ACIT, New Delhi V. Khanna Brothers, New Delhi

ITA 227/DEL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86747 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 1 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 09-02-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 11-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARMINDER KAUR

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH D, NEW DELHI) BEFORE SHRI T.S. KAPOOR, ACCOUNTANT MEMBER AND SHRI C. M. GARG, JUDICIAL MEMBER I.T.A. NO. 227/DEL/2013 ASSESSMENT YEAR : 2010-11 ACIT, CIRCLE 24(1), VS. KHANNA BROTHERS, NEW DELHI 44, UDAY PARK, NEW DELHI GIR / PAN:AAAFK9950-H (APPELLANT) (RESPONDENT) APPELLANT BY : MS. PARMINDER KAUR, SR. DR RESPONDENT BY : SHRI G N GUPTA, ADV. ORDER PER T.S. KAPOOR, AM: THIS IS AN APPEAL FILED BY REVENUE AGAINST THE ORD ER OF LD. CIT(A) DATED 26.10.2012. THE ONLY GRIEVANCE OF THE REVENU E IS THE ACTION OF LD. CIT(A) BY WHICH HE HAD ALLOWED THE CLAIM OF DEDUCTI ON OF RS.,1,30,23,723/- U/S 80-IC OF THE I. T. ACT, 1961. 2. AT THE OUTSET, LD. A.R. SUBMITTED THAT THE CASE OF THE ASSESSEE IS DULY COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL O RDER DATED 14.06.2013 IN I.T.A. NO. 397/DEL/2010 & 2210/DEL/2012 IN ASSESSEE S OWN CASE FOR THE ASSESSMENT YEARS 2006-07 AND 2008-09. 3. LD. D.R. FAIRLY CONCEDED THAT THE ISSUE WAS COVE RED IN FAVOUR OF THE ASSESSEE. 4. AFTER GOING THROUGH THE MATERIAL ON RECORD ALONG WITH TRIBUNAL ORDER DATED 14.06.2013, WE FIND THAT THE ASSESSEE IS A PA RTNERSHIP FIRM AND HAS CLAIMED DEDUCTION U/S 80-IC WHICH THE A.O. HAD DENI ED. HOWEVER, LD. CIT(A) HAD ALLOWED DEDUCTION IN ASSESSMENT YEAR 200 6-07 AND 2008-09 ITA NO.227/DEL/2013 2 AND THE TRIBUNAL HAD UPHELD THE ACTION OF LD. CIT(A ) VIDE ORDER DATED 14.06.2013. THE HONBLE TRIBUNAL IN ITS ORDER HAS REPRODUCED THE FINDINGS OF LD. CIT(A) FOR ASSESSMENT YEAR 2008-09 WHICH IS REPRODUCED BELOW: 6. THE LD.COUNSEL FOR THE ASSESSEE MR.GN GUPTA ON THE OTHER HAND SUBMITTED THAT THE LD.DR IS FACTUALLY INCORREC T IN HIS ARGUMENTS AS THE ASSESSEE WAS ESTABLISHING A STEEL FACTORY AN D NOT A TOBACCO FACTORY. HE SUBMITTED THAT THE ASSESSEE WAS SUPPLY ING STEEL STRUCTURES AFTER FABRICATING AND MANUFACTURING THE SAME AND WA S NOT CONSTRUCTING A BUILDING. HE REFERRED TO THE DEFINI TION OF MANUFACTURE IN S.2(29)BA OF THE ACT. HE RELIED O N THE ORDER OF THE LD.CIT(A) AND SUPPORTED THE SAME. HE RELIED ON THE FOLLOWING CASE LAWS. I. CIT VS. BEEHIVE ENGINEERING CO.AND ALLIED INDUS TRIES P.LTD., 221 ITR 561(AP) II. CIT VS. ELEMECH INDUSTRIAL CONSTRUCTIONS, 229 ITR 503 (A.P.) III. CIT VS. NORTHERN AROMATICS LTD., 326 ITR 27 ( P&H) IV. CIT VS. ALCAM ENGINEERING P.LTD., 336 ITR 294 (MAD) 7. IN REPLY THE LD.D.R. RELIED ON SOME SURVEY FINDI NGS. HE DISTINGUISHED THE CASE LAWS RELIED UPON BY THE ASSE SSEE. 8. AFTER HEARING RIVAL CONTENTIONS, WE ARE OF THE C ONSIDERED OPINION THAT THE ORDER OF THE FIRST APPELLATE AUTHO RITY HAS TO BE UPHELD FOR THE REASON THAT, THE FACTS OF THE CASE C LEARLY DEMONSTRATE THAT THE ASSESSEE HAS MANUFACTURED AN ARTICLE OR A THING. THE LD.CIT(A) IN THE ORDER DT. 30.1.2012 FOR THE AY 200 8-09 HAS DISCUSSED THE ISSUE AT LENGTH. AT PARA 6 AND 7 OF HIS ORDER HE HELD AS FOLLOWS:- (6) I HAVE ALSO CALLED FOR AND EXAMINED THE PURCH ASE ORDER PLACED ON THE APPELLANT BY M/S. DHARMPAL PREMCHAND LTD. DA TED 07.07.2006 FOR THE FABRICATION, SUPPLY, SHOT/SAND BLASTING, PA INTING AND ERECTION OF 1500 MT OF STEEL STRUCTURES FOR ITS STEEL PROJEC T AT AGARTALA. AS PER THE ORDER, THE ENTIRE WORK WAS TO BE EXECUTED STRIC TLY IN CONFORMITY WITH TECHNICAL DETAILS PROVIDED TO THE APPELLANT TH ROUGH DETAILED FABRICATION DRAWINGS MADE AVAILABLE BY M/S. DHARAMP AL PREMCHAND LTD. AS HELD BY THE HIGH COURT OF DELHI IN THE CASE OF CIT VS. NORTHERN AROMATICS LTD. (SUPRA), THE ACTIVITY OF TH E ASSESSEE IS TO BE ITA NO.227/DEL/2013 3 REGARDED AS MANUFACTURING ACTIVITY IRRESPECTIVE OF THE FACTS WHETHER THE PRODUCTS MANUFACTURED BY IT ARE FOR ITS OWN BUS INESS OR IT IS DOING JOB WORK FOR OTHERS. THE APPELLANT HAS PRODUCED, DU RING THE ASSESSMENT PROCEEDINGS AS WELL AS APPELLATE PROCEED INGS, THE COPIES OF EXCISE RETURNS FILED BEFORE THE CENTRAL EXCISE A UTHORITY AT AGARTALA, BILLS OF MACHINERY AND OF RAW MATERIAL PURCHASED, D ETAILS OF FREIGHT AND CARTAGE FOR PURCHASE OF RAW MATERIAL, AND DETAI LS OF JOB WORK PAID. THE APPELLANT HAS CREDIBLY ARGUED THAT IN VIE W OF MANUFACTURE AND FABRICATION WORK CARRIED OUT WITH THE HELP OF C ONTRACT LABOUR TO WHOM JOB CHARGES OF RS. 1,66,17,876/- HAS BEEN PAID , THERE WAS NO REQUIREMENT FOR A LARGE NUMBER OF REGULAR EMPLOYEES . IT IS ALSO CORRECT THAT THE PROVISIONS OF SECTION 80IC DO NOT INCLUDE ANY REQUIREMENT REGARDING THE NUMBER OF WORKERS TO BE E MPLOYED DIRECTLY. REGARDING THE FINDING DURING SURVEY THAT THE MACHIN ES APPEARED TO BE OLD AND NO LONGER IN USE, THE APPELLANT HAS EXPLAIN ED THAT THE CONTRACT FOR SUPPLY AND ERECTION OF STEEL STRUCTURES WAS COM PLETED IN JULY,2009, HENCE, AT THE TIME OF SURVEY ON 09.03.2010, THERE W AS NO LONGER ANY MANUFACTURING ACTIVITY UNDERWAY. 7. THE APPELLANT FIRM IS FOUND TO BE REGISTERED WIT H VAT, CST, SERVICE TAX, AND CENTRAL EXCISE AUTHORITIES. THE AP PELLANT HAS PRODUCED DETAILS OF RENT PAID TO TRIPURA INDUSTRIAL DEVELOPMENT CORPORATION LTD., THE BILLS OF CONSTRUCTION OF THE FACTORY SHEDS AND THE DETAILS OF PAYMENT OF ELECTRICITY CHARGES TO TRIPUR A STATE ELECTRICITY CORPORATION LTD. THE APPELLANT HAS PRODUCED THE BI LLS OF PURCHASE OF THE MACHINERY INSTALLED AT THE PREMISES, COMPRIS ING DRILLING MACHINES, WELDING MACHINES, MOTORS, GAS CUTTING MAC HINES, AIR COMPRESSOR, ETC. THE APPELLANT HAS ALSO PRODUCED DE TAILS AND BILLS OF PURCHASE OF RAW MATERIAL COMPRISING NUTS, BOLTS, RO DS, M.S.ANGLES, CHANNELS, HR SHEETS, METAL PAINTS ETC. AFTER CAREF ULLY CONSIDERING THE VARIOUS EVIDENCES FILED, I AM UNABLE TO UPHOLD THE FINDING OF THE ASSESSING OFFICER THAT NO MANUFACTURING ACTIVITY HA S BEEN CARRIED OUT BY THE APPELLANT. IN MY OPINION, THE APPELLANT HAS FURNISHED ADEQUATE EVIDENCE OF FABRICATION AND ASSEMBLY OF THE STEEL S TRUCTURE FOR THE STEEL PROJECT OF M/S. DHARAMPAL PREMCHAND LTD. AT A GARTALA. THE EVIDENCES RELIED ON BY THE ASSESSING OFFICER, NAMEL Y THE FEW NUMBERS OF REGULAR EMPLOYEES, AND THE DESERTED APPEARANCE O F THE FACTORY SHED, HAVE BEEN SATISFACTORILY EXPLAINED BY THE APP ELLANT. THERE CAN BE NO REASONABLE DOUBT THAT THE APPELLANT MANUFACTU RED TRUSSES, ITA NO.227/DEL/2013 4 COLUMNS, GANTRIES, ETC. IN ITS FACTORY AND TRANSPOR TED THESE ARTICLES TO THE PROJECT SITE OF M/S. DHARMAPAL PREMCHAND WHERE THESE ARTICLES WERE ERECTED BY FASTENING BOLTS ON THE CIVIL WORK A LREADY COMPLETED BY M/S. DHARAMPAL PREMCHAND. THE APPELLANT HAS CARRI ED OUT CUSTOMISED FABRICATION OF THE STEEL STRUCTURE AS PE R DRAWINGS PROVIDED BY THE CONTRACTEE. THE APPELLANT HAS BEEN GRANTED REGISTRATION/APPROVAL FROM VARIOUS REGULATORY AND G OVERNMENT AUTHORITIES AND HAS PAID EXCISE DUTY ON THE ARTICLE S MANUFACTURED BY IT. FOR ALL THE ABOVE STATED REASONS, IT IS HELD TH E APPELLANT IS ENTITLED TO THE DEDUCTION U/S 80IC IN RESPECT OF ITS MANUFAC TURING ACTIVITIES. THE DISALLOWANCE OF RS.3,29,76,090/- IS ACCORDINGLY DELETED. 9. THIS DECISION IS IN LINE WITH THE JUDGEMENT OF H ONBLE A.P.HIGH COURT IN THE CASE OF CIT VS. BEEHIVE ENGINEERING CO . AND ALLIED INDUSTRIES LTD. (SUPRA) WHERE THE FACTS AND DECISIO NS ARE AS FOLLOWS: THE ASSESSEE, A PRIVATE LIMITED COMPANY, PURCHASED M.S.ANGLES, JOINTS, CHANNELS ETC. AND CUT THEM INTO REQUIRED SI ZES, AND THEREAFTER, THE PIECES WERE WELDED, DRILLED WITH HOLES AND FITT ED WITH BOLTS, NUTS, ETC. FOR MANUFACTURING TRUSSES. THE ASSESSEE COMPA NY HAD ALSO UNDERTAKEN THE WORK OF FIXING THE TRUSSES FOR PURPO SES OF ROOFING ON THE BUILDING WHICH WERE UNDER CONSTRUCTION. THE AS SESSEE CLAIMED THAT IT WAS AN INDUSTRIAL COMPANY AND ENTITLED TO T HE BENEFIT OF THE REDUCED RATE OF TAX. THE ITO REJECTED THE CLAIM. HOWEVER, THE APPELLATE ASSISTANT COMMISSIONER AND THE TRIBUNAL A LLOWED THE CLAIM. ON A REFERENCE: HELD, THAT HAVING REGARD TO THE FINDINGS OF FACT RE CORDED BY THE TRIBUNAL, THE ASSESSEE COMPANY SQUARELY FELL WITHIN THE MEANING OF INDUSTRIAL COMPANY WHETHER OR NOT THE INCOME FROM THE ACTIVITIES EXCEEDED 51 PER CENT. IT WAS ENTITLED PER CENT. IT WAS ENTITLED TO THE REDUCED RATE OF TAX. 10. THE LD.CIT(A) HAS RELIED ON THE FOLLOWING CASE LAWS WHICH IN OUR VIEW ARE APPLICABLE TO THE FACTS OF THE CASE. I. CIT VS. ALCAM ENGINEERING P.LTD., 336 ITR 294 II. CIT VS. NORTHERN AROMATICS LTD., 196 CTR 479 (D EL) III. CIT VS. IMPEL FORGE & ALLIED INDUSTRIES LTD., 326 ITR 27 (P&H) ITA NO.227/DEL/2013 5 11. APPLYING THE PROPOSITIONS LAID DOWN IN THESE C ASES TO THE FACTS OF THIS CASE, WE UPHOLD THE ORDER OF THE LD.CIT(A) AS ON FACTS, THE LD.D.R. COULD NOT CONTROVERT THE FINDINGS OF THE LD .COMMISSIONER OF INCOME TAX (APPEALS). 12. COMING TO THE ARGUMENTS OF THE LD.D.R. BASED ON SURVEY AND ON THE GROUND THAT THE ASSESSEE IS CONSTRUCTING AB OVE FACTORY WHICH IS PROHIBITED/UNDESIRABLE ETC. AND THAT IT IS A CASUA L ACTIVITY ETC., WE ARE OF THE OPINION THAT THESE ARE NOT THE GROUNDS ON WH ICH THE A.O. DENIED THE CLAIM OF THE ASSESSEE. SUCH FRESH GROUNDS AND FACTUAL ARGUMENTS ARE NOT BORNE OUT OF RECORD AND HENCE ARE DISMISSED AS DEVOID OF MERIT. 5. IN THE PRESENT CASE, LD. CIT(A) HAS PASSED THE O RDER AFTER FOLLOWING THE FINDINGS OF LD. CIT(A) IN ASSESSMENT YEAR 2008- 09, WHICH WAS UPHELD BY THE TRIBUNAL VIDE ORDER DATED 14.06.2013. FOR T HE SAKE OF CONVENIENCE, THE FINDINGS OF LD. CIT(A) ARE REPRODUCED BELOW: {5} THE ABOVE WRITTEN SUBMISSIONS HAVE BEEN CAREFU LLY CONSIDERED. THE SOLE ISSUE IN CONTENTION IS WHETHER THE APPELLA NT IS ENGAGED IN MANUFACTURE OR NOT. THE ASSESSING 'OFFICER HAS ENTI RELY RELIED ON THE FINDINGS IN THE ASSESSMENT ORDER UNDER SECTION 143( 3) FOR THE ASSESSMENT YEAR 2008-09. IN FACT THE ASSESSING OFFI CER HAS SIMPLY REPRODUCED THE RELEVANT PARAGRAPHS OF THE EARLIER A SSESSMENT ORDER AT PARA 5 OF HIS ORDER, FROM WHICH IT CAN BE SEEN THAT THE CONCLUSIONS DRAWN FOLLOWED FROM THE ASSESSMENT ORDER FOR THE AS SESSMENT YEAR 2006-07. IN THE ASSESSMENT YEAR 2006-07, THE SAID A DDITION WAS DELETED BY THE CIT(A)' XXIII VIDE ORDER DATED 27.11 .2009, WHEREIN A DETAILED ANALYSIS OF THE MANUFACTURING PROCESSES CA RRIED ON BY THE APPELLANT HAD BEEN MADE. IT IS FURTHER SEEN THAT TH E APPEAL OF THE APPELLANT FOR ASSESSMENT YEAR 2008-09 HAS BEEN ALLO WED IN ITS FAVOUR BY THIS OFFICE ORDER DATED 30.01.2012. IT WAS FOUND THAT THE APPELLANT HAD CARRIED OUT THE CONTRACT OF FABRICATION, SUPPLY , SHOT/SAND BLASTING, PAINTING AND ERECTION OF 1500 METRIC TONNES OF STEE L STRUCTURES FOR THE STEEL PROJECT AT AGARTALA OF M/S DHARMPAL PREMCHAND LTD. THE ENTIRE WORK WAS EXECUTED IN CONFORMITY WITH TECHNICAL DETA ILS PROVIDED THROUGH DETAILED FABRICATION DRAWINGS OF THE CLIENT . THE APPELLANT HAD PRODUCED COPIES OF EXCISE RETURNS FILED, BILLS OF P URCHASE OF MACHINERY AND RAW MATERIAL, AND DETAILS OF JOB WORK PAID. THE FIRM WAS FOUND TO ITA NO.227/DEL/2013 6 BE REGISTERED WITH VAT, CST, SERVICE TAX AND CENTRA L EXCISE AUTHORITIES. RELIANCE WAS PLACED ON THE JUDGEMENT O F THE DELHI HIGH COURT IN THE CASE OF CIT VS NORTHERN AROMATICS LTD (2005) 196 CTR 479, TO HOLD THAT THE ACTIVITY OF THE APPELLANT HAD TO BE REGARDED AS MANUFACTURE IRRESPECTIVE OF WHETHER THE PRODUCTS MA NUFACTURED ARE FOR ITS OWN BUSINESS OR AS JOB WORK FOR OTHERS. AFT ER CONSIDERING THE EVIDENCE FURNISHED OF FABRICATION AND ASSEMBLY OF T RUSSES, COLUMNS, GANTRIES, ETC. FOR THE STEEL PLANT OF M/S DHARMPAL PREMCHAND LTD., IT WAS HELD THAT THE APPELLANT WAS ENTITLED TO THE DED UCTION UNDER SECTION 80LE. NO NEW FACTS HAVE BEEN BROUGHT ON RECORD IN T HE CURRENT YEAR TO DISPROVE THE APPELLANT'S CLAIM. IT IS HELD ACCORDIN GLY THAT THE APPELLANT IS ENGAGED IN THE 'MANUFACTURE' OF ARTICL ES AND IS THEREFORE, ELIGIBLE FOR THE DEDUCTION UNDER SECTION 80IC. 6. WE FIND THAT THE FACTS UNDER APPEAL ARE SIMILAR TO THE FACTS IN ASSESSMENT YEAR 2006-07 AND 2008-09 AND, THEREFORE, FOLLOWING THE ABOVE TRIBUNAL ORDER, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT(A). 7. IN VIEW OF ABOVE, APPEAL FILED BY REVENUE IS DIS MISSED. 8. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH FEB., 2015. SD./- SD./- ( C. M. GARG) (T.S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 13 TH FEB., 2015 SP COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). ITA NO.227/DEL/2013 7 S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 11/02/2015 SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR 11, SR. PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 12/2 AM/AM 5 A PPROVED DRAFT COMES TO THE SR. PS/PS 12/2 SR. PS/PS 6 KEPT FOR PRONOUNCEMENT 13/2 SR. PS/PS 7 FILE SENT TO BENCH CLERK 13/2 SR. PS/PS 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER