The DCITNavsari Circle, Navsari V. M/s. H.L. Equipments, Navsari

ITA 1497/AHD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 72997 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 8 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 22-01-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 26-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T P KISHANKUMAR
• Assessee Lawyers: S N SOPARKAR
• Section: 143(3); 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, A HMEDABAD (BEFORE SHRI MUKUL KR. SHRAWAT, J.M. & SHRI ANIL C HATURVEDI, A.M.) I.T. A. NOS. 1606/AHD/2010 & 1497/AHD/2011 (ASSESSMENT YEARS: 2006-07 & 2008-09) ITO, WARD-2, NAVSARI V/S M/S. H.L. EQUIPMENTS 21, PURNA SOCIETY, STATION ROAD, NAVSARI (APPELLANT) (RESPONDENT) DY. COMMISSIONER OF INCOME-TAX, NAVSARI CIRCLE, NAVSARI V/S M/S. H.L. EQUIPMENTS 21, PURNA SOCIETY, STATION ROAD, NAVSARI (APPELLANT) (RESPONDENT) PAN: AADFH 2629H APPELLANT BY : SHRI T.P. KISHANKUMAR CIT , D.R. RESPONDENT BY : SHRI S.N. SOPARKAR ( )/ ORDER DATE OF HEARING : 22-01-2014 DATE OF PRONOUNCEMENT : 21-02-2014 PER SHRI ANIL CHATURVEDI,A.M. 1. THESE TWO APPEALS FILED BY THE REVENUE ARE AGAIN ST THE ORDER OF CIT(A), VALSAD DATED 22.01.2010 & 17.03.2010 FOR A.YS. 2006 -07 & 2008-09 RESPECTIVELY. 2. BEFORE US, AT THE OUTSET BOTH THE PARTIES SUBMI TTED THAT THOUGH THE APPEALS ARE FOR DIFFERENT ASSESSMENT YEARS BUT THE ISSUE IN VOLVED IN BOTH THE APPEALS ARE IDENTICAL EXCEPT FOR THE AMOUNTS AND DATES AND THEREFORE THE SUBMISSIONS ITA NOS. 1606/AHD/2010 & 149 7/AHD/2011 . A.YS. 2006-0 7 & 2008- 09 2 MADE BY THEM IN CASE OF 1 YEAR WOULD BE EQUALLY APP LICABLE TO OTHER AND THEREFORE BOTH THE APPEALS CAN BE HEARD TOGETHER. W E THEREFORE PROCEED TO DISPOSE OF BOTH THE APPEALS BY A CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. WE THUS PROCEED WITH THE FACTS FOR A.Y . 06-07 (ITA. NO. 1606/AHD/2010). 3. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI AL ON RECORD ARE AS UNDER. 4. ASSESSEE IS A FIRM ENGAGED IN THE BUSINESS OF MA NUFACTURE, ASSEMBLING AND TRADING OF ROTARY VACCUM PADDLE DRYER AND ITS MANUF ACTURING UNIT IS LOCATED IN THE UNION TERRITORY OF DAMAN. ASSESSEE FILED ITS RETURN OF INCOME FOR AY 2006-07 ON 30.10.2006 DECLARING TOTAL INCOME OF RS 1,40,740/- AFTER CLAIMING DEDUCTION OF RS 2,86,59,888/- U/S 80IB OF THE ACT. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED U /S 143(3) VIDE ORDER DATED 31.12.2008 AND THE TOTAL INCOME WAS ASSESSED AT RS 3,97,82,620/-. AGGRIEVED BY THE ORDER OF AO ASSESSEE CARRIED THE M ATTER BEFORE CIT(A). CIT(A) VIDE ORDER DATED 22.1.2010 GRANTED SUBSTANTI AL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE ORDER OF CIT(A), REVENUE IS IN NOW IN APPEAL BEFORE US AND THE GROUNDS RAISED BY THE REVENUE BEFORE US READS A S UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A), VALSAD HAS ERRED IN ALLOWING THE DEDUCTION OF RS. 2,86,59,888/- U/S 80IB OF ACT AS WRONGLY CONSIDERING THE ASSEMBLING O F DIFFERENT COMPONENTS AS A MANUFACTURING ACTIVITY RELYING UPON ON THE HONBLE SUPREME COURTS DECISION IN THE CASE OF CIT VS. CEL LULOSE PRODUCTS INDIA LTD. 192 ITR 155 (SC), THOUGH THE FACTS OF QUOTED C ASE ARE DIFFERENT THAN THAT OF THE PRESENT CASE UNDER REFERENCE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A), VALSAD HAS ERRED IN DELETING THE ADDITION O F RS. 1,09,81,995/- MADE BY THE ASSESSING OFFICER IN RESPECT OF UNEXPLA INED EXPENDITURE IN THE FORM OF JOB CHARGES PAID OUTSIDE THE BOOKS. 1 ST GROUND IS WITH RESPECT TO ALLOWING DEDUCTION U/S 8 0IB OF THE ACT: ITA NOS. 1606/AHD/2010 & 149 7/AHD/2011 . A.YS. 2006-0 7 & 2008- 09 3 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AO N OTICED THAT ASSESSEE HAS CLAIMED DEDUCTION OF 100% OF PROFITS U/S 80IB OF TH E ACT. THE ASSESSEE WAS ASKED TO FURNISH THE NATURE OF ACTIVITIES CARRIED O N BY IT AND JUSTIFY ITS CLAIM OF DEDUCTION. TO UNDERSTAND THE PROCESS OF THE WORK, A O ALSO DEPUTED INSPECTORS TO CONDUCT INQUIRY. ASSESSEE SUBMITTED D ETAILED EXPLANATION OF THE ACTIVITY CARRIED OUT BY IT AND SUBMITTED THAT IT CA RRIES OUT THE MANUFACTURING ACTIVITY. HOWEVER THE SUBMISSION OF THE ASSESSEE WA S NOT FOUND ACCEPTABLE TO THE AO. ON THE BASIS OF THE DETAILS SUBMITTED BY THE ASSESSEE AND THE REPORT OF THE INSPECTOR, AO NOTED THAT ASSESSEE WAS OBTAINING VESSELS AND OTHER EQUIPMENTS IN READY TO FIT CONDITIONS AND ASS ESSEE WAS JUST RIVETING, NUT BOLTING AND WELDING. AO ALSO NOTICED THAT ASSESSEE WAS OUTSOURCING ALL THE CRUCIAL MANUFACTURING PROCESS LIKE MANUFACTURING OF VESSELS OUT OF STEEL, THE PROCESS WAS CARRIED OUT BY THE JOB WORK PARTIES AT THEIR RESPECTIVE PREMISES. THUS ACCORDING TO AO, THE NATURE OF ACTIVITY CARRIE D OUT BY THE ASSESSEE WAS NOT OF MANUFACTURING ACTIVITY BUT WAS AN ASSEMBLING WORK CARRIED OUT BY THE ASSESSEE AND THEREFORE THE ASSESSEE WAS NOT ELIGIBL E FOR DEDUCTION U/S 80IB OF THE ACT AND HE THUS DENIED THE DEDUCTION U/S 80I B OF THE ACT. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DECIDED THE ISSUE IN FAVOUR OF ASSESSEE BY HOLDING AS UNDER:- 4.4 BEFORE DECIDING WHETHER THE PROCESS CARRIED ON BY THE APPELLANT IN THE SILVASSA UNIT IS MANUFACTURING OR NOT, I WANTED TO SATISFY MY SELF BY WAY OF UNDERSTANDING THE ACTUAL JOB DONE AT SILVASSA UNIT, WHETHER SEPARATE SET OF BOOKS OF ACCOUNT MAINTAINED FOR THE WORKS DONE I N THE SILVASSA UNIT OR NOT, WHAT TYPES OF RECORDS ARE MAINTAINED FOR BRING ING IN SEMI-FINISHED PRODUCTS TO THE SILVASSA UNIT AND OTHER RELEVANT AS PECTS. AFTER THE SUBMISSIONS WAS MADE BY THE APPELLANT DURING THE AP PELLATE PROCEEDING, THE CASE WAS FURTHER POSTED FOR HEARING TO ASCERTAI N ABOUT THE FACTS NARRATED ABOVE. HOWEVER, THE APPELLANT FOREGO SUCH OPPORTUNITY TO EXPLAIN THE POINTS. THUS, THE ISSUE IS DECIDED ON THE BASIS OF THE FINDING OF THE A.O., THE WRITTEN SUBMISSIONS MADE BY THE A.R. AND ON THE BASIS OF MATERIALS ON RECORDS. IT IS NOT DISPUTED THAT THE A PPELLANT HAS A SMALL SCALE INDUSTRIAL UNIT AT SILVASSA. THE DISPUTE AROS E BETWEEN THE FINDING OF THE AO AND THE APPELLANT WAS THAT THE ASSESSING OFF ICER HELD THAT THE SILVASSA UNIT IS NOT DOING MANUFACTURING OR PRODUCI NG ARTICLE OR THINGS FOR WHICH THE DISALLOWANCE WAS MADE BY THE AO. ITA NOS. 1606/AHD/2010 & 149 7/AHD/2011 . A.YS. 2006-0 7 & 2008- 09 4 4.5 NOW, THE CORE ISSUE IN THIS GROUND OF APPEAL AR E I) WHETHER THE APPELLANT HAS MANUFACTURED / PRODUCED, GOODS OR ARTICLES IN T HE UNIT AT SILVASSA AND 2) WHETHER THE CONDITIONS LAID DOWN U/S 80-IB ARE F ULFILLED BY THE APPELLANT FOR CLAIMING DEDUCTION U/S 8O-IB. THE 'MANUFACTURE OR PRODUCTION' WAS NOT DEFINED IN THE ACT, HOWEVER, THE HON'BLE GUJARAT HC IN THE CASE OF CIT VS. AJAY PRINTERY PRIVATE LIMITED. (1965) 58 ITR (GUJ). HELD THAT 'DETAILED DISCUSSION ON 'MANUFACTURE' APPEARS IN SECTION 2(13 ) AND ALSO IN THE CONTEXT OF SECTION 80-HH, WHICH MAY ALSO BE REFERRE D TO AS UNDER; 'IN ITS ROOTS, THE WORD 'MANUFACTURE' COMES FROM TH E LATIN WORD 'MANUS' WHICH MEANS 'HAND' (AND 'MANU' IS THE ABLATIVE OF T HE WORD 'MANUS') AND THE WORD 'FACERE' WHICH MEANS ' TO MAKE'. IN ORIGIN , THEREFORE, THE WORD IMPLIED THE MAKING OF ANYTHING BY HAND, BUT WITH TH E PASSING OF TIME AND IN THE CONTEXT OF INDUSTRIAL DEVELOPMENT, THE WORD HAS ACQUIRED A NUMBER OF SHARES OF MEANING. IN CONNECTION WITH INDUSTRY O R AN INDUSTRIAL UNDERTAKING, TWO SHADES OF MEANING ARE IMPORTANT. I N THE OXFORD DICTIONARY, VOL 6, THE TWO SHADES OF MEANING ARE GI VEN AS FOLLOWS: (1) THE FIRST IS 'THE ACTION OR PROCESS OF MAKING A RTICLES OR MATERIAL (IN MODERN SE, ON A LARGE SCALE) BY THE APPLICATION OF PHYSICAL LABOUR OR MECHANICAL POWER'. THIS IS THE MOST GENERIC MEANING IN ITS APPLICATION TO INDUSTRY OR INDUSTRIAL UNDERTAKINGS OR ESTABLISHMENTS (2) THERE IS ALSO ANOTHER MORE LIMITED MEANING WHICH IS FOUND REFERRED TO IN THE AUTHORITIES AS MEANING THE TRANSFORMING OF R AW MATERIALS INTO A COMMERCIAL COMMODITY OR A FINISHED PRODUCT WHICH HA S A SEPARATE IDENTITY. IN ASWATHANARAYANA VS. CTO (1965) 15 STC 795 ONE CAN FIND A USEFUL COMPILATION OF MEANINGS ATTACHED TO T HE WORD 'MANUFACTURE' FROM VARIOUS DICTIONARIES AND OTHER S OURCES. SIMILARLY, THE WORD 'PRODUCE', WITH REFERENCE TO ITS MEANING I N INDUSTRY OR POLITICAL ECONOMY HAS TWO DIFFERENT SENSES. IN VOL. 8 OF THE OXFORD DICTIONARY, AT PAGE 1422, THE TWO MEANINGS ARE GIVE N AS FOLLOWS: 'TO BRING FORTH, BRING INTO BEING OR EXISTENCE (A) GENE RALLY TO BRING (A THING) INTO EXISTENCE FROM ITS RAW MATERIALS OR ELEMENTS O R AS THE RESULT OF A PROCESS; AND (B) TO COMPOSE OR BRING OUT BY MENTAL OR PHYSICAL LABOUR (A WORK OF LITERATURE OR ART); TO WORK UP FR OM RAW MATERIAL, FABRICATE, MAKE, MANUFACTURE (MATERIAL OBJECTS)'. 5.6 IT IS ALSO WELL SETTLED LAW THAT THE END PRODU CT SHOULD BE INDEPENDENTLY MARKETABLE AS DECIDED BY THE HON. SUP REME COURT IN THE CASE OF CIT VS. CELLULOSE PRODUCTS INDIA LIMITED 19 2 ITR 155 (SC) FOR CLAIMING THE GOODS OR ARTICLE WERE PRODUCED/MANUFAC TURED. I HAVE CONSIDERED THE ABOVE GUIDING PRINCIPLES FOR TREATIN G THE GOODS OR ARTICLES AS MANUFACTURED / PRODUCED. I HAVE ALSO CONSIDERED THE SUBMISSION OF THE ID. AR IN THIS ACCOUNT. THERE IS NO DOUBT THAT THE APPELLANT HAS MANUFACTURED/PRODUCED THE GOODS OR ARTICLES AT THE UNIT AT SILVASSA. THE SECOND LEG IS UNDISPUTED FACTUALLY. THUS CONSIDERIN G THE RELEVANT FACTS AND CIRCUMSTANCES I AM OF THE OPINION THAT THE SILV ASSA UNIT IS MANUFACTURING/ PRODUCING OF ARTICLE OR THINGS. THE APPELLANT SATISFIED THE CONDITIONS LAID DOWN IN SEC. 8O-IB OF THE ACT. THER EFORE, THE APPELLANT IS ITA NOS. 1606/AHD/2010 & 149 7/AHD/2011 . A.YS. 2006-0 7 & 2008- 09 5 ELIGIBLE FOR DEDUCTION U/S. 80-IB WITH REGARDS TO T HE INCOME HAVING FIRST DEGREE NEXUS TO THE INDUSTRIAL UNDERTAKING AT SILVA SSA. THAT BRINGS ANOTHER IMPORTANT ISSUE OUT HERE THAT HOW MUCH THE APPELLANT SHOULD GET DEDUCTION U/S 80-IB. FROM THE RECORDS IT APPEARS TH AT THE APPELLANT HAD CLAIMED DEDUCTION U/S 80-IB FOR THE ENTIRE AMOUNT I .E THE INCOME FROM BOTH SILVASSA UNIT AND OTHER UNITS. IN MY VIEW, AS ENVISAGE IN SEC. 80-IB, THE INCOME DERIVED FROM INDUSTRIAL UNDERTAKING ELIG IBLE FOR DEDUCTION U/S. 80IB SHOULD BE LOCATED IN NOTIFIED BACKWARD AREAS A ND FOR CLAIMING SUCH DEDUCTION, THE APPELLANT HAVE TO MAINTAIN DIFFERENT SET OF ACCOUNTS WHERE THE APPELLANT HAS INCOME FROM ELIGIBLE AND NON-ELIG IBLE UNITS. I DO NOT HAVE THE BENEFIT OF PERUSING BOOKS OF ACCOUNTS MAIN TAINED BY THE APPELLANT FOR THE SILVASSA UNIT FOR ASCERTAINING TH E QUANTUM OF INCOME FROM THAT INDUSTRIAL. IN THIS BACKGROUND THE AO IS DIRECTED TO DETERMINE THE INCOME FROM SILVASSA UNIT AND RESTRICT THE DEDUCTIO N U/S 80-IB TO THE EXTENT OF INCOME HAVING FIRST DEGREE NEXUS WITH THE INDUSTRIAL UNDERTAKING AT SILVASSA. ACCORDINGLY, THIS GROUND OF APPEAL IS PARTLY ALLOWED. 5 AGGRIEVED BY THE ORDER OF CIT(A), REVENUE IS NOW IN APPEAL BEFORE US. BEFORE US, LD D.R. TOOK US THROUGH THE FINDINGS OF AO AND SUBMITT ED THAT TO UNDERSTAND THE PROCESS UNDERTAKEN BY THE ASSESSEE, AO HAD DEPUTED INSPECTOR TO CONDUCT THE INQUIRY. HE POINTED TO THE REPORT OF THE INSPECTOR WHICH HAS BEEN REPRODUCED BY AO IN THE ORDER WHEREIN THE PRODUCTION INCHARGE SHRI P RAJAPATI HAD EXPLAINED THE ACTIVITIES WAS RIVETING, NUT BOLTING AND WELDING OF DIFFERENT INPUTS AND READY PARTS OBTAINED IN TO THE READYMADE VESSELS RECEIVED BY TH EM. THE INSPECTOR, AFTER PERUSING AND PHYSICALLY VERIFYING THE ACTIVITY HAS REPORTED THAT NO REAL MANUFACTURING ACTIVITY OR PRODUCTION OF ANY ARTICLE WAS DONE IN T HE FACTORY PREMISES OF THE ASSESSEE AT ITS SILVASSA UNIT. HE ALSO SUBMITTED THAT MAJORI TY OF THE MANUFACTURING WORK WAS DONE BY SISTER CONCERN OR OUTSIDE PARTIES AND ONLY ASSEMBLING WORK WAS DONE AT THE UNIT. THE LD D.R FURTHER SUBMITTED THAT ASSESSEE PU RCHASES MAIN RAW MATERIALS WHICH ARE DIRECTLY SENT TO THE OUTSIDE JOB PARTIES FOR MAKING MAIN PARTS OF THE MAIN PRODUCT. ON RECEIPT OF THE VARIOUS MAIN PARTS, THE ASSESSEE DOES THE JOB TO FIT ONE PART TO THE OTHER BY WELDING AND ALSO FIT THE READY TO FIT PARTS SUPPLIED BY VARIOUS PARTIES. HE FURTHER SUBMITTED THAT THE JOB WORK PAR TIES ARE INDEPENDENT PARTIES WHO FUNCTION ON THEIR OWN AND IN NO WAY THE ASSESSEE CA N BE SAID TO BE HAVING DIRECT DAY TO DAY CONTROL OVER THEM. HE FURTHER SUBMITTED THAT MAJORITY OF JOB IS DONE BY OUTSIDE PARTIES IS ALSO PROVED BY THE HUGE LABOUR C HARGES PAID BY THE ASSESSEE. HE ITA NOS. 1606/AHD/2010 & 149 7/AHD/2011 . A.YS. 2006-0 7 & 2008- 09 6 ALSO POINTED TO THE FINDING OF THE AO THAT MAJOR CH UNK OF EXPENSES WAS ON ACCOUNT OF LABOUR AND PROCESSING CHARGES. HE FURTHER SUBMIT TED THAT ONLY BASIC MACHINERIES LIKE WELDING MACHINE, GRINDER MACHINE, ROTATOR, LAT HE MACHINE, CRANE AND BENDING MACHINE WERE ACTUALLY USED AND WITH THESE MACHINERI ES THE ASSESSEE CANNOT BE SAID TO BE CARRYING OUT THE MANUFACTURING ACTIVITY. HE ALSO POINTED TO THE OBSERVATION OF THE AO THAT THE DIG CERTIFICATE MENTIONED THAT T HE ASSESSEE IS DOING FABRICATION AND ASSEMBLING WORK. HE THUS SUPPORTED THE ORDER OF AO. 6 THE LD. A.R. ON THE OTHER HAND SUBMITTED THAT THE ASSESSEE STARTED ITS BUSINESS ACTIVITY IN AY 2004-05 AND THE YEAR UNDER CONSIDERA TION IS THE 3 RD YEAR OF BUSINESS. THE LD. A.R. POINTED TO THE SUBMISSIONS MADE BEFORE AO WHICH HAS BEEN REPRODUCED IN THE ORDER AND FROM IT POINTED TO THE WORK CARRIED OUT AT ITS FACTORY, THE LIST OF MACHINERY/EQUIPMENT OWNED AND USED BY THE A SSESSEE. HE ALSO POINTED OUT TO THE VARIOUS MANUFACTURING PROCESSES CARRIED OUT AT THE END OF ASSESSEE. HE FURTHER SUBMITTED THAT AFTER THE PROCESSING DONE BY THE ASSESSEE, ENTIRELY NEW COMMERCIALLY MARKETABLE PRODUCT WHICH IS DISTINCT F ROM THE RAW MATERIAL COMES INTO EXISTENCE AND IS SOLD. HE FURTHER SUBMITTED THAT TH E MACHINERIES THAT ARE MANUFACTURED BY THE ASSESSEE ARE DIFFERENT FOR EACH CUSTOMER AS PER THEIR INDIVIDUAL REQUIREMENT. IT WAS ALSO SUBMITTED THAT UNLESS THE DIFFERENT PARTS OF MACHINERY WHICH ARE EITHER MANUFACTURED BY IT OR/ARE PROCURED FROM OUTSIDE ARE ENGINEERED, FABRICATED AND ASSEMBLED USING THE SOPHISTICATED MA CHINERY AND EXPERT KNOWLEDGE, THE INDIVIDUAL PARTS WOULD NOT BY THEMSELVES HAVE B EEN SOLD AS AGITATED FILTER, DRYER ROTARY VACCUM PADDLE DRYER. HE FURTHER SUBMITTED TH AT THE UNIT OF THE ASSESSEE HAS BEEN GRANTED A SMALL SCALE INDUSTRIES REGISTRATION BY THE DIRECTORATE OF INDUSTRIES, THE ASSESSEE HAS OBTAINED EXCISE REGISTRATION CERTI FICATE AND THE GOODS MANUFACTURED BY THE ASSESSEE ARE SUBJECT TO EXCISE TARIFF UNDER THE CENTRAL EXCISE TARIFF ACT, 1955. LD A.R. FURTHER SUBMITTED THAT FO R THE PRECEDING ASSESSMENT YEARS I.E. FOR AY 2005-06 AND AY 2007-08 THE CLAIM OF DED UCTION U/S 80IB OF THE ACT WAS ALLOWED IN THE ASSESSMENT FRAMED U/S 143(3) AND HE ALSO PLACED ON RECORD THE COPY OF THE AFORESAID ASSESSMENT ORDERS. FROM THE ORDER PASSED U/S 143(3) FOR AY 2007- 08, HE POINTED OUT THAT THOUGH THE ORDER WAS FRAMED ON 24.12.2009 I.E. AFTER THE DATE ITA NOS. 1606/AHD/2010 & 149 7/AHD/2011 . A.YS. 2006-0 7 & 2008- 09 7 OF ORDER PASSED IN THE PRESENT APPEAL (ORDER FOR AY 2006-07 DATED 31.12.2008), THE ASSESSEE HAS BEEN ALLOWED THE DEDUCTION U/S 80IB. H E SUBMITTED THAT THE AO CANNOT WITHDRAW THE RELIEF WHICH HAS BEEN ALREADY G RANTED WITHOUT DISTURBING THE RELIEF GRANTED IN THE EARLIER YEARS AND FOR THE AFO RESAID PROPOSITION HE RELIED ON THE DECISION OF HON'BLE GUJ HIGH COURT IN THE CASE OF SAURASHTRA CEMENT & CHEMICAL IND. LTD (1980) 123 ITR 669 (GUJ). HE FURTHER PLACE D RELIANCE ON THE DECISION OF H'BLE APEX COURT IN THE CASE OF ASPINWELL & CO LTD VS CIT 251 ITR 323 (SC) FOR THE PROPOSITION THAT THE WORD 'MANUFACTURE' HAS TO BE G IVEN A MEANING AS UNDERSTOOD IN COMMON PARLANCE. HE ALSO PLACED RELIANCE ON THE DEC ISION IN THE CASE OF ITO VS ARIHANT TILES & MARBLES PVT LTD 320 ITR 79 (SC) FOR THE PROPOSITION THAT IF THE ASSESSEE IS ASSESSED UNDER THE EXCISE ACT, TR EATING ITS ACTIVITIES AS MANUFACTURE, THEN UNDER THE INCOME TAX ACT THE ACTI VITY HAS TO BE IDENTIFIED AS MANUFACTURE. HE ALSO PLACED RELIANCE ON THE DECISIO N OF AHMEDABAD TRIBUNAL IN THE CASE OF BHAGAT TEXTILES (ITA NO 294/AHD/2009) AND T HE DECISIONS STATED THEREIN. HE ALSO PLACED ON RECORD THE COPY OF THE AFORESAID DECISION OF TRIBUNAL. HE FURTHER SUBMITTED THAT IN THE CASE OF CIT VS MAHESH CHANDRA SHARMA 308 ITR 222 (P&H) AND CIT VS CHIRANJEEVI WIND ENERGY LTD 333 ITR 192 (MAD) IT HAS BEEN HELD THAT ACTIVITY OF ASSEMBLING AMOUNTS TO MANUFACTURE. HE A LSO PLACED RELIANCE ON VARIOUS OTHER DECISIONS. HE THUS SUPPORTED THE ORDER OF CIT (A). 7 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE MATERIAL ON RECORD. THE DISPUTE IN THE PRESENT CASE IS DENIAL OF DEDUCTION U/S 80IB FOR THE REASON THAT THE AO IS OF THE VIEW THAT THE ACTIVITY OF THE ASSESSEE IS NOT MANUFACTURING BUT IS OF MERE ASSEMBLY OF GOODS. THE UNDISPUTED FACTUAL POSITION IS THAT THE ASSESSEE PURCHASES VARIOUS MATERIALS LIKE SS PLATES, MS PLATES, BEAMS, CHANNELS, GEAR BOX, HYDRAULIC CYLINDER ETC ON WHICH VARIOUS PROCESSES ARE CARRIED OUT BY THE ASSESSEE ITSELF IN ITS FACTORY AND OTHER PROCESSES AND ACTIVITIES ARE ALSO DONE BY VARIOUS OTHER PARTIES ON BEHALF OF THE ASSESSEE. AFTER UNDERGOING VARIOUS PR OCESSES THE FINAL PRODUCT IS SOLD AS PLANT AND MACHINERY (KNOWN AS AGITATED FILTERS, AGITATED FILTER DRYERS, ROTARY VACCUM PADDLE DRYERS ETC). ITA NOS. 1606/AHD/2010 & 149 7/AHD/2011 . A.YS. 2006-0 7 & 2008- 09 8 8 IT IS ALSO AN UNDISPUTED FACT THAT THE YEAR UNDER APPEAL IS 3 RD YEAR WHEN THE ASSESSEE HAS CLAIMED DEDUCTION U/S 80IB OF THE ACT. IN EARLIER YEARS, ASSESSEE HAS ALSO BEEN ALLOWED THE DEDUCTION IN THE ASSESSMENTS FRAMED U/S 143(3). ANOTHER FACT WHICH IS NOTICED IS THAT THE ASSESSMENT FOR THE YEA R UNDER APPEAL WAS FRAMED ON 31.12.2008 WHEREIN THE DEDUCTION U/S 80IB HAS BEEN DISALLOWED BUT HOWEVER FOR THE AY 2007-08 (I.E. SUBSEQUENT YEAR) THOUGH THE ASSESS MENT WAS FRAMED U/S 143(3) ON 24.12.2009 I.E. SUBSEQUENT TO THE DATE OF PRESENT A SSESSMENT, THE ASSESSEE HAS BEEN GRANTED DEDUCTION U/S 80IB WHICH MEANS THAT TH E ASSESSEE HAS BEEN DENIED DEDUCTION ONLY IN THE YEAR UNDER APPEAL AND NEITHER IN EARLIER OR SUBSEQUENT ASSESSMENT YEAR. BEFORE US NOTHING HAS BEEN BROUGHT ON RECORD BY REVENUE TO DEMONSTRATE THAT THE FACTS IN THE YEAR UNDER APPEAL ARE DIFFERENT THEN THOSE OF PRECEDING ASSESSMENT YEARS OR IN THE IMMEDIATE SUCC EEDING YEAR SO AS TO DENY THE BENEFIT OF DEDUCTION U/S. 80IB OF THE ACT. BEFORE U S, NOTHING HAS BEEN BROUGHT ON RECORD TO DEMONSTRATE THAT THE RELIEF WHICH HAS BEE N GRANTED TO THE ASSESSEE IN EARLIER YEARS AND IMMEDIATE SUCCEEDING YEAR HAS BEE N WITHDRAWN. 9 THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF SA URASHTRA CEMENT & CHEMICALS (SUPRA) HAS HELD THAT WITHOUT DISTURBING THE RELIEF GRANTED IN THE INITIAL YEAR THE ITO CANNOT EXAMINE THE QUESTION AGAIN AND DECIDE TO WIT HHOLD OR WITHDRAW THE RELIEF WHICH HAS BEEN ALREADY ONCE GRANTED. 10 IT IS ALSO A FACT THAT THE FINAL GOODS THAT ARE SOLD BY ASSESSEE ARE LIABLE FOR EXCISE DUTY UNDER THE EXCISE LAWS AND THE ASSESSEE HAS ALS O PAID EXCISE DUTY ON THE GOODS SOLD BY IT. 11 CIT(A) HAS ALSO GIVEN A FINDING THAT THE ASSESSE E HAS SATISFIED THE CONDITIONS LAID DOWN IN S. 80IB OF THE ACT AND THE SLLVASSA UNIT IS MANUFACTURING/PRODUCING ARTICLES AND THINGS. 12 IN THE CASE OF MAHESH CHANDRA SHARMA (SUPRA) THE HON'BLE PUNJAB & HARYANA HIGH COURT HAS HELD THAT MOTORCYCLE WHEEL ASSEMBLED BY A SSESSEE BY USING RIM, TUBE, ITA NOS. 1606/AHD/2010 & 149 7/AHD/2011 . A.YS. 2006-0 7 & 2008- 09 9 TYRE, BEARING, DRUM, SPOKE, NIPPLE AND COLLAR RESUL TED IN AN ARTICLE DISTINCT IN NAME, CHARACTER AND USE HENCE 'MANUFACTURE' ELIGIBLE FOR DEDUCTION UNDER SECTION. 80-IB. 13 IN THE CASE OF CHIRANJEEVI WIND ENERGY LTD (SUPR A) THE HON'BLE HIGH COURT HELD THAT THE DIFFERENT PARTS PROCURED BY THE ASSESSEE BY THE MSELVES CANNOT BE TREATED AS A WINDMILL. THOSE DIFFERENT PARTS BEAR DISTINCTIVE NA MES AND WHEN ASSEMBLED TOGETHER, THEREAFTER IT GETS TRANSFORMED INTO AN ULTIMATE PRO DUCT WHICH IS COMMERCIALLY KNOWN AS A 'WINDMILL'. THERE CAN, THEREFORE, BE NO DIFFIC ULTY IN HOLDING THAT SUCH AN ACTIVITY CARRIED ON BY THE ASSESSEE WOULD AMOUNT TO 'MANUFAC TURE' AS WELL AS 'PRODUCTION' OF A THING OR ARTICLE AS SET OUT IN S. 80-IB(2)(III ). 14 CONSIDERING THE TOTALITY OF THE AFORESAID FACTS, WE FIND NO INFIRMITY IN THE ORDER OF CIT(A) AND THEREFORE HAVE NO REASON TO INTERFERE WI TH THE ORDER OF CIT(A) AND THUS THIS GROUND OF REVENUE IS DISMISSED. 2 ND GROUND IS WITH RESPECT TO DELETION OF ADDITION OF UNEXPLAINED JOB CHARGES: 15 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, FRO M THE DETAILS OF EXPENSES ON ACCOUNT OF JOB CHARGES, AO NOTICED THAT ASSESSEE HA D CREDITED VARIOUS PARTIES LISTED (AGGREGATING TO RS 4,75,97,006/-) ON PAGE 52 OF THE ORDER BUT IN THE SCHEDULE FILED WITH THE RETURN OF INCOME, ASSESSEE HAD DEBITED RS 3,66,15,011/- TOWARDS LABOUR AND PROCESSING CHARGES. HE THEREFORE CONCLUDED THAT ASSESSEE HAD CREDITED/PAID RS 1,09,81,995/- (4,75,97,006 MINUS RS. 3,66,15,011 ) AS JOB CHARGES WHICH WERE NOT REFLECTED IN THE BOOKS OF ACCOUNTS OUT OF UNACC OUNTED INCOME AND ACCORDINGLY ADDED THE SAME TO THE INCOME. AGGRIEVED BY THE ORDE R OF AO, ASSESSEE CARRIED THE MATTER BEFORE CIT(A), CIT(A) DELETED THE ADDITION B Y HOLDING AS UNDER:- 6.3 I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDE R AND THE SUBMISSIONS MADE BY THE LD. A.R. OF THE APPELLANT. THE SUBMISSI ONS MADE BY THE LD. A.R. HAVE MERITS. THE A.O. SHOULD HAVE VERIFIED ALL THE SE HEADS OF EXPENSES BY WAY OF RECONCILING THE FIGURES ADOPTED BY THE APPEL LANT BEFORE MAKING SUCH ADDITION. THE APPELLANT HAS BEEN CLAIMING DEDUCTIO N U/S. 80IB AND THERE IS NO ITA NOS. 1606/AHD/2010 & 149 7/AHD/2011 . A.YS. 2006-0 7 & 2008- 09 10 LOGIC WHY IT SHOULD INCURRED EXPENSES OUTSIDE THE B OOKS OF A/C. CONSIDERING THE FACTS AND CIRCUMSTANCES MENTIONED ABOVE, I AM I NCLINE TO HOLD THAT THE ACTION TAKEN BY THE LD. A.O. IS NOT JUSTIFIED. I F ULLY AGREE WITH THE CONTENTION OF THE APPELLANT. HENCE THE APPEAL IN THIS GROUND IS A LLOWED. 16 AGGRIEVED BY THE ORDER OF CIT(A), REVENUE IS NOW IN APPEAL BEFORE US. BEFORE US, LD D.R. SUPPORTED THE ORDER OF AO. ON THE OTHER HAND L D AR REITERATED THE SUBMISSIONS MADE BEFORE CIT(A) AND THUS SUPPORTED THE ORDER OF CIT(A). 17 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT CIT(A) AFTER CONSIDERING THE RECONCILIATION SU BMITTED BY THE ASSESSEE BEFORE HIM, DELETED THE ADDITION. HE HAS FURTHER NOTED THA T AO SHOULD HAVE VERIFIED ALL THE HEADS OF EXPENSES AND RECONCILED THE SAME BEFORE MA KING ADDITION WHICH WAS NOT DONE BY A.O. BEFORE US, REVENUE COULD NOT CONTROVE RT THE FINDINGS OF CIT(A) NOR HAS BROUGHT ANY CONTRARY MATERIAL IN ITS SUPPORT. I N VIEW OF THE AFORESAID FACTS, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF CIT(A ) AND THUS THIS GROUND OF REVENUE IS DISMISSED. 18 IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSE D. ITA NO. 1497/AHD/2011 FOR A.Y. 2008-09. 19 THE ONLY EFFECTIVE GROUND RAISED BY REVENUE READ S AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE HONBLE CIT(A) ERRED IN DELETING THE ADDITION OF RS. 6,01,10,971/- MADE ON ACCOUNT OF DISALLOWANCE OF DEDUCTION U/S. 80IB OF THE I.T. ACT. ITA NOS. 1606/AHD/2010 & 149 7/AHD/2011 . A.YS. 2006-0 7 & 2008- 09 11 20 SINCE THE FACTS OF ALL THE CASES ARE IDENTICAL T O THAT OF IN ITA NO. 1606/AHD/2010, WE FOR SIMILAR REASONS GIVEN HEREINABOVE WHILE DECIDIN G THE APPEAL IN ITA NO. 1606/AHD/2010 HEREINABOVE ALSO DISMISS THE GROUND O F REVENUE. THUS THE APPEAL OF REVENUE IS DISMISSED. 21 IN THE RESULT, BOTH THE APPEALS OF REVENUE ARE D ISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 21 - 02 - 2014. SD/- SD/- (MUKUL KR. SHRAWAT) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AH MEDABAD