITA NO.14/2015 ITA NO.15/2015, C.M. APPL.157/2015] THAT EVEN PROCESS OF E BOOK IS ALSO MANUFACTURING AS UNDER: 14. IN THE PRESENT CASE SECTION 10B USES THE EXPRE SSION 'MANUFACTURES OR PRODUCES... THINGS OR COMPUTER SOF TWARE'. THE FOUR STAGE PROCESS OF COMPILING MATERIAL, COLLATING THE TEXT, DESIGNING THE LAYOUT, SCANNING, DIGITAL IMAGE EDITI NG (TO REMOVE DISTORTION) AND FINAL ARRANGEMENT OF THE DATA, ULTI MATELY TRANSMITTED ACCORDING TO THE CUSTOMER'S SPECIFICATI ON - AND READY TO BE USED FOR PRINTING, FOR EVEN E- BOOK PUBLICATION) IS UNDOUBTEDLY MANUFACTURE OR PRODUCTION.' [UNDERLINED BY US] E) RESPECTFULLY, RELIANCE ON THE DECISION OF HONOU RABLE JURISDICTIONAL HIGH COURT IN CASE OF LIBERTY SHOES LIMITED V CIT BY THE COORDINATE BENCH IS MISPLACED, AS THE FACTS OF THAT CASE WERE ENTIRELY DIFFERENT. FACTS NOTED IN THAT CASE IN PAR A NO .2 OF THAT DECISION ARE AS UNDER: ' 2. THE ASSESSEE COMPUTED ITS INCOME AFTER DEDUCTING INCOME OF RS. 37,95,908 UNDER S. 80-IA OF THE IT ACT, 1961 (I N SHORT, 'THE ACT'). CLAIM OF THE ASSESSEE WAS THAT FINISHED GOOD S WERE ITA NOS. 601 & 123(ASR)/2014 & 2016 AYS 2010-11 & 2011-12 8 PURCHASED AND EXPORTED AND THE SAID GOODS WERE NOT ATTRIBUTABLE TO MANUFACTURING ACTIVITIES OF THE ASSESSEE. ACCORD INGLY, THE AO DISALLOWED THE CLAIM, WHICH WAS AFFIRMED BY THE CIT (A) AS WELL AS BY THE TRIBUNAL. HOWEVER, CLAIM TO THE EXTENT THE G OODS WERE MANUFACTURED BY THE ASSESSEE WAS ALLOWED.' [UNDERLINED BY US] IN THIS CASE, ASSESSEE IS NOT PURCHASING FINISHED G OODS FROM OUTSIDER AND CLAIMING DEDUCTION U/S 80IB THEREON. A DMITTEDLY, ON TRADED GODS DEDUCTIONS U/S 80IB IS NOT AVAILABLE. T HIS HYPOTHESIS IS ALSO NOT DISPUTED BY THE ASSESSEE. HOWEVER, HERE IN THIS CASE ASSESSEE IS NOT PURCHASING FINISHED GOODS BUT IS GE TTING PRINTING WORK DONE FROM JOB WORKER, WHICH IS A VERY LIMITED PART OF THE MANUFACTURING ACTIVITY OF PUBLISHING OF BOOKS. THER EFORE, WE HAVE NOTED THAT FACTS OF DECISION OF LIBERTY SHOES LIMIT ED V CIT (SUPRA) ARE DIFFERENT. F) IN DECIDING, THE ISSUE AGAINST THE ASSESSEE COO RDINATE BENCH WAS OF THE VIEW THAT PRINTING IS THE MAIN ACT IVITY OF THE MANUFACTURING THROUGH WHICH THE BOOKS ARE PRODUCED. WE ARE NOT IN AGREEMENT WITH THIS. THE BOOK DERIVES ITS VALUE FROM THE CONTENT, IDEAS, DESIGN, DRAWINGS, AUTHORSHIP AND PU BLICATION HOUSE. THE VALUE ADDITION IS MAINLY BECAUSE OF THES E ACTIVITIES. PRINTING IS VERY MINISCULE PROCESS OF MANUFACTURING OF THE BOOKS. BOOKS WHICH ARE NEVER PRINTED SUCH AS 'E BOOKS' WHI CH ARE ALSO HELD TO BE 'MANUFACTURING' IN THE DECISION DISCUSSE D ABOVE. IN THE CHANGING ERA, BOOKS ARE ALSO READ ELECTRONICALLY AN D IN DIGITIZED FORMS WHICH ARE NEVER PRINTED. CHANGING TIME NEEDS CHANGE IN UNDERSTANDING THE BUSINESS WITH A SYNCHRONIZED VISI ON WITH BUSINESS, SHREDDING THE ORTHODOX VIEW. G) THE VIEW THAT IS PROPOUNDED BY THE COORDINATE BENCH IS THAT THE PRODUCTION SHOULD TAKE PLACE IN THE INDUSTRIAL UNDERTAKING OF THE ASSESSEE. ON READING OF SECTION 80 IB, WE DO NOT FIND ANY OF THE CONDITIONS, WHICH SAYS THAT THE GOODS SHOULD BE WHOLLY PRODUCED IN THE INDUSTRIAL UNDERTA KING. IN FACT ASSESSEE HAS ONLY PART OF THE MANUFACTURING PR OCESS OUTSOURCED AND COST OF WHICH IS DEBITED IN THE BOOK S OF ACCOUNTS WHICH HAS GONE TO REDUCE THE PROFITABILITY OF THE INDUSTRIAL UNDERTAKING. THE FINANCIAL SCENARIO OF T HE ACCOUNTS FOR THE YEAR ENDED 31.3.2008 SHOWS THAT IT HAS GOT THE SALES OF RS 32,18,95,750/- WHEREAS THE JOB WORK CHARGES IT HAS PAID FOR PRINTING WITH MATERIAL IS O NLY RS 6.85 CRORES. LOOKING TO THE VOLUME OF SALES, WHICH IS 5 TIMES MORE THAN THE JOB WORK CHARGES FOR PRINTING, IT CAN NOT BE SAID THAT 'MANUFACTURING' ACTIVITY IS NOT CARRIED O N AT THE ITA NOS. 601 & 123(ASR)/2014 & 2016 AYS 2010-11 & 2011-12 9 INDUSTRIAL UNDERTAKING OF THE ASSESSEE. FURTHER, IT CANNOT BE SAID THAT PRINTING WORK ITSELF ENCOMPASSES ALL THE ACTIVITIES OF THE PUBLISHING OF BOOKS; WE HAVE ALREADY HELD TH AT IT IS A MINISCULE ACTIVITY OF THE MANUFACTURING PROCESS. H) THE JOB WORK CHARGES ARE JUST LIKE ANY OTHER CH ARGES OF MANUFACTURING ACTIVITY, WHICH HAS IN FACT GONE TO R EDUCE THE ELIGIBLE PROFIT. PART OF THE ACTIVITY OUTSOURCED BY THE ASSESSEE CANNOT BE CONSTRUED THAT IT HAS NOT CARRIED OUT THE WHOLE OF THE MANUFACTURING PROCESS OUTSIDE THE INDUSTRIAL UNDERT AKING. IT IS ALSO ONE OF THE BUSINESS STRATEGY OF THE ASSESSEE A S SUBMITTED IN PEAK SEASON. IT IS NOT THE CASE ALLEGED THAT WHOLE BOOK IS DESIGNED, CONCEPTUALIZED, WRITTEN, PRINTED AND PUBLISHED BY T HE JOB WORKER. I) WE ARE ALSO OF THE VIEW THAT PRINCIPLES OF RES J UIDCATA DOES NOT APPLY TO INCOME TAX MATTERS, AS EACH ASSESSMENT YEAR IS INDEPENDENT. HOWEVER WHEN ASSESSEE HAS CLAIMED THE DEDUCTION IN INITIAL YEARS WHICH ARE NOT DISTURBED, IT CANNOT BE DENIED IN SUBSEQUENT YEARS. J) COORDINATE BENCH WAS ALSO OF THE VIEW THAT AS TH ERE IS NO BIFURCATION OF THE MATERIAL WAS PRINTED OUTSIDE AND INSIDE THE INDUSTRIAL UNDERTAKING, WHOLE DEDUCTION IS NOT ALLO WABLE. WE FAILED TO APPRECIATE THE RATIO LAID DOWN BY THE BENCH AS I T DOES NOT HAVE ANY LEGAL SANCTION AS WELL AS IT IS NOT SUPPORTED B Y ANY JUDICIAL PRECEDENT. WE ARE OF THE VIEW THAT PRINTING COST IN CURRED BY ASSESSEE ON MATERIAL INSIDE THE INDUSTRIAL UNDERTAK ING HAS BEEN DEBITED AS EXPENSES IN VARIOUS FORMS SUCH AS RAW MA TERIAL CONSUMED, WORKMAN CHARGES SUCH AS LABORETC., WHEREA S THE PRINTING JOB WORK CHARGES ISA CONSOLIDATED AMOUNT O F EXPENSES COMPRISING OF THE COST OF GOODS PRODUCED BY THE JOB WORKER AND HIS PROFIT MARGIN THEREON. THEREFORE THE DISTINCTION DR AWN BY THE COORDINATE BENCH IS FUTILE. 18. FURTHER, THE LD. DR HAS RELIED ON THE DECISION OF DELHI HIGH COURT IN CASE OF ORIENT LONGMAN LIMITED V CIT 130 I TR 477 (DELHI). ON CAREFUL PERUSAL OF THE DECISION IN OUR VIEW IT S UPPORTS THE CASE OF THE ASSESSEE AS IT HELD AS UNDER: HELD THE FACT THAT PRIMING AND BOOK BINDING IS DONE BY S OMEONE ELSE DOES NOT IMPLY THAT SOMEONE ELSE IS THE MANUFA CTURER IT IS THE ASSESSEE'S BUSINESS TO MANUFACTURE BOOKS BY DES IGNING THEM, GETTING THEM BOUND AND PRINTED AND FINALLY SE LLING THE PRODUCT. BOOKS IN THE MANUFACTURED SLATE ARE GOODS AND THEIR MANUFACTURE OR PROCESSING IS. AS IN THE CASE OF OTH ER GOODS, THE CONVERSION OF PAPER AND THE MANUSCRIPT WRITTEN BY AN AUTHOR INTO A BOOK THIS CERTAINLY INVOLVES EITHER M ANUFACTURE ITA NOS. 601 & 123(ASR)/2014 & 2016 AYS 2010-11 & 2011-12 10 OR PROCESSING AND THE ASSESSEE WAS UNDOUBTEDLY ENGA GED IN THE BUSINESS OF MANUFACTURING OR PROCESSING BOOKS T HEREFORE, THE ASSESSEE WAS AN 'INDUSTRIAL' COMPANY WITHIN THE MEANING OF SECTION 2(6) (C) OF THE FINANCE ACT. 1970. [EXTRACTED FROM TAXMANN.COM] 19. FURTHER IN THE DECISION OF DELHI PRESS PATRIKA PRAKASHAN LIMITED ( SUPRA) HONOURABLE HIGH COURT HAS HELD THA T IF THE DEDUCTION IS NOT DISTURBED IN INITIAL ASSESSMENT YE AR THEN AO CANNOT DISALLOW THE DEDUCTION IN SUBSEQUENT YEAR WI THOUT DISTURBING THE INITIAL ASSESSMENT YEAR AS UNDER: ' 76. IN CASES WHERE DEDUCTION IS GRANTED UNDER SECTI ON 80 -1 OF THE ACT, THE APPLICABILITY OF THE SECTION IS DETERMINED IN THE YEAR IN WHICH THE NEW INDUSTRIAL UNDERTAKING IS ESTABLISHED . THE QUALIFICATION AS TO WHETHER ANY INDUSTRIAL UNDERTAK ING FULFILLS THE CONDITIONS AS SPECIFIED U/S 80-I OF THE ACT HAS TO BE DETERMINED IN THE YEAR IN WHICH THE NEW INDUSTRIAL UNDERTAKING IS ESTABLISHED. ALTHOUGH THE DEDUCTION UNDER SECTION 80-1 OF THE AC T IS AVAILABLE FOR THE ASSESSMENT YEARS SUCCEEDING THE INITIAL ASSESSM ENT YEAR, THE CONDITIONS FOR AVAILING THE BENEFIT ARE INEXTRICABL Y LINKED WITH THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR IN WH ICH THE NEW UNDERTAKING WAS FORMED. IN SUCH CIRCUMSTANCES, IT W OULD NOT BE POSSIBLE FOR AN ASSESSING OFFICER TO REJECT THE CLA IM OF AN ASSESSEE FOR DEDUCTION UNDER SECTION 80-1 OF THE ACT ON THE GROUND THAT THE INDUSTRIAL UNDERTAKING IN RESPECT OF WHICH DEDUCTIO N IS CLAIMED DID NOT FULFILL THE CONDITIONS AS SPECIFIED INSECTION 8 0-1(2) OF THE ACT, WITHOUT UNDERMINING THE BASIS ON WHICH THE DEDUCTIO N WAS GRANTED TO THE ASSESSEE IN THE INITIAL ASSESSMENT YEAR. THI S IN OUR VIEW WOULD NOT BE PERMISSIBLE UNLESS THE PAST ASSESSMENT S ARE ALSO DISTURBED. 77. THE ASSESSING OFFICERS OVER A PERIOD OF THREE YEARS BEING ASSESSMENT YEARS 1988-89, 1989-1990 AND 1990-1991 H AVE CONSISTENTLY ACCEPTED THE CLAIM OF THE ASSESSEE FOR DEDUCTION UNDER 80-1 OF THE ACT AND IT WOULD NOT BE OPEN FOR THE AS SESSING OFFICER TO DENY THE DEDUCTION UNDER SECTION 80-1 OF THE ACT ON THE GROUND OF NON FULFILLMENT OF THE CONDITIONS UNDER 80-1(2) OF THE ACT WITHOUT DISTURBING THE ASSESSMENT FOR THE ASSESSMENT YEARS RELEVANT TO THE PREVIOUS YEAR IN WHICH THE UNIT NOS. 2 & 3 WERE EST ABLISHED.' 20. IN THIS CASE, IT IS NOT AVAILABLE ON RECORD WHE THER THE ASSESSMENT OF THE APPELLANT HAS BEEN PASSED UNDER SECTION 143( 3) OR UNDER SUMMARY MANNER. BE THAT AS IT MAY. AO HAS ALREADY D ISTURBED THE ASSESSMENT FOR AY 2006-07, 2008-09 AND 2009-10 FOR MAKING DISALLOWANCE BUT HAS CHOSEN NOT TO TAKE ANY RECOURS E FOR AY 2002- 03 TO 2005-06 AND 2007-08. IN THIS CASE, INITIAL YE AR OF DEDUCTION IS AY 2002-03 IN WHICH ADMITTEDLY, THE DEDUCTION HAS B EEN ALLOWED TO ITA NOS. 601 & 123(ASR)/2014 & 2016 AYS 2010-11 & 2011-12 11 THE ASSESSEE U/S 143(1) AND REVENUE HAS ACCEPTED TH E RETURN OF INCOME AS IT IS. THIS ITSELF SHOWS THAT DESPITE ENO UGH WEAPONS IN THE ARMOR OF THE REVENUE PROVIDED IN THE ACT SUCH AS SE CTION 143 (2), 147 AND 263 ETC. NONE OF THEM HAVE BEEN USED. 21. IN THE CASE OF THE ASSESSEE, THE UNIT HAS START ED IN MARCH 2002 AND UP TO ASSESSMENT YEAR 2009-10, DEDUCTION H AS BEEN DENIED IN ASSESSMENT YEAR 2006-07, 2008-09 AND 2008 -09.FOR ALL OTHER YEARS, ADMITTEDLY, THE ASSESSEE HAS BEEN GRAN TED DEDUCTION OR THE REVENUE ACCEPTS RETURN OF INCOME AS IT IS. THIS FACT HAS NOT BEEN DISPUTED BY THE LD DR THEREFORE IF THE DEDUCTION IS NOT DISTURBED IN THE FIRST YEAR OR YEARS OF DEDUCTION FOR WHICH THE ASSESSEE IS ELIGIBLE RESPECTFULLY FOLLOWING THE DECISION OF THE DELHI HI GH COURT WE ARE OF THE VIEW THAT NOW REVENUE CANNOT DENY THE DEDUCTION U/S 80IB TO THE ASSESSEE FOR AY 2008-2009 AND 2009- 10. 22. THE ID. AR OF THE ASSESSEE HAS SUBMITTED ALTERN ATIVELY THAT THE ASSESSEE SHOULD BE GRANTED A PROPORTIONATE DEDUCTIO N AND HE IS READY TO FOREGO THE DEDUCTION WHERE THE PRINTING WO RK HAS BEEN DONE BY SOME OTHER PARTIES. THIS ARGUMENT OF THE AS SESSEE WAS AN ALTERNATIVE ARGUMENT. WE HAVE CAREFULLY CONSIDERED THIS ISSUE. THIS ARGUMENT NEEDS TO BE CONSIDERED IN THE EVENT WE HOL D THAT THE DEDUCTION U/S 80IB IS NOT AVAILABLE ON PORTION OF P ROFIT, WHICH IS RELATED TO THE PRINTING WORK DONE BY JOB WORKER. WE ARE OF THE VIEW THAT ON THE FACTS AND CIRCUMSTANCES OF THIS CASE, A SSESSEE HAS GOT JOB WORK DONE FROM AN OUTSIDE CONTRACTOR OF PRINTIN G WHICH IS A VERY SMALL PART OF THE MANUFACTURING PROCESS OF PUBLISHI NG OF BOOKS. FOR THIS HONBLE DELHI HIGH COURT HAS HELD IN THE CASE OF CIT VS. DELHI PRESS PATRA PRAKASHAN LTD (SUPRA), WHEREIN THE HIGH COURT REJECTED THE CONTENTION OF THE REVENUE THAT INDUSTRIAL UNDER TAKING WHICH UNDERTAKES JOB WORK WOULD NOT BE ENTITLED TO CLAIM DEDUCTION U/S 80IB OF THE ACT. IT WAS HELD CARRYING ON JOB WORK A S ONLY A METHOD OF STRUCTURING BUSINESS. ATAXPAYEREITHER MAY CHOOSE TO PURCHASE RAW MATERIAL AND UTILIZE THE SAME CARRYING THE INDUSTRI AL ACTIVITY OR MAY GET THIS DONE FROM OUTSIDER. THIS ACTIVITY IS SPECI FIED U/S 80IB FOR GRANTING DEDUCTION. MERELY BECAUSE A PART OF THE PR OCESS IS OUTSOURCED, BENEFIT CANNOT BE CURTAILED FOR DEDUCTI ON U/S 80IB OF THE ACT. ON PERUSAL OF THIS DECISION, IT IS APPARENT TH AT HON'BLE DELHI HIGH COURT HAS GONE ONE-STEP FORWARD AND EVEN GRANT ED DEDUCTION TO THE JOB WORKERS. HERE IN THE CASE OF THE ASSESSE E IT IS OWNER OF THE INDUSTRIAL UNDERTAKING AND WHO GETS SOME PART OF MA NUFACTURING PROCESS SUCH AS PRINTING FROM THIRD PARTY AND THEN PUBLISHES A BOOK. ASSESSEE DOES NOT PURCHASE THE BOOK AS A WHOLE BUT IS ONLY GETTING PRINTING PROCESS DONE FROM OUTSIDER. THEREFORE, IN SIMPLE TERMS FOR MANUFACTURING OF THE BOOKS THE ASSESSEE IS GETTING SOME PROCESS OUT OF THE WHOLE PROCESS OUTSOURCED BY ITS CONTRACTOR. THEREFORE, IN THIS ITA NOS. 601 & 123(ASR)/2014 & 2016 AYS 2010-11 & 2011-12 12 FACT RESPECTFULLY FOLLOWING THE DECISION OF THE DEL HI HIGH COURT WE CANNOT RESTRICT THE DEDUCTION AS PER ALTERNATIVE AR GUMENT OF THE ASSESSEE. OUR VIEW IS THAT THE ASSESSEE SHOULD GET THE DEDUCTION FOR WHICH HE IS ELIGIBLE ACCORDING TO THE LAW. FURTHERM ORE, REGARDING THE ALLOCATION OF ELECTRICITY CHARGES, WORKERS ETC. THE ASSESSEE HAS DEMONSTRATED BY PRODUCING THE RELATIVE DOCUMENTS AN D THE LEASE AGREEMENT, WHICH SHOWS THAT THE ELECTRICITY EXPENSE S ARE TO BE BORNE BY THE LESSOR AND NOT BY THE ASSESSEE AND THE REFORE THE REASONS GIVEN BY THE AO, ARE NOT TENABLE. 23. IN VIEW OF THE ABOVE THE CBDT CIRCULAR, DECISIO N OF VARIOUS HIGH COURTS WHERE IN IT IS HELD THAT BOOK PUBLISHIN G IS A MANUFACTURING ACTIVITY, WE ARE NOT INCLINED TO FOLL OW THE DECISION OF ITAT AMRITSAR BENCH IN THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2006-07 AND NOW WE HOLD THAT ASSESSEE, A PUBLI SHER OF BOOKS IS A MANUFACTURER AND THE BOOK PUBLISHING IS A MANU FACTURING ACTIVITY ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT AND IF THE PART OF THE MANUFACTURING PROCESS IS OUTSOURCED ASSESSEE CA NNOT LOSE THE CLAIM OF DEDUCTION AS COST OF THE SAME IS ALREADY D EBITED IN THE PROFIT OF ELIGIBLE UNDERTAKING. HENCE, WE REVERSE T HE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)AND DIR ECT TO ALLOW THE DEDUCTION OF RS.36,21,708/- U/S 80IB OF THE ACT TO THE ASSESSEE HOLDING THAT BOOK-PUBLISHING ACTIVITY IS A MANUFACT URING ACTIVITY ELIGIBLE FOR DEDUCTION UNDER THAT SECTION. ACCORDIN GLY, GROUND NO.L OF APPEAL IS ALLOWED. 24. GROUND NO.2 IS AGAINST THE ADDITION OF RS.5 LAC S ON ACCOUNT OF NON-MAINTENANCE OF STOCK DETAILS. THIS ADDITION HAS BEEN MADE BY THE AO FOR THE REASONS THAT STOCK REGISTER HAS BEEN MAINTAINED AS WELL AS THE BASIS OF VALUATION IN RESPECT OF OPENIN G AND CLOSING STOCK IS NOT AVAILABLE. THE LD. CIT(A) CONFIRMED THIS ADD ITION. BEFORE US, THE LD. AR SUBMITTED THAT THE BOOKS OF ACCOUNT OF THE A SSESSEE ARE DULY AUDITED UNDER THE COMPANIES ACT AS WELL AS UNDER TH E INCOME TAX ACT U/S 44AB AND SECTION 80IB. IT WAS SUBMITTED TH AT THERE IS NO DEFECT POINTED OUT BY THE AO IN THE BOOKS OF ACCOUN TS MAINTAINED BY THE ASSESSEE. FURTHER, THE CLOSING STOCK HAS BEEN C ONSISTENTLY VALUED ACCORDING TO THE METHOD OF ACCOUNTING AND VA LUATION METHOD ADOPTED BY THE ASSESSEE. IN NUTSHELL, HE SUBMITTED THAT THIS DISALLOWANCE MIGHT BE DELETED. 25. THE LD. AR RELIED ON THE ORDER OF THE AO AS WEL L AS LD. COMMISSIONER OF INCOME TAX (APPEALS). ITA NOS. 601 & 123(ASR)/2014 & 2016 AYS 2010-11 & 2011-12 13 6. THE TRIBUNAL ORDER FOR THE ASSESSMENT YEARS 2008 -09 AND 2009- 10, HAS NOT BEEN SHOWN TO HAVE BEEN STAYED, MUCH L ESS REVERSED. AS SUCH, GROUND NO.1 TAKEN BY THE ASSESSEE IS ACCEPTE D. 7. GROUND NO.2 CHALLENGES THE ACTION OF THE LD. CIT (A) IN CONFIRMING THE ADDITION OF RS. 5 LACS ON ACCOUNT OF NON-MAINTE NANCE OF STOCK DETAILS. THE LD. CIT(A) OBSERVED THAT NO DETAILS OF CLOSING STOCK AND OPENING STOCK WERE FURNISHED AND NO STOCK REGISTER WAS MAINTAINED. THE LD. CIT(A)S ORDER FOR THE ASSESSMENT YEARS 2008-09 & 2009-10 WAS AGAINST THE ASSESSEE, WHICH WAS FOLLOWED BY THE LD. CIT(A) FOR THE YEAR UNDER CONSIDERATION ALSO. HERE, AGAIN, THE LD. COUN SEL FOR THE ASSESSEE HAS STATED THE MATTER TO BE COVERED IN FAVOUR OF TH E ASSESSEE BY THE AFORESAID TRIBUNAL ORDER FOR THE ASSESSMENT YEARS 2 008-09 & 2009-10. 8. THE LD. DR, PER CONTRA, HAS AGAIN STRONGLY RELI ED ON THE IMPUGNED ORDER. 9. THE TRIBUNAL ORDER (SUPRA) FOR THE ASSESSMENT YE ARS 2008-09 & 2009-10 HAS DEALT WITH THIS MATTER IN PARAGRAPH-26 OF THE ORDER, AS FOLLOWS: 26. WE HAVE CAREFULLY HEARD THE RIVAL CONTENTION. THE ASSESSEE IS A PRIVATE LTD COMPANY WHICH GETS ITS BO OKS OF ACCOUNT AUDITED AND SAME WERE ALSO PRODUCED BEFORE THE AO D URING THE COURSE OF ASSESSMENT PROCEEDING. ON READING OF THE ASSESSMENT ORDER, WE COULD NOT FIND THAT ANY DEFECT HAS BEEN P OINTED OUT BY THE AO IS THE BOOKS OF ACCOUNTS OR DETAILS SUBMITTED. I T IS ALSO NOT THE CASE OF THE AO THAT ALL THE DETAILS ASKED FOR HAS N OT BEEN FURNISHED. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HA S ALSO CONFIRMED THE ADDITION HOLDING THAT IT IS SMALL AD DITION OF 0.15% TO THE GROSS PROFIT OF COMPANY. WE DO NOT SUBSCRIBE TO THAT VIEW. IN THE CASE OF THE ASSESSEE THE GROSS PROFIT RATE FOR THE LAST YEAR IS 26.1% COMPARED TO 26.57% IN THIS YEAR. THEREFORE, THE ASS ESSEE HAS SHOWN ITA NOS. 601 & 123(ASR)/2014 & 2016 AYS 2010-11 & 2011-12 14 PROGRESSIVE GROSS PROFIT. IN THE AUDIT REPORT PRODU CED BEFORE US, IT HAS BEEN CERTIFIED BY THE AUDITOR THAT ASSESSEE HAS VALUED CLOSING STOCK AS PER THE VALUATION METHOD CONSISTENTLY FOLL OWED. IT IS ALSO MENTIONED IN THE SAME REPORT THAT PHYSICAL VERIFICA TION OF THE INVENTORY HAS BEEN CARRIED OUT AND NO MATERIAL DISC REPANCY IS FOUND. AO OR LD. DR HAS NOT DISPUTED THIS FACT. FUR THER, IF THE ASSESSEE HAS NOT MAINTAINED THE DETAILS OF THE CLOS ING STOCK THEN AO SHOULD HAVE MADE A DEFINITE ASCERTAINABLE ADDITIONS / DISALLOWANCE AND NOT ADHOC ADDITION/DISALLOWANCES. THE MANNER OF MAKING ADDITIONS ON ADHOC BASIS IS A SHORT CUT ADOPTED BY AO, WHICH CANNOT BE APPROVED MERELY BECAUSE STOCK REGISTER IS NOT AVAILABLE IN ABSENCE OF ANY LATENT, PATENT AND GLARING DEFECTS I N THE BOOKS OF ACCOUNT OR IN THE DETAILS PRODUCED BY THE ASSESSEE. IN SIMILAR CIRCUMSTANCES HONOURABLE DELHI HIGH COURT HAS HELD IN CASE OF CIT V JACKSON HOUSE [195 TAXMAN 385] THAT WHERE BOOKS OF ACCOUNT OF ASSESSEE WERE DULY AUDITED, ASSESSING OFFICER HAD N OT POINTED OUT ANY SPECIFIC DEFECT OR DISCREPANCY THEREIN AND INCO ME OF ASSESSEE WAS CLEARLY DISCERNIBLE FROM ACCOUNTING METHOD FOLL OWED BY IT, ACCOUNTS OF ASSESSEE COULD NOT BE SAID TO BE DEFECT IVE OR INCOMPLETE, MERELY BECAUSE STOCK REGISTER WAS NOT MAINTAINED. I N THE CASE OF THE ASSESSEE BILLS, SUPPORTED PURCHASES, SALES, AND ACC OUNTS ARE AUDITED, NONE OF THE EXPENSES WAS FOUND TO BE INFLA TED OR UNSUPPORTED. FURTHER THE ASSESSEE IS IN THE BUSINES S OF PUBLICATION WHERE LOOKING TO THE SIZE AND NATURE OF THE BUSINES S IT MAY NOT BE POSSIBLE TO MAINTAIN MINUTE QUANTITY DETAILS OF THE PAPERS, INKS AND OTHER COLOUR MATERIAL ETC. IN VIEW OF THIS WE DELET E THIS ADDITION OF RS. 5 LAC MADE BY THE AO AND CONFIRMED BY THE CIT(A ), REVERSE THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (AP PEALS) ON THIS COUNT AND ALLOW GROUND NO.2 OF THE APPEAL. 10. THUS, THE GRIEVANCE OF THE ASSESSEE, AS ALSO TA KEN BY THE ASSESSEE BEFORE US BY WAY OF GROUND NO.2, HAS BEEN ACCEPTED FOR THE ASSESSMENT YEARS 2008-09 & 2009-10, HOLDING THAT THE AO HAD NO T POINTED OUT ANY SPECIFIC DEFECT OR DISCREPANCY IN THE BOOKS OF ACCO UNT OR DETAILS AND THE INCOME OF THE ASSESSEE IS CLEARLY DISCERNIBLE FROM THE ACCOUNTING METHOD FOLLOWED BY THE ASSESSEE. THE ACCOUNTS OF THE ASSES SEE CANNOT BE SAID TO BE DEFECTIVE. MERELY STOCK REGISTER WAS NOT MAINTAI NED. THE BILLS SUPPORTED THE PURCHASE AND SALE AND THE ACCOUNTS WE RE AUDITED AND ITA NOS. 601 & 123(ASR)/2014 & 2016 AYS 2010-11 & 2011-12 15 NONE OF THE EXPENSES ARE FOUND EITHER INFLATED OR UNSUPPORTED. IT WAS ALSO HELD THAT THE NATURE OF THE BUSINESS OF THE AS SESSEE, I.E., PUBLICATION WAS SUCH THAT IT WAS WELL NIGH IMPOSSIBLE TO MAINTA IN MINUTE QUANTITY OF STOCK DETAILS OF PAPER/INK AND OTHER COLOUR MATE RIAL, ETC. IT WAS ON THE ABOVE BASIS THAT THE TRIBUNAL DELETED THE SIMILAR ADDITION. THE FACTS IN THE PRESENT CASE HAVE NOT BEEN SHOWN TO BE DIFFEREN T FROM THOSE OF THE ABOVE CASE. ACCORDINGLY, FOLLOWING THE TRIBUNAL OR DER FOR THE ASSESSMENT YEARS 2008-09 & 2009-10, GROUND NO.2 IS ALSO ACCEPT ED. 11. COMING TO GROUND NO.3, THE DISALLOWANCE OF RS.7 3,783/- MADE UNDER SECTION 40(A)(IA) OF THE ACT, AS MADE BY THE AO, WAS CONFIRMED BY THE LD. CIT(A). THE LD. CIT(A) HAS HELD THAT THE CE RTIFICATES ISSUED HAVE BEEN ISSUED BY THE CHARTERED ACCOUNTANT AND NOT BY M/S. KOTAK MOHINDRA PRIME LIMITED, AS WAS THE LEGAL REQUIREME NT. THE ASSESSEE CONTENDS THAT THE PAYEE HAS CONFIRMED THE COMPLIAN CE OF SUBSTANTIVE LOSS AND THEREFORE, THE DISALLOWANCE MADE ON A MERE TECHNICAL GROUND WAS WRONGLY CONFIRMED BY THE LD. CIT(A). 12. THE LD. DR HAS STRONGLY RELIED ON THE IMPUGNED ORDER. 13. THE ASSESSEE HAD PAID INTEREST TO KOTAK MAHINDR A PRIME LIMITED,Y AMOUNTING TO RS.73,783/-. THE ASSESSEE DID NOT MAKE TDS ON THIS PAYMENT. INTEREST BEING COVERED UNDER SECTION 194A OF THE ACT, THE AO MADE DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE AC T. IT REMAINS UNDISPUTED THAT KOTAK MAHINDRA PRIME LIMITED FILE D CONFIRMATION IN THIS REGARD, STATING THAT THE INTEREST HAD BEEN DUL Y ACCOUNTED FOR. ITA NOS. 601 & 123(ASR)/2014 & 2016 AYS 2010-11 & 2011-12 16 14. IN CIT VS. ANSAL LAND MARK TOWNSHIP (P) LTD., 377 ITR 635, IT HAS BEEN HELD THAT THE AMENDMENT IN SECOND PROVISO TO S ECTION 40(A)(IA) OF THE ACT IS DECLARATORY & CURATIVE AND HAS RETROSPEC TIVE EFFECT FROM 01.04.2005. ACCORDINGLY, WHERE THE ASSESSEE FILED C ONFIRMATION FROM THE PAYEE TO THE EFFECT THAT THEY HAVE PAID THE TAXES O N THE AMOUNTS RECEIVED FROM THE ASSESSEE, NO DISALLOWANCE U/S 40(A)(IA) OF THE ACT, IS CALLED FOR. 15. IN VIEW OF THE ABOVE, THE DISALLOWANCE IS DELET ED. GROUND NO.3 IS ACCEPTED. 16. IN GROUND NO.4, A DISALLOWANCE OF RS.1,50,849/ - WAS MADE OUT OF FOREIGN TRAVEL EXPENSES OF DIRECTORS. THE LD. CIT(A ) RESTRICTED THE DISALLOWANCE TO 10% FROM 1,93,500/- TO RS.1,50,849 /-. IT WAS OBSERVED THAT NO DAY TO DAY DETAILS WERE FILED. 17. THE ASSESSEE HAS CONTENDED THAT THE ASSESSEE HA S DEBITED RS.19,35,000/- ON FOREIGN TRAVEL OF DIRECTORS AND R S.16.44 LACS ON FOREIGN TRAVEL OF EMPLOYEE(S); THAT THE AO DISALLOW ED 10% OF THE FOREIGN TRAVEL OF DIRECTORS AMOUNTING TO RS.1,93,500/-; THA T THIS DISALLOWANCE, AS RESTRICTED TO RS.1,50,849/- BY THE LD. CIT(A), IS W ITHOUT ANY BASIS, WITHOUT POINTING OUT ANY PERSONAL EXPENSES HAVING BEEN INCURRED; AND THAT THE ASSESSEES ACCOUNTS ARE AUDITED UNDER THE COMPANIES ACT, AS WELL AS UNDER SECTION 44AB OF THE ACT AND, THEREFOR E, THE DISALLOWANCE BE DELETED. 18. THE LD. DR, HAS AGAIN, STRONGLY RELIED ON THE I MPUGNED ORDER. ITA NOS. 601 & 123(ASR)/2014 & 2016 AYS 2010-11 & 2011-12 17 19. IT IS TRUE THAT NO SPECIFIC INSTANCE OF PERSON AL EXPENSE HAS BEEN POINTED OUT BY EITHER OF THE AUTHORITIES BELOW IN T HE PRESENT CASE. IT IS PERTINENT TO MENTION HERE THAT THE ASSESSEES ACCOU NTS ARE AUDITED, BOTH UNDER THE COMPANIES ACT, AS WELL AS UNDER SECTION 44AB OF THE INCOME TAX ACT, 1961. HOWEVER, SINCE NO DAY TO DAY DETAILS HAVE BEEN FILED, SOME DISALLOWANCE IS IN ORDER. WE FURTHER RESTRICT THIS DISALLOWANCE BY 50%, I.E., FROM RS.1,50,849 TO RS.75,425/-. 20. GROUND NO.4 IS PARTLY ALLOWED. 21. NOW, WE TAKE UP THE APPEAL OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2011-12 IN ITA NO.123(ASR)/2016. SINCE THE FAC TS AND CIRCUMSTANCES IN THE PRESENT APPEAL ARE THE SAME AS WE HAVE DECIDED HEREINABOVE, IN ITA NO.601(ASR)/2014 FOR THE ASSESS MENT YEAR 2010-11, THE SAME APPLIES EQUALLY, MUTATIS MUTANDIS, TO THI S APPEAL ALSO. 22. IN THE RESULT, BOTH APPEALS ARE PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 12/0 7/ 2016. SD/- SD/- (T.S. KAPOOR) (A.D. JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER /SKR/ DATED: 13/07/2016 COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:M/S. EVERGREEN PUBLICATION (INDIA) (P) LIMITED, JALANDHAR. 2. THE JCTI, R-IV, JALANDHAR 3. THE CIT(A), JLR 4. THE CIT, JLR 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER