DCIT, CC - XX, Kolkata, Kolkata V. Rajesh Kr. Drolia, HUF, Kolkata

ITA 1305/KOL/2008

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54484 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 03-07-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D R SINDHAL
• Keywords: Business income; Charitable institution; Assessment record; Benefit of exemption
• Section: 143(3); 142(1); 10AA; 80IB; 10B

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA () BEFORE . . , , , , ! , . . '# $ , ,, , %& '( /AND ) '() , %& ) [BEFORE HONBLE SHRI G. D. AGRAWAL, V.P., HONBLE S HRI B. R. MITTAL, JM & HONBLE SHRI MAHAVIR SINGH, JM] (* (* (* (* / I.T.A NO. 1305KOL/2008 '+, -. '+, -. '+, -. '+, -./ // / ASSESSMENT YEAR: 2005-06 DEPUTY COMMISSIONER OF INCOME-TAX, VS RAJESH KR. DROLIA C.C. XX, KOLKATA (PAN AACHR 8294 R) (01 /APPELLANT ) (2301/ RESPONDENT ) 01 4 5 6 /FOR THE APPELLANT: SHRI D. R. SINDHAL 2301 4 5 6 /FOR THE RESPONDENT: SHRI DILIP LOYALKA/SMT. SHREY A LOYALKA %67 / ORDER PER MAHAVIR SINGH, JM ( ) '() ) '() ) '() ) '(), , , , %& %& %& %& ) THE HONBLE PRESIDENT, INCOME-TAX APPELLATE TRIBUNA L, VIDE ORDER DATED 08.06.2010, CONSTITUTED THIS SPECIAL BENCH UNDER SECTION 253(3) OF THE INCOME TAX ACT,1961(HEREINAFTER CALLED AS THE ACT) TO CONSIDER AND ADJUDICATE FOL LOWING QUESTIONS: 1. WHETHER LD. CIT(A) ERRED IN LAW AS WELL AS IN F ACT IN ALLOWING DEDUCTION U/S. 80-IB TO THE ASSESSEE ON THE INCOME EARNED FROM JOB WORK W HICH COMPRISES OF REPAIRS AND MAINTENANCE? 2. WHETHER LD. CIT(A) ERRED IN LAW AS WELL AS IN FA CT IN TREATING THE INCOME FROM REPAIRING AND MAINTENANCE AT PAR WITH THE INCOME FR OM MANUFACTURING FOR THE PURPOSE OF SEC.80-IB? 2. THE BRIEF FACTS GIVING RISE TO ABOVE QUESTIONS A RE THAT ASSESSEE FILED ITS RETURN OF INCOME ON 28.10.2005 DECLARING TOTAL INCOME AT RS.1,11,320 /-. ASSESSEE IS A MANUFACTURER OF MOULDS FOR BALL PEN AND MOULD PARTS IN UNION TERRITORY OF DADR A AND NAGAR HAVELI. ASSESSING OFFICER ISSUED NOTICES UNDER SECTIONS 143(2) AND 142(1) OF THE I. T. ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) REQUIRING ASSESSEE TO SUBMIT BOOKS OF AC COUNT AND OTHER RELATED DETAILS. IN RESPONSE TO NOTICES, ASSESSEE STATED THAT IT IS A MANUFACTUR ING UNIT AND HAS CLAIMED DEDUCTION U/S. 80-IB OF THE ACT. IT FAILED TO PRODUCE DETAILS BY STATING TH AT FIRE BROKE OUT IN THE OFFICE PREMISES OF TODAYS WRITING PRODUCTS LTD AND ALL RECORDS OF ASS ESSEE PLACED THERE WERE DESTROYED. IT WAS STATED THAT ASSESSEE HUF THROUGH KARTA SHRI RAJESH KUMAR DROLIA WAS ONE OF THE PROMOTER/DIRECTOR OF TODAYS WRITING PRODUCTS LTD. NO BOOKS OF ACCOUNT WERE PRODUCED EXCEPT FEW PRELIMINARY DETAILS AND BREAK UP OF VARIOUS EXP ENSES TO SUBSTANTIATE ITS CLAIM OF DEDUCTION 2 ITA 1305/K/2008 RAJESH KR. DROLIA A.Y.05-06 U/S. 80-IB OF THE ACT. ACCORDINGLY, ASSESSING OFFI CER PROCEEDED TO COMPLETE ASSESSMENT U/S. 144 OF THE ACT DISCUSSING FACTS THAT ASSESSEE HUF I S ENGAGED IN MANUFACTURING OF MOULDS MAINLY SUPPLIED TO MAIN GROUP CONCERN NAMELY TODAY S WRITING PRODUCTS LTD. AND M/S. PREMIUM WRITING PRODUCTS. ACCORDING TO ASSESSING O FFICER, THESE TWO CONCERNS ARE ENGAGED IN MANUFACTURING OF BALL PENS BY USING MOULDS SUPPLIED BY ASSESSEE. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE PROVIDED SERVICES TO TODAYS WRIT ING PRODUCTS LTD. AND M/S. PREMIUM WRITING PRODUCTS BY WAY OF REPAIR AND MAINTENANCE OF MOULDS SOLD TO THEM. THE ASSESSEE CHARGED JOB WORK CHARGES FOR SUCH REPAIRS AND SERVICES AT RS.96 ,01,410/- AND CLAIMED DEDUCTION U/S. 80-IB OF THE ACT. THE ASSESSING OFFICER AFTER GOING THRO UGH ASSESSMENT RECORDS FOR ASSESSMENT YEAR 2003-04 NOTED THAT SIMILAR CLAIM OF DEDUCTION U/S. 80-IB OF THE ACT WAS DISALLOWED BECAUSE IT PROVIDED ONLY SERVICES FOR REPAIRING AND MAINTENANC E OF MOULDS WHICH DOES NOT CONSTITUTE MANUFACTURING ACTIVITY AS IT DOES NOT MANUFACTURE A NY ARTICLE OR THING AND BY THIS PROCESS NO NEW ARTICLE OR THING COMES INTO EXISTENCE. THE ASS ESSING OFFICER NOTED THAT SAME MOULDS EXISTED ALL ALONG, PRIOR OR AFTER REPAIRS AND MAINT ENANCE AND DISCUSSING THE CASE LAW OF HONBLE APEX COURT IN THE CASE OF CIT VS. GEM INDIA MANUFAC TURING CO. (2001) 249 ITR 307 (SC) DISALLOWED CLAIM OF DEDUCTION U/S. 80-IB OF THE ACT . THE ASSESSING OFFICER DISALLOWED THE DEDUCTION CLAIMED BY THE ASSESSEE ON PROFITS FROM J OB WORK CHARGES AT RS.16,05,356/- U/S. 80-IB OF THE ACT. AGGRIEVED, ASSESSEE PREFERRED APPEAL B EFORE CIT(A), WHO ALLOWED CLAIM OF ASSESSEE RELYING ON TRIBUNALS ORDER FOR ASSESSMENT YEARS 20 03-04 AND 2004-05 BY GIVING FOLLOWING FINDING: 3. IT IS SEEN FROM THE PERUSAL OF THE ASSESSMENT O RDER THAT THE DISPUTE ABOUT THE NATURE OF MANUFACTURING PROCESS IN CONNECTION WITH THE CLA IM OF THE APPELLANT FOR DEDUCTION U/S. 80-IB IS IDENTICAL IN THIS MATTER WITH THE DIS PUTES IN ASSESSMENT YEAR 03-04 AND 04- 05. IT IS FURTHER SEEN THAT THEY HAVE BEEN ADJUDIC ATED UPON BY THE HONBLE ITAT IN THOSE ASSESSMENT YEARS IN FAVOUR OF THE APPELLANT. RESPECTFULLY FOLLOWING THE ORDER OF THE ITAT IN THE CASE OF APPELLANT IN THE ASSESSMENT YEARS, THE PRESENT APPEAL IS ALLOWED. AGGRIEVED, REVENUE CAME IN APPEAL BEFORE TRIBUNAL A ND THIS APPEAL WAS REFERRED TO SPECIAL BENCH BY THE ORDER OF HONBLE PRESIDENT. 3. LD. CIT-DR SH. D. R. SINDHAL ARGUED ON BEHALF OF REVENUE. HE STATED FACTS THAT AMOUNTS OF SALES, JOB WORK INCOME, TOTAL DEDUCTION CLAIMED BY ASSESSEE U/S 80-IB OF THE ACT AND DEDUCTION U/S 80-IB OF THE ACT ON JOB WORK RECEIPTS FOR ASSESSMENT YEARS 2003-04, 04-05 AND 05-06 ARE AS UNDER:- A.Y SALES JOB WORK INCOME REPAIR AND MAINTENANCE CHARGES TOTAL 80-IB CLAIM AMOUNT OF 80-IB CLAIM ON JOB WORK INCOME 3 ITA 1305/K/2008 RAJESH KR. DROLIA A.Y.05-06 03-04 RS.52,49,200/- RS.1,34,12,290/- RS.73,08,307/ - RS.44,82,673/- 04-05 RS.80,86,500/- RS.1,11,63,660/- RS.72,94,272/ - RS.43,94,985/- 05-06 RS.98,10,000/- RS.96,01,410/- RS.53,58,756/- RS.34,31,642/- HE ARGUED THAT REPAIR AND MAINTENANCE IS NOT AN ANC ILLARY ACTIVITY OF THE ASSESSEE AND PERUSAL OF ASSESSMENT ORDER FOR ASSTT. YR.2003-04 REVEALS THAT ASSESSMENT WAS FRAMED U/S.144 OF THE ACT, AS ASSESSEE DID NOT PRODUCE BOOKS OF ACCOUNTS BEFOR E AO AND ALSO DID NOT SUBMIT THE DETAILS AS CALLED FOR BY AO U/S.142(1) OF THE ACT. HE REFERRED TO RELEVANT OBSERVATIONS OF THE A.O. FOR ASSTT. YR. 2003-04, WHICH ARE AS BELOW:- IN RESPONSE TO NOTICE SHRI RAJESH SINGH, FCA AND A /R OF THE ASSESSEE APPEARED AND PRODUCED CERTAIN DETAILS. ASSESSEE IS A MANUFACTURI NG UNIT CLAIMED DEDUCTION U/S.8OIB. THEREFORE, A DETAIL REQUISITION WAS MADE FOR DIFFER ENT PARTICULAR RELATED TO MANUFACTURING ACTIVITIES BUT LD. A/R FAILED TO PROD UCE SUCH DETAILS. ABOVE ALL NO BOOKS OF A/CS WAS PRODUCED BEFORE ME FOR EXAMINATION. ONL Y A FEW PRELIMINARY DETAILS WERE PRODUCED ON 07-12-2005 AND THEREAFTER, NO COMPLIANC ES WAS MADE WHEN 142(1) NOTICE WAS SERVED AS EARLY AS IN OCTOBER, 2005. THEREFORE, I PROCEED TO COMPLETE THE ASSESSMENT U/S. 144 TO THE BEST OF MY JUDGMENT ON T HE BASIS OF MATERIALS AVAILABLE IN RECORD. LD. CIT-DR ARGUED THAT ONCE ASSESSEE DID NOT FILE D ETAILS AND DID NOT PRODUCE BOOKS OF ACCOUNT, IT IS NOT POSSIBLE TO KNOW EXACT NATURE OF JOB WORK CHARGES ON WHICH ASSESSEE CLAIMED DEDUCTION U/S.801B OF THE ACT. HE ARGUED T HAT CIT(A) AND TRIBUNAL IN THESE ASSESSMENT YEARS FELT THAT JOB WORK CHARGES IN TH IS CASE MEANS MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THINGS ON BEHALF OF OTHERS. HE REFE RRED TO PARAGRAPH 6 OF CIT(A)S ORDER FOR ASSESSMENT YEAR 2003-04 AND ARGUED THAT THIS MISINT ERPRETATION OF JOB WORK IS CLEAR AS UNDER: THE SUBMISSIONS ARE CAREFULLY CONSIDERED. IT IS NO T DISPUTED THAT THE APPELLANT USED TO GET DEDUCTION U/S.80-IA OR 80 IB IN THE EARLIER ASSESSM ENT YEARS WITH IDENTICAL FACTS. WHILE IT IS TRUE THAT THE FINDINGS IN THE EARLIER ASSESSMENT YE AR, ARE NOT BINDING UPON THE TAX AUTHORITIES CONSIDERING THE MATTER, ORDINARILY THE EARLIER FIND INGS ARE NOT UNSETTLED IF THEY ARE NOT ARBITRARY OR PERVERSE AND IF THEY ARE ARRIVED AT AF TER MAKING DUE ENQUIRIES. THE CLAIM OF THE APPELLANT IS THAT THE DECISION IN THE ASSESSMENT OR DER U/S. 143(3) OF ALLOWING DEDUCTIONS U/S.8OLA/IB WAS ARRIVED AT AFTER MAKING DUE ENQUIRI ES . THE RELEVANT EXPRESSION IN SECTION 80-LA/80-IB IS W HETHER THE PROFITS AND GAINS ARE DERIVED FROM AN UNDERTAKING ENGAGED IN ACTIVITIES LISTED IN THE RELEVANT SECTIONS MANUFACTURING OR PRODUCING ANY ARTICLE OR THING. THERE IS NO DISPUTE IN THE CASE THAT THE APPELLANT DERIVES PROFIT FROM MANUFACTURING PLASTIC MOULDS. IT ALSO CANNOT B E DISPUTED THAT PLASTIC MOULD IS AN ARTICLE OR THING. THE WRITTEN SUBMISSION ON BEHALF OF THE A PPELLANT RELIES UPON SEVERAL AUTHORITIES WHICH HOLD THAT AN ARTICLE OR THING MANUFACTURED ON BEHALF OF OTHERS ON JOB WORK BASIS, IS ALSO MANUFACTURING AN ARTICLE OR THING. ALTHOUGH, THE AU THORITIES RENDERED THEIR JUDGMENTS IN THE CONTEXT OF OTHER SECTIONS, THE EXPRESSION INTERPRET ED BY THEM IS WHETHER AN ARTICLE OR THING IS MANUFACTURED. KERALA HIGH COURT IN THE CASE OF FORB ES EWART AND FIGGIS PVT. LTD (SUPRA) SPECIFICALLY CONSIDERED WHETHER MANUFACTURING ACTIV ITY AS JOB WORK ON THE RAW MATERIAL SUPPLIED BY THE OTHER PARTY WOULD AMOUNT TO MANUFAC TURING AN ARTICLE IN TERMS OF SECTION 32A OF THE ACT, IT WAS HELD THAT INTERMEDIATE ITEMS PRO DUCED BY ANY MANUFACTURING ACTIVITY WHICH ARE USED AS COMPONENTS BY ANOTHER MANUFACTURER IN P RODUCING THE FINAL PRODUCT FOR THE MARKET IS ALSO AN ARTICLE OR THING, THE PORTION OF WHICH WOULD ENTITLE THE PRODUCER FOR RELEVANT DEDUCTIONS UNDER THE LAW. WHETHER THE RAW MATERIAL IS PURCHASED BY THE APPELLANT OR SUPPLIED 4 ITA 1305/K/2008 RAJESH KR. DROLIA A.Y.05-06 BY THE BUYER OF THE PRODUCT IS NOT RELEVANT FOR DEC IDING WHETHER THE APPELLANT MANUFACTURED AN ARTICLE OR THING OUT OF SUCH MATERIALS PURCHASED BY ITSELF OR RECEIVED FROM OTHERS, IF IT IS JOB WORK, THE PROFITS OF THE MANUFACTURER WOULD TO THIS EXTENT BE LESS THAN THE PROFITS IN THE CASE OF MANUFACTURING ON ITS OWN. THEREFORE, SUCH A DJUSTMENTS AS ARE REQUIRED IN THE CASE OF JOB WORK MANUFACTURING, IS ALREADY DONE BY THE MARK ET CONDITIONS. THE ONLY QUESTION IS WHETHER THE PLASTIC MOULD AMOUNTS TO MANUFACTURING OF ARTICLE OR THING. THAT THE RAW MATERIAL IS RECEIVED FROM THE PURCHASER IS AN IRRELEVANT CON SIDERATION. SO ALSO THE FACT THAT THE PRODUCT IS PURCHASED BY THE SUPPLIER OF RAW MATERIAL. HENCE IT IS HELD THAT THE APPELLANT PRODUCES AN ARTICLE OR THING WITH ENTITLEMENT TO DEDUCTIONS CLA IMED. HE FURTHER ARGUED THAT EVEN HONBLE TRIBUNAL GOT CO NFUSED AND INTERPRETATION OF JOB WORK CHARGES CONTINUED. HE REFERRED TO RELEVANT PORTION OF THE ORDER OF TRIBUNAL FOR A.Y.03-04 WHICH IS AS BELOW:- THE A.O HELD THAT THE DEDUCTION COULD BE AVAILABLE TO AN INDUSTRIAL UNDERTAKING WHICH MANUFACTURES OR PRODUCES THE ARTICLE OR THING S TO THE EXTENT THE ASSESSEE MANUFACTURES ON BEHALF OF OTHERS, THE REAL NATURE O F ITS ACTIVITY IS TO PROVIDE SERVICES. THE ASSESSING OFFICER WAS REFERRING TO THE WRITTEN RESPONSE FROM THE APPELLANT THAT WHILE ASSESSEE MANUFACTURED MOULDS FOR PLASTIC BALL PENS, THE SISTER CONCERNS MANUFACTURED BALL PENS AND COMPONENTS. THE ASSESSEE SUPPLIED THESE MOULDS TO THE SISTER CONCERNS AND ALSO UNDERTOOK REPAIRS AND MAIN TENANCE OF MOULDS. ACCORDING TO THE A.O., REPAIRS AND MAINTENANCE CERTAINLY DO NOT CONSTITUTE MANUFACTURING. THE A.O. OMITS TO CONSIDER THE MAIN ACTIVITY OF THE ASSESSEE , NAMELY TO MANUFACTURE MOULDS AND SUPPLY THEM TO SISTER CONCERNS. REPAIRS AND MAINTEN ANCE OF MOULDS IS AN ANCILLARY AND AN ALLOWED ACTIVITY. EVEN IF THE ASSESSING OFF ICER DISALLOWED THE DEDUCTION U/S.80- LB ERRONEOUSLY EMPHASIZING THE MARGINAL PART OF THE WORK OF THE ASSESSEE, NAMELY, PROVIDING REPAIRS AND MAINTENANCE SUPPORT, THE QUES TION STILL REMAINS WHETHER THE ASSESSEE CARRYING OUT MANUFACTURING ON BEHALF OF OT HERS, CAN BE SAID TO BE MANUFACTURING AN ARTICLE OR THING TO QUALIFY FOR DE DUCTION U/S.80-IB. HE ARGUED THAT IN THIS ORDER TRIBUNAL HEAVILY RELIE D UPON ERRONEOUS INTERPRETATION OF JOB WORK CHARGES BY CIT(A) AND ALSO REFERRED TO T HE DECISION OF AMRITSAR BENCH OF ITAT AND CONFIRMED THE ORDER OF CIT(A). SIMILARLY, HE NARRAT ED FACTS THAT ASSESSMENT ORDER FOR ASSTT. YR. 2004-05 HAS ALSO BEEN PASSED BY AO U/S.144 OF THE A CT, AS AGAIN ASSESSEE DID NOT FILE REQUIRED DETAILS AND DID NOT PRODUCE BOOKS OF ACCOUNT. HE ST ATED THAT IN THIS YEAR ALSO NATURE OF JOB WORK CHARGES REMAINED VAGUE, UNCLEAR AND LIABLE TO BE MISINTERPRETED BY CIT(A) AS WELL AS TRIBUNAL RELYING UPON THEIR EARLIER ORDERS FOR DECI DING APPEAL FOR ASSTT. YR. 2004-05. 4. HE NARRATED FACTS FROM ASSTT. YR. 2005-06, THA T ASSESSEE TOOK PLEA THAT THERE WAS FIRE IN ITS PREMISES AND AGAIN MANY OF DETAILS COULD NOT BE FUR NISHED BY THE ASSESSEE. HOWEVER, MOST IMPORTANTLY, DURING ASSESSMENT PROCEEDINGS OF A.Y.2 005-06, ASSESSEE FILED COST BREAK-UP AND THE KIND OF WORK DONE IN JOB WORK MANUFACTURING WHI CH IS AS UNDER:- COST BREAK-UP: JAI DURGCS ENGINEERING COMPANY IS MANUFACTURING PLA STIC MOULDS & THEIR COMPONENTS FOR WRITING INSTRUMENTS INDUSTRIES. MOUL D IS HEART OF BALLPEN DESIGN & IT IS A CREATIVE JOB. A MOULD IS NOT SIMILAR TO ANOTHER M OULD HENCE COST OF EACH MOULD VARY WITH OTHER MOULD. THE COST OF MOULD DEPENDS OF SIMP LICITY/ COMPLEXITY OF ITS DESIGN, SIZE & NUMBER OF CAVITY IN EACH MOULD. THE COST OF I SET OF BALLPEN MOULD VARIES FROM 5 ITA 1305/K/2008 RAJESH KR. DROLIA A.Y.05-06 RS.8.00 LACS TO RS.20.00 LACS DEPENDING UPON ABOVE CRITERIAS. IN MANUFACTURING OF A MOULD THE BASIC RAW MATERIAL ARE VARIOUS KINDS OF I RON & STEEL, TOOLS, JIGS & ALMOST 80% COST IS THAT OF LABOUR PAYMENT. THIS IS BASICAL LY A TECHNO-LABOUR ORIENTED JOB. JOB WORK MANUFACTURING WE ARE DOING JOB WORK FOR THOSE PARTIES TO WHOM WE SOLD THE MOULDS. JOB WORK IS BASICALLY MANUFACTURING OF MOULD PARTS WHICH ARE NE EDED REGULARLY BY THOSE PARTIES TO KEEP THE MOULD IN RUNNING CONDITION & GET THEIR PRO DUCTION. WE ARE DOING THE SAME FROM LAST 4-5 YEARS AND WE ARE ELIGIBLE TO CLAIM DE DUCTION U/S.801B AND WE GOT THE SAME IN THE PREVIOUS ASSESSMENT YEARS FROM THE DEPA RTMENT. LD. CIT-DR, IN VIEW OF ABOVE FACTS, ARGUED THAT SAI D JOB WORK IS NOTHING BUT REPAIRING AND MAINTENANCE OF THE MOULD WHICH HAVE BEEN SOLD BY AS SESSEE EARLIER. THEREFORE, DECISIONS OF TRIBUNAL FOR A.Y.2003-04 AND A.Y.2004-05 WILL NOT C OVER THE APPEAL PENDING FOR A.Y.2005- 06. HE STATED THAT TRIBUNAL IN ITS ORDER FOR ASSTT . YR. 2004-05 HAS RELIED UPON DECISION OF ITAT, AMRITSAR BENCH IN THE CASE OF SHAROFF ELECTRI CALS PVT. LTD. V ACIT (2004) 89 TTJ 761(ASR), WHEREIN IT WAS HELD THAT REPAIRING OF OLD TRANSFORM ERS UN-DISPUTABLY BEING USE OF SAME MACHINERY AND THEREFORE, BENEFIT U/S.8OHH/80I OF THE ACT COULD NOT BE DENIED. THEREFORE, HE STATED THAT THE DECISION OF ITAT AMRITSAR BENCH RELIED UPON BY ASSESSEE IS DISTINGUISHABLE ON FACTS IN THE PRESENT CASE AS ASSESSEE IS ONLY MA KING REPAIRS AND MAINTENANCE OF MOULDS PRODUCED EARLIER BY ASSESSEE. LD. CIT-DR FURTHER DI STINGUISHED CASE LAW OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. BUCKAU WOLF NEW INDIA ENGINEERING WORKS LTD. (1984) 150 ITR 180 (BOM) BY STATING THAT WORDS USED IN SEC TION 80-I OF THE ACT WERE ATTRIBUTABLE TO WHEREIN HONBLE BOMBAY HIGH COURT MENTIONED WORDS A TTRIBUTABLE TO HAVE BEEN DELIBERATELY USED BY LEGISLATURE AND THEY HAVE WIDER IMPORT THAN THE EXPRESSION DERIVED FROM AND HE STATED THAT WORDS USED IN SECTION 8OIB OF THE ACT ARE DER IVED FROM WHICH HAS NARROW MEANING. HE ALSO REFERRED TO CASE LAW OF HONBLE KERALA HIGH CO URT IN THE CASE OF CIT VS. A. M. MOOSA (1999) 237 ITR 867 (KER), WHEREIN IT IS HELD THAT P ROFIT MUST BE DERIVED FROM BUSINESS ACTIVITIES RELATED TO INDUSTRIAL UNDERTAKING AND TH AT INCOME BY WAY OF SALE OF IMPORT LICENCE, EXPORT HOUSE PREMIUM AND CUSTOMS DRAW BOCK WILL NOT BE ENTITLED FOR DEDUCTION U/S.80J AND 8OHH OF THE ACT. HE ALSO REFERRED TO THE CASE LAW OF HONBLE KERALA HIGH COURT IN THE CASE OF CIT VS. FORBES EWART & FIGGIS (P) LTD (1999) 238 I TR 762 (KER), WHICH CONTAINS ISSUE OF JOB WORK MANUFACTURING AND HAS NO RELEVANCE TO THE FACT S OF ASSESSEES CASE. HE STATED THAT FOR CLAIMING DEDUCTION U/S.801B OF THE ACT THERE MUST B E MANUFACTURE OR PRODUCTION OF A NEW ARTICLE AND THERE IS OVERWHELMING JUDICIAL OPINION IN FAVOUR OF THIS PROPOSITION. FOR THIS, LD. CIT-DR PLACED RELIANCE ON THE CASE OF LAW OF HONBL E APEX COURT IN THE CASE OF TAMIL NADU STATE TRANSPORT CORPORATION LTD V CIT (2001) 252 IT R 883 (S.C.), WHEREIN IT IS HELD THAT TYRE RETREADING DOES NOT AMOUNT TO PRODUCTION AND PRODUC TION MEANS, WHICH BRINGS INTO EXISTENCE A NEW ARTICLE. WHEN A TYRE WEARS OUT, ITS LIFE MAY BE RENEWED BY RETREADING BUT A DIFFERENT AND DISTINCT COMMODITY CANNOT BE SAID TO HAVE COME INTO EXISTENCE AS A RESULT OF RETREADING AND 6 ITA 1305/K/2008 RAJESH KR. DROLIA A.Y.05-06 THEREFORE, THE BUSINESS OF RETREADING OF TYRES DID NOT AMOUNT TO PRODUCTION OF A NEW ARTICLE ENTITLING ASSESSEE TO RELIEF U/S.80J AND U/S.8OHH O F THE ACT. ACCORDING TO HIM, THIS DECISION IS SQUARELY APPLICABLE TO THE CASE OF ASSESSEE AS THE NATURE OF JOB WORK IN THE CASE OF THIS ASSESSEE IS NOTHING BUT REPAIRS AND MAINTENANCE OF MOULDS SO LD EARLIER. HE STATED FACTS THAT DUE TO REPAIRS AND MAINTENANCE OF OLD MOULDS, THEIR LIFE MIGHT BE RENEWED AND THEY MIGHT BECOME USEFUL FOR FURTHER USE. BUT, THE ACTIVITY OF REPAIRING AND MAI NTENANCE BRINGS NO NEW ARTICLE OR THING, THEREFORE, ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U /S.80-IB OF THE ACT ON SUCH JOB CHARGES. 5. LD. CIT-DR FURTHER RELIED ON THE DECISION OF H ONBLE KERALA HIGH COURT IN THE CASE OF CIT V VIJAYA RETREADERS (2002) 253 ITR 53 (KER), WH EREIN IT IS HELD THAT THERE SHOULD BE MANUFACTURE OR PRODUCTION OF A NEW ARTICLE BUT RETR EADING OF TYRES GIVES NO NEW ARTICLE AND, THEREFORE, IT IS HELD THAT ASSESSEE IS NOT ENTITLED FOR DEDUCTION U/S.80I OF THE ACT. FURTHER, HE RELIED ON THE DECISION OF HONBLE APEX COURT IN THE CASE OF CIT V RELISH FOODS (1999) 237 ITR 59 (SC), WHEREIN IT IS HELD THAT THE CONDITION PREC EDENT BEFORE DEDUCTION U/S.80HH OF THE ACT IS THAT NEW ARTICLE MUST COME INTO EXISTENCE AS A R ESULT OF MANUFACTURE OR PRODUCTION AND HAS HELD THAT WHEN RAW SHRIMPS AND PRAWNS ARE SUBJECTED TO THE PROCESS OF CUTTING HEAD AND TAILS, PEELING, DEVEINING, CLEANING AND FREEZING, THEY DO NOT CEASE TO BE SHRIMPS AND PRAWNS AND DO NOT BECOME OTHER DISTINCT COMMODITY AND THEREFORE, DEDUCTION U/S. 80HH OF THE ACT IS NOT AVAILABLE TO THE ASSESSEE. HE FURTHER RELIED ON TH E DECISION OF HONBLE APEX COURT IN THE CASE OF CIT V GEM INDIA MANUFACTURING CO. (2001) 249 ITR 307 (SC), WHEREIN HONBLE APEX COURT HELD THAT SUBJECTING RAW, UNCUT DIAMONDS TO A PROCESS OF CUTTING AND POLISHING, WHICH YIELDS THE POLISHED DIAMONDS DOES NOT AMOUNT TO MAN UFACTURE OR PRODUCTION OF AN ARTICLE OR THING AS A NEW ARTICLE OR THING DOES NOT COME INTO EXISTENCE AND THEREFORE, THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S.801 OF THE ACT. HE ALSO RELIED ON THE DECISION OF LIBERTY INDIA V CIT REPORTED IN (2009) 317 ITR 218 (SC), WHEREIN IT IS HELD THAT THE WORDS DERIVED FROM ARE NARROWER IN CONNOTATION AS COMPARED TO THE WORDS A TTRIBUTABLE TO AND THAT BY USING THE EXPRESSION DERIVED FROM THE PARLIAMENT INTENDED T O COVER SOURCES NOT BEYOND THE FIRST DEGREE AND ALSO THAT THE SOURCE OF RECEIPTS MUST BE MANUFA CTURE AND PRODUCTION OF AN ARTICLE. LD. CIT- DR REFERRED TO WORDS USED IN SECTION 35B OF THE ACT AS MANUFACTURE AND PRODUCTION. HE REFERRED TO THE CASE LAW OF CIT V TARA AGENCIES (20 07) 292 ITR 444 (SC), WHEREIN HONBLE APEX COURT HAS HELD THAT THE ACTIVITY OF BLENDING O F TEA WILL NOT AMOUNT TO MANUFACTURE OR PRODUCTION AND THEREFORE, HONBLE SUPREME COURT DEN IED WEIGHTED DEDUCTION U/S.35B OF THE ACT TO ASSESSEE. HE ALSO REFERRED TO THE DECISION OF COORDINATE BENCH OF THIS TRIBUNAL, CHENNAI BENCHES IN THE CASE OF DXN HERBAL MANUFACTURING (IN DIA) PVT. LTD. V ITO (2009) 3L6 ITR (AT) 126 CHENNAI), WHEREIN IT IS HELD THAT THE ACTI VITY OF MIXING OF MUSHROOM POWDER AND 7 ITA 1305/K/2008 RAJESH KR. DROLIA A.Y.05-06 PUTTING THEM INTO CAPSULES IS NEITHER MANUFACTURING NOR PRODUCTION OF ARTICLE AND THEREFORE, THE ASSESSEE IS NOT ENTITLED TO DEDUCTION U/S.801B OF T HE ACT. 6. LD. CIT-DR FURTHER STATED THAT RECENTLY HONBLE DELHI HIGH COURT, EXACTLY ON SIMILAR ISSUE WHERE AFTER SALES SERVICE, WHETHER ENTITLED T O DEDUCTION U/S. 80HH AND 80I OF THE ACT WAS THE SUBJECT MATTER IN THE CASE OF HONDA SIEL POWER PRODUCTS LTD. V CIT (2009) 318 ITR 309 (DELHI), WHEREIN IT IS HELD THAT ASSESSEE IS NOT EN TITLED TO DEDUCTIONS U/S. 80 HH AND 80 I OF THE ACT ON PROFITS FROM SALE OF IMPORTED MACHINERY AND SPARE PARTS USED FOR PROVIDING AFTER SALES SERVICE. IN VIEW OF THE FACTS OF PRESENT CASE AND CASE LAWS ABOVE RELIED UPON, LD. CIT-DR STATED THAT DEDUCTION U/S.801B OF THE ACT WILL BE A VAILABLE TO ASSESSEE ONLY IF A NEW ARTICLE COMES INTO EXISTENCE AS A RESULT OF MANUFACTURE OR PRODUCTION BUT IN THE PRESENT CASE, ASSESSEE IS DOING ONLY REPAIRS AND MAINTENANCE OF OLD MOULDS WHICH WERE SOLD BY HIM EARLIER IN THE GARB OF SO-CALLED JOB CHARGES. ACCORDING TO HIM, AS A RE SULT OF REPAIRS AND MAINTENANCE, NO NEW ARTICLES COME INTO EXISTENCE AND IT IS NEITHER MANU FACTURED NOR PRODUCTION, THEREFORE, IT IS NOT ENTITLED FOR DEDUCTION U/S.80-IB OF THE ACT, ON THE SO-CALLED JOB CHARGES. ACCORDINGLY, HE URGED BEFORE US THAT THE ORDER OF CIT(A) BE REVERSED AND THAT OF THE AO BE RESTORED. 7. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSES SEE STATED FACTS THAT ASSESSEE IS A MANUFACTURER OF MOULDS FOR BALL PEN AND MOULD PARTS IN THE UNION TERRITORY OF DADRA AND NAGAR HAVELI AND THESE MOULDS ARE HOLLOW DESIGN OF BALL P EN PARTS WHICH ARE MANUFACTURED WITH THE HELP OF INJECTION MOULDING MACHINES. HE STATED THAT MOULD MANUFACTURED BY THE ASSESSEE CONSISTS OF THE UNDER MENTIONED PARTS WHICH ARE ALS O MANUFACTURED BY THE ASSESSEE ITSELF: A) PUNCHES B) PIN POINT C) GUIDE PINS D) GUIDE/DEGREE BUSH E) HANGING PIN/LINK RODE F) EJECTOR BUSH G) CAVITIES HE BRIEFLY STATED PROCESS FOR MANUFACTURING EACH OF ABOVE PARTS FOR WHICH SEPARATE PROCESSES & SEPARATE SET OF MACHINES ARE USED AND NARRATED BRIE F DESCRIPTION OF MANUFACTURING OF EACH PART AS BELOW: A) PUNCHES: FOR MANUFACTURING PUNCHES H13 & H11 ST EEL ARE USED & IT IS CUT TO THE SIZE OF THE PUNCH WITH THE HELP OF SPECIAL CUTTING MACHINES AND THEN ROUGH TURNING IS DONE ON IT WITH THE HELP OF TURNING MACHINES. THEREAFTER ITS HARDENING IS CARRIED OUT AS PER NEED I.E. VACUME OR FURNACE HARDENING. THE HARDENING SHOULD BE 46-48 AS PER ROCKWELL HARDENING SCALE. 8 ITA 1305/K/2008 RAJESH KR. DROLIA A.Y.05-06 THEREAFTER CYLINDRICAL GRINDING, SURFACE GRINDING A RE DONE WITH THE HELP OF CYLINDRICAL & SURFACE GRINDING MACHINES. THEREAFTER THESE PUNCHES ARE DIAMOND POLISHED & HARD CHROMED WHICH INVOLVES VERY HIGH PRECISION AND TECHNIQUE LI KE ELECTROPLATING AND CARRIED OUT WITH THE HELP OF SOPHISTICATED MACHINE WHICH IS A MANUFACTUR ING ACTIVITY IN ITSELF. B) PIN POINT: FOR MANUFACTURING PIN POINTS H13 & H1 1 STEEL ARE USED & IT IS CUT TO THE SIZE OF THE PIN POINT WITH THE HELP OF SPECIAL CUTTING MACH INES AND THEN ROUGH TURNING IS DONE ON IT WITH THE HELP OF TURNING MACHINES. THEREAFTER IT IS GIVE N FOR FURNACE HARDENING. THE HARDENING SHOULD BE 42- 44 AS PER ROCKWELL HARDENING SCALE. T HEREAFTER CYLINDRICAL GRINDING, SURFACE GRINDING ARE DONE WITH THE HELP OF CYLINDRICAL & SU RFACE GRINDING MACHINES THROUGH SPECIALIZED EDM DRILLS. THESE PIN POINTS ARE NOW PUT TO SPARK E ROSION WITH THE HELP OF SPARKING MACHINES & HARD CHROMED. C) GUIDE PINS: FOR MANUFACTURING OF GUIDE PINS EM36 STEEL ARE USED & IT IS CUT TO THE SIZE OF THE GUIDE PINS WITH THE HELP OF SPECIAL CUTTING MA CHINES. THEN ROUGH TURNING IS DONE ON IT WITH THE HELP OF TURNING MACHINES. THEREAFTER IT IS GIVE N FOR FURNACE HARDENING. THEREAFTER CYLINDRICAL GRINDING, SURFACE GRINDING ARE DONE WIT H THE HELP OF CYLINDRICAL & SURFACE GRINDING MACHINES. THESE GUIDE PINS ARE LUBRICATED WITH SPEC IAL LUBRICANTS AND GROOVES ARE ATTACHED. D) GUIDE/ DEGREE BUSH: FOR MANUFACTURING OF GUIDE B USH EM24 STEEL ARE USED & IT IS CUT TO THE SIZE OF THE GUIDE BUSH WITH THE HELP OF SPECIAL CUT TING MACHINES. THEN ROUGH TURNING IS DONE ON IT WITH THE HELP OF TURNING MACHINES. THEREAFTER IT IS GIVEN FOR FURNACE HARDENING AND HARDENING SHOULD BE 58 AS PER ROCKWELL HARDENING SCALE. THER EAFTER CYLINDRICAL GRINDING SURFACE GRINDING ARE DONE WITH THE HELP OF CYLINDRICAL & S URFACE GRINDING MACHINES. E) HANGING PINS/LINK RODE : FOR MANUFACTURING OF HA NGING PINS NICKEL CHROME STEEL ARE USED & IT IS CUT TO THE SIZE OF THE HANGING PINS WITH TH E HELP OF SPECIAL CUTTING MACHINES. THEN ROUGH TURNING IS DONE ON IT WITH THE HELP OF TURNING MACH INES. THEREAFTER IT IS GIVEN FOR VACUUM HARDENING AND HARDENING SHOULD BE 44 AS PER ROCKWEL L HARDENING SCALE. THEREAFTER CYLINDRICAL GRINDING, SURFACE GRINDING ARE DONE WITH THE HELP O F CYLINDRICAL & SURFACE GRINDING MACHINES. F) EJECTOR BUSH: FOR MANUFACTURING OF EJECTOR BUSH H13 STEEL ARE USED & IT IS CUT TO THE SIZE OF THE EJECTOR BUSH WITH THE HELP OF SPECIAL CUTTING M ACHINE. THEN ROUGH TURNING IS DONE ON IT WITH THE HELP OF TURNING MACHINES THEREAFTER IT IS GIVEN FOR FURNACE HARDENING AND HARDENING SHOULD BE 46 AS PER ROCKWELL HARDENING SCALE. THEREAFTER CYLINDRICAL GRINDING, SURFACE GRINDING ARE DONE WITH THE HELP OF CYLINDRICAL & SURFACE GRINDIN G MACHINES. G) CAVITITES: FOR MANUFACTURING OF CAVITIES H13 CH ROME/STAVESSAR STEEL ARE USED & IT IS CUT TO THE SIZE OF THE CAVITIES WITH THE HELP OF SPECIAL C UTTING MACHINE. THEN ROUGH TURNING IS DONE ON IT WITH THE HELP OF TURNING MACHINES. THEREAFTER IT IS GIVEN FOR FURNACE HARDENING AND HARDENING SHOULD BE 46 AS PER ROCKWELL HARDENING SCALE. THER EAFTER CYLINDRICAL GRINDING, SURFACE GRINDING ARE DONE WITH THE HELP OF CYLINDRICAL & SU RFACE GRINDING MACHINES. IN EACH CAVITIES ELECTRODES ARE INSERTED. THE LD. COUNSEL FOR ASSESSEE STATED THAT MANUFACTUR E OF ABOVE PARTS WITH ITS OWN MATERIAL AS WELL AS STEEL SUPPLIED BY CUSTOMERS AND SALE OF MOU LDS AS WELL AS SUPPLY OF MOULD PARTS MANUFACTURED QUALIFIES FOR DEDUCTION U/S 80-IB OF T HE ACT, WHETHER MANUFACTURED ON ITS OWN MATERIAL OR ON JOB WORK BASIS. THE ASSESSEE IS BASI CALLY A MANUFACTURER AND HE REFERRED AN EXAMPLE OF VOLTAS AN AIR CONDITIONING MACHINE MAN UFACTURER WHO MANUFACTURES COMPRESSOR, COOLING COIL, BODY OF AIR CONDITIONER AND OTHER PAR TS. HE SELLS COMPLETE AIR CONDITIONING MACHINE AS WELL AS PARTS LIKE COMPRESSOR, COOLING C OIL ETC AND IN CASE AIR-CONDITIONING MACHINE DEVELOPS PROBLEM AND ITS COMPRESSOR IS REPLACED BY MANUFACTURER, THE ACTIVITY MAY BE REPAIR 9 ITA 1305/K/2008 RAJESH KR. DROLIA A.Y.05-06 FOR THE CUSTOMER BUT SAME IS A SALE OF MANUFACTURED PART FOR VOLTAS. SIMILARLY HEWLETT PACKARD (HP) MANUFACTURES COMPUTERS AND COMPUTER PARTS LIKE MOTHERBOARD, CPU, HARD DISK, SCREENS, KEYBOARD ETC AND IT SELLS FULLY ASSEMBLED COMPUTERS AS WELL AS ITS PARTS. ACCORDING TO HIM BOTH SALES ARE SALES OF MANUFACTURED ITEMS ONLY BUT IN C ASE CUSTOMER GETS HARD DISK OF COMPUTER REPLACED, IT MAY BE REPAIR WORK FOR THE CUSTOMER BU T IT IS A SALE OF MANUFACTURED PART (HARD DISK) FOR HP. HE ALSO REFERRED TO THE CONTRARY, THAT IF A PERSON BUYS HARD DISK FROM MARKET AND REPLACES THE SAME IN THE COMPUTER OF A CUSTOMER, TH E SAME MAY BE TERMED AS REPAIRING ACTIVITY. IN VIEW OF THIS HE ARGUED THAT SUPPLYING OF MANUFAC TURED PARTS IN THE COURSE OF AFTER SALES SERVICE IS VERY MUCH MANUFACTURING ACTIVITY. HE STA TED IN REFERENCE TO THE SPECIAL BENCH THAT ISSUES FRAMED BY REVENUE PREDICATES THAT INCOME SHO WN TO HAVE BEEN EARNED FROM JOB WORKS IN FACT REPRESENTS ASSESSEES INCOME FROM REPAIRS A ND MAINTENANCE BUT THIS PREMISE IS FAR FROM FACTS. HE STATED FACTS THAT ASSESSEE PROVIDED AFTER SALES SERVICE TO ITS VALUED CUSTOMERS, WHICH IS ESSENTIAL FOR SELLING MOULDS. AFTER SALES SERVICE I S AN EXCLUSIVE SERVICE TO ITS OWN CUSTOMERS AND IT IS NOT THAT ASSESSEE CARRIES ON THE BUSINESS OF DOING REPAIR. HE ARGUED THAT EVEN IF PART OF JOB WORK IS AFTER SALES SERVICE, THAT IS IMMATERIAL, BE CAUSE AFTER-SALE SERVICE IS AN INDISPENSABLE PART OF MANUFACTURING, ALMOST UNIVERSALLY, UNDERTAKEN BY MANUFACTURERS TO MAINTAIN CONFIDENCE AND DEPENDENCE OF THE USERS AND TO RETAIN MARKET OF MAN UFACTURED ITEMS. THE LD. COUNSEL FOR THE ASSESSEE REFERRED TO THE DECISION OF DELHI BENCH OF ITAT IN THE CASE OF ACIT V. WOODWORD GOVERNORS INDIA (P) LTD. (2007) 15 SOT 362 (DEL), W HEREIN IT IS HELD THAT THE ACTIVITY OF AFTER SALE SERVICE IS MANUFACTURING ACTIVITY AND OBSERVED AS UNDER: IN THE INSTANT CASE, THE ASSESSEE COMPANY WAS EN GAGED IN MANUFACTURE, SALE AND SERVICING OF INDUSTRIAL APPLICATION ELECTRONIC CONT ROLS ETC. ON THE PROFIT EARNED BY THE INDUSTRIAL UNDERTAKING, THE ASSESSEE CLAIMED DEDUCT ION UNDER S. 80-IB. AS PER PROVISIONS OF S. 80-IB, ASSESSEE IS ENTITLED TO DED UCTION IN RESPECT OF PROFITS AND GAINS FROM CERTAIN INDUSTRIAL UNDERTAKINGS AS REFERRED TO IN SUB-S.S (3) TO (11) OF THE ACT. THE DEDUCTION IS COMPUTED WITH RESPECT TO PROFITS AND G AINS DERIVED FROM SUCH INDUSTRIAL UNDERTAKING FOR A CERTAIN PERIOD AS SPECIFIED IN TH E ACT. THE PROFIT ON WHICH THE ASSESSEE IS ENTITLED TO CLAIM DEDUCTION SHOULD BE A RISING OUT OF MANUFACTURE OR PRODUCTION OF THE ARTICLE OR THINGS SPECIFIED IN TH E ACT. IN THE INSTANT CASE, THE ASSESSEE COMPANY WAS BASICALLY ENGAGED IN, MANUFACTURING OF ITS PRODUCTS. THERE IS NO DISPUTE WITH REGARD TO THE CLAIM OF DEDUCTION ON THE PROFIT S DERIVED FROM SUCH MANUFACTURED GOODS. IN ADDITION TO IT, THE ASSESSEE COMPANY WAS ALSO PROVIDING TRAINING TO EMPLOYEES OF ITS CUSTOMERS FOR THE USE OF THE PRODUCTS SOLD T O THEM AND ALSO PROVIDING AFTER SALES SERVICES AND REPAIRING OF THE PRODUCTS SOLD TO ITS CUSTOMERS. THE ACTIVITIES WHICH ARE RELATED TO ACTIVITY OF MANUFACTURE AND SALE OF PROD UCTS ARE THAT OF PROVISION OF TRAINING OF THE CUSTOMERS EMPLOYEES FOR BEING ABLE TO USE T HE PRODUCTS AND AFTER SALE SERVICE AND REPAIRS. THE PROFIT FROM THESE ACTIVITIES ARE INDEED 'DERIV ED' FROM INDUSTRIAL UNDERTAKING AND FORMED PART OF MANUFACTURING PRODUC TS. AS THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF HIGH PRE CISION GOVERNORS AND OTHER CONTROL DEVICES. GIVEN THE HIGH TECHNICAL PRECISION IT IS I NCUMBENT UPON THE ASSESSEE TO NOT ONLY ADEQUATELY TRAIN THE CUSTOMERS EMPLOYEES TO B E ABLE TO USE SUCH PRODUCTS BUT AS AND WHEN THE NEED ARISES PROVIDE AFTER SALES SERVIC E AND REPAIR SUCH PRODUCTS FOR THEIR CONTINUED EFFICIENT USE. ADMITTEDLY, ALL THESE ACTI VITIES ARE CARRIED OUT BY THE UNDERTAKING ITSELF AND ONLY SUPPLEMENT THE MANUFACT URING ACTIVITY BEING CARRIED OUT BY THE UNDERTAKING. THUS, THE ESSENTIAL INGREDIENT OF NEXUS BETWEEN THE PROFIT AND THE 10 ITA 1305/K/2008 RAJESH KR. DROLIA A.Y.05-06 UNDERTAKING GETS ESTABLISHED. THERE IS NO INFIRMITY IN THE ORDER OF THE CIT(A) FOR ALLOWING DEDUCTION UNDER S. 80-IB EVEN IN RESPECT O F PROFITS DERIVED FROM TRAINING OF CUSTOMERS EMPLOYEES AND AFTER SALES SERVICES AND R EPAIRS. LD. COUNSEL FOR THE ASSESSEE ALSO REFERRED TO THE D ECISION OF AHMEDABAD BENCH OF ITAT IN THE CASE OF DCIT VS. MIRA INDUSTRIES 87 ITD 475 (AHD), WHEREIN SIMILAR VIEW IS EXPRESSED 8. LD. COUNSEL FOR THE ASSESSEE FURTHER REFERRED TO THE DECISION OF AMRITSAR BENCH OF ITAT IN THE CASE OF SARAF ELECTRICALS (P) LTD (SUPRA), W HEREIN IT IS HELD MANUFACTURING NEW ITEMS AND SERVICING USED ONES NEEDING DEBUGGING AFTER OPERATI ON FOR A TIME INVOLVING THE USE OF SAME MACHINERY REQUIRED FOR MANUFACTURING, IN SUCH SITUA TION, REPAIR IS NO DIFFERENT FROM MANUFACTURING. HE DREW SUPPORT FROM CIT V. TAMIL NA DU TREATMENT TESTING SERVICES (P) LTD. 238 ITR 529(MAD), WHEREIN IT IS HELD THEREIN THAT G IVING HEAT TREATMENT TO TOUGHEN THE UNTREATED CRANKSHAFTS AND FORGINGS AND CASTINGS FOR USE IN AUTOMOBILES IS MANUFACTURING THOUGH THERE OCCURS NO PHYSICAL CHANGE THROUGH OPERATIONS. LD. COUNSEL FOR ASSESSEE ARGUED THAT BECAUSE OF PREPONDERANCE OF JUDICIAL VIEW OF MANUFA CTURE ON OWN ACCOUNT AND ON JOB WORK AS ON A PARITY, REVENUE HAS RAISED THIS ISSUE THAT JOB WORK INDEED REPRESENTS AFTER SALE REPAIR WORK AND CONTESTS THE ELIGIBILITY FOR EXEMPTION TO THE E XTENT INCOME REPRESENTS INCOME FROM SUCH REPAIR ALLEGEDLY TO PASS OFF AS JOB WORK. HE ARGUED THAT, OF LATE, THERE HAS BEEN A LEGISLATIVE DEVELOPMENT. NOW A DEFINITION OF THE WORD MANUFACT URE WHICH IS DETERMINANT OF ISSUES IN THE CASE HAS BEEN CARVED OUT AND EMERGENCE OF THE DEFIN ITION ALTERS THE SCENARIO. HE STATED THAT UNTIL RECENTLY NOWHERE IN SECTION 80 IA OR 80 IB OF THE ACT AND, FOR THAT MATTER, IN THE ACT, NO DEFINITION OF THE WORD MANUFACTURE WAS AVAILABLE. THE ABSENCE OF DEFINITION OF THE WORD WAS NOT BY CHANCE BUT BY DESIGN TO LEAVE THE WORD TO IT S WIDEST AMPLITUDE POSSIBLE CONSONANT WITH INCENTIVE NATURE OF BENEFITS OF DEDUCTION/EXEMPTION UNDER VARIOUS SECTIONS HINGING ON MANUFACTURE AS THE CENTRAL CONDITION PRECEDENT. ACC ORDING TO HIM, THIS PROVED TO BE PRONE TO DISPUTE AND THUS COUNTER-PRODUCTIVE. LD. COUNSEL FO R THE ASSESSEE REFERRED TO EXPORT IMPORT POLICY 2002 TO 2007 (HEREINAFTER EXIM POLICY FOR SH ORT), WHEREBY MANUFACTURE IS DEFINED IN CHAPTER DC, WHICH IS AS FOLLOWS: MANUFACTURE MEANS TO MAKE, PRODUCE, FABRICATE, AS SEMBLE, PROCESS OR DRAWING INTO EXISTENCE BY MACHINE, A NEW PRODUCT HAVING A DISTINCTIVE NAME , CHARACTER OR USE AND SHALL INCLUDE PROCESSES SUCH AS REFRIGERATION, POLISHING, BLENDIN G, RECONDITIONING, REPAIR, REFURBISHING, TESTING CALIBRATION, REENGINEERING. MANUFACTURE F OR THE PURPOSE OF THIS POLICY SHALL ALSO INCLUDE AGRICULTURE, AQUACULTURE, ANIMAL HUSBANDRY, FLORICULTURE, PISCI-CULTURE, POULTRY, SERICULTURE, VITI-CULTURE AND MINING. LD. COUNSEL STATED THAT UNTIL RECENTLY, IT IS A FAC T THAT, THIS DEFINITION WAS IN A DIFFERENT ACT WITH THE OBJECT OF IMPOSING RESTRICTIONS ON IMPORT AND E XPORT ACTIVITY, WHICH WAS CONSIDERED A CONSTRAINT ON ITS IMPORTATION IN THE ACT IN THE CON TEXT OF ITS INCENTIVE PROVISIONS. HE ARGUED 11 ITA 1305/K/2008 RAJESH KR. DROLIA A.Y.05-06 THAT THIS OBSTACLE IS REMOVED BY REASON OF THE FACT THAT THIS VERY DEFINITION HAS BEEN BODILY LIFTED INTO SECTION 2(R) OF THE SPECIAL ECONOMIC ZONES ACT 2005 WITH EFFECT FROM 10.2.2006. ACCORDING TO HIM, SELFSAME DEFINITION HAS BEEN INCO RPORATED IN SECTION 10AA OF THE ACT BY REFERENCE TO SAID SECTION 2(R) OF SEZ ACT AND CHANG ED ITS DEFINITION IN EXIM POLICY. THE DEFINITION IN SECTION 2(R) READS AS UNDER: MANUFACTURE MEANS TO MAKE, PRODUCE, FABRICATE, AS SEMBLE, PROCESS OR DRAWING INTO EXISTENCE BY MACHINE, A NEW PRODUCT HAVING A DISTIN CTIVE NAME, CHARACTER OR USE AND SHALL INCLUDE PROCESSES SUCH AS REFRIGERATION, POLI SHING, BLENDING, RECONDITIONING, REPAIR, CUTTING, REFURBISHING, TESTING CALIBRATION, REENGINEERING. MANUFACTURE FOR THE PURPOSE OF THIS POLICY SHALL ALSO INCLUDE AGRICULTU RE, AQUACULTURE, ANIMAL HUSBANDRY, FLORICULTURE, PISCI-CULTURE, PAULTRY, SERICULTURE, VITI-CULTURE AND MINING. IN VIEW OF THE ABOVE, LD. COUNSEL FOR THE ASSESSEE ARGUED THAT ONE STRIKING ASPECT IN THIS CONNECTION IS THAT IT IS CLAUSE (C) OF SCHEDULE OF THE SEZ ACT THAT HAS INSERTED SECTION 10AA AFTER SECTION 10A OF THE ACT AND CLAUSE (III) OF EX PLANATION 1 BELOW SUB-SECTION (9) OF SECTION 10AA CONTAINS THE DEFINITION OF MANUFACTURE BY RE FERENCE TO SECTION 2(R) OF THE SEZ ACT 2005. IT READS: MANUFACTURE SHALL HAVE THE SAME MEANING AS ASSIGN ED TO IT IN CLAUSE (R) OF SECTION 2 OF THE SPECIAL ECONOMIC ZONES ACT 2005. THUS IT IS INCORPORATION OF DEFINITION OF MANUFACTURE IN THE SEZ ACT AND IN TURN IN EXIM PO LICY IN THE ACT BY REFERENCE. HE FURTHER STATED THAT BESIDES SECTION 10AA OF THE ACT, THE SE Z ACT 2005 ALSO INSERTED SECTION 80IAB OF THE ACT AND THUS SEZ ACT HAS THE ELEVATION AS A SUP PLEMENTAL SOURCE OF LEGISLATION IN THE ACT AND THE TWO SECTIONS CITED ARE CREATURES OF WEDLOCK BETWEEN THE TWO. IN THE LIGHT OF THE ABOVE, LD. COUNSEL FOR THE ASSESSEE ARGUED THAT THE WORK R ELATING TO REPAIR FINDS PLACE IN DEFINITION OF MANUFACTURE AS ADOPTED FOR THE PURPOSE OF SECT ION 10AA OF THE ACT AND IT IS FOR THE FIRST TIME THAT A DEFINITION OF THE WORD MANUFACTURE IS AVAILABLE IN THE ACT. ACCORDING TO HIM, THIS BRINGS AN END TO THE HARROWING HUNT FOR ITS MEANING AND, THEREFORE, AS A LOGICAL EXTENSION OF PRESENCE OF DEFINITION IN THE ACT, ISSUE RAISED BY REVENUE GETS SETTLED IN VINDICATION OF TRIBUNALS EARLIER ORDERS FOR SERIES OF PAST ASSESS MENT YEARS FAVOURING ASSESSEES CASE, IMMATERIAL WHETHER THE INCOME FROM JOB WORKS WHOLLY OR IN PART REPRESENTS INCOME FROM REPAIR. LD. COUNSEL FOR THE ASSESSEE ALSO ARGUED THAT LOGIC FOR CALLING INTO AID THE DEFINITION IN SECTION 10AA OF THE ACT IS STRAIGHTFORWARD AND FORTHRIGHT A ND PROVISIONS OF DEDUCTION IN SECTION 80-IB OF THE ACT ARE UNDISPUTEDLY MEANT TO ENCOURAGE ENTR EPRENEURS TO SET UP MANUFACTURING UNDERTAKINGS IN IDENTIFIED BACKWARD AREAS. THIS SEC TION GIVES ENTREPRENEURS REWARD FOR UNDERGOING HARDIHOOD IN VENTURING OUT IN SUCH AREAS AND CONTRIBUTING TOWARDS NATIONS STRIFE FOR EVEN GROWTH OF THE INDUSTRY NATIONWIDE. SO, IT IS E SSENTIALLY AN INCENTIVE PROVISION AND A RELIEF PROVISION AS WELL. THIS NEEDS A PURPOSIVE APPROACH WHILE GIVING THE WORD MANUFACTURE ITS CONNOTATION. 12 ITA 1305/K/2008 RAJESH KR. DROLIA A.Y.05-06 9. LD. COUNSEL FOR THE ASSESSEE REFERRED TO SECTION 10AA OF THE ACT, WHICH IS ALSO AN INCENTIVE PROVISION GIVEN TO A MANUFACTURER AS A BO OSTER TO 100% EXPORT ORIENTED INDUSTRIAL ACTIVITY IN THE SPECIAL ECONOMIC ZONES AND, THEREFO RE, SECTION 80-IB AND 10AA OF THE ACT QUITE JUSTIFIABLY BE SAID TO STAND ON THE EQUATION FROM THE OBJECT OF SOCIAL BENEFIT. HE REFERRED TO MAJOR INTERSECTING POINTS IN THE FUNDAMENTALS OF THE TWO SECTIONS ARE AS FOLLOWS: (I) BOTH CONCERN INDUSTRIAL UNDERTAKING MANUFACTURING GOODS (II) IN IDENTIFIED AREA IDENTIFIED BACKWARD AREAS IN THE CASE OF 80-IB AND SPECIAL ECONOMIC ZONES DEMARCATED BY THE SEZ ACT 2005 FOR S ECTION 10AA. HE STATED THAT ONLY ADDITIONAL ANGLE FOR SECTION 10 AA OF THE ACT IS THAT THE INDUSTRIAL UNDERTAKING HAS TO BE 100% EXPORT-ORIENTED, BUT THA T DOES NOT IMPAIR THE FUNDAMENTAL UNITY OR EQUATION OF TWO PROVISIONS. ACCORDING TO HIM, SECT ION 5 OF THE SEZ ACT SETS OUT AS GUIDELINES FOR NOTIFYING SPECIAL ECONOMIC ZONE OF WHICH THE PR IMARY FACTOR AMONG OTHER FACTORS IS GENERATION OF ADDITIONAL ECONOMIC ACTIVITY AND AGAI N, UNDER ITS SECTION 6, THE ZONES ARE TO BE DEMARCATED AS PROCESSING AND NON-PROCESSING AREAS. THE PROCESSING AREA MEANS AREA FOR SETTING UP UNITS FOR ACTIVITIES, BEING THE MANUFACTURE OF G OODS, OR RENDERING SERVICES; OR (B) THE AREA EXCLUSIVELY FOR TRADING OR WAREHOUSING PURPOSES; WH ILE THE NON-PROCESSING AREA ARE FOR ACTIVITIES OTHER THAN THOSE SPECIFIED UNDER CLAUSE (A) OR CLAUSE (B). HE ARGUED THAT THE PERTINENCE OF THE PROVISIONS OF SEZ ACT LIES IN DEM ONSTRATING THE KINDRED NATURE OF THE TWO PROVISIONS OF THE ACT WHERE BOTH HAVE AS THE PRESID ING OBJECT THE SPREAD OF THE ACTIVITY OF MANUFACTURE AND GENERATION OF ECONOMIC ACTIVITY IN THE AREAS WHERE THE SAME ARE MOST DESIRED FROM WELFARE POINT OF VIEW AND THE NATIONS SOCIO-E CONOMIC ENRICHMENT. THEY BOTH OFFER INCENTIVE TO WIN OVER THE ENTREPRENEURS SKEPTICISM ABOUT PROSPECTS OF INDUSTRY IN SUCH AREAS. THE EXEMPTION OR DEDUCTION OF PROFIT IS MEANT TO AR OUSE MOTIVATION FOR ENTREPRENEURS TO DIVERT THEIR INDUSTRIAL VENTURES TO SUCH AREAS AND THUS, I NDISPUTABLY, THE OBJECTS OF SPECIAL FAVOURS AND SITUATIONS CALLING FOR SAME ANALOGY. HE REFERRED T O EXPLANATION DEFINING MANUFACTURE, WHICH IS PREFACED BY WORDS FOR THE PURPOSE OF THIS SECTI ON I. E. SECTION 10AA OF THE ACT, BUT IT DISPELS THE AMBIGUITY, UNCERTAINTY AND CONFUSION OV ER THE WORD USED IN OTHER SECTIONS OF THE ACT WITH OBJECT SIMILAR TO THAT OF SECTION 10AA OF THE ACT. THE EQUATION OF OBJECTS MAKES THE DEFINITION USEFUL AS A GUIDE FOR THE PURPOSE OF UNL OCKING THE MIND OF LEGISLATURE WITH REGARD TO THE WORD OCCURRING ELSEWHERE IN THE ACT. FOR THIS THE LD. COUNSEL FOR THE ASSESSEE RELIED ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF DIT V. SHREE VISHESHWAR NATH MEMORIAL PUBLIC CHARITABLE TRUST (2011) 333 ITR 248 (DEL), WHEREIN IT IS HELD THAT THE DEFINITION OF THE WORD IN SOME OTHER STATUTE CAN BE BORROWED IN CASE THE WORD IS NOT DEFINED IN THE ACT. BUT HE STATED THAT IN THE INSTANT CASE THE DEFINITION OF M ANUFACTURE IS AVAILABLE IN THE ACT ITSELF THOUGH IN DIFFERENT SECTION. AS SUCH THERE IS NO REASON FO R NOT ADOPTING THE SAME. LD. COUNSEL FOR THE 13 ITA 1305/K/2008 RAJESH KR. DROLIA A.Y.05-06 ASSESSEE ALSO REFERRED TO THE DECISION OF KERALA HI GH COURT IN THE CASE OF TATA TEA LTD. VS. ACIT REPORTED IN (2010) 234 CTR 90 (KER), (2010) 18 9 TAXMAN 303 (KER.), WHEREIN IT HAS APPLIED THIS DEFINITION OF MANUFACTURE IN SECTION 1 0AA OF THE ACT IN DEFINING MANUFACTURE FOR SECTION 10B EVEN IN THE ABSENCE OF THE DEFINITION I N THAT SECTION AND HAS HELD THAT PROCESSING OF BLENDING TEA AMOUNTS TO MANUFACTURE AND THE INCOME THEREFROM IS ENTITLED TO THE EXEMPTION UNDER SECTION 10B OF THE ACT. ORIGINALLY SECTION 10 B OF THE ACT DEFINED MANUFACTURE TO INCLUDE PROCESSING, BUT THE SAID DEFINITION WAS DELETED BY THE FINANCE ACT 2000. THE ISSUE WAS WHETHER WITH THE DISAPPEARANCE OF THE DEFINITION BENEFIT OF EXEMPTION FOR INCOME FROM PROCESSING UNDER SECTION 10B OF THE ACT PALES OUT. THE HIGH COURT AN SWERED IN NEGATIVE, HOLDING THAT DELETION OF DEFINITION WAS NOT FOR RESTRICTION BUT FOR FURTHER ENLARGEMENT OF THE MEANING. HE ALSO REFERRED TO ANOTHER DECISION OF HONBLE KERALA HIGH COURT, VIZ. , GIRNAR INDUSTRIES VS. CIT (2010) 230 CTR (KER) 401, (2010) 187 TAXMAN 136 , WHEREIN IT TOOK THE VIEW THAT IN THE ABSENCE OF DEFINITION OF MANUFACTURE IN 10A OF THE ACT, AID CAN BE TAKEN FROM ITS DEFINITION IN SECTION 10AA OF THE ACT. LD. COUNSEL FINALLY ARGUED THAT S INCE DEFINITION OF MANUFACTURE IN SECTION 10AA OF THE ACT INCLUDES REPAIR AS ONE OF THE PARAM ETERS OF THE EXPRESSION MANUFACTURE, IT IS ONLY FAIR, REASONABLE AND IRRESISTIBLE THAT REPAIR SHOULD ALSO BE TAKEN AS A PARAMETER OF MANUFACTURE FOR THE PURPOSE OF SECTION 80-IB OF T HE ACT. THERE IS NOTHING IN THE OBJECT OF SECTION 80-IB OF THE ACT, WHICH CAN BE SAID TO BE R EPUGNANT TO THE OBJECT OF SECTION 10AA OF THE ACT. BOTH PROVISIONS STAND ON EQUATION IN REGAR D TO THE BASIC NATURE OF THE OBJECTS, I.E., GROWTH OF INDUSTRY - ONE, FOR THE PURPOSE OF EXPORT DEVELOPMENT AND THE OTHER FOR THE PURPOSE OF REMOVING THE POCKETS OF INDUSTRIAL BACKWARDNESS OF THE NATIONAL ECONOMY. SO, THEY ARE PUBLIC INTEREST PROVISIONS AND FUNDAMENTALLY MARKED BY A COMMON TRAIT OF BETTERMENT OF NATIONAL ECONOMY. LD. COUNSEL FOR THE ASSESSEE FIN ALLY RELIED ON SETTLED LAW THAT A PROVISION FOR DEDUCTION, EXEMPTION OR RELIEF SHOULD BE INTERPRETE D LIBERALLY, REASONABLY AND IN FAVOUR OF ASSESSEE AND IT SHOULD BE SO CONSTRUED AS TO EFFECT UATE THE OBJECT OF LEGISLATURE AND NOT TO DEFEAT IT. HE RELIED ON CIT VS. GWALIOR RAYON SILK MFG. CO . LTD. 196 ITR 149 (SC), BAJAJ TEMPO V. CIT 196 ITR 188(SC); CIT V. U. P. COOPERATIVE FEDER ATION LTD. 176 ITR 435(SC); MYSORE MINERALS V. CIT 239 ITR 775 (SC); BROACH DISTT. COOPERATIVE COTTON SALES, GINNING AND PRESSING SOCIETY LTD. V. CIT, AHMEDABAD 177 ITR 418 (SC); CIT, MADRAS V. SOUTH ARCOT DISTRICT COOPERATIVE MARKETING SOCIETY LTD. 176 ITR 117(SC); AMRITSAR V. STRAWBOARD MANUFACTURING CO. LTD. 177 ITR 431(SC); CIT BOMBAY AND OTHERS V. MAHINDRA AND MAHINDRA LTD. AND OTHERS 144 ITR 225(SC); CBDT V. ADITYA V B IRLA 170 ITR 137(SC); CIT, CENTRAL-I CALCUTTA V. BIRLA BROS. PVT. LTD. 133 ITR 373(CAL); CIT V SALEM TEXTILES LTD 237 ITR 662(MAD); CIT, TAMIL NADU I V SIMPSON AND COMPANY 1 22 ITR 283(MAD); J.K.ABDUL JABBAR V CIT 237 ITR 389(MAD); CIT V K.S.CHANDRASEKARAN, S UNDARAM FINANCE LTD 216 ITR 455(MAD); CIT, GUJARAT I V. SATELLITE ENGINEERING L TD. 113 ITR 208(GUJ); CIT GUJARAT V. 14 ITA 1305/K/2008 RAJESH KR. DROLIA A.Y.05-06 GUJARAT STATE WAREHOUSING CORPORATION 124 ITR 282(G UJ); CIT V GUJARAT OIL AND ALLIED INDUSTRIES 201 ITR 325(GUJ); CIT V. MAHANT OIL INDU STRIES PVT. LTD 193 ITR 620(KAR); GOKULDAS EXPORT V. CIT 200 ITR 401(KAR); CIT V. BHA GEERATHA ENGINEERING LTD. 193 ITR 674(KER); CWT V. N. C. JOHN 233 ITR 475(KER); CIT V . TRINITY HOSPITAL 225 ITR 178(RAJ); JAMMU AND KASHMIR TOURISM DEVELOPMENT CORPORATION V . CIT 248 ITR 94(J&K). 10. THE LD. COUNSEL, WITHOUT PREJUDICE TO ABOVE ARG UMENTS AND CASE LAWS, ARGUED THAT IF AT ALL THERE ARE DECISIONS WHICH CREATE DOUBT, IT IS A SETTLED LAW THAT IN CASE OF DOUBTS THE CONSTRUCTION MOST BENEFICIAL OR FAVOURABLE TO ASSES SEE SHOULD BE ADOPTED EVEN IF IT RESULTS IN HIS OBTAINING A DOUBLE ADVANTAGE AND IF IT IS A CASE OF CONSIDERING RESPECTIVE HARDSHIPS OR INCONVENIENCES OF REVENUE AND ASSESSEE, THE COURT S HOULD LEAN IN FAVOUR OF ASSESSEE. FOR THIS, HE REFERRED TO DECISIONS OF CIT VS. VEGETABLE PRODUCTS LTD. (1973) 88 ITR 192 (SC), CIT V. SHIVARUDRAPPA 200 ITR 1, 6 , CIT VS. MULTI METALS L TD. (1991) 188 ITR 151 (RAJ), CIT VS. BHARAT NIDHI LTD. (1983) 141 ITR 740 (DEL) AND CIT VS. INTERNATIONAL COMPUTERS LTD. (1981) 131 ITR 1 (BOM), CENTRAL PROVINCES & BERAR PROVINCI AL CO-OPERATIVE BANK LTD. V. CIT (1946) 14 ITR 479, CIT V. MIRZA ATAULLAHA BAIG & ANR. (19 93) 202 ITR 291, OUDH SUGAR V. CIT 222 ITR 726, CIT V. LOKMAT NEWS PAPERS PVT. LTD. (1995) 216 ITR 199. IN VIEW OF THIS, LD. COUNSEL STATED THAT CUMULATIVE EFFECT OF JUDICIAL P RINCIPLES CLEARLY INDICATES CONTRA-INDICATION FOR THE CASE SOUGHT TO BE MADE OUT AGAINST ASSESSEE AND EVEN IN THE ABSENCE OF DEFINITION OF MANUFACTURE, LIBERAL CONSTRUCTION REQUIRES THAT REP AIR BY WAY OF AFTER-SALE SERVICE AS THE INTEGRAL PART OF MANUFACTURE. IT IS EMPIRIC AXIOM THAT ALL M ANUFACTURERS PROVIDE CUSTOMERS USING THEIR PRODUCTS AFTER-SALE SERVICE, SO TO CONSTRUE SUCH A FTER SALES SERVICE AS PART OF MANUFACTURING ACTIVITY IS QUITE REASONABLE. 11. LD. COUNSEL FOR THE ASSESSEE DISTINGUISHED CASE LAWS CITED BY REVENUE OF THE SUPREME COURT IN TAMIL NADU STATE TRANSPORT CORPORATION LTD . (SUPRA) AS WELL AS THE DECISION OF THE KERALA HIGH COURT IN VIJAYA RETREADERS (SUPRA), WHE REIN IT HAS BEEN HELD THAT TYRE-RETREADING IS NOT PRODUCTION. IN THE ABOVE CASES ASSESSEES WERE N OT THE MANUFACTURERS OF TYRES OR RETREAD RUBBER. THEY WERE PURCHASING RETREAD RUBBER FROM TY RE MANUFACTURERS AND PASTING THE SAME ON THE WORN TYRES. AS SUCH THEY WERE NOT MANUFACTURERS . THIS DECISION IS NON- GERMANE TO THE PRESENT ISSUE. IN VIEW OF THIS FACT, HE STATED THAT REPAIR IN ASSESSEES CASE IS AFTER-SALE SERVICE AS ALL MANUFACTURERS UNIVERSALLY OFFER TO THEIR CUSTOM ERS. HE ALSO DISTINGUISHED CASE RELISH FOODS (SUPRA) STATING THAT IT HAS BEEN HELD THAT DECAPITA TING, DRESSING, DEVEINING AND FREEZING SHRIMPS AND PRAWNS IS NO PROCESS OF MANUFACTURING OR PRODUC ING. THIS IS ALSO NOT RELEVANT. HERE THE ASSESSEE IS ADMITTEDLY A MANUFACTURER OF BALL PEN M OULDS. THE ASSESSEE UNDERTAKES REPAIR OF THE MOULDS MANUFACTURED BY IT AS AFTER-SALES SERVICE. H E ALSO DISTINGUISHED ANOTHER CASE CITED BY 15 ITA 1305/K/2008 RAJESH KR. DROLIA A.Y.05-06 REVENUE OF GEM INDIA MANUFACTURING CO. (SUPRA) WHER E CUTTING AND POLISHING DIAMOND WAS HELD AS NOT AMOUNTING TO MANUFACTURE OR PRODUCTION. THIS CASE IS ALSO NOT APPLICABLE TO THE ASSESSEE BECAUSE THE ASSESSEE IS ADMITTEDLY A MANUF ACTURER OF MOULDS. THE NEXT CASE RELIED UPON BY THE REVENUE IS LIBERTY INDIA (SUPRA), WHERE IN IT HAS BEEN HELD THAT THE WORD DERIVED FROM IS NARROWER THAN THE WORDS ATTRIBUTABLE TO. THIS CASE IS ALSO NOT APPLICABLE AS THE ENTIRE PROFIT OF THE ASSESSEE HAS BEEN DIRECTLY DERIVED FR OM MANUFACTURING ACTIVITY ONLY. THE NEXT CASE RELIED UPON BY THE REVENUE IS TARA AGENCIES (SUPRA) . THIS CASE RELATED TO BLENDING OF TEA. AT THE TIME OF THE JUDGMENT DEFINITION OF THE WORD MANUFAC TURE WAS NOT AVAILABLE IN THE ACT AND AFTER ITS INCORPORATION KERELA HIGH IN THE CASE OF TATA T EA LTD (SUPRA) HAS HELD TEA BLENDING TO BE MANUFACTURE AFTER DISTINGUISHING THE CASE OF TARA A GENCIES (SUPRA). MOREOVER ASSESSEE IS NOT CARRYING ON BLENDING ACTIVITY. THE NEXT CASE RELIED ON IS DXN HERBAL MANUFACTURING (INDIA) PVT. LTD. (SUPRA), WHEREIN THE QUESTION AROSE WHETH ER MIXING MUSHROOM POWDER AND FILLING IN CAPSULES WAS CONSTRUABLE AS MANUFACTURE AND TRIBUNA L ANSWERED IN NEGATIVE. THE CASE OF THE ASSESSEE IS NOT THAT OF ANY MIXING ACTIVITY. THE AS SESSEE IS VERY MUCH CARRYING ON MANUFACTURING ACTIVITY. 12. LD. COUNSEL FOR THE ASSESSEE FURTHER DISTINGUIS HED THE CASE LAW OF HONBLE DELHI HIGH COURT IN THE CASE OF HONDA SIEL POWER PRODUCTS LTD. (SUPRA), WHEREIN THE DELHI HIGH COURT HELD THAT SALE OF IMPORTED SPARE PARTS FOR AFTER SALE SE RVICE DOES NOT AMOUNT TO MANUFACTURE. IN THIS CASE HONDA SIEL WAS IMPORTING COMPLETE GENSETS, SPA RE PARTS AND ALSO ASSEMBLING FEW GENSETS. THE COURT HELD THAT PROFIT FROM SALE OF IMPORTED SP ARE PARTS CANNOT BE HELD TO BE PROFIT FROM MANUFACTURING ACTIVITY. HOWEVER IN THE CASE OF THE ASSESSEE IT SELLS PARTS MANUFACTURED BY ITSELF. AS SUCH THIS CASE ALSO DOES NOT APPLY TO THE ASSESS EE. HE TRIED TO NEGATE THE ARGUMENT OF REVENUE THAT TAX DEDUCTION AT SOURCE IS A PROOF THA T PAYMENTS MADE BY PARTIES ARE NOT FOR SALE OF MANUFACTURED GOODS BUT FOR REPAIR AND THIS INFERENC E IS TOTALLY INCONSISTENT WITH REALITIES. THE ASSESSEE CLAIMED THAT MANUFACTURE IS PART OF JOB WO RK, I.E. OF MATERIALS SUPPLIED BY OTHER PARTIES FOR MOULDS TO BE MANUFACTURED BY ASSESSEE. THE ASSI GNMENT OF SUCH JOB WORK IS TREATED AS CONTRACT AND TAX DEDUCTION HAS NO BEARINGS, WHETHER ASSESSEE RECEIVED PAYMENTS FOR JOB WORK DONE OR REPAIR WORK. TAX DEDUCTION PROVES NOTHING T O DISENTITLE ASSESSEE FROM BENEFIT OF DEDUCTION U/S 80-IB OF THE ACT. IN VIEW OF THE ABOV E, SINCE THE ASSESSEE IS NOT CARRYING OUT ANY REPAIR WORK, IT IS THE MANUFACTURER OF MOULDS AND M OULD PARTS AND PROVIDING AFTER SALES SERVICE TO ITS CUSTOMERS, THE ENTIRE PROFIT IS DERIVED FROM MANUFACTURING ACTIVITY ONLY AND AS SUCH IS ENTITLED TO DEDUCTION U/S 80-IB OF THE ACT ON ITS E NTIRE INCOME. SO, WHOLE DISPUTE IS SUPERFLUOUS. MOREOVER IN VIEW OF SETTLED PRINCIPLE OF LAW TO INT ERPRET PROVISIONS OF DEDUCTION AND EXEMPTIONS OR RELIEF LIBERALLY, REASONABLY AND IN F AVOUR OF ASSESSEE SO AS TO EFFECTUATE THE OBJECT OF LEGISLATURE AND NOT TO DEFEAT IT AND IN CASE OF DOUBTS THE CONSTRUCTION MOST BENEFICIAL OR 16 ITA 1305/K/2008 RAJESH KR. DROLIA A.Y.05-06 FAVOURABLE TO THE ASSESSEE SHOULD BE ADOPTED EVEN I F IT RESULTS IN HIS OBTAINING A DOUBLE ADVANTAGE, THE ASSESSEE SHOULD NOT BE DENIED DEDUCT ION U/S 80-IB OF THE ACT ON JOB WORK. 13. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUG H FACTS AND CIRCUMSTANCES OF THE CASE. THE ADMITTED FACTS ARE THAT ASSESSEE IS ENGAGED IN MANUFACTURING OF MOULDS AND ALSO CARRYING ON REPAIRS AND MAINTENANCE OF SAME MOULDS SOLD TO B UYERS. THE ASSESSEES TOTAL RECEIPT FROM JOB WORK CHARGES INCLUDING REPAIRING AND SERVICES A RE AT RS.96,01,410/-. THE ASSESSEE CLAIMED ENTIRE JOB WORK CHARGES INCLUDING REPAIRING AND SER VICES AS DEDUCTION U/S. 80-IB OF THE ACT AND ASSESSING OFFICER DISALLOWED DEDUCTION U/S. 80-IB O F THE ACT FROM JOB WORK CHARGES AT RS.16,05,356/- OUT OF PROFIT FROM JOB CHARGES DISCL OSED AT RS.35,32,470/- ON THE BASIS THAT THE SAME COMPRISES RECEIPTS OF REPAIRS AND MAINTENANCE. NOW, ABOVE QUESTION REFERRED WHETHER INCOME EARNED FROM JOB WORK WHICH INCLUDES REPAIRS AND MAINTENANCE IS TO BE ALLOWED DEDUCTION U/S. 80-IB OF THE ACT. FIRST OF ALL, WE HAVE TO GO THROUGH PROVISIONS OF SECTION 80-IB OF THE ACT. THE RELEVANT PROVISION OF SECTION 80-I B (1) AND (4) OF THE ACT READS AS UNDER: DEDUCTION IN RESPECT OF PROFITS AND GAINS FROM CERT AIN INDUSTRIAL UNDERTAKINGS OTHER THAN INFRASTRUCTURE DEVELOPMENT UNDERTAKINGS. 80-IB. (1) WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INC LUDES ANY PROFITS AND GAINS DERIVED FROM ANY BUSINESS REFERRED TO IN SUB-SECTIO NS (3) TO 41 [(11), (11A) AND (11B)] (SUCH BUSINESS BEING HEREINAFTER REFERRED TO AS THE ELIGIBLE BUSINESS), THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF TH IS SECTION, BE ALLOWED, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION FROM SUCH PROFITS AND GAINS OF AN AMOUNT EQUAL TO SUCH PERCENTAGE AND FOR SUCH NUMBER OF ASS ESSMENT YEARS AS SPECIFIED IN THIS SECTION. (4) THE AMOUNT OF DEDUCTION IN THE CASE OF AN INDU STRIAL UNDERTAKING IN AN INDUSTRIALLY BACKWARD STATE SPECIFIED IN THE EIGHTH SCHEDULE SHA LL BE HUNDRED PER CENT OF THE PROFITS AND GAINS DERIVED FROM SUCH INDUSTRIAL UNDERTAKING FOR FIVE ASSESSMENT YEARS BEGINNING WITH THE INITIAL ASSESSMENT YEAR AND THEREAFTER TWE NTY-FIVE PER CENT (OR THIRTY PER CENT WHERE THE ASSESSEE IS A COMPANY) OF THE PROFITS AND GAINS DERIVED FROM SUCH INDUSTRIAL UNDERTAKING SECTION 80-IB WAS INTRODUCED W.E.F. 1.4.2000 BY THE FINANCE ACT, 1999 AS A RESULT OF SUBSTITUTION OF THE THEN EXISTING SECTION 80-IA OF THE ACT. THE SCOPE AND EFFECT OF THE INTRODUCTION OF SECTION 80-IB BY THE FINANCE ACT, 1 999 HAS BEEN CLARIFIED IN THE DEPARTMENTAL CIRCULAR NO.779 DATED 14 TH SEPTEMBER, 1999, WHICH WAS FURTHER AMENDED BY FINA NCE ACT, 2000 W.E.F. 1.4.2001, BY FINANCE ACT, 2001 W.E.F. 1.4.20 02, BY FINANCE ACT, 2002 W.E.F. 1.4.2003, BY FINANCE ACT, 2003 WR.E.F. 1.4.2004 AND BY FINANCE A CT, 2004 W.E.F. 1.4.2005. THE SCOPE AND EFFECT OF THE ABOVE STATED AMENDMENTS HAVE BEEN MAD E CLEAR BY BOARD CIRCULAR NO.795 DATED 9 TH AUGUST, 2000 VIDE PARA 37, 37.2, 37.3 AND 37.4 AS U NDER: 37. TAX HOLIDAY IN RESPECT OF UNDERTAKINGS SET UP IN INDUSTRIALLY BACKWARD STATES AND UNION TERRITORIES OF THE EIGHTH SCHEDULE AND INDUST RIALLY BACKWARD DISTRICTS EXTENDED UP 17 ITA 1305/K/2008 RAJESH KR. DROLIA A.Y.05-06 TO 31 ST MARCH, 2002.- 37.1 UNDER THE EXISTING PROVISIONS O F SECTION 80-IB OF THE INCOME- TAX ACT, 1961, A DEDUCTION IS ALLOWED, IN COMPUTING THE TAXABLE INCOME, IN RESPECT OF PROFITS DERIVED FROM A NEW INDUSTRIAL UNDERTAKING O R THE BUSINESS OF A HOTEL. 37.2 FOR ENCOURAGING INDUSTRIALIZATION IN INDUSTRI ALLY BACKWARD STATES, THE FINANCE ACT, 1993, PROVIDED FOR A FIVE YEAR TAX HOLIDAY FOR INDU STRIAL UNDERTAKINGS SET UP IN INDUSTRIALLY BACKWARD STATES AND UNION TERRITORIES SPECIFIED IN THE EIGHTH SCHEDULE, WHICH START MANUFACTURE OR PRODUCTION DURING THE PE RIOD BEGINNING ON THE 1ST DAY OF APRIL, 1993, BUT BEFORE THE 31ST DAY OF MARCH, 2000 . AFTER THE FIRST FIVE YEARS, A DEDUCTION OF 30 PER CENT OF PROFITS IN THE CASE OF COMPANIES (25 PER CENT. IN THE CASE OF OTHER ASSESSEES) IS ALLOWED FOR THE SUBSEQUENT FIVE YEARS . SIMILARLY, A FIVE YEAR TAX HOLIDAY IS AVAILABLE TO UNDERTAKINGS SET UP IN NOTIFIED INDUST RIALLY BACKWARD DISTRICTS OF CATEGORY A AND A THREE YEAR TAX HOLIDAY TO THOSE SET UP IN INDUSTRIALLY BACKWARD DISTRICTS OF CATEGORY B, WHICH BEGIN MANUFACTURE OR PRODUCTION AFTER 1ST OCTOBER, 1994, BUT ON OR BEFORE 31ST MARCH, 2000. 37.3 THE FINANCE ACT, 2000, EXTENDS THE TAX HOLIDAY TO UNDERTAKINGS SET UP IN INDUSTRIALLY BACKWARD STATES AND UNION TERRITORIES AS SPECIFIED IN THE EIGHTH SCHEDULE, WHICH START MANUFACTURE/PRODUCTION EVEN AFTER 31ST MARCH, 2000, BUT ON OR BEFORE 31 ST MARCH, 2002. IT ALSO SEEKS TO EXTEND THE TAX HOLIDAY TO UNDERTAK INGS SET UP IN INDUSTRIALLY BACKWARD DISTRICTS ON OR BEFORE 31ST MARCH, 2002. 37.4 THE AMENDMENTS WILL TAKE EFFECT FROM 1ST APRIL , 2001, AND WILL, ACCORDINGLY, APPLY IN RELATION TO THE ASSESSMENT YEAR 2001-2002 AND SUBSE QUENT YEARS. [SECTION 39) WE FIND THAT THE EXPRESSION USED IN SECTION 80-IB OF THE ACT IS WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INCLUDES ANY PROFITS AND GAINS DERIV ED FROM ANY ELIGIBLE BUSINESS IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, BE ALLOWED , IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION FROM SUCH PROFITS AND GAI NS., IT MEANS THAT THE PURPOSE FOR PROVIDING DEDUCTION FROM BUSINESS PROFITS U/S. 80-I B OF THE ACT WAS TO ENCOURAGE INDUSTRIAL ACTIVITY IN INDIA AND IT IS INCONCEIVABLE THAT DEDU CTIONS SHOULD BE MADE AVAILABLE IN RESPECT TO PROFITS AND GAINS WHICH ARE NOT DERIVED FROM AN ACT IVITY HAVING A DIRECT NEXUS TO THE INDUSTRIAL ACTIVITY AS CONTEMPLATED IN THIS SECTION. THE ENTI RE SECTION HAS TO BE READ AS A WHOLE AND INTERPRETATION PLACED THEREON HAS TO BE FIT THE OVE RALL SCHEME OF THE PROVISION, WHICH IS TO ENCOURAGE INDUSTRIAL ACTIVITY IN INDIA AND IF THE I NTERPRETATION SOUGHT TO BE PLACED BY LD. COUNSEL FOR ASSESSEE IS ACCEPTED, THEN IT MIGHT POS SIBLY LEAD TO A SITUATION WHERE PROFITS FROM REPAIRS AND MAINTENANCE APART FROM JOB WORK FOR WHI CH INDUSTRIAL UNDERTAKING HAS BEEN SET UP FOR MANUFACTURING MAY UNDERTAKE VERY LITTLE MANUFAC TURING IN AN ASSESSMENT YEAR BUT ASSESSEE YET CLAIMED DEDUCTION FROM THE PROFITS AND GAINS OF BUSINESS INCLUDING REPAIRS AND MAINTENANCE. WE FIND IN THE CONTEXT OF SECTION 80-IB OF THE ACT AND THAT OF SECTION 80-HH AND SECTION 80-I OF THE ACT ARE INASMUCH AS ARE IN PARAMETRIA, BECAUSE IN BOTH SECTIONS 80-HH AND 80-I OF THE ACT USES THE EXPRESSION PROFITS AND GAINS DERIVED FROM AN INDUSTRIAL UNDERTAKING, THE BURDEN IS ON ASSESSEE TO SHOW THAT INCOME EARNED FROM AN ACTIVIT Y, THE PROFITS FROM WHICH ARE CLAIMED TO QUALIFY FOR DEDUCTION HAS IMMEDIATE AND DIRECT NEXU S TO ESSENTIAL ACTIVITY OF THE INDUSTRIAL UNDERTAKING. IN THIS CONTEXT, HONBLE APEX COURT I N THE CASE OF PANDIAN CHEMICALS LTD. VS. 18 ITA 1305/K/2008 RAJESH KR. DROLIA A.Y.05-06 CIT (2003) 262 ITR 278 REITERATES THIS DISTINCTION AND INSIST THAT ONLY SUCH BUSINESS PROFIT THAT HAVE A DIRECT NEXUS TO THE ESSENTIAL BUSINESS ACTIV ITY OF ASSESSEE, CAN QUALIFY FOR DEDUCTION U/S. 80-HH OF THE ACT. HONBLE APEX COURT IN PANDIAN CH EMICALS LTD. (SUPRA), AFFIRMING THE DECISION OF HONBLE MADRAS HIGH COURT IN CIT VS. PA NDIAN CHEMICALS LTD. (1998) 233 ITR 497 (MAD), HELD AS UNDER: THE HIGH COURT REJECTED THE SUBMISSION OF THE APPE LLANT BY RELYING UPON THE DECISION OF THIS COURT IN CAMBAY ELECTRIC SUPPLY INDUSTRIAL CO. LTD. V. CIT [1978] 113 ITR 84, WHERE THIS COURT HAD CLEARLY STATED THAT THE EXPRES SION DERIVED FROM HAD A NARROWER CONNOTATION THAN THE EXPRESSION ATTRIBUTABLE TO (PAGE 93) : IN THIS CONNECTION, IT MAY BE POINTED OUT THAT WHE NEVER THE LEGISLATURE WANTED TO GIVE A RESTRICTED MEANING IN THE MANNER S UGGESTED BY THE LEARNED SOLICITOR- GENERAL, IT HAS USED THE EXPRESSION DERIVED FROM, AS, FOR INSTANCE, IN SECTION 80J. IN OUR VIEW, SINCE THE EXPRESSION OF WIDER IMPORT, NAM ELY, ATTRIBUTABLE TO, HAS BEEN USED, THE LEGISLATURE INTENDED TO COVER RECEIPTS FROM SOU RCES OTHER THAN THE ACTUAL CONDUCT OF THE BUSINESS OF GENERATION AND DISTRIBUTION OF ELEC TRICITY. THE WORD DERIVED HAS BEEN CONSTRUED AS FAR BACK IN 1948 BY THE PRIVY COUNCIL IN CIT V. RAJA BAHADUR KAMAKHAYA NARAYAN SINGH [1948] 16 ITR 325 WHEN IT SAID (PAGE 328) : THE WORD DERIVED IS NOT A TERM OF ART. ITS USE IN THE DEFINITION INDEED DEMANDS AN ENQUIRY INTO THE GENEALOGY OF THE PRODUC T. BUT THE ENQUIRY SHOULD STOP AS SOON AS THE EFFECTIVE SOURCE IS DISCOVERED. IN THE GENEAOLOGICAL TREE OF THE INTEREST LAND INDEED APPEARS IN THE SECOND DEGREE, BUT THE IMMEDI ATE AND EFFECTIVE SOURCE IS RENT, WHICH HAS SUFFERED THE ACCIDENT OF NON-PAYMENT. AND RENT IS NOT LAND WITHIN THE MEANING OF THE DEFINITION. THIS DEFINITION WAS APPROVED AND REITERATED IN 195 5 BY A CONSTITUTION BENCH OF THIS COURT IN THE DECISION OF MRS. BACHA F. GUZDAR V. CI T [1955] 27 ITR 1 AT PAGE 7. IT IS CLEAR, THEREFORE, THAT THE WORD DERIVED FROM IN S ECTION 80HH OF THE INCOME-TAX ACT, 1961, MUST BE UNDERSTOOD AS SOMETHING WHICH HAS DIR ECT OR IMMEDIATE NEXUS WITH THE APPELLANT'S INDUSTRIAL UNDERTAKING. ALTHOUGH ELECT RICITY MAY BE REQUIRED FOR THE PURPOSES OF THE INDUSTRIAL UNDERTAKING, THE DEPOSIT REQUIRED FOR ITS SUPPLY IS A STEP REMOVED FROM THE BUSINESS OF THE INDUSTRIAL UNDERTA KING. THE DERIVATION OF PROFITS ON THE DEPOSIT MADE WITH ELECTRICITY BOARD CANNOT BE S AID TO FLOW DIRECTLY FROM THE INDUSTRIAL UNDERTAKING ITSELF. THE LEARNED COUNSEL APPEARING ON BEHALF OF THE APP ELLANT HAS REFERRED TO SEVERAL DECISIONS OF THE MADRAS HIGH COURT IN ORDER TO CONT END THAT THE WORD DERIVED FROM COULD BE CONSTRUED TO INCLUDE SITUATIONS, WHERE THE INCOME AROSE FROM SOMETHING HAVING A CLOSE CONNECTION WITH THE INDUSTRIAL UNDER - TAKING ITSELF. ALL THE DECISIONS CITED BY THE APPELLANT HAVE BEEN CONSIDERED BY THE MADRAS HIGH COURT IN THE CASE OF PANDIAN CHEMICALS LTD. [1998] 233 ITR 497. WE SEE N O REASON TO DISAGREE WITH THE REASONING GIVEN BY THE HIGH COURT IN PANDIAN CHEMI CALS LTD.'S CASE [1998] 233 ITR 497 WITH RESPECT TO THOSE DECISIONS TO HOLD THAT TH EY DO NOT IN ANY WAY ALLOW THE WORD DERIVED IN SECTION 80HH TO BE CONSTRUED IN THE M ANNER CONTENDED BY THE APPELLANT. THE LEARNED COUNSEL FOR THE APPELLANT THEN CONTEND ED THAT HAVING REGARD TO THE OBJECT WITH WHICH SECTION 80HH WAS INTRODUCED IN THE STATU TE BOOK, THIS COURT SHOULD GIVE A LIBERAL INTERPRETATION TO THE WORDS IN A MANNER SO AS TO ALLOW SUCH OBJECT TO BE FULFILLED. THE RULES OF INTERPRETATION WOULD COME I NTO PLAY ONLY IF THERE IS ANY DOUBT WITH REGARD TO THE EXPRESS LANGUAGE USED. WHERE TH E WORDS ARE UNEQUIVOCAL, THERE IS NO SCOPE FOR IMPORTING ANY RULE OF INTERPRETATION A S SUBMITTED BY THE APPELLANT. IN THE 19 ITA 1305/K/2008 RAJESH KR. DROLIA A.Y.05-06 CIRCUMSTANCES OF THE CASE, WE AFFIRM THE DECISION O F THE HIGH COURT AND DISMISS THE APPEAL WITHOUT ANY ORDER AS TO COSTS. WE FIND THAT HONBLE APEX COURT HAS CONSIDERED ITS OWN DECISION IN THE CASE OF CAMBAY ELECTRIC SUPPLY INDUSTRIAL CO. LTD. (SUPRA) AS WELL AS THE DECISION OF MRS. BACHA F. GUZDAR (SUPRA). AND ALSO OF RAJA BAHADUR KAMAKHYA NARAYAN SINGH (SUPRA), WHEREIN THE DEFINITION OF THE WORD DERIVED WAS DISCUSSED AND THE SAME WAS R EITERATED BY CONSTITUTION BENCH OF HONBLE APEX COURT IN MRS. BACHA F. GUZDAR (SUPRA). 14. WE FURTHER FIND FROM THE DECISION OF HONBLE AP EX COURT IN THE CASE OF CIT VS. STERLING FOOD (1999) 237 ITR 579(SC), WHEREIN THE ISSUE WAS WHETHER THE INCOME DERIVED BY ASSESSEE BY SALE OF IMPORT ENTITLEMENTS WAS PROFIT AND GAIN DERIVED FROM ITS INDUSTRIAL UNDERTAKING OF PROCESSING SEA FOOD. HONBLE APEX C OURT OBSERVED THAT THE DIVISION BENCH OF THE HIGH COURT CAME TO THE CONCLUSION THAT INCOME W HICH THE ASSESSEE HAD MADE BY SELLING THE IMPORT ENTITLEMENTS WAS NOT A PROFIT AND GAIN WHICH IT HAD DERIVED FROM ITS INDUSTRIAL UNDERTAKING. FURTHER, THE DIVISION BENCH OF THE HI GH COURT OBSERVED THAT TO OBTAIN BENEFIT OF SECTION 80HH, THE ASSESSEE HAD TO ESTABLISH THAT TH E PROFITS AND GAINS WERE DERIVED FROM ITS INDUSTRIAL UNDERTAKING AND IT WAS NOT JUST SUFFICIE NT THAT A COMMERCIAL CONNECTION WAS ESTABLISHED BETWEEN THE PROFITS EARNED AND THE INDU STRIAL UNDERTAKING. THE INDUSTRIAL UNDERTAKING ITSELF HAD TO BE THE SOURCE OF PROFIT A ND THE BUSINESS OF THE INDUSTRIAL UNDERTAKING HAD DIRECTLY TO YIELD THAT PROFIT. THE INDUSTRIAL UNDERTAKING HAD THE DIRECT SOURCE OF THAT PROFIT AND NOT A MEANS TO EARN ANY OTHER PROFIT. ACCORDIN GLY, IN IMPORT ENTITLEMENTS, THE SOURCE REFERABLE TO THE PROFITS AND GAINS ARISING OUT OF T HE SALE PROCEEDS OF IMPORT ENTITLEMENTS WAS THEREFORE, THE SCHEME OF THE CENTRAL GOVERNMENT AND NOT THAT OF INDUSTRIAL UNDERTAKING. HONBLE APEX COURT FINALLY HELD AS UNDER: OUR ATTENTION WAS ALSO INVITED TO THE JUDGMENT OF THIS COURT IN NATIONAL ORGANIC CHEMICAL INDUSTRIES LTD. V. COLLECTOR OF CENTRAL EX CISE [1997] 106 STC 467. THE RELEVANT PORTION OF THE JUDGMENT IS CONTAINED IN PA RAGRAPHS 10, 11 AND 12 AND THEY READ THUS (PAGE 470): 10. THE DICTIONARIES STATE THAT THE WORD DERIVE IS USUALLY FOLLOWED BY THE WORD FROM, AND IT MEANS: GET OR TRACE FROM A SOURCE; ARISE FRO M, ORIGINATE IN; SHOW THE ORIGIN OR FORMATION OF. 11. THE USE OF THE WORDS DERIVED FROM IN ITEM 11 -AA(2) SUGGESTS THAT THE ORIGINAL SOURCE OF THE PRODUCT HAS TO BE FOUND. THUS, AS A M ATTER OF PLAIN ENGLISH, WHEN IT IS SAID THAT ONE WORD IS DERIVED FROM ANOTHER, OFTEN IN AN OTHER LANGUAGE, WHAT IS MEANT IS THAT THE SOURCE OF THAT WORD IS ANOTHER WORD, OFTEN IN ANOTHER LANGUAGE. AS AN ILLUSTRATION, THE WORD DEMOCRACY IS DERIVED FROM THE GREEK WORD DEMOS THE PEOPLE, AND MOST DICTIONARIES WILL SO STATE. THAT IS THE ORDINARY ME ANING OF THE WORDS DERIVED FROM AND THERE IS NO REASON TO DEPART FROM THAT ORDINARY MEA N- ING HERE. 20 ITA 1305/K/2008 RAJESH KR. DROLIA A.Y.05-06 12. CRUDE PETROLEUM IS REFINED TO PRODUCE RAW NAPH THA. RAW NAPHTHA IS FURTHER REFINED, OR CRACKED TO PRODUCE THE SAID PRODUCTS. THIS IS NO T CONTROVERTED. IT SEEMS TO US TO MAKE NO DIFFERENCE THAT THE APPELLANTS BUY THE RAW NAPHT HA FROM OTHERS. THE QUESTION IS TO BE JUDGED REGARDLESS OF THIS, AND THE QUESTION IS WHET HER THE INTERVENTION OF THE RAW NAPHTHA WOULD JUSTIFY THE FINDING THAT THE SAID PRO DUCTS ARE NOT DERIVED FROM REFINING OF CRUDE PETROLEUM. THE REFINING OF CRUDE PETROLEUM P RODUCES VARIOUS PRODUCTS AT DIFFERENT STAGES. RAW NAPHTHA IS ONE SUCH STAGE. TH E FURTHER REFINING, OR CRACKING, OF RAW NAPHTHA RESULTS IN THE SAID PRODUCTS. THE SOUR CE OF THE SAID PRODUCTS IS CRUDE PETROLEUM. THE SAID PRODUCTS MUST THEREFORE, BE HE LD TO HAVE BEEN DERIVED FROM CRUDE PETROLEUM. WE DO NOT THINK THAT THE SOURCE OF THE IMPORT ENTI TLEMENTS CAN BE SAID TO BE THE INDUSTRIAL UNDERTAKING OF THE ASSESSEE. THE SOURCE OF THE IMPORT ENTITLEMENTS CAN, IN THE CIRCUMSTANCES, ONLY BE SAID TO BE THE EXPORT PROMOT ION SCHEME OF THE CENTRAL GOVERNMENT WHEREUNDER THE EXPORT ENTITLEMENTS BECOM E AVAILABLE. THERE MUST BE, FOR THE APPLICATION OF THE WORDS DERIVED FROM, A DIRE CT NEXUS BETWEEN THE PROFITS AND GAINS AND THE INDUSTRIAL UNDERTAKING. IN THE INSTAN T CASE, THE NEXUS IS NOT DIRECT BUT ONLY INCIDENTAL. THE INDUSTRIAL UNDERTAKING EXPORTS PROC ESSED SEA FOOD. BY REASON OF SUCH EXPORT, THE EXPORT PROMOTION SCHEME APPLIES. THEREU NDER, THE ASSESSEE IS ENTITLED TO IMPORT ENTITLEMENTS, WHICH IT CAN SELL. THE SALE CO NSIDERATION THEREFROM CANNOT, IN OUR VIEW, BE HELD TO CONSTITUTE A PROFIT AND GAIN DERIV ED FROM THE ASSESSEES INDUSTRIAL UNDERTAKING. 15. THE LD. COUNSEL FOR THE ASSESSEES ARGUMENT THA T AN INDUSTRIAL UNDERTAKING ALSO TO UNDERTAKE ACTIVITY OF REPAIRING AND SERVICING, WHIC H IN TURN COULD COMPLETE THE COMPANYS PRODUCT PROFILE SO THAT CUSTOMERS ARE OFFERED COMPR EHENSIVE SERVICES INCLUDING AFTER SALE SERVICES. BUT WE CANNOT BUY THIS ARGUMENT OF THE LD . COUNSEL FOR THE ASSESSEE AS SERVICE AND MAINTENANCE IS NOT AN INTEGRAL PART OF MANUFACTURIN G ACTIVITY OF INDUSTRIAL UNDERTAKING AND AS IS CLEAR FROM THE OPENING WORD OF SECTION 80-IB OF THE ACT THAT DEDUCTION IN RESPECT OF PROFITS AND GAINS FROM CERTAIN INDUSTRIAL UNDERTAKING IS TO BE ALLOWED UNDER THE PROVISIONS OF SECTION 80-IB OF THE ACT WHILE COMPUTING TAXABLE INCOME IN RESPEC T OF PROFITS DERIVED FROM AN INDUSTRIAL UNDERTAKING AND NOT FROM ANY OTHER ACTIVITY WHICH H AS NO IMMEDIATE OR DIRECT NEXUS TO THE ESSENTIAL ACTIVITY OF THE INDUSTRIAL UNDERTAKING. SECTION 80-IB OF THE ACT USES THE OPENING WORD THAT WHERE THE GROSS TOTAL INCOME OF ASSESSEE INCLU DES ANY PROFITS AND GAINS DERIVED FROM ANY BUSINESS AND THE DEDUCTION UNDER THIS PROVISION BE ALLOWED IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE FROM SUCH PROFITS AND GAINS OF AN AMOU NT EQUAL TO SUCH PERCENTAGE AND FOR SUCH NUMBER OF ASSESSMENT YEARS AS SPECIFIED IN THIS SEC TION. THE HONBLE APEX COURT HAS ALSO DRAWN A DISTINCTION BETWEEN THE EXPRESSION DERIVED FROM AND ATTRIBUTABLE TO IN THE CASE OF CAMBAY ELECTRIC SUPPLY CO. LTD VS. CIT (1978) 113 I TR 84(SC), WHEREIN IT IS HELD THAT THE EXPRESSION ATTRIBUTABLE TO WAS WIDER IN IMPORT T HAN THE EXPRESSION DERIVED FROM. THE EXPRESSION OF WIDER IMPORT, NAMELY, ATTRIBUTABLE TO , WAS USED WHEN THE LEGISLATURE INTENDED TO COVER RECEIPTS FROM SOURCES OTHER THAN THE ACTUAL C ONDUCT OF THE BUSINESS. BUT IN THE PRESENT CASE BEFORE US, THE ASSESSEES SOURCE OF INCOME IS FROM REPAIRS AND MAINTENANCE I.E. AFTER SALE SERVICES AND IT MAY HAVE COMMERCIAL CONNECTION BETW EEN THE PROFITS EARNED AND THE INDUSTRIAL UNDERTAKING BUT INDUSTRIAL UNDERTAKING ITSELF IS NO T THE SOURCE OF THIS PROFIT. THIS PROFIT FROM 21 ITA 1305/K/2008 RAJESH KR. DROLIA A.Y.05-06 REPAIR AND MAINTENANCE EARNED BY ASSESSEE IS NOT A DIRECT YIELD FROM INDUSTRIAL UNDERTAKING AS THE WORD USED IN SECTION 80-IB OF THE ACT OF PROFIT S AND GAINS DERIVED FROM. 16. ANOTHER FACET OF THE ARGUMENT MADE BY THE ASSES SEE IS THAT SINCE THE DEFINITION OF MANUFACTURE IN SECTION 10AA INCLUDES REPAIRS IS ONE OF THE PARAMETERS OF THE EXPRESSION MANUFACTURE, WE HAVE CONSIDERED THAT THE DEFINITIO N OF MANUFACTURE HAS BEEN BODILY LIFTED INTO SECTION 2(R) OF THE SEZ ACT, 2005 W.E.F. 10.2.2006. WE HAVE GONE THROUGH THE PROVISIONS OF SECTION 10AA(9) AND EXPLANATION (1) BELOW SECTION 1 0AA(9) OF THE ACT AND FOUND THAT THIS EXPLANATION IS FOR THE PURPOSE OF THIS SECTION ONLY AND IT CANNOT BE ENLARGED TO OTHER CHAPTERS OF THIS ACT. THE RELEVANT EXPLANATION (1) STARTS AS U NDER: EXPLANATION 1 FOR THE PURPOSES OF THIS SECTION,- AND RELEVANT DEFINITION OF MANUFACTURE READS AS U NDER: (III) MANUFACTURE SHALL HAVE THE SAME MEANING AS ASSIGN ED TO IT IN CLAUSE OF SECTION 2 OF THE SPECIAL ECONOMIC ZONES ACT, 2005. FROM THE ARGUMENTS OF LD. COUNSEL FOR ASSESSEE IT I S CLEAR THAT THE EXPLANATION 1, ABOVE REFERRED, IS FOR THE PURPOSE OF THIS SECTION ONLY A ND IT CANNOT BE USED ELSEWHERE IN THE ACT AS SECTION 10AA IS A CODE IN ITSELF AND IT GIVES COMPL ETE EXEMPTION TO THE INCOME EARNED BY UNITS IN SEZS. THE INCOME EARNED FROM UNITS IN SEZS DO N OT FORM PART OF TOTAL INCOME U/S. 10AA OF THE ACT, WHEREAS U/S. 80-IB OF THE ACT THE DEDUCTIO N IS TO BE ALLOWED WHERE GROSS TOTAL INCOME OF ASSESSEE INCLUDES ANY PROFITS AND GAINS DERIVED FROM BUSINESS PROFITS OF INDUSTRIAL UNDERTAKING WHILE COMPUTING THE TOTAL INCOME OF TH E ASSESSEE. WE ARE OF THE VIEW THAT INCLUSION OF THE DEFINITION OF MANUFACTURE AS ASS IGNED IN CLAUSE (R) OF SECTION 2 OF THE SEZ ACT, 2005 IN SECTION 10AA OF THE ACT, WILL NOT APPL Y TO OTHER PROVISIONS OF THE ACT, PARTICULARLY SECTION 80-IB OF THE ACT IN VIEW OF SPECIFIC MENTIO N IN EXPLANATION (1) THAT THESE DEFINITIONS ARE FOR THE PURPOSES OF THIS SECTION I.E. SEC. 10AA OF THE ACT. ACCORDINGLY, THESE ARGUMENTS OF LD. COUNSEL FOR THE ASSESSEE ARE NOT CONVINCING IN VIEW OF CLEAR PROVISIONS. THERE IS MARKED DIFFERENCE BETWEEN THE PROVISIONS OF SECTION 10AA O F THE ACT THAT IS MEANT FOR EXEMPTION OF INCOME FROM THE TOTAL INCOME OF THE ASSESSEE, WHERE AS SECTION 80-IB OF THE ACT GRANTS DEDUCTION TO THE ASSESSEE FROM THE PROFITS AND GAIN S DERIVED FROM ITS INDUSTRIAL UNDERTAKING AND THAT ALSO FROM THE BUSINESS OF THE INDUSTRIAL UNDER TAKING THAT HAD DIRECTLY YIELDED THAT PROFIT. HENCE THIS FACET OF THE ARGUMENT OF LD. COUNSEL IS REJECTED. 17. ANOTHER FACET OF ARGUMENT MADE BY LD. COUNSEL T HAT THE ASSESSEE SALE MOULDS AS WELL AS SUPPLY MOULD PARTS MANUFACTURED BY IT. FOR THIS LD . COUNSEL STATED THAT THE ASSESSEE IS BASICALLY A MANUFACTURER ONLY AND HE CITED EXAMPLE OF VOLTAS AIR-CONDITIONER THAT THE 22 ITA 1305/K/2008 RAJESH KR. DROLIA A.Y.05-06 MANUFACTURER MANUFACTURES AIR-CONDITIONING MACHINE, MANUFACTURES COMPRESSOR, COOLING COIL, BODY OF AIR-CONDITIONER AND OTHER PARTS BUT SELLS C OMPLETE AIR-CONDITIONING MACHINES AS WELL AS PARTS. HE REFERRED THAT IN CASE AIR-CONDITIONING M ACHINES AND ITS COMPRESSOR IS REPLACED, THE ACTIVITY MAY BE REPAIR FOR CUSTOMER BUT SAME IS SAL E OF MANUFACTURED PARTS FOR VOLTAS. WE HAVE NO QUARREL OVER THE PROPOSITION AND IN CASE THE ASS ESSEE IS SELLING MOULDS MANUFACTURED BY IT AND SPARE PARTS OF MOULDS ALSO SOLD FOR DOING REPAI RS AND MAINTENANCE, QUA SALE OF MOULDS AND SPARE PARTS OF MOULDS ASSESSEE IS ENTITLED FOR DEDU CTION U/S. 80-IB OF THE ACT. BUT IN RESPECT TO REPAIR OF MOULDS, IT CHARGES TWO TYPES OF RECEIPTS I.E. RECEIPT ON ACCOUNT OF SALE OF SPARE PARTS AS WELL AS REPAIRS AND MAINTENANCE CHARGES, IN CASE OF SALE OF SPARE PARTS ASSESSEE IS ENTITLED FOR DEDUCTION U/S. 80-IB OF THE ACT BUT IN RESPECT TO R EPAIRS AND MAINTENANCE CHARGES IT IS NOT ENTITLED FOR DEDUCTION IN VIEW OF CLEAR PROVISIONS OF SECTION 80-IB OF THE ACT, BECAUSE THAT RECEIPT HAS NO IMMEDIATE OR DIRECT NEXUS WITH THE I NDUSTRIAL UNDERTAKING AND THAT IS NOT THE SOURCE OF PROFIT OF INDUSTRIAL UNDERTAKING. REFERE NCE MADE BY LD. COUNSEL FOR ASSESSEE OF WOODWORD GOVERNORS INDIA (P) LTD. (SUPRA) OF DELHI BENCH OF ITAT, WHEREIN TRIBUNAL HAS ALLOWED THE CLAIM BY HOLDING THAT THE ASSESSEE COMP ANY WAS ALSO PROVIDING TRAINING TO EMPLOYEES OF ITS CUSTOMERS FOR THE USE OF PRODUCTS SOLD TO THEM AND ALSO PROVIDING AFTER SALES SERVICES AND REPAIRING OF THE PRODUCTS SOLD TO ITS CUSTOMERS AND ACCORDINGLY, ACTIVITIES WHICH ARE RELATED ACTIVITIES OF MANUFACTURE AND SALE OF P RODUCTS ARE THAT OF PROVISION FOR TRAINING OF THE CUSTOMERS EMPLOYEES FOR BEING ABLE TO USE THE PRODU CTS AND AFTER SALES SERVICE AND REPAIR. THE TRIBUNAL HELD THAT PROFITS FROM THESE ACTIVITIES AR E INDEED DERIVED FROM INDUSTRIAL UNDERTAKING AND FORMED PART OF MANUFACTURING PRODUCTS. WE ARE OF THE VIEW THAT DECISION OF DELHI BENCH IN THE CASE OF WOODWORD GOVERNORS INDIA (P) LTD. (SUPR A) IS NOT IN TERM OF THE PROVISIONS OF SECTION 80-IB OF THE ACT AS AFTER SALE SERVICES AND REPAIRING OF THE PRODUCTS SOLD TO ITS CUSTOMERS DOES NOT COME WITHIN THE PURVIEW OF MANUFACTURE AND ALSO PROFIT EARNED IS NOT DERIVED FROM INDUSTRIAL UNDERTAKING. THE DECISION OF HONBLE DE LHI HIGH COURT IN THE CASE OF HONDA SIEL POWER PRODUCTS LTD. (SUPRA), REFERRED BY LD. CIT-DR , IS A CLEAR AUTHORITY DIRECTLY ON THE SAME ISSUE WHERE PROFITS FROM SALE OF IMPORTED MACHINERY AND SPARE PARTS USED FOR PROVIDING AFTER SALE SERVICES WAS HELD NOT TO BE THE PROFITS FROM I NDUSTRIAL UNDERTAKINGS ENTITLED FOR SPECIATION DEDUCTION U/S. 80HH AND 80I OF THE ACT. BEFORE HON BLE DELHI HIGH COURT, THE FACTS WERE THAT THE ASSESSEE WAS ENGAGED IN THE MANUFACTURE AND SAL E OF PORTABLE GENSETS AND WATER PUMPS. IN THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 1995-9 6, FILED ON NOVEMBER 30, 1995, THE ASSESSEE DISCLOSED A BUSINESS INCOME OF RS.4,48,18,770. THE ASSESSEE CLAIMED A DEDUCTION UNDER SECTION 80HH OF THE ACT AT RS. 2,56,76,813 AND UNDER SECTIO N 80-I OF THE ACT AT RS. 3,20,96,017 RESPECTIVELY. THE ASSESSEE IMPORTED CERTAIN SPARE P ARTS AND COMPONENTS WHICH WERE USED IN THE MANUFACTURE OF GENSETS AS WELL AS FOR PROVIDING AFT ER-SALES SERVICE TO CUSTOMERS. ADDITIONALLY, THE ASSESSEE IMPORTED GENSETS OF A CERTAIN CAPACITY WHICH WERE NOT BEING MANUFACTURED IN INDIA 23 ITA 1305/K/2008 RAJESH KR. DROLIA A.Y.05-06 TO COMPLEMENT ITS PRODUCT PROFILE AND PRESENT TO TH E CUSTOMERS A CHOICE FROM A COMPLETE RANGE OF GENSETS. THE ASSESSING OFFICER DENIED THE CLAIM OF DEDUCTION UNDER SECTIONS 80HH AND 80-I OF THE ACT IN RESPECT OF THE PROFITS EARNED FROM BO TH THE SALE OF SPARE PARTS AND COMPONENTS AS WELL AS THE SALE OF IMPORTED GENSETS ON THE GROUND THAT THE PROFITS THEREFROM COULD NOT BE CONSIDERED TO BE INCOME 'DERIVED' FROM THE INDUSTRI AL UNDERTAKING. THIS WAS UPHELD BY THE TRIBUNAL. HONBLE HIGH COURT DISMISSING THE APPEAL HELD AS UNDER: (I) THAT THE TRIBUNAL WAS RIGHT IN LAW IN UPHOLDIN G THE ORDER OF THE ASSESSING OFFICER REDUCING THE PROFIT EARNED ON SALE OF SPARE PARTS AND IMPORTED GENSETS FROM THE INCOME OF THE ELIGIBLE UNDERTAKING(S) FOR THE PURPOSE OF COMPUTING DEDUCTIONS UNDER SECTIONS 80HH AND 80-I. (II) THAT SALE OF IMPORTED SPARE PARTS USED IN PROV IDING AFTER-SALES SERVICE TO CUSTOMERS MIGHT BE INCIDENTAL TO THE BUSINESS ACTIV ITY OF THE ASSESSEE BUT HAD NO DIRECT NEXUS WITH THE ACTIVITY OF THE INDUSTRIAL UN DERTAKING WHICH WAS THE MANUFACTURE OF GENSETS. PROFITS FROM SUCH SALE WERE NOT ENTITLED TO SPECIAL DEDUCTION UNDER SECTIONS 80HH AND 80-I. WE FIND FROM THE ABOVE DECISION OF HONBLE DELHI HI GH COURT THAT NO DOUBT THE ISSUE WAS PROFIT FROM SALE OF IMPORTED MACHINERY AND SPARE PA RTS BUT ALSO CHARGES FOR PROVIDING AFTER SALES SERVICES AND HONBLE DELHI HIGH COURT HAS NEG ATED THE CLAIM OF ASSESSEE IN TERMS OF ABOVE. 18. NOW WE WILL CONCLUDE OUR DECISION IN TERMS OF T HE ABOVE AS UNDER: (I) THAT THE ASSESSEES CASE OF REPAIRING AND MAINT ENANCE CHARGES ARE NOT AT PAR WITH THE INCOME FROM MANUFACTURING FOR THE PURPOSES OF SECTI ON 80-IB OF THE ACT EVEN THOUGH IN SECTION 10AA OF THE ACT THE DEFINITION OF MANUFACTURE HAS BEEN BODILY LIFTED INTO SECTION 2(R) OF SEZ ACT, 2005 W.E.F. 10.02.2006, REASON BEING THE EXPLA NATION (1) PRESCRIBING DEFINITIONS AFTER SUB- SECTION 9 OF SECTION 10AA CLARIFIES THAT THESE DEFI NITIONS WILL APPLY FOR THE PURPOSES OF THIS SECTION ONLY. SECTION 10AA OF THE ACT BEING A CODE IN ITSELF, THE DEFINITION INCORPORATED FROM ANOTHER ACT CANNOT BE APPLIED TO OTHER PROVISIONS O F THE ACT. EVEN OTHERWISE, THE INCOME FALLING U/S. 10AA DO NOT FORM PART OF TOTAL INCOME WHEREAS U/S. 80-IB OF THE ACT ONLY DEDUCTION FROM PROFITS AND GAINS DERIVED FROM INDUSTRIAL UNDE RTAKING IS ALLOWED AND THUS THERE IS MARKED DIFFERENCE IN THESE TWO PROVISIONS AND DEFINITION O F OTHER SECTION CANNOT BE BORROWED FOR ALLOWANCE OF DEDUCTION U/S. 80IB OF THE ACT. (II) THE ASSESSEE IS EARNING JOB WORK CHARGES AS WE LL AS REPAIRS AND MAINTENANCE, WHICH ARE INCLUDED IN JOB WORK CHARGES, NO DOUBT IT IS ESTABL ISHED THAT THERE IS COMMERCIAL CONNECTION BETWEEN PROFITS EARNED ON ACCOUNT OF REPAIRS AND MA INTENANCE AND THE INDUSTRIAL UNDERTAKING BUT FOR THAT SOURCE OF PROFIT IS NOT DIRECTLY FROM INDUSTRIAL UNDERTAKING. THE BUSINESS OF INDUSTRIAL UNDERTAKING HAD DIRECTLY TO YIELD THAT P ROFIT TO CLAIM DEDUCTION U/S. 80-IB OF THE ACT. 24 ITA 1305/K/2008 RAJESH KR. DROLIA A.Y.05-06 (III) WE HAVE CONSIDERED THE CASE LAWS RELIED ON BY BOTH THE SIDES NOTED AND DISCUSSED, BUT WE FIND THAT THE PROVISION OF SECTION 80-IB OF THE ACT IS IN PARI MATERIA WITH THE PROVISIONS OF SECTION 80HH AND 80I OF THE ACT, WHEREIN HONBLE AP EX COURT IN STERLING FOOD, PANDIAN CHEMICALS LTD. AND CAMBAY ELECTRIC SUPPLY INDUSTRIA L CO. LTD. (SUPRA) HAS DISCUSSED THE EXPRESSION IN THE CONTEXT OF THESE SECTIONS THAT TH E USE OF EXPRESSION PROFITS AND GAINS DERIVED FROM AN INDUSTRIAL UNDERTAKING, THERE IS DISTINCTIO N BETWEEN THE EXPRESSIONS DERIVED FROM AND ATTRIBUTABLE TO. HONBLE APEX COURT HELD THAT ONL Y SUCH BUSINESS PROFITS THAT HAVE A DIRECT NEXUS TO THE ESSENTIAL BUSINESS ACTIVITY OF THE ASS ESSEE CAN QUALIFY FOR DEDUCTION UNDER SECTION 80HH OF THE ACT. INASMUCH AS BOTH SECTIONS 80HH AND 80-I USE THE EXPRESSION 'PROFITS AND GAINS DERIVED FROM AN INDUSTRIAL UNDERTAKING', THE BURDEN IS ON THE ASSESSEE TO SHOW THAT THE INCOME EARNED FROM AN ACTIVITY, THE PROFITS FROM WH ICH ARE CLAIMED TO QUALIFY FOR DEDUCTION, HAS AN IMMEDIATE AND DIRECT NEXUS TO THE ESSENTIAL ACTIVITY OF THE INDUSTRIAL UNDERTAKING. HENCE, OUR ANSWER TO FIRST QUESTION REFERRED IS THAT THE A SSESSEE IS ENTITLED FOR DEDUCTION U/S. 80-IB ON INCOME EARNED FROM JOB WORK CHARGES BUT EXCLUDING R EPAIRS AND MAINTENANCE CHARGES. OUR ANSWER TO SECOND QUESTION REFERRED IS THAT THE INCO ME FROM REPAIR AND MAINTENANCE CANNOT BE TREATED AT PAR WITH THE INCOME FROM MANUFACTURING F OR THE PURPOSES OF DEDUCTION U/S. 80-IB OF THE ACT. IV) THAT THE ASSESSEE IN THE PRESENT CASE HAS EARN ED INCOME FROM JOB WORK WHICH COMPRISES OF REPAIRS AND MAINTENANCE, IT HAS TWO LIMBS THAT T HE INCOME FROM JOB WORK IS TO BE ALLOWED AS DEDUCTION IN TERMS OF SECTION 80-IB OF THE ACT BUT INCOME FROM REPAIRS AND MAINTENANCE CANNOT BE EQUATED AT PAR WITH INCOME FROM MANUFACTURING AN D HENCE NOT ELIGIBLE FOR DEDUCTION IN TERMS OF SECTION 80-IB OF THE ACT. IN THE PRESENT CASE, ASSESSEE IS A MANUFACTURING UNIT AND HAS CLAIMED DEDUCTION U/S. 80-IB OF THE ACT ON JOB WORK CHARGES INCLUDING REPAIRS AND MAINTENANCE. AS STATED BY ASSESSEE, IT FAILED TO PR ODUCE DETAILS AS FIRE BROKE OUT IN OFFICE PREMISES OF TODAYS WRITING PRODUCTS LTD AND ALL RE CORDS OF ASSESSEE PLACED THERE WERE DESTROYED. NO BOOKS OF ACCOUNT WERE PRODUCED EXCEP T FEW PRELIMINARY DETAILS AND BREAK UP OF VARIOUS EXPENSES AND ACCORDINGLY, ASSESSING OFFICER COMPLETED ASSESSMENT U/S. 144 OF THE ACT BY DISALLOWING DEDUCTION CLAIMED U/S. 80-IB OF THE ACT JOB WORK CHARGES INCLUDING SUCH REPAIRS AND MAINTENANCE BY HOLDING THAT MAINTENANCE OF MOUL DS WHICH DOES NOT CONSTITUTE MANUFACTURING ACTIVITY AS IT DOES NOT MANUFACTURE A NY ARTICLE OR THING AND BY THIS PROCESS NO NEW ARTICLE OR THING COMES INTO EXISTENCE. IN TERM OF ABOVE THAT INCOME EARNED FROM JOB WORK WILL QUALIFY FOR DEDUCTION U/S. 80-IB OF THE ACT BU T INCOME FROM REPAIRS AND MAINTENANCE IS NOT AT PAR WITH INCOME FROM MANUFACTURING AND WILL NOT QUALIFY FOR DEDUCTION U/S. 80-IB OF THE ACT. IN VIEW OF ABOVE FACTS, THE MATTER SHOULD HAVE GONE BACK TO ASSESSING OFFICER TO DECIDE AS TO HOW MUCH IS JOB WORK CHARGES AND HOW MUCH IS REPAIR AND MAINTENANCE CHARGES AND THEN TO DISALLOW DEDUCTION FROM INCOME OF REPAIRS AND MAINT ENANCE AND TO ALLOW DEDUCTION U/S. 80-IB 25 ITA 1305/K/2008 RAJESH KR. DROLIA A.Y.05-06 OF THE ACT FOR JOB WORK CHARGES RECEIVED BY ASSESSE E. HOWEVER, AT THE TIME OF HEARING, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THERE WAS A MAJOR FIRE BROKE OUT AND AS SUCH ENTIRE RECORD OF THE ASSESSEE WAS DESTROYED AND IT WOULD N OT BE POSSIBLE TO FURNISH BOOKS OF ACCOUNT AND OTHER DOCUMENTS TO ASSESSING OFFICER IF THE MAT TER IS RESTORED TO HIS FILE TO DECIDE DEDUCTION ALLOWABLE TO ASSESSEE U/S. 80-IB OF THE ACT OUT OF TOTAL RECEIPT OF RS.96,01,410/- SHOWN BY ASSESSEE BY WAY OF REPAIRING AND MAINTENANCE IN THE FORM OF JOB WORK CHARGES. THEREFORE, INSTEAD OF RESTORING THE MATTER TO ASSESSING OFFICE R AND WITH A VIEW TO FINALLY DECIDE THE ISSUE BEFORE US, WE ARE OF THE CONSIDERED VIEW THAT IT W ILL BE REASONABLE TO CONSIDER 50% OF THE RECEIPT AS JOB WORK CHARGES ON WHICH ASSESSEE WILL BE ENTITLED TO GET DEDUCTION U/S. 80-IB OF THE ACT AND THE BALANCE 50% IS THE RECEIPT ON ACCOUNT O F REPAIR AND MAINTENANCE CHARGES ON WHICH THE ASSESSEE WILL NOT BE ENTITLED TO GET DEDUCTION U/S. 80-IB OF THE ACT. THEREFORE, THE GROUND OF APPEAL TAKEN BY DEPARTMENT IS ALLOWED IN PART AS IN DICATED ABOVE. 19. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED IN PART. 20. ORDER PRONOUNCED IN OPEN COURT ON 12.8.2011 SD/- SD/- SD/- ( . . , ! ) ( . . '# $ , ,, , %& ) ( ) '() , %& ) (G. D. AGRAWAL) (B. R. MITTAL) (MAHAV IR SINGH) VICE PRESIDENT JUDICIAL MEMBER JUDICIAL MEMBER ( 8 8 8 8) )) ) DATED 12 TH AUGUST, 2011 PRONOUNCED BY SD/-(BRM) SD/-(SVM) SD/- (MS) JM AM JM 9: '+; '< JD.(SR.P.S.) %67 4 2'' 6-=- COPY OF THE ORDER FORWARDED TO: 1 . 01 / APPELLANT DCIT, CC-XX, KOLKATA. 2 2301 / RESPONDENT, RAJESH KR. DROLIA, HUF, C/O, JAJODIA MERCHANTILE PVT. LTD., 13, BRABOURNE ROAD, KOLKATA-1. 3 . '7+ ( )/ THE CIT(A), KOLKATA 4. '7+ / CIT, KOLKATA 5 . C'D 2'+ / DR, KOLKATA BENCHES, KOLKATA 3 2'/ TRUE COPY, %67+E/ BY ORDER, ) ( /ASSTT. REGISTRAR .