ITO, Jaipur V. SMT. RANJANA JOHARI, Jaipur

ITA 222/JPR/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87549 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 11 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 06-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Opportunity of being heard; Rule of consistency
• Section: 133A; 10B; 10

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH VH-VKJ-EHUK] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM VK;DJ VIHY LA- @ ITA NO. 222/JP/2012 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2008-09 THE I.T.O. WARD 6(2), JAIPUR. CUKE VS. SMT. RANJANA JOHARI, PROP. M/S GLOBAL ART EXPORTS, S-249, MAHAVEER NAGAR, TONK ROAD, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ L A-@ PAN/GIR NO.: ACKPM 7029 D VIHYKFKHZ @ APPELLANT IZR;FKHZ @ RESPONDENT IZR;K{KSI.K @ C.O. NO. 29/JP/2012 (ARISING OUT OF VK;DJ VIHY LA-@ ITA NO. 222/JP/2012) FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2008-09 SMT. RANJANA JOHARI, PROP. M/S GLOBAL ART EXPORTS, S-249, MAHAVEER NAGAR, TONK ROAD, JAIPUR. CUKE VS. THE I.T.O. WARD 6(2), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA- @ PAN/GIR NO.: ACKPM 7029 D IZR;K{KSID @ OBJECTOR IZR;FKHZ @ RESPONDENT JKTLO DH VKSJ LS @ REVENUE BY : SHRI AJAY MALIK (ADDL.CIT) FU/KZKFJRH DH VKSJ LS @ ASSESSEE BY : SHRI VIKASH RAJVANSHI (CA) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 04/12/2014 ?KKS'K .KK DH RKJH[ K @ DATE OF PRONOUNCEMENT : 2702/2015 ITA 222/JP/2012 & C.O. 29/JP/2012_ ITO VS SMT. RANJANA JOHARI 2 VKNS'K @ ORDER PER: T.R. MEENA, A.M. THE APPEAL BY REVENUE AND CROSS OBJECTION BY ASSESS EE ARISE FROM THE ORDER DATED 19/12/2011 OF LEARNED CIT (A)- II, JAIPUR FOR A.Y. 2008-09. RESPECTIVE GROUNDS OF APPEAL AS WELL AS C. O. ARE AS UNDER:- GROUNDS IN REVENUE APPEAL. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A)-II, JAIPUR HAS ERRED IN:- (1) ALLOWING EXEMPTION U/S 10BA OF THE IT ACT IN SPIT E OF THE FACT THAT GOODS EXPORTED WERE NOT MANUFACTURED BY THE ASSESSEE WHICH IS THE PRIMARY CONDITION FOR EXEMPTION U/S 10BA. (2) NOT CONSIDERING THE FACTS FOUND DURING THE COU RSE OF SURVEY CONDUCTED EARLIER AT ASSESSEES BUSINESS PREMISES, WHICH CONFIRMED THAT THE ASSESSEE WAS NOT CARRYING OUT MANUFACTURING ACTIVITY. (3) NOT CONSIDERING THE FACT THAT FOR CLAIMING EXE MPTION U/S 10BA OF THE IT ACT, SUBSTANTIAL MANUFACTURING ACTIVITY IS TO BE CARRIED OUT AND INSIGNIFICANT ACT IVITY LIKE POLISHING, FITTING ETC. TO ALMOST FINISHED GOO DS PURCHASED FROM THE MARKET WOULD NOT SUFFICE FOR THE PURPOSE OF SECTION 10BA. (4) NOT CONSIDERING THE FACT THAT THE ASSESSEE MAD E PURCHASE OF RAW WOOD OF RS. 2,02,99,938/- WHICH IS ONLY 15.90% OF TOTAL PURCHASE. BALANCE 84.1`0% PURCHASES MADE BY THE ASSESSEE ARE OF POLISHING MATERIAL, PACKING MATERIAL, SEMI-FINISHED GOODS, WHICH PROVES THAT NO SUBSTANTIAL MANUFACTURING ACTIVITY IS DONE BY THE ASSESSEE WHICH IS THE PRIMA RY CONDITION FOR EXEMPTION U/S 10BA. ITA 222/JP/2012 & C.O. 29/JP/2012_ ITO VS SMT. RANJANA JOHARI 3 (5) NOT CONSIDERING THE FINDING OF THE A.O. THAT T HE ASSESSEE IS BASICALLY ENGAGED IN PURCHASING READYMADE FURNITURE OF ARTISTIC WORK AND AFTER DOING SOME POLISHING AND FINISHING WORK EXPORTING THE SAME. WHICH IS PROVED FROM THE LIST OF SUNDRY CREDITORS FOR GOODS MORE THAN RS. 5 LACS FURNISHED BY THE ASSESSEE WHEREIN MOST OF THE MAJOR CREDITORS AR E HANDICRAFT SHOWROOM WHICH SUPPLY READYMADE FURNITURE HAVING ARTISTIC WORK. GROUND IN CROSS OBJECTION ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A)-II, JAIPUR HAS ERRED IN FACT AS WELL AS IN LAW:- (I) IN NOT ALLOWING DEPRECIATION OF FACTORY BUILDIN G AT JHOTWARA OF RS. 84,181/-. 2. ALL THE GROUNDS OF THE REVENUES APPEAL ARE REVO LVING AROUND THE DEDUCTION U/S 10BA OF THE INCOME TAX ACT, 1961 (IN S HORT THE ACT) NOT CARRYING OUT THE MANUFACTURING ACTIVITY AS REQUIRED BY THE LAW. THE LEARNED ASSESSING OFFICER OBSERVED THAT THE ASSESSE E IS EXPORTER OF WOODEN FURNITURE. DURING THE YEAR UNDER CONSIDERATIO N, THE ASSESSEE WAS DRAWING INCOME FROM EXPORT OF WOODEN FURNITURE IN THE NAME AND STYLE OF M/S GLOBAL ART EXPORTS AT SITAPURA INDUSTR IAL AREA, JAIPUR. IN THE PROFIT AND LOSS ACCOUNT, NET PROFIT OF RS. 71,52,97 5/- HAD BEEN DECLARED ON TURNOVER OF RS. 16,61,00,380/-. THIS NET PROFIT INCLUDES RENTAL INCOME OF RS. 60,000/-. IN THE COMPUTATION OF INCOME, ENTI RE PROFIT OF BUSINESS I.E. RS. 71,25,075/- HAD BEEN CLAIMED EXEMPT U/S 10 BA OF THE ACT. THE ITA 222/JP/2012 & C.O. 29/JP/2012_ ITO VS SMT. RANJANA JOHARI 4 LEARNED ASSESSING OFFICER FURTHER OBSERVED THAT TH E ASSESSEE HAD DECLARED 100% EXEMPTION OF PROFIT U/S 10BA OF THE A CT, THEREFORE, HE GAVE REASONABLE OPPORTUNITY OF BEING HEARD ON MANUF ACTURING AS WELL AS CLAIM MADE BY THE APPELLANT U/S 10BA OF THE ACT. IT HAS BEEN HELD THAT FOR A.Y. 2004-05, 2005-06 AND 2006-07, THIS DE DUCTION HAS BEEN DISALLOWED BY THE THEN ASSESSING OFFICER ON THE GROU ND THAT MAJOR ACTIVITY WAS UNDERTAKEN BY THE ASSESSEE WERE TRADING ONLY, NO ARTISTIC ITEMS MANUFACTURED AS PER SUB-SECTION (2) OF SECTIO N 10BA OF THE ACT, THERE MUST BE MANUFACTURING OR PRODUCTION OF ELIGIB LE ARTICLES OF THINGS. SINCE MOST OF PURCHASES WERE OF READYMADE FURNITURE WHICH WAS EXPORTED AS IT WAS OR AFTER MINOR POLISHING ON THE S AME. THEREFORE, IT HAS BEEN HELD THAT THESE ACTIVITIES CANNOT BE CONSI DERED AS MANUFACTURING OR PRODUCTION. BY CONSIDERING THE VAR IOUS DECISIONS IN PARAGRAPHS NO. 4 OF THE ASSESSMENT ORDER, HELD THAT DEFINITION LAID DOWN BY THE HON'BLE SUPREME COURT AND HONBLE RAJAST HAN HIGH COURT AS CITED IN THE ASSESSMENT ORDER, IT CAN EASILY BE CONCLUDED THAT BUSINESS ACTIVITY OF THE ASSESSEE OF PURCHASING REA DYMADE FURNITURE AGAINST THE FORM 17B FOR TRADING PURPOSES AND EXPOR TING THE SAME ONLY AFTER POLISHING AND PACKING THE SAME, CANNOT BE TER MED AS MANUFACTURING OF FURNITURE, NOT TO SUBJECT OF MANUF ACTURING OF ITA 222/JP/2012 & C.O. 29/JP/2012_ ITO VS SMT. RANJANA JOHARI 5 HANDMADE ARTISTIC FURNITURE. UNDER THESE CIRCUMSTAN CES, IT IS CRYSTAL CLEAR THAT THE ASSESSEE DOES NOT FULFILL THE BASIC CONDITION OF MANUFACTURING AND MADE ARTISTIC WOODEN ARTICLES AS L AID DOWN U/S 10BA OF THE ACT AND SHE IS NOT ELIGIBLE FOR EXEMPTION UN DER THIS SECTION. ACCORDINGLY, HE TREATED AMOUNTING TO RS. 71,25,075/ - AS NORMAL TAXABLE INCOME FROM BUSINESS. 3. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING OF FICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LEARNED CIT( A), WHO HAD ALLOWED THE APPEAL BY OBSERVING AS UNDER:- 3.1 I HAVE DULY CONSIDERED THE SUBMISSIONS OF THE APPELLANT. I FIND THAT THE ISSUE OF ALLOWABILITY OF DEDUCTION U/S 10BA HAS BEEN DECIDED IN THE FAVOUR OF THE ASSESSEE BY T HE ORDER OF HON'BLE JAIPUR TRIBUNAL (ITA NO. 1111, 1112 & 1113/JP/2010)DATED 14/07/2011 FOR A.Y. 21004-05, A. Y. 2005-06 AND A.Y. 2006-07. THE OBSERVATIONS OF THE HON'BLE TRIBUNAL IN PARA 12 ARE REPRODUCED AS UNDER: WE HAVE HEARD RIVAL SUBMISSIONS AND CONSIDERED TH EM CAREFULLY. WE HAVE ALSO PERUSED VARIOUS EVIDENCES F ILED BEFORE LD. CIT (A) IN SUPPORT OF THE CASE OF THE ASSESSEE AND ALSO THE DETAILED WRITTEN SUBMISSIONS PLACED ON RECORD ALONGWITH THE SUBMISSION OF LD. CLT DR. AFTER CONSIDERING THE SUBMISSION AND PERUSING A LL OTHER MATERIALS, WE FIND THAT LD. CIT(A) WAS JUSTIFI ED IN ITA 222/JP/2012 & C.O. 29/JP/2012_ ITO VS SMT. RANJANA JOHARI 6 HOLDING THAT ASSESSEE IS ELIGIBLE FOR DEDUCTION CLA IMED UNDER SECTION 10BA OF THE ACT FOR ALL THE THREE YEA RS. FACTS AND SUBMISSIONS HAVE BEEN DISCUSSED BY LD. CIT(A) IN DETAIL. THE OBJECTION OF THE AO RAISED IN H IS ASSESSMENT ORDER AS WELL AS IN HIS REMAND REPORT WERE ALSO TAKEN INTO CONSIDERATION BY LD. CIT(A) AND THEREAFTER LD. CIT(A) HAS ARRIVED AT THE CONCLUSION THAT ASSESSEE IS NOT MERELY A PROCESSOR BUT HAS DONE SUBSTANTIAL ACTIVITY OF MANUFACTURING THE HANDICRAF T GOODS AND, THEREFORE, THE ASSESSEE IS ENTITLED FOR DEDUCTION UNDER SECTION 10BA OF THE ACT. THE MAIN PLANK OF ARGUMENT OF LD. CIT DR IS THAT ASSESSEE IS SIMPLY A PROCESSOR AS HE HAS INCURRED ONLY 1% OF TH E TOTAL TURNOVER AS LABOUR EXPENSES. THIS IS NOT CORRE CT. 1% LABOUR EXPENSES ARE INCURRED ON PRIVATE LABOURER ENGAGED BY THE ASSESSEE ON JOB WORK GOT DONE BY THE ASSESSEE, OTHERWISE THE ASSESSEE HAS ITS OWN MANUFACTURING PREMISES WHERE PERMANENT EMPLOYEES ARE EMPLOYED AND IF THIS EXPENDITURE IS TAKEN INTO CONSIDERATION THEN IT IS NOT 1% BUT IT IS SUBSTANTI AL EXPENDITURE. THIS ASPECT HAS ALSO BEEN EXAMINED BY LD. CIT (A) AND FOUND THAT THE ASSESSEE HAS INCURRED SUBSTANTIAL EXPENDITURE ON ITS MANUFACTURING ACTIVI TY. STATEMENTS OF 12 PERSONS WERE RECORDED BY AO DURING REMAND PROCEEDINGS AND THOSE PERSONS HAVE CATEGORICALLY STATED THAT THEY SOLD UNFINISHED GOOD S TO ITA 222/JP/2012 & C.O. 29/JP/2012_ ITO VS SMT. RANJANA JOHARI 7 THE ASSESSEE AND MAJOR PORTION OF WORK ON THOSE GOOD S HAVE BEEN DONE BY THE ASSESSEE ITSELF IN THEIR PREMISES. NEITHER THE FACTS NARRATED BY THE SUPPLIE R WERE FOUND INCORRECT NOR THERE WAS ANY OTHER EVIDENCE TO HOLD THAT THE ASSESSEE IS ONLY DOING MANUFACTURI NG PROCESS. ON SIMILAR FACTS, THE TRIBUNAL IN CASE OF MANGALAM ARTS IN ITA NO. 815/JP/2007 DATED 20/06/2008 HAS HELD THAT THE ASSESSEE IS ENTITLED F OR DEDUCTION UNDER SECTION 10BA .THE LD. CIT (A) HAS ALS O TAKEN THIS CASE INTO CONSIDERATION AND FOUND THAT F ACTS ARE SIMILAR. THEREFORE, IN OUR CONSIDERED VIEW AND IN VIEW OF RULE OF CONSISTENCY, THE LD. CIT (A) WAS JUSTI FIED IN HOLDING THAT THE ASSESSEE IS ENTITLED FOR DEDUCT ION UNDER SECTION 10BA OF THE ACT. NEITHER ANY FRESH MATERIAL WAS BROUGHT ON RECORD BY LD. CIT DR NOR THE FINDINGS OF LD. CIT(A) COULD BE CONTROVERTED BY PLAC ING POSITIVE MATERIAL THEREFORE FOR THIS REASON ALSO, WE ARE OF THE VIEW THAT ORDER OF LD. CIT (A) IS LIABLE TO BE CONFIRMED FOR ALL THE THREE YEARS. ACCORDINGLY, WE CONFIRMED THE FINDING OF LD. CIT (A) IN THIS REGARD FOR ALL THE THREE YEARS.' 3.2 AS PER SECTION 10BA (2), THE FOLLOWING CONDITION S WERE NECESSARY FOR CLAIMING THE DEDUCTION: A) IT MANUFACTURES OR PRODUCES THE ELIGIBLE ARTICL ES OR THINGS WITHOUT THE USE OF IMPORTED RAW MATERIAL; ITA 222/JP/2012 & C.O. 29/JP/2012_ ITO VS SMT. RANJANA JOHARI 8 'ELIGIBLE ARTICLE MEANS' ALL HANDMADE ARTICLES OR THINGS, WHICH ARE OF ARTISTIC VALUE AND WHICH REQUIRES THE US E OF WOOD AS THE MAIN RAW MATERIAL-.' SINCE THE BUSINESS OF THE ASSESSEE IS EXPORT OF WO ODEN HANDICRAFT ITEMS HAVING ARTISTIC VALUE WITH AN ANTIQ UE LOOK, RAW MATERIALS SUCH AS WOODEN ITEMS, POLISH, STO NES, BRASS, IRON, ETC. ARE USED FOR MAKING IT AN ARTISTI C ITEM. SINCE GROOVING, BRASS WORK, INLAY WORK, METAL WORK, CARVING, STUDDING WORK, STONE WORK AND OTHER RELATED PROCESS CANNOT BE CARRIED OUT WITH THE HELP OF MACHI NES (SINCE BEING A METICULOUS WORK) IT INVOLVES THOUGHT , PERSONAL SKILLS AND CONSTRUCTIVE POWER TO MANUFACTUR E THE PRODUCT OF ARTISTIC NATURE. THE SEMI FINISHED WOODEN ITEMS AND ARTICLE AND THINGS PURCHASED AGAINST FORM 17B ARE FURTHER SUBJECTED TO MANUFACTURING PROCESS AND CONVERTED INTO ELIGIBLE HANDMADE CRAFTED ARTISTIC WO ODEN ARTICLES AND THINGS. FOR EXAMPLE FOR MANUFACTURING A TABLE, ONLY A TOP WAS PURCHASED WHICH TOO HAD A SKEL ETON SHAPE. THEREAFTER LEGS OF THE TABLE WERE MADE BY THE ASSESSEE ON WHICH TABLE TOP WAS FITTED. ALL THE CARVI NG WORK AS DESIRED BY THE CUSTOMER WAS DONE BY THE ASSESSEE. THEREAFTER FINISHING OF THE TABLE WAS DONE BY THE ASSESSEE. SIMILARLY, IN CASE OF ALL ITEMS, THE ASSESSEE HAD DONE MAJOR ACTIVITY OF MANUFACTURING TO BRING T HE ARTICLE IN A NEW AND FINISHED SHAPE. THEREFORE, IT CO ULD NOT BE SAID THAT ASSESSEE WAS MERELY A PROCESSOR AND NO ITA 222/JP/2012 & C.O. 29/JP/2012_ ITO VS SMT. RANJANA JOHARI 9 SUBSTANTIAL WORK HAD BEEN DONE BY THE ASSESSEE. HENC E THE ASSESSEE QUALIFIED THE FIRST CONDITION. NO IMPO RTED RAW MATERIAL WAS USED BY THE ASSESSEE AND SHE HAD CARRIE D OUT THE MANUFACTURING ACTIVITY AS BY THE ITAT. B) IT IS NOT FORMED BY THE SPLITTING UP OR THE REC ONSTRUCTION, OF A BUSINESS ALREADY IN THE EXISTENCE. THE ASSESSEE STARTED FIRST TIME NEW UNDERTAKING AND MANUFACTURING W.E.F. 05.11.2003 AS PER COPY OF S.S.I . PERMANENT REGISTRATION CERTIFICATE BY DISTRICT INDU STRIAL CENTER, UDYOG BHAWAN, JAIPUR ISSUED ON 09.11.2005. THEREFORE, THE CONTENTION OF THE AO WAS WRONG THAT THE UNIT WAS FORMED BY THE SPLITTING UP OR THE RECONSTRU CTION, OF A BUSINESS ALREADY IN THE EXISTENCE. C) IT IS NOT FORMED BY THE TRANSFER TO A NEW BUSINE SS OF MACHINERY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE. SINCE ASSESSEE HAS STARTED A NEW UNDERTAKING AS DESCRIBED ABOVE AND THE ASSESSEE HAD PURCHASED ALL NEW PLANT & MACHINERY FOR MANUFACTURING PROCESS & DURING THE ASSESSMENT YEAR 2008-09 ALSO, THE ASSESSEE PURCHASE D ALL NEW PLANT & MACHINERY OF RS. 1,02,23,345/-. THER EFORE THIS CONDITION IS ALSO FULFILLED. THE MAIN MACHINERY WAS HAND TOOL, GRINDER, SANDING MACHINE & DRILL MACHINE REQUIRED FOR WOODEN HANDICRAFT ARTISTIC WORK. D) NINETY PERCENT OR MORE OF ITS SALE DURING THE P REVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR ARE BY WAY OF ITA 222/JP/2012 & C.O. 29/JP/2012_ ITO VS SMT. RANJANA JOHARI 10 EXPORTS OF THE ELIGIBLE ARTICLES OR THING. DURING T HE YEAR ALSO, THE ASSESSEE HAS EXPORTED 99.92% OF ELIGIBLE ARTICLES OR THINGS. HENCE THE ABOVE SAID CONDITION OF SECTION 10BA IS FULFILLED BY THE ASSESSEE. E) IT EMPLOYS TWENTY OR MORE WORKERS DURING THE PREV IOUS YEAR IN THE PROCESS OF MANUFACTURE OR PRODUCTION. SECTION 10BA OF THE INCOME TAX ACT SPECIFIES THAT T HE ASSESSEE EMPLOYS TWENTY OR MORE WORKERS DURING THE PREVIOUS YEAR IN THE PROCESS OF MANUFACTURE OR PRODUCTION. AS PER THE WAGES REGISTER SO PRODUCED BE FORE THE AO, TOTAL WORKERS EMPLOYED BY THE ASSESSEE DURIN G THE RELEVANT YEAR WERE AROUND 44. HOWEVER TOTAL WORKER S EMPLOYED THROUGH CONTRACTOR TO WHOM JOB CHARGES PAID WERE AROUND 150 DURING THE YEAR. THUS, IT IS AMPLY CL EAR ON FACTS AND IN LAW BOTH THAT THE APPELLANT IS A MANUFACTURING EXPORTER AND HAD SATISFIED ALL THE CONDITIONS LAID DOWN U/S 10BA (2) (E) AND HENCE THE ENTIRE DEDUCTION WAS TO BE ALLOWED. 3.3 LT WAS ALSO HELD BY THE HON'BLE JODHPUR TRIBUNAL IN THE CASE OF KWAL PRO EXPORTS VS ITO (ITA NO. 543,544,545/JD/2 007 AND 415/JD/2008) THAT THE AO HAD INFERRED THAT THE ASSESSEE SIMPLY CARRIED OUT TRADING OF MANUFACTURED ITEMS PURCHASED LOCALLY AND THIS FINDING WAS FOUND TO BE P ERVERSE ON FACTS. THE TRIBUNAL OBSERVED THAT VARIOUS STEPS UNDERTAKEN BY THE ASSESSEE ON THE SEMI-FINISHED GOO DS ITA 222/JP/2012 & C.O. 29/JP/2012_ ITO VS SMT. RANJANA JOHARI 11 AND OTHER ARTICLES GAVE THEM A COMMERCIAL LOOK MAKI NG THE ARTICLE COMPLETELY DISTINCT IN CHARACTER AND MAKING THEM MARKETABLE COMMODITY. THE TRIBUNAL FURTHER OBSERVED THAT EVEN THOUGH THE ORIGINAL IDENTITY OF THE MATERIAL D ID NOT LOSE ITS IDENTITY COMPLETELY YET A DIFFERENT COMMER CIAL COMMODITY HAD BEEN BROUGHT INTO EXISTENCE BY THE ASSESSEE AND THAT THE END PRODUCT SO PRODUCED WAS DIFFERENT AND DISTINCT BOTH IN CHARACTER AND USE AS WELL. THE TRIBUNAL HELD THAT IF CHANGE MADE IN THE ARTICLE RES ULTED IN A NEW AND DIFFERENT ARTICLE THEN IT WOULD AMOUNT TO MANUFACTURING ACTIVITY WHICH WOULD IMPLY A CHANGE AN D TRANSFORMATION. IT WAS HELD THAT IN A CASE WHEREIN AS SESSEE HAD UNDERTAKEN A CHAIN OF ACTIVITIES TO CONVERT THE LOCALLY PURCHASED SEMI FINISHED GOODS AND OTHER ARTICLES IN TO MARKETABLE COMMODITY ALTOGETHER DIFFERENT BOTH IN CHARACTER AND USE THAN WHAT WAS PURCHASED ORIGINALLY THEN THE ASSESSEE WOULD BE ENTITLED TO DEDUCTION U/S 10B OF THE INCOME TAX ACT. FURTHER IT WAS HELD THAT EVEN THOUGH THE ORIGINAL MATERIAL DID NOT LOOSE ITS IDENTITY COMPLE TELY, YET A DIFFERENT COMMERCIAL COMMODITY HAD BEEN BROUGHT INT O EXISTENCE BY THE ASSESSEE WHICH TANTAMOUNT TO MANUFACTURING ACTIVITY. 3.4 THE APPELLANT HAD CLAIMED TOTAL PURCHASES AND DI RECT EXPENSES OF RS. 1`5,35,05,538/-. THE PURCHASES OF S EMI- FINISHED GOODS AS PER FORM VAT 15 (NOT AGAINST FORM 17B) WERE OF RS. 8,03,51,262/-. HENCE VALUE ADDITION WAS M ADE ITA 222/JP/2012 & C.O. 29/JP/2012_ ITO VS SMT. RANJANA JOHARI 12 ON 91.04% OF THE TOTAL PURCHASES OF SEMI FINISHED G OODS. THE MANUFACTURING & OTHER DIRECT EXPENSES WERE AT RS. 7,31,54,276/- WHICH CONSTITUTED 47.65% OF TOTAL DIR ECT EXPENSES. THEREFORE THE VALUE ADDITION WAS MADE AFTER PRODUCTION ACTIVITIES AND GOODS WERE NOT EXPORTED AS SUCH. ONLY ON THE BASIS OF PURCHASES BEING MADE AGAINST F ORM 17B, IT COULD NOT BE SAID THAT THE ASSESSEE HAD NOT DONE ANY MANUFACTURING ACTIVITY BECAUSE AS PER RULE 23(1 )(B) OF RST ACT, THERE WAS NO PROHIBITION ON THE BUYER EXPORT ER FROM MAKING CHANGES IN THE PRODUCTS TO BE EXPORTED AND THERE WAS NOTHING WHICH COULD WARRANT ADVERSE INFERENC E ON THE GROUND THAT PURCHASES WERE MADE AGAINST SALE TAX 17B FORM. IN VIEW OF ABOVE FACTS, I DIRECT THE AO TO ALLOW DEDUCTION OF RS 71,25,075/- U/S 10BA TO THE APPELLA NT. THIS GROUND OF APPEAL IS ALLOWED. 4. NOW THE REVENUE IS IN APPEAL BEFORE US. THE LEARNE D D.R. VEHEMENTLY SUPPORTED THE ORDER OF THE ASSESSING OFF ICER. 5. AT THE OUTSET, THE LEARNED AR FOR THE ASSESSEE A RGUED THAT THIS ISSUE HAS ALREADY BEEN CONSIDERED BY THE HONBLE IT AT, JAIPUR IN ASSESSEES OWN CASE VIDE ORDER DATED 14/07/2011 PASS ED IN ITA NOS. 1111, 1112 AND 1113/JP/2010 FOR A.Y. 2004-05, 2005- 06 AND 2006-07 AND HELD THAT THE ASSESSEE WAS MANUFACTURING THE GOO DS FOR EXPORT PURPOSES. THE HONBLE ITAT, JAIPUR HAS GIVEN DETAILED FINDINGS ON THIS ITA 222/JP/2012 & C.O. 29/JP/2012_ ITO VS SMT. RANJANA JOHARI 13 ISSUE. THERE WAS A SURVEY U/S 133A OF THE ACT AT THE FACTORY PREMISES AND NO ADVERSE FINDINGS WAS FOUND BY THE SURVEY TEAM . NO PHYSICAL INVENTORY WAS PREPARED AT THE FACTORY AND NO ADVANCE TAX WAS DEMANDED BY THE DEPARTMENT FROM THE ASSESSEE DURING THE SURVEY PROCEEDINGS. ONLY STATEMENT OF SMT. RANJANA JOHRI WA S RECORDED. COPY OF THE STATEMENT HAD NOT BEEN PROVIDED BY THE DEPAR TMENT. THE SURVEY TEAM WAS SATISFIED WITH THE CLAIMING OF EXEMPTION U/ S 10BA OF THE ACT. HE DRAWN OUR ATTENTION ON THE FINDING GIVEN BY THE H ONBLE ITAT JAIPUR IN ASSESSEES OWN CASE AT PARAGRAPH NO. 12 OF ITS O RDER ON THIS ISSUE. THEREFORE, HE PRAYED TO DISMISS THE REVENUES APPEAL AND CONFIRM THE ORDER OF THE LEARNED CIT(A). 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THE CO ORDINATE BENCH IN ASSESSEES OWN CASE IN ITA NOS. 1111, 1112 AND 1113/ JP/2010 FOR A.Y. 2004-05, 2005-06 AND 2006-07 ON IDENTICAL FACTS AND CIRCUMSTANCES HAS HELD THAT THE ASSESSEES ACTIVITIES IS MANUFACTURIN G OR PRODUCTION AS DEFINED BY THE ACT IN SECTION 10BA OF THE ACT. THE O PERATIVE PORTION OF THE ORDER IS REPRODUCED AS UNDER:- 12. WE HAVE HEARD RIVAL SUBMISSIONS AND CONSIDERED THEM CAREFULLY. WE HAVE ALSO PERUSED VARIOUS EVIDENCES F ILED ITA 222/JP/2012 & C.O. 29/JP/2012_ ITO VS SMT. RANJANA JOHARI 14 BEFORE LD. CIT (A) IN SUPPORT OF THE CASE OF THE ASS ESSEE AND ALSO THE DETAILED WRITTEN SUBMISSIONS PLACED ON RECORD ALONG WITH THE SUBMISSIONS OF LD. CIT D/R. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING ALL OTHER MATERIALS, WE FIND THAT LD. CIT (A) WAS JUSTIFIED IN H OLDING THAT ASSESSEE IS ELIGIBLE FOR DEDUCTION CLAIMED UND ER SECTION 10BA OF THE ACT FOR ALL THE THREE YEARS. FACTS AND SUBMISSIONS HAVE BEEN DISCUSSED BY LD. CIT (A) IN DE TAIL. THE OBJECTION OF THE AO RAISED IN HIS ASSESSMENT ORD ER AS WELL AS IN HIS REMAND REPORT WERE ALSO TAKEN INTO CONSIDERATION BY LD. CIT (A) AND THEREAFTER LD. CIT ( A) HAS ARRIVED AT THE CONCLUSION THAT ASSESSEE IS NOT MERE LY A PROCESSOR BUT HAS DONE SUBSTANTIAL ACTIVITY OF MANUFACTURING THE HANDICRAFT GOODS AND, THEREFORE, THE ASSESSEE IS ENTITLED FOR DEDUCTION UNDER SECTION 10 BA OF THE ACT. THE MAIN PLANK OF ARGUMENT OF LD. CIT D/R IS TH AT ASSESSEE IS SIMPLY A PROCESSOR AS HE HAS INCURRED O NLY 1% OF THE TOTAL TURNOVER AS LABOUR EXPENSES. THIS IS N OT CORRECT. 1% LABOUR EXPENSES ARE INCURRED ON PRIVATE LABOURER ENGAGED BY THE ASSESSEE ON JOB WORK GOT DON E BY THE ASSESSEE, OTHERWISE THE ASSESSEE HAS ITS OWN MANUFACTURING PREMISES WHERE PERMANENT EMPLOYEES AR E EMPLOYED AND IF THIS EXPENDITURE IS TAKEN INTO CONS IDERATION THEN IT IS NOT 1% BUT IT IS SUBSTANTIAL EXPENDITURE . THIS ASPECT HAS ALSO BEEN EXAMINED BY THE LD. CIT (A) AND FOUND THAT THE ASSESSEE HAS INCURRED SUBSTANTIAL ITA 222/JP/2012 & C.O. 29/JP/2012_ ITO VS SMT. RANJANA JOHARI 15 EXPENDITURE ON ITS MANUFACTURING ACTIVITY. STATEMEN TS OF12 PERSONS WERE RECORDED BY AO DURING REMAND PROCEEDING S AND THOSE PERSONS HAVE CATEGORICALLY STATED THAT TH EY SOLD UNFINISHED GOODS TO THE ASSESSEE AND MAJOR PORTION OF WORK ON THOSE GOODS HAVE BEEN DONE BY THE ASSESSEE I TSELF IN THEIR PREMISES. NEITHER THE FACTS NARRATED BY TH E SUPPLIER WERE FOUND INCORRECT NOR THERE WAS ANY OTHER EVIDENCE TO HOLD THAT THE ASSESSEE IS ONLY DOING MANUFACTURING PROCESS. ON SIMILAR FACTS, THE TRIBUNAL IN CASE OF MANGALAM A RTS IN ITA NO. 815/JP/2007 DATED 20.6.2008 HAS HELD THAT T HE ASSESSEE IS ENTITLED FOR DEDUCTION UNDER SECTION 10 BA. THE LD. CIT (A) HAS ALSO TAKEN THIS CASE INTO CONSIDERAT ION AND FOUND THAT FACTS ARE SIMILAR. THEREFORE, IN OUR CONS IDERED VIEW AND IN VIEW OF RULE OF CONSISTENCY, THE LD. CIT (A) WAS JUSTIFIED IN HOLDING THAT ASSESSEE IS ENTITLED FOR DEDUCTION UNDER SECTION 10BA OF THE ACT. NEITHER ANY FRESH MA TERIAL WAS BROUGHT ON RECORD BY LD. CIT D/R NOR THE FINDINGS OF LD. CIT (A) COULD BE CONTROVERTED BY PLACING POSITIV E MATERIAL, THEREFORE, FOR THIS REASON ALSO, WE ARE OF THE VIEW THAT ORDER OF LD. CIT (A) IS LIABLE TO BE CONFIRMED FOR ALL THE THREE YEARS. ACCORDINGLY, WE CONFIRM THE FINDING OF LD. CIT (A) IN THIS REGARD FOR ALL THE THREE YEARS. BY RESPECTFULLY FOLLOWING THE ORDER OF THE COORDINAT E BENCH IN ASSESSEES OWN CASE ON SAME ISSUE, WE ARE OF THE CONS IDERED VIEW THAT THE ASSESSEE WAS IN MANUFACTURING OF GOODS AND ELIGI BLE FOR DEDUCTION ITA 222/JP/2012 & C.O. 29/JP/2012_ ITO VS SMT. RANJANA JOHARI 16 U/S 10BA OF THE ACT. ACCORDINGLY, WE CONFIRM THE ORD ER OF THE LEARNED CIT(A). 7. THE GROUND OF THE C.O. IS NOT PRESSED BY THE LEAR NED A.R., THEREFORE, WE DISMISS THE C.O. FILED BY THE ASSESSEE AS NOT PRESSED. 8. IN THE RESULT, THE REVENUES APPEAL AND C.O. OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27/02/2015. SD/- SD/- VKJ-IH-RKSYKUH VH-VKJ-EHUK (R.P.TOLANI) (T.R. MEENA) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ @ JAIPUR FNUKAD @ DATED:- 27 TH FEBRUARY, 2015 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- THE ITO, WARD 6(2), JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- SMT. RANJANA JOHARI, JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 222/JP/2012 & C.O. 29/JP/2012) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR