The ITO, Ward-1(2), Surat V. Evershine Embroidery Pvt.Ltd., Surat

ITA 1272/AHD/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 9732 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 15-09-2010
• Assessment Year: 2007-2008
• Appeal Filed On: 23-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K JHA
• Keywords: Depreciation; Additional depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH SMC BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER DATE OF HEARING : 15/09/2010 DRAFTED ON: 16/09/2010 ITA NO.1272/AHD/2010 ASSESSMENT YEAR : 2007-08 THE INCOME TAX OFFICER WARD-1(2), SURAT VS. EVERSHINE EMBROIDERY PVT.LTD. PLOT NO.A-3 & B-113 TO 117 GIDC, PANDESARA SURAT PAN/GIR NO. : AADCS 3067 R ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI S.K. JHA, SR. D.R. RESPONDENT BY: -NONE- (WRITTEN SUBMISSIONS) O R D E R THIS IS AN APPEAL AT THE BEHEST OF THE REVENUE WHI CH HAS EMANATED FROM THE ORDER OF THE LEARNED CIT(APPEALS)-I, SURAT DATED 22/02/2010 PASSED FOR ASSESSMENT YEAR 2007-08 AND THE ONLY GR OUND WHICH IS THE SUBSTANTIVE GROUND READS AS UNDER:- 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A)-I, SURAT HAS E4RREDIN DELETING T HE ADDITION MADE BY THE AO OF RS.6,165,874/- ON ACCOUNT OF CLA IM OF ADDITIONAL DEPRECIATION. 2. ON THE DATE OF HEARING, NO ONE APPEARED FROM THE SIDE OF THE RESPONDENT-ASSESSEE, HOWEVER, WRITTEN SUBMISSION IS PLACED ON RECORD. I HAVE HEARD THE LEARNED DEPARTMENTAL REPRESENTATIVE MR.S.K. JHA. ITA NO.1272/AHD /2010 ITO VS. EVERSHINE EMBROIDERY PVT.LTD. ASST.YEAR - 2007-08 - 2 - 3. IN RESPECT OF THE ABOVE GRIEVANCE, THE FACTS AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S.143(3) O F THE I.T. ACT, 1961 DATED 18/12/2009, THAT THE ASSESSEE-COMPANY IS CARR YING ON THE JOB-WORK OF EMBROIDERY. THE DISPUTE WAS WHETHER THE MACHIN ERY USED FOR THE EMBROIDERY WORK OF THE FABRICS WAS ENTITLED FOR THE ADDITIONAL DEPRECIATION. IN THIS REGARD, THE REPLY OF THE A SSESSEE BEFORE THE ASSESSING OFFICER WAS AS UNDER:- 3.1. THE ASSESSEE COMPANY VIDE ITS SUBMISSION D TD. 16.12.2009 HAS SUBMITTED THAT THE ASSESSEE IS ENGAGED IN THE B USINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING O N JOB WORK BASIS AND IT HAS CLAIMED ADDITIONAL DEPRECIATION IN ADDITION TO 5% DEPRECIATION ALLOWABLE AS THE ASSESSEE IS ENGAGED I N THE MANUFACTURE OR PRODUCTION OR ARTICLE OR THING AS PE R SECTION 32(1)(IIA). THE BUSINESS OF THE ASSESSEE IS MANUF ACTURING OR PRODUCTION OR ARTICLE OR THING BECAUSE THE ACTIVITY IS CARRIED OUT ON BY MACHINES AND A NEW COMMODITY EMERGES HAVING HIGH VALUE WITH DISTINCT IDENTITY AND MARKETABILITY. IT WAS SUBMI TTED THAT THERE IS A SEPARATE HEAD FOR LEVY OF EXCISE DUTY IN THE FABRIC S. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE PURCHASED SWISS EMBROID ERY MACHINE LASSER WHICH HAS REPLACED CONVENTIONAL TECHNOLOGY O F THE SHUTTLE DRIVE WITH A HIGH PRECISION CRANK DRIVE AND EMBROID ERY QUALITY IS OPTIMIZED AND VISIBLY INCREASED BY THE SMOOTH AND P RECISE MAXIMUM STITCH ACCURACY WITH GREATEST EFFICIENCY ON THE ENTIRE EMBROIDERY AREA. THE MACHINERY IS USED FOR EMBROID ERING, CUTTING, PUNCHING, HALLOWING, ENGRAVING AND LAYER C UTTING ON DIFFERENT TYPES OF FABRICS AND THESE ARE BASIC STEP S FOR CREATING EMBROIDERY WITH A COMPUTERIZED MACHINE:- (A) CREATE A DIGITALIZED EMBROIDERY DESIGN FILE. (B) EDIT THE DESIGN AND/OR COMBINE WITH THE OTHER DESIG N (OPTIONAL) (C) LOAD THE FINAL DESIGN FILE INTO THE EMBROIDERY MACH INE. (D) STABILIZE THE FABRICS AND PLACE IT IN THE MACHINE. (E) START AND MONITOR THE EMBROIDERY MACHINE. ITA NO.1272/AHD /2010 ITO VS. EVERSHINE EMBROIDERY PVT.LTD. ASST.YEAR - 2007-08 - 3 - 4. THE ASSESSING OFFICER WAS NOT CONVINCED ON THE G ROUND THAT THE ASSESSEE WAS NOT ENGAGED IN MANUFACTURING OR IN PRO DUCTION OF ANY ARTICLE OR THING. IN HIS OPINION, THE INPUT MATER IAL WAS FABRIC AND THE OUTPUT WAS ALSO THE FABRIC, THEREFORE, NO SEPARATE OR DISTINCT PRODUCT HAD EMERGED OUT OF THE CLAIMED PROCESS OF EMBROIDERY AS CARRIED OUT BY THE ASSESSEE. HE HAS ALSO MENTIONED THAT THERE WAS NO TRANSFORMATION OF GOODS SO AS TO CALL THE SAME A COMMERCIALLY KNOWN D IFFERENT ARTICLE WAS PRODUCED BY THE ASSESSEE. ACCORDING TO ASSESSING OFFICER, THE EMBROIDERY WORK WAS NOTHING BUT THE VALUE ADDITION IN THE FABRIC TO MAKE IT MORE ATTRACTIVE. FINALLY, THE CLAIM WAS DISALL OWED. 5. WHEN THE MATTER REACHED BEFORE THE FIRST APPELLA TE AUTHORITY, IT WAS REITERATED THAT THE ACTIVITY OF THE FIRM HAD FALLEN WITHIN THE DEFINITION AS PRESCRIBED IN THE STATUTE BECAUSE THE MACHINE HAS P ERFORMED THE JOB OF CUTTING, PUNCHING, HALLOWING AND ENGRAVING, ETC. B EFORE THE FIRST APPELLATE AUTHORITY, A DECISION OF THE HON'BLE SUPR EME COURT IN THE CASE OF S.S.M. BROTHERS PVT.LTD. & OTHERS VS. CIT REP ORTED AS (2000)243 ITR 418 (SC) WAS CITED AND FOLLOWING THE SAME, THE LEARNED CIT(APPEALS) HAS ALLOWED THE CLAIM. 6. ON HEARING, THE LEARNED DEPARTMENTAL REPRESENTAT IVE MR. S.K.JHA, I AM OF THE VIEW THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE HON'BLE SUPREME COURT AS PRONOUNCED IN THE CASE OF S.S.M. BROTHERS PVT.LTD. & OTHERS (SUPRA), WHEREIN IT WAS HELD AS UNDER:- SECTION 33(1)(B)(B)(I), IN SO FAR AS IT IS RELEVAN T, READS THUS : ITA NO.1272/AHD /2010 ITO VS. EVERSHINE EMBROIDERY PVT.LTD. ASST.YEAR - 2007-08 - 4 - 'WHERE THE MACHINERY OR PLANT IS INSTALLED FOR THE PURPOSES OF BUSINESS OF CONSTRUCTION, MANUFACTURE OR PRODUCTION OF ANY ONE OR MORE OF THE ARTICLES OR THINGS SPECIFIED IN THE LIS T TO THE FIFTH SCHEDULE.' ITEM NO. 32 OF THE FIFTH SCHEDULE TO THE ACT READS THUS : 'TEXTILES (INCLUDING THOSE DYED, PRINTED OR OTHERWI SE PROCESSED) MADE WHOLLY OR MAINLY OF COTTON, INCLUDING COTTON Y ARN, HOSIERY AND ROPE.' WHEN BOTH PROVISIONS ARE READ TOGETHER THIS IS THE RESULT : WHERE THE MACHINERY OR PLANT IS INSTALLED FOR THE PURPOSE S OF THE BUSINESS OF PRODUCTION OF TEXTILES, INCLUDING THOSE DYED, PR INTED OR OTHERWISE PROCESSED, MADE WHOLLY OR MAINLY OUT OF COTTON, THE ASSESSEE IS ENTITLED TO THE DEDUCTION OF THE DEVELOPMENT REBATE THEREUNDER. WHAT IS IMPORTANT IS THAT THIS DEVELOPMENT REBATE I S AVAILABLE IF THE MACHINERY OR PLANT IS INSTALLED FOR THE PURPOSES OF THE BUSINESS OF THE PRODUCTION OF TEXTILES, INCLUDING THOSE 'OTHERW ISE PROCESSED'. IF THE MACHINERY OR PLANT IS REQUIRED TO BE UTILISED I N THE PRODUCTION OF SUCH TEXTILES, AT WHATEVER STAGE, THE ASSESSEE IS E NTITLED TO THE BENEFIT OF THIS DEVELOPMENT REBATE. IT IS NOT DISPU TED, FAIRLY, THAT IF THE ASSESSEE HAD BEEN PRODUCING THE EMBROIDERED CLO TH STARTING FROM SCRATCH, THAT IS, BY STARTING WITH COTTON, THI S MACHINERY WOULD HAVE BEEN ENTITLED TO BE CONSIDERED FOR THE PURPOSE S OF SUCH DEVELOPMENT REBATE. WE ARE OF THE VIEW THAT IT MAKES NO DIFFERENCE THAT IN THE PARTICULAR CASE, THE ASSESSEE BUYS THE CLOTH AND THEN PROCESSE S IT, USING THE MACHINERY, BY EMBROIDERING IT AND, IN SOME CASES, B Y DYEING IT. THE ASSESSEE UTILISES THE MACHINERY IN THE PRODUCTI ON OF PROCESSED TEXTILES. THEREFORE, THE MACHINERY IN ENTITLED TO T HE DEVELOPMENT REBATE UNDER SECTION 33(1)(B)(B)(I). THE QUESTION H AS THEREFORE, TO BE ANSWERED IN THE AFFIRMATIVE AND IN FAVOUR OF THE ASSESSEE. THE APPEALS ARE ALLOWED ACCORDINGLY. THERE SHALL BE NO ORDER AS TO COSTS. 6.1. THOUGH, THE LEARNED DEPARTMENTAL REPRESENTATIV E MR.S.K.JHA HAS STATED THAT THE ISSUE BEFORE THE HON'BLE APEX COURT WAS IN RESPECT OF DEVELOPMENT REBATE AND THE SAID SECTION HAS WIDER SCOPE THAN THE DEFINITION PRESCRIBED FOR CLAIM OF ADDITIONAL DEPR ECIATION, BUT WE ARE NOT CONVINCED WITH THE SAID ARGUMENT BECAUSE THE HON'BL E COURT HAS IN AN UNEQUIVOCAL TERM HAVE HELD THAT THE PROCESS OF EMBR OIDERY IS NOTHING BUT ITA NO.1272/AHD /2010 ITO VS. EVERSHINE EMBROIDERY PVT.LTD. ASST.YEAR - 2007-08 - 5 - A MANUFACTURING PROCESS WITHIN THE PRESCRIBED DEFIN ITION OF THE STATUTE. MOREOVER, IT IS ALSO AN ADMITTED FACTUAL POSITION T HAT THE ASSESSEE HAD INSTALLED SWISS EMBROIDERY MACHINERY LASSER. FURT HER, IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE IS REGISTERED AS SSI U NIT BY THE DISTRICT INDUSTRIES CENTRE, SURAT UNDER THE STATUS OF A MANU FACTURING UNIT. IT IS ALSO NOT IN DISPUTE THAT THE UNIT IN QUESTION IS LIABLE TO PAY EXCISE DUTY AS MANUFACTURER UNDER EXCISE ACT. CONSIDERING ALL TH ESE ASPECTS AND THE TOTALITY OF THE CIRCUMSTANCES OF THE CASE, I AM OF THE VIEW THAT THE LEARNED CIT(APPEALS) HAS RIGHTLY FOLLOWED THE DECIS ION OF THE HON'BLE APEX COURT AND ALLOWED THE CLAIM TO THE ASSESSEE. THUS, THIS GROUND OF THE REVENUE STANDS DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMIS SED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 17/09/2010. SD/- ( MUKUL KR. SHRAWAT ) JUDICIAL MEMBER AHMEDABAD; DATED T.C. NAIR, SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE DEPARTMENT. 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-I, SURAT 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD ITA NO.1272/AHD /2010 ITO VS. EVERSHINE EMBROIDERY PVT.LTD. ASST.YEAR - 2007-08 - 6 - 1. DATE OF DICTATION..15/09/2010 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 15/09/2010 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S. 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 17/09/2010 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER