The ITO,Vapi Ward-1, Vapi V. M/s. Honey (India) Corporation,

ITA 22/AHD/2009

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 9214 (ITAT-AHMEDABAD)
• Duration Of Justice: 8 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-02-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 09-12-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 02-01-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUMIT KUMAR VARMA
• Assessee Lawyers: S N SOPARKAR
• Keywords: Depreciation
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER SN ITA NO. AY APPELLANT RESPONDENT 1. 21/AHD/2009 2005-06 ITO, VAPI WARD-1/2, VAPI M/S. HONEY (INDIA) CORPORATION DIV. I, A-1, SURVEY NO.215/3, DADRA (D&NH) PAN : AADFH 6989 G 2. 2625/AHD/2009 2006-07 3. 2808/AHD/2010 2007-08 4. 22/AHD/2009 2005-06 ITO, VAPI WARD-1, VAPI M/S. HONEY (INDIA) CORPORATION DIV. II, A-1, SURVEY NO.215/3, DADRA (D&NH) PAN : AADFH 7002 A 5. 2602/AHD/2009 2006-07 6. 2816/AHD/2010 2007-08 REVENUE BY : SHRI SUMIT KUMAR VARMA, DR ASSESSEE BY : SHRI S.N. SOPARKAR, AR DATE OF HEARING : 09 /12/2016 DATE OF PRONOUNCEMENT IN COURT : 17/02/20 17 / O R D E R THIS IS GROUP OF SIX REVENUE APPEALS IN THE CASE OF TWO ABOVE MENTIONED ASSESSEES WHICH ARE GROUP CONCERNS. THE I SSUES AND GROUNDS BEING SIMILAR, THESE APPEALS WERE HEARD TOGETHER AN D ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE COMMON GROUNDS RAISED IN BOTH ASSESSEES ARE TO THE EFFECT THAT THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN. (A) DELETING THE DISALLOWANCE OF DEDUCTION U/S 80I B AS UNDER:- DIVISION AY DEDUCTION U/S 80IB DIV-I 2005-06 RS.26,58,479/- DIV-I 2006-07 RS.1,67,549/- DIV-I 2007-08 RS.35,55,510/- DIV-II 2005-06 RS.33,53,560/- DIV-II 2006-07 RS.11,76,406/- (B) DIRECTING TO ALLOW DEDUCTION U/S 80IB ON THE DI SALLOWANCE U/S 40(A)(IA) AS UNDER:- SMC-ITA NOS. 21,22, 2602 & 2625/AHD/2009 & ITA NO. 2808 & 2816/AHD/2010 - HONEY (I) CORPN DIV 1 & 2 AY : 2005-06, 2006-07 & 2007-08 2 DIVISION AY DISALLOWANCE U/S 40(A)(IA) DIV-I 2005-06 RS.8,34,711/- DIV-I 2006-07 RS.18,07,735/- DIV-I 2007-08 RS.10,39,467/- DIV-II 2005-06 RS.8,40,497/- DIV-II 2006-07 RS.2,00,237/- DIV-II 2006-07 RS.21,93,256/- 3. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON TH E ORDER OF THE ASSESSING OFFICER. 4. LD. COUNSEL FOR THE ASSESSEE CONTENDS THAT THE B RIEF FACTS ARE BOTH THE ASSESSEES ARE PARTNERSHIP FIRM, I.E., DIVISION-I & II, SITUATED IN THE BACKWARD AREA OF DADRA & NAGAR HAVELI AND ENGAGED IN THE MAN UFACTURING OF PAPER TUBES. BOTH THE UNITS ARE CLAIMED TO BE ELIGIBLE F OR DEDUCTION U/S 80IB OF THE ACT @ 100% OF INCOME FOR INITIAL FIVE YEARS FRO M THE DATE OF COMMENCEMENT OF ITS MANUFACTURING ACTIVITIES. RET URNS OF INCOMES WERE FILED ALONGWITH THE REQUISITE AUDIT REPORT PROVIDED U/S 44AB ALONGWITH THE PRESCRIBED CA CERTIFICATE FOR ELIGIBILITY U/S80IB. SURVEY PROCEEDINGS WERE CONDUCTED ON 17.03.2006 IN THE GROUP CASES OF SHRI RASHID AHMED SHAIKH, VAPI AND THE ASSESSEES ARE THE GROUP ENTITIES. DU RING THE COURSE OF SURVEY PROCEEDINGS, IT WAS SEEN THAT ON THE DATE OF SURVEY PROCEEDINGS, ONLY THE ACTIVITIES OF HONEY INDIA CORPORATION DIV-II ARE UN DER PROGRESS AND THERE WERE NO ACTIVITIES OF DIV-I AND DIV-III. VERIFICATI ON OF THE MUSTER REGISTER MAINTAINED AT THE ABOVE PREMISES REVEALED THAT REQU IREMENT OF EMPLOYING 10 WORKERS FOR EACH UNIT HAS NOT BEEN COMPLIED WITH BY THE ABOVE UNITS. IT WAS ALSO SEEN THAT THE FINISHED GOODS WERE PRODUCED BY THE M/S. HONEY PAPER TUBE AND M/S. HONEY PAPER BOX, PHASE-I, GIDC, VAPI AND ONLY SALES VOUCHERS IN THE NAME OF ABOVE UNITS WERE PREPARED. THEREFORE, THE SURVEY TEAM CAME TO THE CONCLUSION THAT NO ACTIVITIES WERE CONDUCTED AT THE ABOVE PREMISES AND AS SUCH THESE UNITS ARE NOT ENTI TLED FOR EXEMPTION U/S 80IB OF THE ACT. FURTHER THE SURVEY TEAM HAS IMPOU NDED THE MUSTER SMC-ITA NOS. 21,22, 2602 & 2625/AHD/2009 & ITA NO. 2808 & 2816/AHD/2010 - HONEY (I) CORPN DIV 1 & 2 AY : 2005-06, 2006-07 & 2007-08 3 REGISTERS, SINCE THEY WILL BE USEFUL IN FINALIZING THE ASSESSMENT FOR AY 2005- 06. HOWEVER, ON VERIFICATION OF THE IMPOUNDED MUSTE R REGISTER, IT WAS SEEN THAT THE ASSESSEE HAD NOT EMPLOYED 10 OR MORE WORKE RS FOR THE SUBSTANTIAL PERIOD OF THE FY 2004-05 RELEVANT TO AY 2005-06. T HE ASSESSING OFFICER WAS OF THE VIEW THAT AS PER THE SURVEY TEAMS REPORT, N O MANUFACTURING ACTIVITY WAS CARRIED OUT AT THE FACTORY PREMISES CLAIMED BY THE ASSESSEE. IN THIS CONNECTION, THE ASSESSEE VIDE LETTER DATED 07.11.20 07 HAS EXPLAINED AS UNDER:- WE ARE HEREBY SUBMITTING THE WRITTEN SUBMISSION BY THE ASSESSEE ON ELIGIBILITY OF ASSESSEE FOR CLAIM OF DEDUCTION U/S. 80IB. IN THE SUBMISSION THE ASSESSEE HAS IN DETAIL GIVEN THE INFORMATION THAT HOW IT HAS COMPLIED WITH ALL THE CONDITIONS LAID DOWN IN S ECTION 801B. FURTHER THE ASSESSEE HAS ALSO FORCEFULLY AND WITH THE BACKUP OF THE FACTS AND DOCUMENTARY EVIDENCE HAS NEGATED THE CONTENTION OF THE INCOME T AX DEPARTMENT THAT NO MANUFACTURING ACTIVITY WAS BEING CARRIED OUT AT THE DADRA UNIT. THE DEPARTMENT HAS TRIED TO RAISE THE CONTENTION TH AT DURING THE SURVEY PROCEEDINGS IN MARCH, 2006, IT WAS FOUND THAT NO MA NUFACTURING ACTIVITY WAS BEING CARRIED OUT. HOWEVER, IT WAS CLARIFIED AT THAT STAGE ITSELF THAT THE FACTORY WAS CLOSED AS THE WORKERS WERE ON LEAVE DUE TO HOLI FESTIVAL. THIS FACT HAS ALSO BEEN REITERATED BY RASHID AHMED SHAIKH IN HIS STATEMENT TAKEN BY THE INCOME TAX DEPARTMENT. FURTHER THE SECOND CONTENTION OF THE INCOME TAX DEP ARTMENT THAT THE NUMBER OF WORKERS WERE BELOW 10 IS ALSO NEGATED IN THE SUBMISSION GIVEN SUPPORTED WITH THE COPIES OF WAGES REGISTER. THEREFORE, THE SUBMISSION BY THE ASSESSEE CLEARLY E STABLISHES THAT MANUFACTURING ACTIVITY WAS INDEED BEING CARRIED OUT AT THE SAID UNIT AND IT HAS RIGHTFULLY CLAIMED THE DEDUCTION U/S 80IB. 4.1 ALONGWITH THE ABOVE SUBMISSION, THE ASSESSEE H AS PUT A DETAILED ARGUMENT REGARDING ELIGIBILITY OF DEDUCTION U/S 80I B. IN SUPPORT OF HIS CLAIM, THE ASSESSEE HAS GIVEN COPIES OF ELECTRICITY BILLS FROM APRIL, 2004 TO MARCH, 2005, AND COPIES OF PAGES OF WAGES REGISTER AND ALSO RELIED UPON THE SMC-ITA NOS. 21,22, 2602 & 2625/AHD/2009 & ITA NO. 2808 & 2816/AHD/2010 - HONEY (I) CORPN DIV 1 & 2 AY : 2005-06, 2006-07 & 2007-08 4 DETAILS ALREADY FURNISHED WITH EARLIER SUBMISSION. THE ASSESSEE HAS ARGUED THAT IT CAN BE SEEN FROM THE ATTENDANCE REGISTER ( IN DEPARTMENT CUSTODY) AND THE WAGES REGISTER THAT THE ASSESSEE HAS BEEN E MPLOYING 8-11 WORKERS AT THE UNIT. IT IS STATED THAT FOR MAJOR PART OF THE YEAR 10 OR MORE THAN 10 WORKERS HAVE BEEN EMPLOYED AT THE UNIT AND HAVE BEE N INVOLVED IN THE MANUFACTURING OF PAPER TUBE. 4.2 THE ASSESSING OFFICER FURTHER OBSERVED THAT, TH OUGH DEPRECIATION WAS CLAIMED IN THE P&L A/C IN SCHEDULE D OF FIXED ASS ET, THERE WAS NO OPENING STOCK OF MACHINERY. THE ASSESSEE REPLIED THAT THEY WERE PURCHASED IN THIS YEAR FROM GAJANAN ENGINEERING WORKS. THE ASSESSING OFFICER POINTED OUT THAT IN FORM NO. 10CCB THE DATE OF COMMENCEMENT WAS CERTIFIED AS 28.03.2005. THE ASSESSEE REPLIED THAT THE SAME WAS A TYPOGRAPHICAL ERROR AND THE PRODUCTION WAS ACTUALLY COMMENCED ON 28.03. 2004. THE ASSESSEE CLAIMED PAYMENT OF LABOUR CHARGES OF RS.8,34,711/- FOR GETTING THE WORK DONE FROM ASSOCIATED CONCERN M/S. HONEY PAPER TUBE, VAPI (IN SHORT HPT). THE ASSESSING OFFICER, AFTER RECONCILED TH E SAME, FOUND THAT NONE OF THE BILLS WERE RAISED BY HPT FOR ANY SEMI-FINISHED PRODUCT AS CLAIMED BY THE ASSESSEE. THUS, AS RIGHTLY OBSERVED BY SURVEY T EAM, THE ASSESSEE WAS NOT MANUFACTURING ANY PRODUCT BUT GOT THE FINISHED PROD UCT FROM HPT AND THE ASSESSEE HAD NOT CONDUCTED ANY MANUFACTURING ACTIVI TY; THEREFORE, THE CLAIM OF 80IB DEDUCTION WAS REJECTED. 5. AGGRIEVED, THE ASSESSEE PREFERRED FIRST APPEAL W HERE THE LD. CIT(A) ALLOWED THE ASSESSEES CLAIM BY FOLLOWING OBSERVATI ONS:- 5.16. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND AFTER CONSIDERING THE AFORESAID FACTS AND RIVAL SUBMISSIONS, I HOLD THAT THE DENIAL OF THE CLAIM OF THE APPELLANT THAT IT HAS MANUFACTURED THE PRODUCTS IS UNJUSTIFIED. THE RECORDS CLEARLY ESTABLISH THAT THE APPELLANT HAS MANUFACTUR ED GOODS. THE DISALLOWANCE OF DEDUCTION U/S 80IB ONLY ON SAID PRE MISES THAT THE APPELLANT HAS NOT MANUFACTURED ARTICLES OR GOODS IS INCORRECT . THERE BEING NO OTHER SMC-ITA NOS. 21,22, 2602 & 2625/AHD/2009 & ITA NO. 2808 & 2816/AHD/2010 - HONEY (I) CORPN DIV 1 & 2 AY : 2005-06, 2006-07 & 2007-08 5 DEFICIENCY NOTICED IN THE COMPLIANCE OF THE SAID SE CTION 80IB BY THE APPELLANT, THE DENIAL OF DEDUCTION CLAIMED ON THE SAID GROUND IS INCORRECT. 5.17 THE AO HAS PROPOSED THAT ALTERNATIVELY, THE DE DUCTION CLAIMED U/S. 80IB BY THE APPELLANT BE RESTRICTED BY-THE AMOUNT O F RS.13,61,183/- AS WORKED IN HIS REMAND REPORT. AO HAS COMPUTED PROFIT EARNED BY THE APPELLANT ON AN AVERAGE WORKING OF THE QUANTUM OF T HE RAW MATERIAL PROCESSED AT THE RELATED JOB WORKER M/S. HONEY PAPE R TUBES. HE HAS CONSIDERED THE COST OF THE GOODS MANUFACTURED AT TH E SAID M/S. HONEY PAPER TUBES. DEDUCTING THE SAID COST, THE PROFIT EARNED O N THE GOODS MANUFACTURED FROM HONEY PAPER TUBE IS DERIVED. IT IS SUBMITTED B Y AO THAT SO MUCH OF THE PROFIT EARNED ON THE GOODS PROCESSED FROM HONEY PAP ER TUBE BE DISALLOWED. 5.18. THE PROPOSAL OF AO IS NOT CORRECT. THE RAW MATERIAL CONSUMED IN SUCH OUTSOURCED PROCESSED PRODUCTS IS UNDOUBTEDLY S UPPLIED BY THE APPELLANT. THE CONCERNED JOB WORKER IS PAID PROCESS ING CHARGES ONLY FOR CONVERTING THE RAW MATERIAL OF THE APPELLANT. HENCE THE GOODS ARE NOT SUPPLIED BY THE IMPUGNED OUTSIDE AGENCY SIMPLY AS T RADING GOODS. THE FINISHED GOODS OF THE APPELLANT ARE COVERED UNDER T HE CENTRAL EXCISE REGULATIONS. CENTRAL EXCISE AUTHORITIES HAVE COLL ECTED DUTY OF RS.48,47,236/- WHICH ACCEPTS THE FACT THAT THE GOOD S ARE MANUFACTURED BY THE APPELLANT. UNDER THE SAID CENTRAL EXCISE REGULATION S, THE DISPATCHES OF THE FINISHED FOODS ARE ACCOMPANIED WITH A GATE PASS MAD E FROM THE PREMISES OF THE MANUFACTURING UNIT. THE STIPULATION OF THE CENT RAL EXCISE REGULATION IS NOT FOUND VIOLATED. IN THE CIRCUMSTANCES, THE OUTSO URCED PROCESSED GOODS ALSO FORM PART OF THE GOODS MANUFACTURED BY THE APPELLAN T. THE PROPOSAL OF AO TO DISALLOW THE PROFIT ARTIFICIALLY COMPUTED ON WORKIN G OUT AVERAGES IS NOT JUSTIFIED IN THE CIRCUMSTANCES. THE SAME IS REJECTE D. 5.19. IN VIEW OF THE AFORESAID DISCUSSION GROUND NO. 1 AND 2 ARE DECIDED IN FAVOUR OF THE APPELLANT. I HOLD THAT THE DISALLOWAN CE OF THE CLAIM U/S. 80IB WAS INCORRECT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. AO IS DIRECTED TO ALLOW THE DEDUCTION U/S. 80IB. THE ASSESSEE SUCCEED S IN THESE GROUNDS OF APPEAL. 6. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE T RIBUNAL. 7. THE LD. DR CONTENDS THAT (A) THE ASSESSEES CA CERTIFIED THAT THE DATE OF CO MMENCEMENT OF MANUFACTURING OPERATIONS WAS FROM 28.03.2005. THER EAFTER, WHEN ASSESSING OFFICER POINTED OUT THE INCONSISTENC IES, THE ASSESSEE CHANGED ITS VERSION CLAIMING THAT IT WAS A SMC-ITA NOS. 21,22, 2602 & 2625/AHD/2009 & ITA NO. 2808 & 2816/AHD/2010 - HONEY (I) CORPN DIV 1 & 2 AY : 2005-06, 2006-07 & 2007-08 6 TYPOGRAPHICAL ERROR AND THE DATE OF COMMENCEMENT WA S 28.03.2004. LD. CIT(A), WITHOUT VERIFYING WHETHER THE CHANGE OF ONE YEAR WAS VERIFIED BY CA OR NOT, ALLOWED THE CLAIM OF THE ASSESSEE. (B) THE FACT THAT THE ASSESSEE WAS NOT CARRYING OUT ANY MANUFACTURING ACTIVITIES AS CLAIMED BY 28.03.2004 W AS CORROBORATED BY THE EVIDENCES AND THE MATERIAL IMPO UNDED DURING THE COURSE OF SURVEY. FURTHER, NO EXPLANATI ON HAS BEEN FILED FROM THE CA AS TO HOW THE MISTAKE WAS COMMITT ED. REFERENCE IS INVITED TO FORM 10CCB WHICH DOES NOT S AY REVISED 10CCB CERTIFICATE ISSUED BY CA. SIMILARLY, THE XER OX COPY OF THE AUDIT REPORT EXHIBITED ON THE PAPER-BOOK AT PAG E 24 CONTAINS NEITHER THE SIGNATURE OF THE CA NOR THE DA TE OF SIGNING THE SAID FORM NO.10CCB. THE LD. CIT(A), WITHOUT O BSERVING ALL THESE INCONSISTENCIES, SURVEY TEAMS REPORT AND THE MATERIAL IMPOUNDED DURING THE COURSE OF SURVEY, HELD THAT TH E RECORD CLEARLY ESTABLISHES THAT THE ASSESSEE WAS MANUFACTU RING GOODS IN ITS PREMISES AND THE FINDING OF THE ASSESSING OF FICER WAS INCORRECT. (C) EVEN THE AVERAGE WORKING OF THE ASSESSING OFFIC ER HAS BEEN DISCARDED. (D) OVERWHELMING RELIANCE HAS BEEN PLACED ON THE PAYMENT OF EXCISE DUTY BY THE ASSESSEE. EXCISE D UTY IS PAYABLE AT THE POINT OF CLEARANCE OF GOODS, I.E. DISPATCH OF GOODS. THE HPT AND ASSESSEES ARE ASSOCIATED CONCERNS AND HAVE CONVENIENTLY ARRANGED THE AFFAIRS. MERE PAYMEN T OF EXCISE DUTY BY THE ASSESSEE DOES NOT FACTUALLY CONCL UDE THAT THE ASSESSEE ITSELF MANUFACTURE THE GOODS WHICH IS A C ONDITION SMC-ITA NOS. 21,22, 2602 & 2625/AHD/2009 & ITA NO. 2808 & 2816/AHD/2010 - HONEY (I) CORPN DIV 1 & 2 AY : 2005-06, 2006-07 & 2007-08 7 PRECEDENT FOR ALLOWABILITY OF DEDUCTION U/S 80IB. THUS, THE ASSESSEES CLAIM HAS BEEN ACCEPTED BY THE CIT(A) RE LYING ON OBSERVATIONS WHICH DO NOT CONFIRM TO THE IMPOUNDED MATERIAL, SURVEY REPORT, AOS PERTINENT OBSERVATIONS AND UNSI GNED AUDIT REPORT. THEREFORE, THE RELIEF HAS BEEN GRANTED WIT HOUT DUE CONSIDERATION OF FACTS. 7.1 APROPOS GROUND NO.3, IF THERE WAS NO MANUFACTUR ING ACTIVITY AT THE ASSESSEES PREMISES, IT IMPLIES THAT THE MUSTER ROL E PREPARED BY THE ASSESSEE WAS UNRELIABLE AND A SELF-SERVING PREPARATION OF EV IDENCE. 7.2 APROPOS OTHER GROUND, I.E. DISALLOWANCE U/S 40( A)(IA), NO TDS HAS BEEN DEDUCTED FROM HPT WHICH AGAIN INDICATES THAT A SSESSEES ACTIONS ARE NOT AFFIRMED BY THE COMPLIANCE STATUTORY PROVISIONS . HAD IT PAID THE JOB WORK TO HPT, THE ASSESSEE WOULD HAVE DEFINITELY DED UCTED TDS THEREON. THE SAME HAS BEEN RIGHTLY DISALLOWED. 7.3 IN THE REMAND REPORT ALSO, THE LD. AO HAS CLEAR LY MADE OUT A CASE THAT THE ASSESSEES CLAIM OF PURCHASING OF SEMI-FINISHED GOODS FROM THE HPT IS INCORRECT AND IN FACT ONLY RESALE HAS BEEN CARRIED OUT & TO CREATE A SMOKESCREEN, THE THEORY OF PAYMENT OF EXCISE DUTY H AS BEEN PUT FORTH. 8. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER H AND, CONTENDS THAT THE ASSESSEES POINTED OUT THAT THE CA BY MISTAKE HAS P UT THE DATE 28.03.2005 AS DATE OF COMMENCEMENT WHICH WAS A TYPOGRAPHICAL ERRO R AND THE SAME IS 28.03.2004. THE ELECTRICITY BILLS AND OTHER NECESS ARY EVIDENCES WERE EXAMINED BY LD. CIT(A) AND THE FINDING OF FACTS HAS BEEN RECORDED IN THIS BEHALF. THE LD. AO IN ALTERNATE HAS CONTENDED THAT PROPORTIONATE DEDUCTION U/S 80IB SHOULD BE GIVEN WHICH INDICATES THAT THE F ACT OF PART MANUFACTURING BY HPT AND PART MANUFACTURING BY ASSE SSEE HAS BEEN SMC-ITA NOS. 21,22, 2602 & 2625/AHD/2009 & ITA NO. 2808 & 2816/AHD/2010 - HONEY (I) CORPN DIV 1 & 2 AY : 2005-06, 2006-07 & 2007-08 8 ACCEPTED. THEREFORE, THE DEDUCTION U/S 80IB HAS BEE N RIGHTLY ALLOWED BY LD. CIT(A). RELIANCE IS PLACED ON THE DECISION OF ITAT , AHMEDABAD BENCHES IN THE CASE OF M/S. SUBHALACHAL PRINT & PACK VS. ACIT IN ITA NO.2128/AHD/2007 DATED 08.12.2009, WHEREIN IT WAS H ELD AS UNDER:- 7. WHEN WE CONSIDER THE NARROW APPROACH ADOPTED BY THE LOWER AUTHORITIES IN DECIDING THE ISSUE WHETHER THE ASSESSEE IS CARRY ING ON MANUFACTURING ACTIVITY OR NOT, IT IS VERY NECESSARY TO BEAR IN MI ND THE ABOVE MENTIONED CONCERN EXPRESSED BY THEIR LORDSHIPS OF THE SUPREME COURT. THE ASSESSEE FIRM HAS ESTABLISHED A NEW UNIT TO MANUFACTURE SLIT TED PACKING REELS NECESSARY FOR THE SAID UNIT. THE ASSESSEE HAS ERECT ED PLANT AND MACHINERY. THE ASSESSEE IS CARRYING ON A NUMBER OF MANUFACTURI NG OR CONVERSION PROCESSES EITHER DIRECTLY OR THROUGH JOB WORKERS. I T IS NOT NECESSARY THAT THE ASSESSEE ITSELF SHOULD CARRY OUT ALL THE STAGES OF MANUFACTURING PROCESS. OUTSOURCING OF CERTAIN PROCESSES IS PERMISSIBLE IN LAW AS HELD BY VARIOUS COURTS. THE ARGUMENTS OF THE REVENUE THAT THE ACTIV ITIES OF THE ASSESSEE DO NOT AMOUNT TO MANUFACTURING ACTIVITIES AS ASSESSEE IS ONLY SLITTING OR CUTTING OF PAPER ROLLS INTO SMALLER REELS. IN FACT THE ASSE SSEE IS GETTING THE SHEETS PRINTED/LAMINATED UPTO THE REQUIRED MARK AND THEREA FTER GETS INTO SMALL REELS AND RE-PACK IT FOR FINAL DISPATCH. THE ACTIVITY OF SLITTING ITSELF INVOLVES DIFFERENT PROCESSES BY WHICH THE CHARACTER OF THE M ATERIAL IS TRANSFORMED INTO A DIFFERENT NATURE. THE FACT THAT THE ASSESSEE IS O UTSOURCING CERTAIN PROCESSING ACTIVITIES DOES NOT DISQUALIFY THE ASSESSEE TO BE P LACED IN THE STATUS OF A MANUFACTURER. IN CIT VS. ORICON, 151 ITR 296 AND CI T VS. PENWALT, 196 ITR 813, IT WAS HELD THAT A PROCESSOR OF GOODS NEED NOT HIMSELF CARRY OUT ALL THE PROCESSES RESULTING IN THE END PRODUCT AND HE M AY GET SOME OF THEM DONE BY A THIRD PARTY. WHEN WE CONSIDERED ALL THESE ACTI VITIES CARRIED OUT BY THE ASSESSEE, IN THE LIGHT OF THE ABOVE OBSERVATIONS OF THE HON'BLE SUPREME COURT, IN THE CASE OF M/S. ARIHANT TEXTILES PVT. LTD., WE ARE OF THE VIEW THAT THE ACTIVITY CARRIED ON BY THE ELIGIBLE UNIT OF THE ASS ESSEE IS A MANUFACTURING ACTIVITY AND THE ASSESSEE IS ELIGIBLE FOR THE DEDUC TION CONTEMPLATED UNDER SECTION 80IB(4) AS FAR AS THAT RELEVANT INCOM E IS CONCERNED. 8.1 APROPOS SECOND GROUND, IT IS CONTENDED THAT EVE N IF DISALLOWANCE U/S 40(A)(IA) IS MADE, IT WILL RESULT INTO ENHANCEMENT IN MANUFACTURING AND BUSINESS PROFITS. IN THAT CASE ALSO, THE ASSESSEE BEING ELIGIBLE FOR DEDUCTION U/S 80IB, THE DISALLOWANCE WILL RESULT INTO NIL TAX LIABILITY AS THE INCREASED INCOME WILL BE ELIGIBLE FOR DEDUCTION. RELIANCE IS PLACED ON THE FOLLOWING JUDGMENTS:- SMC-ITA NOS. 21,22, 2602 & 2625/AHD/2009 & ITA NO. 2808 & 2816/AHD/2010 - HONEY (I) CORPN DIV 1 & 2 AY : 2005-06, 2006-07 & 2007-08 9 I. HONBLE GUJARAT HIGH COURT JUDGMENT IN THE CASE OF CIT VS. TRANS ASIA PLAST IN TAX APPEAL NO. 1755 OF 2009 II. HONBLE GUJARAT HIGH COURT JUDGMENT IN THE CASE OF CIT VS. 1- UP CLOTHING CO. IN TAX APPEAL NO. 1382 OF 2009 III. ITAT, AHMEDABAD DECISION IN THE CASE OF DCIT VS. RA MESHBHAI C. PRAJAPATI, [2013] 29 TAXMANN.COM 64 (AHD.) IV. ITAT, AHMEDABAD DECISION IN THE CASE OF ITO VS. M/S . KEVAL CONSTRUCTION IN ITA NO.3175/AHD/2009. 9. I HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW. AS THE FACTS EMERGE, THE AUDIT REPORT/FROM NO.10CCB ISSUED BY TH E CA IS UNSIGNED AND UNDATED. THERE IS NO OTHER EVIDENCE PLACED BY T HE ASSESSEE ON THE PAPER-BOOK TO CORROBORATE THE FACT THAT THE MANUFAC TURING ACTIVITY OF THE ASSESSEE CONCERN COMMENCED FROM 28.03.2004. BESIDE S, ACCORDING TO SURVEY REPORTS, THE ASSESSEE COULD NOT DEMONSTRATE ANY MAN UFACTURING ACTIVITY. DUE TO UNSIGNED AND UNVERIFIED 10CCB CERTIFICATE OF CA, THE VERIFICATION OF SCHEDULE D OF FIXED ASSET ALSO COULD NOT BE MADE. THE SURVEY STATEMENT HAS NOT BEEN FILED BY THE ASSESSEE IN THE PAPER-BOO K. THEREFORE, IT COULD NOT BE ASCERTAINED AS TO WHETHER THE ASSESSEE OR ITS EM PLOYEES NARRATED ANY FACTS AT THE TIME OF SURVEY. UNLESS THE FACTS OF THE CAS E ARE PROPERLY VERIFIED, THE RATIO OF ITAT JUDGMENT IN THE CASE OF M/S. SUBHALAC HAL PRINT & PACK (SUPRA) CANNOT BE APPLIED. IN MY CONSIDERED VIEW, THE FACT S OF THE CASE HAVE NOT BEEN PROPERLY APPRECIATED WHICH NEEDS TO BE VERIFIE D IN ORDER TO ARRIVE AT PROPER FINDING OF FACTS. IN THE ENTIRETY OF FACTS A ND CIRCUMSTANCES, I AM INCLINED TO SET ASIDE THE REVENUE APPEALS BACK TO T HE FILE OF THE LD. CIT(A) TO DECIDE THE SAME AFRESH AFTER VERIFYING THE RELEVANT FACTS, SURVEY MATERIAL AND STATEMENTS, IF ANY. 10. SINCE THE OTHER GROUNDS RAISED BY THE ASSESSEE ARE DEPENDENT ON ALLOWABILITY OF DEDUCTION U/S 80IB, THE REMAINING G ROUNDS RAISED BEING SMC-ITA NOS. 21,22, 2602 & 2625/AHD/2009 & ITA NO. 2808 & 2816/AHD/2010 - HONEY (I) CORPN DIV 1 & 2 AY : 2005-06, 2006-07 & 2007-08 10 INTER-CONNECTED IN REVENUES APPEALS ARE ALSO SET A SIDE AND RESTORED BACK TO THE FILE OF LD. CIT(A). 11. SINCE THE FACTS, CIRCUMSTANCES AND GROUNDS OF APPEAL IN THE CASE OF M/S. HONEY (INDIA) CORPORATION DIV. II ARE SIMILA R TO THAT OF DIV-I, FOLLOWING THE SAME REASONING (SUPRA), THE APPEALS OF THE REVENUE IN THE CASE OF DIV-II ARE ALSO SET ASIDE AND RESTORED BACK TO THE FILE OF LD. CIT(A) WITH SIMILAR OBSERVATIONS. 12. IN THE RESULT, ALL THE REVENUES APPEALS ARE AL LOWED FOR STATISTICAL PURPOSES. SD/- R.P. TOLANI (JUDICIAL MEMBER) AHMEDABAD; DATED 17/02/2017 *BIJU T., SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE . / BY ORDER, TRUE COPY / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD