ITO, CHENNAI V. M/s. Deco De Trend, Kancheepuram

ITA 1657/CHNY/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0948 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 22-01-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 24-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: N VIJAY KUMAR
• Section: 143(3); 80HHC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH CHENNAI BEFORE DR. O. K. NARAYANAN, VICE PRESIDENT AND SHRI V. DURGA RAO, JUDICIAL MEMBER ------- ITA NO. 1657/MDS/2012 ASSESSMENT YEAR : 2009-10 THE INCOME TAX OFFICER, BUSINESS WARD-XIII(2), CHENNAI. V. M/S. DECO DE TREND, NO.4/371, DAVID NAGAR, VANDALUR-WALAJABAD ROAD, PADAPPAI VILLAGE, SRIPERUMBUDUR TALUK, KANCHEEPURAM DT. PIN :601 301. (PAN : AADFD4304P) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI GURU BASHYAM, JCIT RESPONDENT BY : SHRI N. VIJAY KUMAR, CA DATE OF HEARING : 22.0 1.2013 DATE OF PRONOUNCEMENT : 22.01.201 3 O R D E R PER V. DURGA RAO, JUDICIAL MEMBER : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE CIT(APPEALS)-XII, CHENNAI DATED 03-05-2012 F OR THE ASSESSMENT YEAR 2009-10. ITA NO.1657/MDS/2012 : 2 : 2. FACTS IN BRIEF ARE THAT THE ASSESSEE IS IN THE B USINESS OF EXPORT OF DRIED PARTS OF FLOWERS, BOTANICALS ETC. FOR THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD FILED ITS RETU RN OF INCOME DECLARING INCOME AT NIL AFTER CLAIMING A DEDUCTION OF ` 8,54,04,179/- UNDER SECTION 10-B OF THE INCOME TAX A CT, 1961 ('THE ACT' FOR SHORT). INITIALLY, THE RETURN WAS P ROCESSED UNDER SECTION 143(1) AND THE ASSESSMENT WAS FINALLY COMPL ETED UNDER SECTION 143(3) OF THE ACT. DURING THE COURSE OF ASSESSMENT THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE WAS NEITHER MANUFACTURING NOR PRODUCING ANY PRODUCT WHICH WAS ONE OF THE ESSENTIAL REQUISITES FOR CLAIMING DE DUCTION U/S 10-B OF THE ACT. THE ASSESSEE HAD NO SUBSTANTIAL PL ANT AND MACHINERY WHICH WAS REQUIRED TO CARRY OUT THE PRODU CTION PROCESS CLAIMED TO HAVE BEEN CARRIED OUT. THE FIXE D ASSETS MAINLY CONSISTED OF LAND & BUILDINGS, OFFICE EQUIPM ENTS, FURNITURE & FIXTURES, VEHICLES BOTH COMMERCIAL AND NON- COMMERCIAL. THE INPUT (RAW MATERIALS) AND OUTPUT ( FINISHED PRODUCT) WERE NO DIFFERENT EXCEPT FOR PACKAGING IN LOTS. THERE WAS NO EVIDENCE TO BELIEVE THE MANUFACTURE/PRODUCTI ON PROCESSES CLAIMED, WERE EVER CARRIED OUT. THERE WA S NO VALUE ADDITION TO THE FINAL PRODUCTS AS COMPARED TO THE I NPUTS. THIS ITA NO.1657/MDS/2012 : 3 : FINDING WAS ALSO BASED ON A CAREFUL EXAMINATION OF THE ASSESSEES PURCHASES OF RAW MATERIALS WHICH WERE TA ILOR MADE, PRE-COLOURED AND PRE-SIZED BOTANICALS, PLANT PRODUC TS, SEA SHELLS AND STONES. THESE DID NOT UNDERGO ANY TRANSF ORMATION WHICH QUALIFIED TO BE TERMED AS MANUFACTURE/PRODUCT ION IN TERMS OF SEC. 10-B OF THE ACT. THE ASSESSING OFFIC ER FURTHER OBSERVED THAT THE ASSESSEE DID NOT SATISFY ANOTHER ESSENTIAL REQUISITE OF SEC. 10-B THAT IT SHOULD BE A NEWLY EST ABLISHED UNDERTAKING NOT FORMED BY THE SPLITTING UP OR RECON STRUCTION OF A BUSINESS ALREADY IN EXISTENCE. THE SISTER CONCER N OF THE ASSESSEE M/S. DRY DE FASHION (P) LTD. WAS ALREADY I N THE SAME ACTIVITY BEFORE THE FORMATION OF THE ASSESSEE FIRM AND THE DIRECTORS OF THIS COMPANY WERE INDEED THE PROMOTERS OF THIS FIRM. THE HUMAN RESOURCES OF THE COMPANY WERE USED TO CARRY OUT THE ACTIVITIES OF THE FIRM. AN ANALYSIS OF THE BUSINESS VOLUMES OF THE COMPANY AND FIRM FOR THE PERIOD BETW EEN 2003-04 AND 2007-08 REVEALED THAT THERE WAS A STEAD Y DECLINE IN THE TURNOVER OF THE COMPANY AND A CORRESPONDING INCREASE IN THE TURNOVER OF THE FIRM. THIS WAS IN THE BACKG ROUND OF WITHDRAWAL OF DEDUCTION U/S 80HHC FROM ASSESSMENT Y EAR 2005-06 FROM THE STATUTE, WHICH WAS HITHERTO RESORT ED TO BY ITA NO.1657/MDS/2012 : 4 : THE COMPANY. THESE CONFIRM THE FINDING THAT THE BU SINESS OF THE COMPANY WAS INDEED DIVERTED ALONG WITH ITS RESO URCES TO THE FIRM TO CLAIM TAX BENEFITS BY WAY OF DEDUCTION U/S 10-B OF THE ACT. THE ASSESSEE HAD INFORMALLY DIVERTED THE BUSINESS AND RESOURCES OF THE COMPANY TO THE FIRM, WITHOUT A NY DOCUMENTED TRANSFER TO MAKE A TECHNICAL EXCUSE THAT BOTH THE ENTITIES WERE DIFFERENT. THIS HAS CONTRADICTED THE ESSENTIAL REQUIREMENTS AND PURPOSE OF SEC. 10-B AND ESTABLISHE D THE PURPOSE AND INTENTIONS OF FLOATING A PARTNERSHIP FI RM WITH NO CHANGE IN THE PERSONS CONTROLLING THE BUSINESS, NO INTRODUCTION OF ANY NEW PROCESS OR TECHNOLOGY AND NO ACCEPTABLE/ PERCEPTIBLE CHANGE IN THE FINAL PRODUCT. IN VIEW O F THE ABOVE OBSERVATION THE ASSESSING OFFICER DISALLOWED THE CL AIM OF DEDUCTION U/S 10-B OF THE ACT TO THE TUNE OF ` 8,57,09,127/-. HE FURTHER OBSERVED THAT SIMILAR DISALLOWANCES HAVE BEEN MADE FOR THE EARLIER ASSESSMENT YEARS, 2004-05, 200 5-06, 2006-07 AND 2007-08 ALSO. HOWEVER, FOR ALL THESE Y EARS BOTH THE CIT(APPEALS) AND THE TRIBUNAL HAVE ALLOWED THE CLAIM OF THE ASSESSEE AND THE DEPARTMENT HAS PREFERRED APPEA L TO THE HONBLE HIGH COURT AGAINST THE DECISIONS OF THE THE SE APPELLATE AUTHORITIES AND THE ISSUE HAS NOT REACHED ITS FINAL ITY. ITA NO.1657/MDS/2012 : 5 : ACCORDINGLY, THE ASSESSING OFFICER THE COMPUTED TH E TOTAL INCOME OF THE ASSESSEE BY DENYING THE DEDUCTION UND ER SECTION 10-B OF THE ACT. 3. ON BEING AGGRIEVED, THE ASSESSEE CARRIED THE MAT TER BEFORE THE CIT(APPEALS). THE CIT(APPEALS) BY FOLLO WING THE DECISION OF THE TRIBUNAL FOR THE ASSESSMENT YEARS 2 004-05 TO 2007-08 IN THE ASSESSEES OWN CASE HELD ON IDENTIC AL FACTS AND CIRCUMSTANCES THE CIT(APPEALS) AS WELL AS THE T RIBUNAL HELD THAT THE ASSESSEES ACTIVITY OF PREPARING BOUQ UETS, WREATHS, GARLANDS, POTPOURRIS, BUNCHES ETC. MADE UP OF DRIED PARTS OF PLANTS, FLOWERS, LEAVES, STEMS ETC. AMOUNT ED TO MANUFACTURING OR PRODUCTION OF A THING OR AN ARTICL E AND ACCORDINGLY ELIGIBLE FOR DEDUCTION U/S 10-B OF THE ACT. HE ALSO OBSERVED THAT THE SAME ISSUE HAD COME UP BEFORE HIM FOR ADJUDICATION FOR ASSESSMENT YEAR 2008-09 IN ITA NO. 217/2010-11 WHERE, FOLLOWING THE ORDERS OF THE TRIB UNAL IN THE ASSESSEES OWN CASE IN EARLIER YEARS, HE HAD HELD T HAT THE ASSESSEE;S ACTIVITY AMOUNTED TO MANUFACTURING AND A LLOWED THE APPEALS. IN VIEW OF THE ABOVE, THE CIT(APPEALS ) HELD THAT THE ASSESSEE IS ENTITLED TO THE EXEMPTION OF ITS IN COME UNDER SEC. 10-B OF THE ACT. ITA NO.1657/MDS/2012 : 6 : 4. ON BEING AGGRIEVED, THE REVENUE HAS COME UP IN A PPEAL BEFORE THE TRIBUNAL. AT THE TIME OF HEARING THE LE ARNED COUNSEL FOR THE ASSESSEE FILED A PAPER BOOK CONSIST ING OF 29 PAGES. IT WAS SUBMITTED THAT THE TRIBUNAL HAS DECI DED THE ISSUE IN FAVOUR OF THE ASSESSEE FOR THE ASSESSMENT YEARS 2004- 05 TO 2007-08 AND 2008-09 AND THAT THE ISSUE IS COV ERED IN FAVOUR OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERA TION. 5. WE HAVE HEARD BOTH THE SIDES, PERUSED THE RECORD S AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. AFTER CAREFUL CONSIDERATION, WE FIND THAT THE TRIBUNAL HAS ALREAD Y DECIDED THE ISSUE IN ITA NO. 1692/MDS/2008 FOR THE ASSESSME NT YEAR 2005-06 DATED 18-09-2009 IN FAVOUR OF THE ASSESSEE THAT THE ASSESSEE IS ENTITLED TO THE DEDUCTION U/S 10-B OF T HE ACT. FURTHER IN ITA NOS. 1169 & 1170/MDS/2009 FOR THE AS SESSMENT YEARS 2004-05 AND 2006-07 BY ORDER DATED 04-12-2009 THE TRIBUNAL HAS DECIDED THE ISSUE IN FAVOUR OF THE ASS ESSEE BY FOLLOWING THE DECISION OF THE TRIBUNAL FOR THE ASSE SSMENT YEAR 2005-06 AND ALLOWED THE DEDUCTION U/S 10-B CLAIMED B Y THE ASSESSEE. SUBSEQUENTLY, IN ITA NO. 1043/MDS/2010 F OR THE ASSESSMENT YEAR 2007-08 THE TRIBUNAL HAS DECIDED TH E ISSUE IN FAVOUR OF THE ASSESSEE BY FOLLOWING ITS ORDER FOR T HE ITA NO.1657/MDS/2012 : 7 : ASSESSMENT YEARS 2004-05 AND 2005-06 VIDE ORDER DAT ED 08- 09-2010. SIMILAR VIEW WAS DECIDED BY THE TRIBUNAL IN ITA NO. 288/MDS/2012 FOR THE ASSESSMENT YEAR 2008-09 BY ORD ER DATED 03-05-2012. IN VIEW OF THE ABOVE DECISIONS O F THE CO- ORDINATE BENCH OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR DIFFERENT ASSESSMENT YEARS, WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE CIT(APPEALS). ACCORDINGLY, THE ORDER OF THE CIT(APPEALS) FOR THE YEAR UNDER CONSIDERATION IS CO NFIRMED AND THE APPEAL FILED BY THE REVENUE IS DISMISSED. 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON THE 22 ND OF JANUARY, 2013, AT CHENNAI. SD/- SD/- (DR. O. K. NARAYANAN) (V.DURGA RAO) VICE PRESIDENT JUDICIAL MEMBER CHENNAI, DATED THE 22 ND JANUARY, 2013. H. COPY TO: ASSESSEE/AO/CIT(A)/CIT/D.R./GUARD FILE