M/s. Evergreen Publication (India) Ltd, Jalandhar V. The Addl.Commissioner of Income-tax, Jalandhar

ITA 237/ASR/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8879 (ITAT-AMRITSAR)
• Duration Of Justice: 4 year(s) 8 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 20-11-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 10-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B R R KUMAR
• Keywords: Rectification of order
• Section: 143(3); 80IB; 194C; 10B

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B : NEW DELHI BEFORE SHRI A.T.VARKEY , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO . 237/ASR/2011 ITA NO. 2 88 /ASR/201 2 (ASSESSMENT YEAR: 2008 - 09 & 2009 - 10 ) EVERGREE N PUBLICATIONS (INDIA) LTD., 40, CHANDAN NAGAR, JALANDHAR VS. ADDL. CIT, RANGE - IV, JALANDHAR, (APPELLANT) (RESPONDENT) ITA NO. 251/ASR/2011 (ASSESSMENT YEAR: 2008 - 09) ADDL. CIT, RANGE - IV, JALANDHAR, VS. EVERGREE N PUBLICATIONS (INDIA) LTD., 40, CHANDAN NAGAR, JALANDHAR (APPELLANT) (RESPONDENT) DATE OF HEARING 29 / 01 /2016 DATE OF PRONOUNCEMENT 07 /02/2016 ASSESSEE BY: SH. RAKESH JAIN, ADV SH. GURJEET SINGH, CA REVENUE BY: SH. B.R.R. KUMAR, SR. DR O R D E R PER PRASHANT MAHARISHI, A. M. 01 . CAPTIONED THREE APPEALS ARE FOR THE SAME ASSESSEE. C ROSS APPEALS ARE PREFERRED BY THE ASSESSEE AND REVENUE AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME - TAX (APPEALS), JALANDHAR DATED 15.02.2011 FOR THE ASSESSMENT YEAR 2008 - 09 AND FOR AY 2009 - 10 ASSESSEE IS IN APPEAL BEFORE US AGAINST ORDER OF CIT (A ) JALANDHAR DATED 11/05/2012 . PAGE 2 OF 28 EVERGREEN PUBLICATIO NS PRIVATE LIMITED V ADDL. CIT & ADDL CIT V EVERGREEN PUBLICATIONS PRIVATE LIMITED [ITA NO. 237/ASR/2011 & ITA NO. 256/ASR/2011 ] ( ASSESSMENT YEAR: 200 8 - 09) 02 . FACTS FOR BOTH THE YEARS ARE SIMILAR IN CASE OF ASSESSEES APPEAL FOR AY 2008 - 09 AND 2009 - 10. THEREFORE, WE FIRST TAKE UP APPEAL OF ASSESSEE FOR A Y 2008 - 09. 03 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. LEARNED CIT ( A), JALANDHAR IS NOT JUSTIFIED IN LAW IN CONFIRMING DISALLOWANCE OF CLAIM OF RS 3621708 / - U/S 80IB OF THE IT ACT, 1961 AND HAS FAILED TO APPRECIATE THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. LEARNED CIT(A), JALANDHAR IS NOT JUSTIFIED IN CONFIRMING AN ADDITION OF RS 500000 / - ON ACCOUNT OF NON - MAINTENANCE OF STOCK DETAILS ON PURELY ARBITRARY AND EXTRANEOUS CONSIDERATIONS AND HAS THUS ERRED IN LAW AS WE. 04 . THE REVENUE IN CROSS APPEAL HAS RAISED THE FOLLOWING GROUNDS: - 1. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW IN DELETING THE DISALLOWANCE OF RS.6,84,56,374/ - MADE U /S 40(A)(IA) OF THE INCOME TAX ACT, 1961. 2. WHILE DOING SO, THE LD. CIT ( A) HAS FAILED TO APPRECIATE THE FACTS THAT PRINTING DONE WITH MATERIAL AMOUNTS TO CONTRACT FOR WORK, LABOUR AND SERVICE WHICH IS COVERED UNDER THE PROVISIONS OF SECTION 194C OF THE IN COME TAX ACT, 1961. 3. IT IS PRAYED THAT THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) BE SET - ASIDE AND THAT THE ORDER OF THE ASSESSING OFFICER RESTORED. 05 . BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS A PRIVATE LTD. COMPANY ENGAGED IN THE BUSINESS OF PRINTING AND PUBLISHING OF BOOKS . FOR ASSESSMENT YEAR 2008 - 09 I T FILED ITS RETURN OF INCOME ON 27.09.2008 DECLARING TOTAL INCOME OF RS.93 , 44 , 754/ - . IN ITS RETURN OF INCOME, IT CLAIMED DEDUCTION U/S 80IB OF THE ACT OF RS.36 , 21 , 708 / - ON PUBLICATI ON OF BOOKS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE CLAIM OF DEDUCTION WAS EXAMINED AND IT WAS DISALLOWED RELYING ON THE DECISION OF ITAT AMRITSAR PAGE 3 OF 28 EVERGREEN PUBLICATIO NS PRIVATE LIMITED V ADDL. CIT & ADDL CIT V EVERGREEN PUBLICATIONS PRIVATE LIMITED [ITA NO. 237/ASR/2011 & ITA NO. 256/ASR/2011 ] ( ASSESSMENT YEAR: 200 8 - 09) BENCH IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2006 - 07. SIMILARLY CLAIM OF DEDUCTION U/S 80 IB FOR AY 2009 - 10 OF RS 1,31,98,452 / - WAS DISALLOWED. FURTHER FOR AY 2008 - 09 DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS NOTED BY AO THAT ASSESSEE HAS MADE PAYMENT TO GET OUTSIDE JOB WORK DONE THROUGH CONTRACT OF PRINTING ETC. AND THEREFORE THE PAYMENT OF RS.6 , 84 , 56 , 374/ - IS DISALLOWED U/S 40 (A)(IA) OF THE ACT AS ADMITTEDLY NO TAX HAS BEEN DEDUCTED THEREON. AS ASSESSEE HAS NOT MAINTAINED STOCK REGISTER AND HENCE LD. AO MADE AN AD HOC DISALLOWANCE OF RS.5 LACS T O THE INCOME OF THE ASSESSEE. 06 . AGGRIEVED BY THIS ASSESSEE PREFERRED AN APPEAL BEFORE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) WHO PARTLY ALLOWED APPEAL OF THE ASSESSEE BY DELETING DISALLOWANCE U/S 40A(IA) OF THE ACT BUT CONFIRMING DISALLOWANCE U/S 80 IB OF THE ACT . REGARDING 80IB DEDUCTION, LEARNED COMMISSIONER OF INCOME T AX (APPEALS) DISALLOWED THE CLAIM U/S 80IB RELYING ON THE DECISION OF AMRITSAR BENCH IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2006 - 07. THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) ALSO RELIED ON DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF LIBERTY SHOES LTD. VS. CIT ( A) 293 ITR 478 AS WELL AS HONBLE SUPREME COURT IN THE CASE OF LIBERTY INDIA LTD WHERE IN IT IS HELD THAT WHEN THE GOODS ARE PURCHASED FROM OT HERS AND ARE TRADED NO BENEFIT OF DEDUCTION U/S 80 IA CAN BE ALLOWED. D ISALLOWANCE U/S 40 A(IA) OF PAGE 4 OF 28 EVERGREEN PUBLICATIO NS PRIVATE LIMITED V ADDL. CIT & ADDL CIT V EVERGREEN PUBLICATIONS PRIVATE LIMITED [ITA NO. 237/ASR/2011 & ITA NO. 256/ASR/2011 ] ( ASSESSMENT YEAR: 200 8 - 09) RS.68456374/ - WAS DELETED RELYING ON THE CIRCULAR NO.681 ISSUED BY CBDT AND ALSO HELD THAT PROVISIONS OF SECTION 194C IS NOT APPL ICABLE AS CONTRACT WAS GIVEN FOR SUPPLY OF GOODS. REGARDING THE THIRD DISALLOWANCE OF ADDITION OF RS.5 LACS, HE CONFIRMED IT HOLDING THAT IT ADDS ONLY 0.15% TO THE GP DECLARED BY ASSESSEE . 07 . AGGRIEVED BY THIS ORDER REVENUE AND ASSESSEE BOTH ARE IN APPEAL AS PER GROUND OF APPEAL STATED ABOVE . 08 . WE FIRST TAKE UP THE APPEAL OF THE ASSESSEE. GROUNDS NO.1 IS AGAINST THE CONFIRMATION OF DISALLOWANCE OF CLAIM OF RS.36 , 21 , 708/ - U/S 80IB OF THE ACT . 09 . BEFORE US THE LD. AR SUBMITTED AS UNDER: - A ) HE SUBMITTED THAT THE ASSESSEE HAS SET UP THIS PUBLISHING UNIT AND BUSINESS HAS COMMENCED FROM 22.02.2002 AND FIRST YEAR OF OPERATION IS ASSESSMENT YEAR 2002 - 03. A SSESSEE HAS BEEN CLAIMING DEDUCTION U/S 80IB ON THIS INCOME U P TO ASSESSMENT YEAR 2005 - 06 AND ASSESSEE HAS BEEN GRANTED THIS DEDUCTION WITHOUT DISTURBING IT AND FURTHER IN SUBSEQUENT YEARS IN ASSESSMENT YEAR 2007 - 08 THE DEDUCTION HAS BEEN GRANTED. THEREFORE, HIS SUBMISSION WAS THAT FROM ASSESSMENT YEAR 2002 - 03 TO 2009 - 10 REVENUE HAS DISALLOWED DED UCTION U/S 80IB FOR ASSESSMENT YEAR 2006 - 07 AND 2008 - 09 AND 2009 - 10 ONLY . THEREFORE, IN THE INITIAL YEAR, THE DEDUCTION HAS NOT BEEN DENIED AND ACCEPTED BY REVENUE BUT IN SUBSEQUENT YEARS, SELECTIVELY IT HAS BEEN DENIED THEREFORE REVENUE BLOWING HOT AND COLD ALTOGETHER. HE FURTHER SUBMITTED THAT IF IN THE FIRST YEAR DEDUCTION IS ALLOWED REVENUE AGAIN SHOULDNOT PAGE 5 OF 28 EVERGREEN PUBLICATIO NS PRIVATE LIMITED V ADDL. CIT & ADDL CIT V EVERGREEN PUBLICATIONS PRIVATE LIMITED [ITA NO. 237/ASR/2011 & ITA NO. 256/ASR/2011 ] ( ASSESSMENT YEAR: 200 8 - 09) DISTURBINCENTIVES DEDUCTION IN SUBSEQUENT YEARS. HIS SUBMISSION WAS THAT IF THE IN CENTIVE DEDUCTION IS NOT DISTURBED IN FIRST YEAR WHERE THE ELIGIBILITY CONDITIONS ARE TO BE SEEN, THEN IN SUBSEQUENT YEAR THE DEDUCTION CANNOT BE DENIED WITHOUT DISALLOWING THE SAME IN INITIAL YEAR. B ) HIS SECOND ARGUMENT WAS THAT THIS ISSUE IS THOUGH DECIDED BY HONBLE ITAT AMRITSAR BENCH FOR ASSESSMENT YEAR 2006 - 07 IN CASE OF THE ASSESSEE IT IS NOT A CORRECT DECISION BECAUSE IT HAS NOT FOLLOWED THE DECISION OF THE JURISDICTIONAL HIGH COURT, IT IS NOT IN ACCORDANCE WITH THE PRINCIPLES O F CONSISTENCY , AND DEDUCTIONIS DISALLOWED ON ABSENCE OF ARTIFICIAL BIFURCATION . HE TOOK US TO PARA 4.14 OF THE ORDER OF THE ITAT IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2006 - 07, HE SUBMITTED THAT THIS DECISION IS NOT CORRECT . C ) REGARDING THE CLAIM OF DEDUC TION, HE SUBMITTED THAT IT IS CASE OF PUBLISHING OF BOOKS ETC. , WHICH ARE SQUARELY COVERED UNDER THE DEFINITION OF MANUFACTURING AS IT BRINGS OUT NEW PRODUCT, WHICH HAS A DIFFERENT USE, MARKETABILITY, CUSTOMER SHIP AND UTILITY. THEREFORE, THE NEW THING IS EMERGING OUT OF THIS ACTIVITY BY PUBLISHING HOUSE AND IT AMOUNTS TO MANUFACTURING. HE TOOK US TO THE VARIOUS STEPS INVOLVED IN PUBLISHING OF BOOKS AND THEREFORE HE SUBMITTED THAT THE ASSESSEE IS ELIGIBLE FOR THE CLAIM U/S 80IB. D ) HE FURTHER ARGUED THAT THE OPINION OF THE AO THAT IT IS ENTITLED FOR DEDUCTION ONLY ON THE BOOKS PRINTED BY IT IS INCORRECT AND ACCORDING TO HIM THE ASSESSEE IS ELIGIBLE FOR DEDUCTION ON THE WHOLE OF THE PROFIT DERIVED FROM THE UNDERTAKING EVEN THEN PART O F THE PRINTING WORK IS G OT DONE FROM OUTSIDE ON JOB WORK DONE BASIS. HE SUBMITTED THAT IT IS NOT THE FACTS ALLEGED BY THE AO THAT ASSESSEE IS PURCHASING FINISHED GOODS AND TRADING PAGE 6 OF 28 EVERGREEN PUBLICATIO NS PRIVATE LIMITED V ADDL. CIT & ADDL CIT V EVERGREEN PUBLICATIONS PRIVATE LIMITED [ITA NO. 237/ASR/2011 & ITA NO. 256/ASR/2011 ] ( ASSESSMENT YEAR: 200 8 - 09) THEREIN. HE SUBMITTED THAT IT IS JUST PRINTING ON JOB WORK BASIS ON THE MATER IAL OF THE CONTRACTOR WHERE THE CONTENT, DESIGNING, LABELING AND OTHER ASPECTS ARE OF THE ASSESSEE. HE FURTHER SUBMITTED THAT THE JOB WORK COST HAS ALREADY BEEN DEBITED IN THE PROFIT AND LOSS ACCOUNT. E ) HE FURTHER SUBMITTED THAT DECISION RELIED UP ON BY T HE LOWER AUTHORITIES OF JURISDICTION HIGH COURT IN CASE OF LIBERTY SHOES IS ALL TOGETHER ON DIFFERENT FACTS AND DO NOT APPLY TO THE CASE OF THE ASSESSEE AS IT DOES NOT BUY FINISHED GOODS FROM OUTSIDE BUT GETS THE PART OF THE WORK DONE BY OTHERS. HE SUBMITT ED THAT IT IS NOT THE CLAIM OF THE LOWER AUTHORITIES THAT THE WHOLE BOOKS IS DEVELOPED, DESIGNED, PRINTED, EDITED BY THE PRINTERS. HE SUBMITTED THAT IT IS MERELY THE PRINTING WORK BECAUSE OF THE SHORTAGE OF MACHINES ON PART OF THE ASSESSEE IN THE PEAK SEAS ON. F ) HE TOOK US THROUGH THE FIXED ASSETS SCHEDULE OF THE COMPANY WHERE I T HAS VARIOUS PRINTING MACHINES, PHOTO - STATE MACHINES AND PLUS S PRAY MACHINES AVAILABLE WITH IT WHICH ARE USED BY IT IN THE MANUFACTURING . HE ALSO SUBMITTED THAT THE ASSESSEE IS LESSEE IN TH E PREMISES IN WHICH IT IS CARRYING ON ITS ACTIVITY, WHICH HAS AREA OF APPROXIMATE LY 10,000 SQ FT. HE SUBMITTED THAT ACCORDING THE LEASE RENT THE ELECTRICITY INSTALLED AT THE PREMISES AND ACCORDING TO THE CLAUSE 5 OF THE LEASE AGREEMENT THE POWER AND LIGHT CHARGES ARE PAYABLE BY THE LESSOR AND NOT THE ASSESSEE . G ) HE FURTHER SUBMITTED THAT COMPANY HAS EMPLOYED 47 EMPLOYEES DURING THE YEAR AND THEREFORE IT HAS DEMONSTRATED PAGE 7 OF 28 EVERGREEN PUBLICATIO NS PRIVATE LIMITED V ADDL. CIT & ADDL CIT V EVERGREEN PUBLICATIONS PRIVATE LIMITED [ITA NO. 237/ASR/2011 & ITA NO. 256/ASR/2011 ] ( ASSESSMENT YEAR: 200 8 - 09) THAT ENOUGH WORK FORCE IS ALSO USED. FOR THIS, HE SUBMITTED THE DETAILS OF WAGES AND SALARIES PAID BY THE ASSESSEE ALONG WITH NAME AND ROLE OF EMPLOYEES . H ) HE FURTHER SUBMITTED THAT THE CLAIM OF THE ASSESSEE IS FULLY SUPPORTED BY CERTIFICATE OF CA REQUIRED AS PER RULE 18BBB OF THE INCOME TAX RULES. IN VIEW OF THE ABOVE, HE SUBMITTED THAT THE ASSESSEE SHOULD BE ALLOWED DEDUCTION U/S 80IB. IN THE END HE SUBMITTED THAT ALTERNATIVELY IF THE CLAIM OF THE ASSESSEE IS NOT ACCEPTED ON THE WHOLE OF THE SUM AND IF IT IS HELD PRINTED WORK DONE BY THE A SSESSEE IS NOT ELIGIBLE THEN THE PARTIAL CLAIM OF DEDUCTION IS RS 2686590 / - INSTEAD OF RS 3621708 / - WHICH SHOULD BE ALLOWED. HE SUBMITTED THAT IT IS MERELY AN ALTERNATIVE CLAIM WITHOUT ADMITTING THE REDUCTION IN DEDUCTION. 10 . AGAINST THIS LD., DR SUBMITTED THAT IN THE ASSESSEES OWN CASE, THIS ISSUE HAS BEEN DECIDED AND THEREFORE NOW THE ISSUE IS NO MORE RES INTEGRA AND THAT ASSESSEE IS NOT ELIGIBLE FOR THIS DEDUCTION . HE VEHEMENTLY SUBMITTED THAT DECISION FOR THE ASSESSMENT YEAR 2006 - 07 IN ASSESSEES OWN CASE SHOULD BE FOLLOWED. HE FURTHER SUBMITTED THAT IT IS NOT A PROCESS OF MANUFACTURING AT ALL FOR THIS HE RELIED ON THE DECISION OF ORIENT LONGMAN REPORTED IN 130 ITR 477. 11 . WE HAVE CAREFULLY CONSIDERED RIVAL CONTENTION .IT IS IMPORTANT TO NOT E THAT I N ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2006 - 07 PAGE 8 OF 28 EVERGREEN PUBLICATIO NS PRIVATE LIMITED V ADDL. CIT & ADDL CIT V EVERGREEN PUBLICATIONS PRIVATE LIMITED [ITA NO. 237/ASR/2011 & ITA NO. 256/ASR/2011 ] ( ASSESSMENT YEAR: 200 8 - 09) ITAT HAS DECIDED THIS ISSUE DENYING DEDUCTION TO THE ASSESSEE AS UNDER: - 4.14. BASED ON THE' DISCUSSION ABOVE, I AM OF THE VIEW THAT PRINTING IS THE MAIN ACTIVITY OF MANUFACTURE THROUGH WHICH GOOD S (BOOKS) ARE PRODUCED. THE OTHER ACTIVITIES OF THE DESIGNING ARE AT BEST PROCESSING ACTIVITIES WITHOUT PRODUCING A DISTINCT COMMERCIAL COMMODITY. IN ANY CASE, DEDUCTION U/S 80IB HAS BEEN SOUGHT IN RESPECT OF PRODUCTION OF BOOK . I AM ALSO OF THE OPINION TH AT TO QUALI FY FOR DEDUCTION U/S 80IB, THE PRODUCTION SHOULD TAKE PLACE IN THE INDUSTRIAL UNDERTAKING OF THE ASSESSEE. FOR THIS PROPOSITION I RELY ON THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF LIBERTY SHOES LTD. (SU P RA) . THE DECISIONS TO T HE CON TRARY ( E.G. IN THE CASE OF M/S. INDIA LTD. (SUPRA) ARE RESPECTFULLY NOT, FOLLOWED IN VIEW OF THIS DECISION OF THE JURISDICTIONAL HIGH COURT. THE AOS CONCLUSION INTHIS REGARD IS UPHELD. THE APPELLANT'S CONTENTION REGARDINGTHIS DEDUCTION IN ME PAST HAS TO BE VIEWED IN THE LIGHT OF THE FACT THATTHIS ISSUE WAS NOT EXAMINED I N THE EARLIER ASSESSMENT PROCEEDINGS . THE DECISIONS RELIED UPON BY THE APPELLANT DO NOT STATE THAT EVEN IF A N ISSUE HAS NOT BEEN EXAMINED IN THE PAST, THE SAME WILL BE DEEMED TOHAVE BEEN EXAMINED AND CANNOT BE REOPENED OR TAKEN UP FORASSESSMENTHAS BEEN COMPLETED WITHOUT EXAMINING, THE RELEVANT FACTS, IT WILL NOT ACT AS RES JUDICATA IN THE SUBSEQUENT PROCEEDINGS. IN THE CASE OF CIT V.OSWAL AGRO MILLS LTD. 24 DTR (S C) 265, THE HON'BLE APEX COURT RIOTED THATTHE RELEVANT ISSUE HAD BEEN ALLOWED BY THE HIGH COURT ONLY ON THE BASIS OF PRINC IPLE OF CONSISTENCY; IT WAS HELD THAT THE HIGH COULD SHOULD HAVE EXAMINED THE NAT URE OF THE SAID EXPENDITURE, AND SET ASIDE THEIR ORDER FOR FRESH EXAMINATION. THUS, UNLESS AN ISSUE IS EXAMINED WITH REFERENCE TO THE FACTS, IT CANNOT BE SAID TO HAVE ATTAINED FINALITY. THIS CONTENTION IS, THEREFORE, NOT ACCEPTED IN THE ABSENCE OF A BIFURC ATION SHOWING THE INCOME IN RESPECT OF THE BOOKS MANUFACTURED BY THE ASSESSEE ITSELF AND THAT WHICH HAS BEEN GOT PRINTED FROM OUTSIDE (WITH OR WITHOUT MATERIAL), I UPHOLD THE AOS CONCLUSION THAT DEDUCTION U/S 80IB IN RESPECT OF BOOKS MANUFACTURED BY IT SH OULD BE ALLOWED TO IT NOR HAS FURNISHED ANY COMPUTATION SHOWING SUCH INCOME. UNDER THE CIRCUMSTANCES, THE DISALLOWANCE BY THE AO IS UPHELD AND THIS GROUND OF APPEAL IS REJECTED. 12 . COORDINATE BENCH HAS DECIDED THIS ISSUE FOR FOLLOWING REASONS: - A . PRINTING IS THE MAIN ACTIVITY OF MANUFACTURE THROUGHWHICH GOODS ( BOOKS ) ARE PRODUCED. THE OTHER ACTIVITIES OF DESIGNING ARE AT BEST PROCESSING ACTIVITIES WITHOUT PRODUCING A DISTINCT COMMERCIAL COMMODITY. B . P RODUCTION SHOULD TAKE PLACE IN INDUSTRIAL UNDERTAKING OF TH E ASSESSEE. PAGE 9 OF 28 EVERGREEN PUBLICATIO NS PRIVATE LIMITED V ADDL. CIT & ADDL CIT V EVERGREEN PUBLICATIONS PRIVATE LIMITED [ITA NO. 237/ASR/2011 & ITA NO. 256/ASR/2011 ] ( ASSESSMENT YEAR: 200 8 - 09) C . IF DEDUCTION IS ALLOWED IN PAST, THERE IS NO COMPELLING REASON TO NOT TO DISTURB IT IN SUBSEQUENTYEARS AS THERE IS NO RES JUDICATA IN THE INCOME TAX PROCEEDINGS. D . THERE IS NO BIFURCATION OF MATERIAL GOT PRINTED OUTSIDE AND INSIDE INDUSTRIAL UN DERTAKING? 13 . WE HAVE CAREFULLY PERUSED THE DECISION, WHICH IS GENERALLY TO BE FOLLOWED BY US , UNLESS THERE ARE COMPELLING CIRCUMSTANCES, WHICH WARRANTS DEVIATION FROM IT. IT IS IMPORTANT TO DECIDE WHETHER THE ACTIVITY CARRIED OUT BY ASSESSEE OF PUBLISHING OF BOOKS IS MANUFACTURING OR NOT. 14 . BRIEFLY STATED THE FACT IS THAT UNDISPUTEDLY THE ASSESSEE CARRY ON THE FOLLOWING ACTIVITIES IN ITS PUBLICATION BUSINESS. ASSESSEE COMPANY CARRIED ON MANUFACTURE AND PRODUCTION OF BOOKS DURING THE PREVIOUS YEAR UNDER REFERENCE AND THERE IS NO DOUBT ABOUT THIS FACT AND THERE IS NO PURCHASE OF FINISHED GOODS OF OUTSIDE CONCERN FROM THE OUTSIDE CONCERN FOR THE PURPOSE OF TRADING BY THE ASSESSEE COMPANY. THE PROCESS INVOLVED IN MANUFACTURE/PRODUCTION OF PUBLICA TIONS AD DETAILED BELOW CONFIRM THE FACT OF MANUFACTURE/ PRODUCTION: A . STEPS TO FIND OUT PUBLISHING REQUIRED B . FINDING APPROPRIATE AND SUITABLE AUTHOR C . GETTING THE MANUSCRIPTS FOR PUBLICATION D . GETTING PROOFS AND PROOF READING FOR RECTIFICATION OF MISTAKES/ ERRORS E . PREPARING AND DESIGNING OF PROPER LAY OUT OF PAGES AND DESIGNING OF COVER/ BACK COVER OF THE PUBLICATION F . PREPARING NEGATIVES AND POSITIVES FOR PRINTING G . PRINTING H . SORTING AND STITCHING OF THE PAGES OF THE PUBLICATION I . BINDING OF THE PUBLICATION. 15 . WITH EFFECT FROM 1.4.2009, DEFINITION OF MANUFACTURING HAS BEEN INSERTED IN THE INCOME TAX ACT. THOUGH THIS PROVISION APPLIES FROM PAGE 10 OF 28 EVERGREEN PUBLICATIO NS PRIVATE LIMITED V ADDL. CIT & ADDL CIT V EVERGREEN PUBLICATIONS PRIVATE LIMITED [ITA NO. 237/ASR/2011 & ITA NO. 256/ASR/2011 ] ( ASSESSMENT YEAR: 200 8 - 09) ASSESSMEN T YEAR 2009 - 10 BUT IT HAS A PERSUASIVE VALUE AS IT D EFINES THE TERM MANUFACTURING IN SECTION 2 (29BA) OF THE INCOME TAX ACT AS UNDER: - 'MANUFACTURE', WITH ITS GRAMMATICAL VARIATIONS, MEANS A CHANGE IN A NON - LIVING PHYSICAL OBJECT OR ARTICLE OR THING, (A) RESULTING IN TRANSFORMATION OF THE OBJECT OR ARTICLE OR THING INTO A NEW AND DISTINCT OBJECT OR ARTICLE OR THING HAVING A DIFFERENT NAME, CHARACTER AND USE; OR (B) BRINGING INTO EXISTENCE OF A NEW AND DISTINCT OBJECT OR ARTICLE OR THING WITH A DIFFERENT CHEMICAL COMPOSITION OR INTEGRAL STRUCTURE; 16 . ACCORDING TO THIS DEFINITION IF THERE IS A CHANGE IN NON - LIVING PHYSICAL OBJE C T OR ARTICLE OR THING RESULTING IN TRANSFORMATION OF OBJECT OR THING OR ARTICLE INTO A NEW AND DISTINCT OBJECT HAVING A DIFFERENT NAME , CHARACTER AND USE OR BRINGING INTO EXISTENCE OF A NEW OBJECT THEN IT AMOUNTS TO MANUFACTURE. ASSESSEE CARRIES OUT PROCESS IS THAT AN IDEA IS CONVERTED INTO MANUSCRIPT AND THEN PRINTED WHICH IS DIFFERENT FROM PAPER , THEN AFTER PROOFING, RE - PROOFING, EDITING, AND DESIGNING AND THEN PRINTING IT AND AFTER THAT IT IS B OUND TO GIVE IT A LOOK OF THE BOOK IS ALTOGETHER DIFFERENT FROM THE PRINT PAPER AND INK BEING USED. THEREFORE , IT USED PAPER, INK ETC. AND IF THE PROCESS OF PUBLICATION BRING S OUT A COMPLETELY NEW THING IN THE FORM OF BOOK OR PUBLICATION, IT H AS DIFFERENT NAME, DIFFERENT CHARACTER AND FOR DIFFERENT CLASS OF CUSTOMERS. THEREFORE, THE PROCESS OF THE PUBLISHING OF THE BOOK SATISFIES THE DEFINITION OF MANUFACTURING AS PER THE ACT. PAGE 11 OF 28 EVERGREEN PUBLICATIO NS PRIVATE LIMITED V ADDL. CIT & ADDL CIT V EVERGREEN PUBLICATIONS PRIVATE LIMITED [ITA NO. 237/ASR/2011 & ITA NO. 256/ASR/2011 ] ( ASSESSMENT YEAR: 200 8 - 09) 17 . AS WE H AVE NOTED THAT WE ARE BOUND BY DECISION OF THE CO - ORDINATE BENCH RENDERED IN THE CASE OF THE ASSESSEE ITSELF , H OWEVER WE ARE CONSTRAIN ED TO NOT TO FOLLOW THAT DECISION FOR FOLLOWING REASONS : - A ) CIRCULAR NO.347 ISSUED BY THE CBDT DATED 07.07.1992 H AS CONSIDERED THAT WHETHER A BOOK PUBLISHING COMPANY W HETHER QUALIFIES TO BE TREATED AS COMPANY ENGAGED IN MANUFACTURING OR PROCESSING OF GOODS WITHIN THE MEANING OF SECTION 104(4)(A) OF THE INCOME TAX ACT AS UNDER : - BOOK PUBLISHING COMPANY - WHETHER QUALIFI ES TO BE TREATED AS COMPANY ENGAGED IN MANUFACTURE OR PROCESSING OF GOODS WITHIN THE MEANING OF SECTION 104(4 ) ( A) 1. THE BOARD HAS RECEIVED REPRESENTATIONS THAT COMPANIES ENGAGED IN PUBLISHING OF BOOKS SHOULD BE TREATED AS INDUSTRIAL COMPANIES FOR THE PUR POSE OF SECTION 104. REFERENCE HAS BEEN MADE IN THIS CONNECTION TO THE DECISIONS OF THE MADRAS AND CALCUTTA HIGH COURTS IN THE CASES OF CIT V. COMMERCIAL LAWS OF INDIA (P.) LTD. [1977] 107 ITR 822 AND ADDL. CIT V. A. MUKHERJEE & CO. (P.) LTD. [1978] 113 ITR 718, RESPECTIVELY. IN THE MADRAS HIGH COURT DECI SION IT HAS BEEN HELD THAT FOLDING AND STITCHING THE PRINTED SHEETS AND CONVERTING THEM INTO PARTS OR BOOKS, AS THE CASE MAY BE, CONSTITUTED PROCESSING OF GOODS. IN THE CALCUTTA HIGH COURT DECISION IT WA S HELD THAT IT IS WHOLLY UNNECESSARY FOR A PUBLISH ER OF BOOKS TO BE AN OWNER OF A PRINTING PRESS OR TO BE HIMSELF A BOOK - BINDER TO BE A MANUFACTURER OF BOOKS. A PUBLISHER MAY GET THE BOOKS PRINTED FROM ANY PRINTER, BUT THE PRINTER IS A MERE CONTRACTOR AND THE PUBLISHER CARRIES ON THE BUSINESS OF MANUFAC TURING AND PROCESSING OF GOODS. 2. THE BOARD HAS BEEN ADVISED TO ACCEPT THESE DECISIONS. IN VIEW THEREOF, BOOK PUBLISHING COMPANIES EVEN THOUGH THEY MAY THEM - SELVES NOT BE ENGAGED IN THE PRINTING OR BINDING OF BOOKS QUALIFY TO BE TREATED AS INDUSTRIAL COMPANIES FOR THE PURPOSE OF SECTION 104 AS WELL AS FOR THE CONCESSIONAL TAX TREATMENT GIVEN TO INDUS TRIAL COMPANIES. CIRCULAR: NO. 347 [ F. NO. 166/4/81 - IT(A - I) ], DATED 7 - 7 - 1982 W HILE ANSWERING THIS QUESTION CBDT HELD THAT A PUBLISHER MAY GET THE BOOKS PRINTED FROM ANY PRINTER BUT THE PRINTING IS A MERE CONTRACT AND THE PUBLISHER CARRIES ON THE BUSINESS OF MANUFACTURING AND PROCESSING OF GOODS AND IN THAT CIRCULAR AFTER CONSIDERING THE DECISION OF HONBLE MADRAS HIGH COURT AND CALCUTTA HIGH COURT IN THE CASE OF CIT VS. COMMERCIAL LAWS OF INDIA PVT. LTD. 107 ITR 822 AND ADDITIONAL CIT VS. A MUKHERJEE AND COMPANY LTD. 113 ITR 718 THE CBDT HAS PAGE 12 OF 28 EVERGREEN PUBLICATIO NS PRIVATE LIMITED V ADDL. CIT & ADDL CIT V EVERGREEN PUBLICATIONS PRIVATE LIMITED [ITA NO. 237/ASR/2011 & ITA NO. 256/ASR/2011 ] ( ASSESSMENT YEAR: 200 8 - 09) ACCEPTED THAT BOOK - PUBLISHING COMPANIES EV EN THOUGH THEY MAY HIMSELF NOT ENGAGED IN PRINTING OR BINDING OF BOOKS ARE TREATED AS INDUSTRIAL COMPANY FOR THE PURPOSE OF SECTION 104 AS WELL AS FOR THE CONCESSIONAL TAX TREATMENT GIVEN TO THE INDUSTRIAL COMPANIES. IN THIS CIRCULAR CBDT HAS INTERPRETED T HAT A PUBLISHER OF A BOOKS IS MANUFACTURE OF BOOKS. HOWEVER, THE PROVISIONS OF SECTION 104 OF THE ACT ARE NOT ON STATUTE BUT THE CIRCULAR LAYS DOWN THAT THE PUBLISHER IS A MANUFACTURER BASED ON JUDICIAL PRECEDENTS AVAILABLE. THOSE CIRCULARS ARE BINDING ON LOWER AUTHORITIES. AS THIS CIRCULAR HAS NOT BEEN CONSIDERED OR PUT BEFORE THE BENCH DURING THE COURSE OF HEARING FOR THE ASSESSMENT YEAR 2006 - 07 AND THEREFORE IN IGNORANCE OF THAT DECISION THE COORDINATE BENCH HAS DECIDED THAT THE ASSESSEE , PUBLISHER IS NOT A MANUFACTURE R OF THE PRODUCT. B ) HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. DELHI PRESS PATRA PRAKASHAN LTD IT R NO.49 - 50/ 1996 ITA NO .151/2002, 302/2002 AND 480/2005 WHERE THE ASSESSEE IS ENGAGED IN THE PRINTING AND PUBLISHING OF NEWSPAPER AND PERIODICALS AS HELD THAT THE ASSESSEE IS CARRYING ON ACTIVITY OF MANUFACTURING AND WHETHER THE PRINTERS ARE ELIGIBLE FOR DEDUCTION U/S 80 I OF TH E ACT OR NOT AS UNDER : - 50. THE NEXT ASPECT WHICH HAS BEEN ADDRESSED AT LENGTH BY THE COUNSEL FOR THE PARTIES IS WHETHER UNIT NOS.2 & 3 WOULD FULFILL THE CONDITIONS AS SPECIFIED IN SECTION 80 - I(2)(III) OF THE ACT. IT HAS BEEN CONTENDED ON BEHALF OF THE REVENUE THAT PRINTING DOES NOT ALTER THE CHARACTER OF RAW MATERIALS AND CANNOT CONSTITUTE MANUFACTURE. IT HAS BEEN FURTHER CONTENDED THAT AS THE PRINTED MATERIAL WHICH RESULTS FROM THE ACTIVITIES PAGE 13 OF 28 EVERGREEN PUBLICATIO NS PRIVATE LIMITED V ADDL. CIT & ADDL CIT V EVERGREEN PUBLICATIONS PRIVATE LIMITED [ITA NO. 237/ASR/2011 & ITA NO. 256/ASR/2011 ] ( ASSESSMENT YEAR: 200 8 - 09) CARRIED O N IN UNIT NOS. 2 AND 3 IS ALSO NOT KNOWN TO THE MARKET AS A DISTINCT PRODUCT AS THE SAME CANNOT BE DEALT WITH WITHOUT SUBJECTING THE PRINTED MATERIAL TO A BINDING PROCESS WHICH IS NOT CARRIED ON BY UNIT NOS.2 & 3. 51. MR SAHNI HAS RELIED STRONGLY ON THE DE CISION OF THE SUPREME COURT IN THE CASE OF DELHI CLOTH & GENERAL MILLS (SUPRA) IN SUPPORT OF HIS CONTENTION. WE DO NOT THINK THAT THE DECISION IS OF MUCH ASSISTANCE IN THE FACTS OF THE PRESENT CASE. IN THAT CASE, THE RESPONDENTS WERE ENGAGED IN MANUFACTURI NG 'VANASPATI' AND HAD CHALLENGED THE LEVY OF EXCISE DUTY ON THE MANUFACTURE OF VANASPATI FROM RAW OIL. THE EXCISE AUTHORITIES HAD LEVIED EXCISE ON MANUFACTURE OF VANASPATI AS 'VEGETABLE NON - ESSENTIAL, OILS, ALL SORTS OR IN RELATION TO THE MANUFACTURE OF W HICH ANY PROCESS IS ORDINARILY CARRIED ON WITH THE AID OF POWER'. THE COURT EXAMINED THE PROCESSES CARRIED ON IN CONVERSION OF RAW OILS TO VANASPATI AND HELD THAT THE SAME DO NOT AMOUNT TO MANUFACTURE. THE COURT HELD THAT THE WORD MANUFACTURE IS UNDERSTOOD TO MEAN BRINGING INTO EXISTENCE A NEW SUBSTANCE. THE COURT DREW A DISTINCTION BETWEEN PROCESSING AND MANUFACTURING AND HELD THAT WHEREAS MANUFACTURE IMPLIED A CHANGE, EVERY CHANGE COULD NOT BE CONSTRUED AS MANUFACTURE. THE RELEVANT EXTRACT FROM THE SAID D ECISION IN THE CASE OF DELHI CLOTH & GENERAL MILLS (SUPRA) IS QUOTED BELOW: - 'ACCORDING TO THE LEARNED COUNSEL 'MANUFACTURE' IS COMPLETE AS SOON AS BY THE APPLICATION OF ONE OR MORE PROCESSES, THE RAW MATERIAL UNDERGOES SOME CHANGE. TO SAY THIS IS TO EQUAT E 'PROCESSING' TO 'MANUFACTURE 'AND FOR THIS WE CAN FIND NO WARRANT IN LAW. THE WORD 'MANUFACTURE' USED AS A VERB IS GENERALLY UNDERSTOOD TO MEAN AS 'BRINGING INTO EXISTENCE A NEW SUBSTANCE' AND DOES NOT MEAN MERELY 'TO PRODUCE SOME CHANGE IN A SUBSTANCE', HOWEVER, MINOR IN CONSEQUENCE THE CHANGE MAY BE. THIS DISTINCTION IS WELL BROUGHT ABOUT IN A PASSAGE THUS QUOTED IN PERMANENT EDITION OF WORDS AND PHRASE. VOL.26 FROM AN AMERICAN JUDGMENT. THE PASSAGE RUNS THUS' - 'MANUFACTURE' IMPLIES A CHANGE BUT EVERY C HANGE IS NOT MANUFACTURE AND YET EVERY CHANGE OF AN ARTICLE IS THE RESULT OF TREATMENT, LABOUR AND MANIPULATION. BUT SOMETHING MORE IS NECESSARY PAGE 14 OF 28 EVERGREEN PUBLICATIO NS PRIVATE LIMITED V ADDL. CIT & ADDL CIT V EVERGREEN PUBLICATIONS PRIVATE LIMITED [ITA NO. 237/ASR/2011 & ITA NO. 256/ASR/2011 ] ( ASSESSMENT YEAR: 200 8 - 09) AND THERE MUST BE TRANSFORMATION; A NEW AND DIFFERENT ARTICLE MUST EMERGE HAVING A DISTINCTIVE NAME, CHARACTER OR USE. 52. IN THE PRESENT CASE, UNIT NOS.2 & 3 ARE ENGAGED IN PRINTING. THE RAW MATERIALS USED ARE PAPER, INK AND OTHER CONSUMABLES WHICH ARE COMPLETELY DISTINCT FROM THE PRINTED PAPER THAT RESULTS FROM THE ACTIVITY ON IN UNIT NOS.2 & 3. 53. WE ARE UNABLE TO ACCEPT THE CONTENTION THAT THE PRINTING DOES NOT ALTER THE CHARACTER OF THE PAPER USED AND THERE IS NO DISTINCTION BETWEEN THE RAW PAPER AND THE RESULTANT PRODUCT. THE PURPOSE AND USAGE OF A BLANK PAPER IS COMPLETELY DIFFERENT FROM THE USE AND PURPOSE OF A PRINTED MAGAZINE OR PERIODICAL. ONCE THE BLANK PAPER UNDERGOES A PROCESS OF PRINTING, THE CHARACTER OF BLANK PAPER CHANGES COMPLETELY AND THE CONTENT OF THE PRINTED MATERIAL NOW BECOMES THE IDENTITY OF A PRINTED PAPER. NO ONE CAN SAY THAT BLANK PAPER AND PRINTED ARTICLE ARE ONE AND THE SAME AND IN OUR OPINION IT CAN HARDLY BE SAID THAT PRINTING CARRIED OUT IN AN INDUSTRIAL UNDERTAKING WOULD NOT AMOUNT TO MANUFACTURING. A PRINTED MAGAZINE OR PERIODICAL EVEN IF IT IS NOT BOUND HAS A DEFINITE IDENTITY AND ITS USAGE IS COMPLETELY DIFFERENT FROM A BLANK PAPER ON WHICH IT IS PRINTED. C ) IT HAS BEEN HELD BY HONOU RABLE DELHI HIGH COURT IN REPLIKA PRESS PRIVATE LIMITED & ANR V DCIT[ DATE OF DECISION: 5TH AUGUST, 2013 W.P.(C) 7452/2010 ] WHILE CONSIDERING DEDUCTION U/S 10B OF THE INCOME TAX ACT AS UNDER: - 15. SECTION 10B APPLIES TO 100% EXPORT ORIENTED UNDERTAKING ENGAGED IN EXPORT OF ARTICLES, THINGS OR COMPUTER SOFTWARE FOR A PERIOD OF TEN CONSECUTIVE ASSESSMENT YEARS BEGINNING FROM THE YEAR IN WHICH T HE UNDERTAKING BEGINS TO MANUFACTURE OR PRODUCE ARTICLES, THINGS OR COMPUTER SOFTWARE. THE WORDS ARTICLES AND THINGS ARE WIDE AND BY NO STRETCH, IT CAN BE SAID THAT THE PETITIONER DOES NOT PRODUCE AN ARTICLE OR A THING. AFTER RECEIPT OF MANUSCRIPTS FRO M ABROAD, THE PETITIONER HAS TO DO TYPE SETTING, MAKE/PROCESS/PRINT ON PAPER AND THEN BIND PRINTED PAGES INTO BOOKS. THUS, A NEW PRODUCT, DISTINCT AND SEPARATE FROM THE BARE MANUSCRIPTS TAKES SHAPE AND GETS A PHYSICAL SHAPE IN FORM OF BOOKS. BOOKS ARE AN A RTICLE OR A THING AND THE PROCESS INVOLVED IS CERTAINLY PRODUCTION, IF NOT MANUFACTURE. PAGE 15 OF 28 EVERGREEN PUBLICATIO NS PRIVATE LIMITED V ADDL. CIT & ADDL CIT V EVERGREEN PUBLICATIONS PRIVATE LIMITED [ITA NO. 237/ASR/2011 & ITA NO. 256/ASR/2011 ] ( ASSESSMENT YEAR: 200 8 - 09) D ) FURTHER HONOURABLE DELHI HIGH COURT HAS HELD IN THE CASE OF CIT V KIRAN KAPOOR [ DECIDED ON : 19.01.2015 ITA NO.13/2015 ITA NO.14/2015 ITA NO.15/2015, C.M. APPL.157/20 15] THAT EVEN PROCESS OF E BOOK IS AL S O MANUFACTURING AS UNDER : - 14. IN THE PRESENT CASE SECTION 10B USES THE EXPRESSION MANUFACTURES OR PRODUCES THINGS OR COMPUTER SOFTWARE. THE FOUR STAGE PROCESS OF COMPILING MATERIAL, COLLATING THE TEXT, DESIGNI NG THE LAYOUT, SCANNING, DIGITAL IMAGE EDITING (TO REMOVE DISTORTION) AND FINAL ARRANGEMENT OF THE DATA, ULTIMATELY TRANSMITTED ACCORDING TO THE CUSTOMERS SPECIFICATION AND READY TO BE USED FOR PRINTING, ( OR EVEN E - BOOK PUBLICATION ) IS UNDOUBTEDLY MANUF ACTURE OR PRODUCTION. [UNDERLINED BY US] E ) RESPECTFULLY, RELIANCE ON THE DECISION OF HONOURABLE JURISDICTIONAL HIGH COURT IN CASE OF LIBERTY SHOES LIMITED V CIT BY THE COORDINATE BENCH IS MISPLACED, AS THE FACTS OF THAT CASE WERE ENTIRELY DIFFERENT. F ACTS NOTED IN THAT CASE IN PARA NO .2 OF THAT DECISION ARE AS UNDER : - 2. THE ASSESSEE COMPUTED ITS INCOME AFTER DEDUCTING INCOME OF RS. 37,95,908 UNDER S. 80 - IA OF THE IT ACT, 1961 (IN SHORT, 'THE ACT). CLAIM OF THE ASSESSEE WAS THAT FINISHED GOODS WERE PURCHASED AND EXPORTED AND THE SAID GOODS WERE NOT ATTRIBUTABLE TO MANUFACTURING ACTIVITIES OF THE ASSESSEE. ACCORDINGLY, THE AO DISALLOWED THE CLAIM, WHICH WAS AFFIRMED BY THE CIT ( A) AS WELL AS BY THE TRIBUNAL. HOWEVER, CLAIM TO THE EXTENT THE GOODS WERE MANUFACTURED BY THE ASSESSEE WAS ALLOWED. [UNDERLINED BY US] IN THIS CASE, ASSESSEE IS NOT PURCHASING FINISHED GOODS FROM OUTSIDER AND CLAIMING DEDUCTION U/S 80IB THEREON. ADMITTEDLY, ON TRADED GODS DEDUCTIONS U/S 80IB IS NOT AVAILABLE. THIS HYPOTHESIS IS ALSO NOT DISPUTED BY THE ASSESSEE. HOWEVER, HERE IN THIS CASE ASSESSEE IS NOT PURCHASING FINISHED GOODS BUT IS GETTING PRINTING WORK DONE FROM JOB WORKER, WHICH IS A VERY LIMITED PAR T OF THE MANUFACTURING ACTIVITY OF PUBLISHINGOF PAGE 16 OF 28 EVERGREEN PUBLICATIO NS PRIVATE LIMITED V ADDL. CIT & ADDL CIT V EVERGREEN PUBLICATIONS PRIVATE LIMITED [ITA NO. 237/ASR/2011 & ITA NO. 256/ASR/2011 ] ( ASSESSMENT YEAR: 200 8 - 09) BOOKS . THEREFORE, WE HAVE NOTED THAT FACTSOF DECISION OF LIBERTY SHOES LIMITED V CIT (SUPRA ) ARE DIFFERENT. F ) IN DECIDING, THE ISSUE AGAINST THE ASSESSEE COORDINATE BENCH WAS OF THE VIEW THAT PRINTING IS THE MAIN ACTIVITY OF THE MANUFACTURING THROUGH WHICH THE BOOKS ARE PRODUCED. WE ARE NOT IN AGREEMENT WITH THIS. THE BOOK DERIVES ITS VALUE FROM THE CONTENT, IDEAS, DESIGN, DRAWINGS , AUTHORSHIP AND PUBLICATION HOUSE. THE VALUE ADDITION IS MAI NLY BECAUSE OF THESE ACTIVITIES . P RINTING IS VERYMINISCULE PROCESS OF MANUFACTURING OF THE BOOKS. B OOKS WHICH ARE NEVER PRINTED SUCH AS E BOOKS WHICH ARE ALSO HELD TO BE MANUFACTURING IN THE DECISION DISCUSSED ABOVE. IN THE CHANGING ERA, BOOKS ARE AL SO READ ELECTRONICALLY AND IN DIGITIZED FORMS WHICH ARE NEVER PRINTED. CHANGING TIME NEEDS CHANGE IN UNDERSTANDING THE BUSINESS WITH A SYNCHRONIZED VISION WITHBUSINESS, SHREDDING THE ORTHODOX VIEW. G ) THE VIEW THAT IS PROPOUNDED BY THE COORDINATE BENCH IS T HAT THE PRODUCTION SHOULD TAKE PLACE IN THE INDUSTRIAL UNDERTAKING OF THE ASSESSEE. ON READING OF SECTION 80 IB, WE DONOT FIND ANY OF THE CONDITIONS, WHICH SAYS THAT THE GOODS SHOULD BE WHOLLY PRODUCED IN THE INDUSTRIAL UNDERTAKING. IN FACT ASSESSEE HAS ONLY PART OF THE MANUFACTURING PROCESS OUTSOURCED AND COST OF WHICH IS DEBITED IN THE BOOKS OF ACCOUNTS WHICH HAS GONE TO REDUCE THE PROFITABILITY OF THE INDUSTRIAL UNDERTAKING. THE FINANCIAL SCENARIO OF THE ACCOUNTS FOR THE YEAR ENDED 31.3.2008 SHOWS THAT IT HAS GOT THE SALES OF RS 32,18,95,750/ - WHEREAS THE JOB WORK CHARGES IT HAS PAID FOR PRINTING WITH MATERIAL IS ONLY RS 6.85 CRORES. LOOKING TO THE VOLUME OF SALES, WHICH IS 5 TIMES MORE THAN THE JOB WORK PAGE 17 OF 28 EVERGREEN PUBLICATIO NS PRIVATE LIMITED V ADDL. CIT & ADDL CIT V EVERGREEN PUBLICATIONS PRIVATE LIMITED [ITA NO. 237/ASR/2011 & ITA NO. 256/ASR/2011 ] ( ASSESSMENT YEAR: 200 8 - 09) CHARGES FOR PRINTING , I T CANNOT BE SAID THAT MANUFACTURING ACTIVITY IS NOT CARRIED ON AT THE INDUSTRIAL UNDERTAKING OF THE ASSESSEE. FURTHER, IT CANNOT BE SAID THAT PRINTING WORK ITSELF ENCOMPASSES ALL THE ACTIVIT IES OF THE PUBLISHING OF BOOKS; WE HAVE ALREADY HELD THAT IT IS A MINISCULE ACTIVIT Y OF THE MANUFACTURING PROCESS. H ) THE JOB WORK CHARGES ARE JUST LIKE ANY OTHER CHARGES OF MANUFACTURING ACTIVITY, WHICH HAS IN FACT GONE TO REDUCE THE ELIGIBLE PROFIT. PART OF THE ACTIVITY OUTSOURCED BY THE ASSESSEE CANNOT BE CONSTRUED THAT IT HAS NOT CARRI ED OUT THE WHOLE OF THE MANUFACTURING PROCESS OUTSIDE THE INDUSTRIAL UNDERTAKING. IT IS ALSO ONE OF THE BUSINESS STRATEGY OF THE ASSESSEE AS SUBMITTED IN PEAK SEASON. IT IS NOT THE CASE ALLEGED THAT WHOLE BOOK IS DESIGNED, CONCEPTUALIZED, WRITTEN, PRINTE D AND PUBLISHED BY THE JOB WORKER. I ) WE ARE ALSO OF THE VIEWTHAT PRINCIPLES OF RES JUIDCATA DOES NOT APPLY TO INCOME TAX MATTERS, AS EACH ASSESSMENT YEAR IS INDEPENDENT. HOWEVER WHEN ASSESSEE HAS CLAIMED THE DEDUCTION IN INITIAL YEARS WHICH ARE NOT DIST URBED, IT CANNOT BE DENIED IN SUBSEQUENT YEARS. J ) COORDINATE BENCH WAS ALSO OF THE VIEW THAT AS T HERE IS NO BIFURCATION OF THE MATERIAL WAS PRINTED OUTSIDE AND INSIDE THE INDUSTRIAL UNDERTAKING , WHOLE DEDUCTION IS NOT ALLOWABLE. WE FAILED TO APPRECIATE THE RATIO LAID DOWN BY THE BENCH AS IT DOES NOT HAVE ANY LEGAL SANCTION AS WELL AS IT IS NOT SUPPORTED BY ANY JUDICIAL PRECEDENT. WE ARE OF THE VIEW THAT PRINTING COST INCURRED BY ASSESSEE ON M ATERIAL INSIDE THE INDUSTRIAL UNDERTAKING HAS BEEN DEBITED AS EXPENSES IN VARIOUS FORMS SUCH AS RAW MATERIAL CONSUMED, WORKMAN CHARGES SUCH AS LABORETC. , WHEREAS THE PRINTING JOB WORK CHARGES ISA CONSOLIDATED AMOUNT OF EXPENSES COMPRISING OF THE COST O F GOODS PRODUCED BY THE JOB WORKER AND HIS PROFIT MARGIN PAGE 18 OF 28 EVERGREEN PUBLICATIO NS PRIVATE LIMITED V ADDL. CIT & ADDL CIT V EVERGREEN PUBLICATIONS PRIVATE LIMITED [ITA NO. 237/ASR/2011 & ITA NO. 256/ASR/2011 ] ( ASSESSMENT YEAR: 200 8 - 09) THEREON. THEREFORE THE DISTINCTION DRAWN BY THE COORDINATE BENCH IS FUTILE. 18 . FURTHER, THE LD. DR HAS RELIED ON THE DECISION OF DELHI HIGH COURT IN CASE OF ORIENT LONGMAN LIMITED V CIT 130 ITR 477 (DELHI). ON CAREFUL PERUSAL OF THE DECISION IN OUR VIEW IT SUPPORTS THE CASE OF THE ASSESSEE AS IT HELD AS UNDER : - HELD THE FACT THAT PRINTING AND BOOK BINDING IS DONE BY SOMEONE ELSE DOES NOT IMPLY THAT SOMEONE ELSE IS THE MANUFACTURER. IT IS THE ASSESSEE'S BUSINESS TO MANUFACTURE BOOKS BY DESIGNING THEM, GETTING THEM BOUND AND PRINTED AND FINALLY SELLING THE PRODUCT. BOOKS IN THE MANUFACTURED STATE ARE GOODS AND THEIR MANUFACTURE OR PROCESSING IS, AS IN THE CASE OF OTHER GOODS, THE CONVERSION OF PAPER AND THE MANUSCRIPT WRITTEN BY AN AUTHOR INTO A BOOK. THIS CERTAINLY INVOLVES EITHER MANUFACTURE OR PROCESSING AND THE ASSESSEE WAS UNDOUBTEDLY ENGAGED IN THE BUSINESS OF MANUFACTURING OR PROCESSING BOOKS. THEREFORE, THE ASSESSEE WAS AN 'INDUSTRIAL' COMPANY WITHIN THE MEANING OF SECTION 2 (6) (C) OF THE FINANCE ACT, 1970. [EXTRACTED FROM TAXMANN.COM] 19 . FURTHER IN THE DECISION OF DELHI PRESS PATRIKA PRAKASHAN LIMITED ( SUPRA) HONOURABLE HIGH COURT HAS HELD THAT IF THE DEDUCTION IS NOT DISTURBED IN INITIAL ASSESSMENT YEAR THEN AO CANNOT DISALLOW THE DEDUCTION IN SUBSEQUENT YEAR WITHOUT DISTURBING THE INITIAL ASSESSMENT YEAR AS UNDER : - 76. IN CASES WHERE DEDUCTION IS GRANTED UNDER SECTION 80 - I OF THE ACT, THE APPLICABILITY OF THE SECTION IS DETERMINED IN THE YEAR IN WHICH THE NEW INDUSTRIAL UNDERTAKING IS ESTABLISHED. THE QUALIFICATION AS TO WHETHER ANY INDUSTRIAL UNDERTAKING FULFILLS THE CONDITION AS SPECIFIED UNDER SECTION 80 - I OF THE ACT HAS TO PAGE 19 OF 28 EVERGREEN PUBLICATIO NS PRIVATE LIMITED V ADDL. CIT & ADDL CIT V EVERGREEN PUBLICATIONS PRIVATE LIMITED [ITA NO. 237/ASR/2011 & ITA NO. 256/ASR/2011 ] ( ASSESSMENT YEAR: 200 8 - 09) BE DETERMINED IN THE YEAR IN WHICH THE NEW INDUSTRIAL UNDERTAKING IS ESTABLISHED. ALTHOUGH THE DEDUCTION UNDER SECTION 80 - I OF THE ACT IS AVAILABLE FOR THE ASSESSMENT YEARS SUCCEEDING THE INITIAL ASSESSMENT YEAR, THE CONDITIONS FOR AVAILING THE BENEFIT ARE INEXTRICABLY LINKED WITH THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR IN WHICH THE NEW UNDERTAKING WAS FORMED. IN SUCH CIRCUMSTANCES, IT WOULD NOT BE POSSIBLE FOR AN ASSESSING OFFICER TO REJECT THE CLAIM OF AN ASSESSEE FOR DEDUCTION UNDER SECTION 80 - I OF THE ACT ON THE GROUND THAT TH E INDUSTRIAL UNDERTAKING IN RESPECT OF WHICH DEDUCTION IS CLAIMED DID NOT FULFILL THE CONDITIONS AS SPECIFIED IN SECTION 80 - I(2) OF THE ACT, WITHOUT UNDERMINING THE BASIS ON WHICH THE DEDUCTION WAS GRANTED T O THE ASSESSEE IN THE INITIAL ASSESSMENT YEAR. THIS IN OUR VIEW WOULD NOT BE PERMISSIBLE UNLESS THE PAST ASSESSMENTS ARE ALSO DISTURBED. 77. THE ASSESSING OFFICERS OVER A PERIOD OF THREE YEARS BEING ASSESSMENT YEARS 1988 - 89, 1989 - 1990 AND 1990 - 1991 HAVE CO NSISTENTLY ACCEPTED THE CLAIM OF THE ASSESSEE FOR DEDUCTION UNDER 80 - I OF THE ACT AND IT WOULD NOT BE OPEN FOR THE ASSESSING OFFICER TO DENY THE DEDUCTION UNDER SECTION 80 - I OF THE ACT ON THE GROUND OF NON FULFILLMENT OF THE CONDITIONS UNDER 80 - I(2) OF THE ACT WITHOUT DISTURBING THE ASSESSMENT FOR THE ASSESSMENT YEARS RELEVANT TO THE PREVIOUS YEAR IN WHICH THE UNIT NOS.2 & 3 WERE ESTABLISHED. 20 . IN THIS CASE, IT IS NOT AVAILABLE ON RECORD WHETHER THE ASSESSMEN T OF THE APPELLANT HAS BEEN PASSED UNDER SECTION 143(3) OR UNDER SUMMARY MANNER. BE THAT AS IT MAY. AO HAS ALREADY DISTURBED THE ASSESSMENT FOR AY 2006 - 07, 2008 - 09 AND 2009 - 10 FOR MAKING DISALLOWANCE BUT HAS CHOSEN NOT TO TAKE ANY RECOURSE FOR AY 2002 - 03 TO 2005 - 06 AND 2007 - 08. IN THIS CASE, INITIAL YEAR OF DEDUCTION IS AY 2002 - 03 IN WHICH ADMITTEDLY, THE DEDUCTION HAS BEEN ALLOWED TO THE ASSESSEE U/S 143(1) AND REVENUE HAS ACCEPTED THE RETURN OF INCOME AS IT IS. THIS ITSELF SHOWS THAT DESPITE ENOUG H WEAPONS IN THE ARMOR OF THE REVENUE PROVIDED IN THE ACT SUCH AS SECTION 143 (2), 147 AND 263 ETC. NONE OF THEM HA VE BE E N USED. PAGE 20 OF 28 EVERGREEN PUBLICATIO NS PRIVATE LIMITED V ADDL. CIT & ADDL CIT V EVERGREEN PUBLICATIONS PRIVATE LIMITED [ITA NO. 237/ASR/2011 & ITA NO. 256/ASR/2011 ] ( ASSESSMENT YEAR: 200 8 - 09) 21 . IN THE CASE OF THE ASSESSEE, THE UNIT HAS STARTED IN MARCH 2002 AND UP TO ASSESSMENT YEAR 2009 - 10 , DEDUCTION HAS BEEN DENIED IN ASSESSMENT YEAR 2006 - 07 , 2008 - 09 AND 2008 - 09 .F OR ALL OTHER YEAR S, ADMITTEDLY, THE ASSESSEE HAS BEEN GRANTED DEDUCTION OR THE REVENUE ACCEPTS RETURN OF INCOME AS IT IS. THIS FACT HAS NOT BEEN DIS PUTED BY THE LD DR THEREFORE IF THE DEDUCTION IS NOT DISTURBED IN THE FIRST YEAR OR YEARS OF DEDUCTION FOR WHICH THE ASSESSEE IS ELIGIBLE RESPECTFULLY FOLLOWING THE DECISION OF THE DELHI HIGH COURT WE ARE OF THE VIEW THAT NOW REVENUE CANNOT DENY THE DEDUCTION U/S 80IB TO THE ASSESSEE FOR AY 2008 - 2009 AND 2009 - 10 . 22 . THE LD. AR OF THE ASSESSEE HAS SUBMITTED ALTERNATIVELY THAT THE ASSESSEE SHOULD BE GRANTED A PROPORTIONATE DEDUCTION AND HE IS READY TO FOREGO THE DEDUCTION WHERE THE PRINTING WORK HAS BEEN DONE BY SOME OTHER PARTIES. THIS ARGUME NT OF THE ASSESSEE WAS A N ALTERNATIVE ARGUMENT. WE HAVE CAREFULLY CONSIDERED THIS ISSUE . THIS ARGUMENT NEEDS TO BE CONSIDERED IN THE EVENT WE HOLD THAT THE DEDUCTION U/S 80IB IS NOT AVAILABLE ON PORTION OF PROFIT, WHICH IS RELATED TO THE PRINTING WORK DONE BY JOB WORKER. WE ARE OF THE VIEW THAT ON THE FACTS AND CIRCUMSTANCES OF THIS CASE, ASSESSEE HAS GOT JOB WORK DONE FROM AN OUTSIDE CONTRACTOR OF PRINTING WHICH IS A VERY SMALL PART OF THE MANUFACTURING PROCESS OF PUBLISHING OF BOOKS. FOR THIS HONBLE DELHI HIGH COURT HAS HELD IN PAGE 21 OF 28 EVERGREEN PUBLICATIO NS PRIVATE LIMITED V ADDL. CIT & ADDL CIT V EVERGREEN PUBLICATIONS PRIVATE LIMITED [ITA NO. 237/ASR/2011 & ITA NO. 256/ASR/2011 ] ( ASSESSMENT YEAR: 200 8 - 09) THE CASE OF CIT VS. DELHI PRESS PATRA PRAKASHAN LTD (SUPRA), WHEREIN THE HIGH COURT REJECTED THE CONTENTION OF THE REVENUE THAT INDUSTRIAL UNDERTAKING WHICH UNDERTAKES JOB WORK WOULD NOT BE ENTITLED TO CLAIM DEDUCTION U/S 80IB OF THE ACT. IT WAS HELD CARRYING ON JOB WORK AS ONLY A METHOD OF STRUCTURING BUSINESS. A TAXPAYEREITHER MAY CHOOSE TO PURCHASE RAW MATERIAL AND UTILIZE THE SAME CARRYING THE INDUSTRIAL ACTIVITY OR MAY GET THIS DONE FROM OUTSIDER. THIS ACTIVITY IS SPECIFIED U/S 80IB FOR GRANTING DEDUCTION . MERELY BECAUSE A PART OF THE PROCESS IS OUTSOURCED , BENEFIT CANNOT BE CURTAILED FOR DEDUCTION U/S 80IB OF THE ACT . ON P ERUSAL O F THIS DECISION, IT IS APPARENT THAT HONBLE DELHI HIGH COURT HAS GONE ONE - STEP FORWARD AND EVEN GR ANTED DEDUCTION TO THE JOB WORKERS. HERE IN THE CASE OF THE ASSESSEE IT IS OWNER OF T HE INDUSTRIAL UNDERTAKING AND WHO GETS SOME PART OF MANUFACTURING PROCESS SUCH AS PRINTING FROM THIRD PARTY AND THEN PUBLISHES A BOOK . ASSESSEE DOES NOT PURCHASE THE BOOK AS A WHOLE BUT IS ONLY GETTING PRINTING PROCESS DONE FROM OUTSIDER. THEREFORE, IN SIMPLE TERMS FOR MANUFACTURING OF THE BOOKS THE ASSESSEE IS GETTING SOME PROCESS OUT OF THE WHOLE PROCESS OUTSOURCED BY ITS CONTRACTOR. THEREFORE, IN THIS FACT RESPECTFULLY FOLLOWING THE DECISION OF THE DELHI HIGH COURT WE CANNOT RESTRICT THE DEDUCTION AS PER ALTERNATIVE ARGUMENT OF THE ASSESSEE. OUR VIEW IS THAT THE ASSESSEE SHOULD GET THE DEDUCTION FOR WHICH HE IS ELIGIBLE PAGE 22 OF 28 EVERGREEN PUBLICATIO NS PRIVATE LIMITED V ADDL. CIT & ADDL CIT V EVERGREEN PUBLICATIONS PRIVATE LIMITED [ITA NO. 237/ASR/2011 & ITA NO. 256/ASR/2011 ] ( ASSESSMENT YEAR: 200 8 - 09) ACCORDING TO THE LAW. FU RTHERMORE, REGARDING THE ALLOCATION OF ELECTRICITY CHARGES, WORKERS ETC. THE ASSESSEE HAS DEMONSTRATED BY PRODUCING THE RELATIVE DOCUMENTS AND THE LEASE AGREEMENT, WHICH SHOWS THAT THE ELECTRICITY EXPENSES ARE TO BE BORNE BY THE LESSOR AND NOT BY THE ASSES SEE AND THEREFORE THE REASONS GIVEN BY THE AO, ARE NOT TENABLE. 23 . IN VIEW OF THE ABOVE THE CBDT CIRCULAR , DECISION OF VARIOUS HIGHCOURTS WHERE IN IT IS HELED THAT BOOK PUBLISHING IS A MANUFACTURING ACTIVITY, WE ARE NOT INCLINED TO FOLLOW THE DECISION OF ITAT AMRITSAR BENCH IN THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2006 - 07 AND NOW WE HOLD THAT ASSESSEE , A PUBLISHER OF BOOKS IS A MANUFACTURER AND THE BOOK PU BLISHING IS A MANUFACTURING ACTIVITY ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT AND IF THE PART OF THE MANUFACTURING PROCESS IS OUTSOURCED ASSESSEE CANNOT LOSE THE CLAIM OF DEDUCTION AS COST OF THE SAME IS ALREADY DEBITED IN THE PROFIT OF ELIGIBLE UNDER TAKING . HENCE, WE REVERSE THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AND DIRECT TO ALLOW THE DEDUCTION OF RS.36 , 21 , 708/ - U/S 80IB OF THE ACT TO THE ASSESSEE HOLDING THAT BOOK - PUBLISHING ACTIVITY IS A MANUFACTURING ACTIVITY ELIGIBLE FOR DEDUCTION UNDER THAT SECTION. ACCORDINGLY, GROUND NO.1 OF APPEAL IS ALLOWED. 24 . GROUND NO.2 IS AGAINST THE ADDITION OF RS.5 LACS ON ACCOUNT OF NON - MAINTENANCE OF STOCK DETAILS. THIS ADDITION HAS BEEN MADE BY PAGE 23 OF 28 EVERGREEN PUBLICATIO NS PRIVATE LIMITED V ADDL. CIT & ADDL CIT V EVERGREEN PUBLICATIONS PRIVATE LIMITED [ITA NO. 237/ASR/2011 & ITA NO. 256/ASR/2011 ] ( ASSESSMENT YEAR: 200 8 - 09) THE AO FOR THE REASONS THAT NOSTOCK REGISTER HA S BEEN MAINTAINED AS WELL AS THE BASIS OF VALUATION IN RESPECT OF OPENING AND CLOSING STOCK IS NOT AVAILABLE. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THIS ADDITION. BEFORE US, THE LD AR SUB MITTED THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE DULLY AUDITED UNDER THE COMPANIES ACT AS WELL AS UNDER THE INCOME TAX ACT U/S 44AB AND SECTION 80 IB . IT WAS SUBMITTED THAT THERE IS NO DEFECT POINTED OUT BY AO IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE. FURTHER, THE CLOSING STOCK HAS BEEN CONSISTENTLY VALUED ACCORDING TO THE METHOD OF ACCOUNTING AND VALUATION METHOD ADOPTED BY THE ASSESSEE. IN NUTSHELL, HE SUBMITTED THAT THIS DISALLOWANCE MIGHT BE DELETED. 25 . LD. AR RELIED ON THE ORDER OF THE AO AS WELL AS LEARNED COMMISSIONER OF INCOME TAX (APPEALS). 26 . WE HAVE CAREFULLY HEARD THE RIVAL CONTENTION. THE ASSESSEE IS A PRIVATE LTD COMPANY WHICH GET S ITS BOOKS OF ACCOUNT A UDITED AND SAME WERE ALSO PRODUCED BEFORE THE AO DURING THE COURSE OF ASSESSMENT PROCEEDING . O N READING OF THE ASSESSMENT ORDER, WE COULD NOT FIND THAT ANY DEFECT HAS BEEN POINTED OUT BY THE AO IN THE BOOKS OF ACCOUNTS OR DETAILS SUBMITTED. IT IS ALSO NOT THE CASE OF THE AO THAT ALL THE DETAILS ASKED FOR HAS NOT BEEN FURNISHED. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ALSO CONFIRMED THE ADDITION HOLDING THAT IT IS SMALL ADDITION OF 0.15% TO PAGE 24 OF 28 EVERGREEN PUBLICATIO NS PRIVATE LIMITED V ADDL. CIT & ADDL CIT V EVERGREEN PUBLICATIONS PRIVATE LIMITED [ITA NO. 237/ASR/2011 & ITA NO. 256/ASR/2011 ] ( ASSESSMENT YEAR: 200 8 - 09) THE GROSS PROFIT OF COMPANY. WE DO NOT SUBSCRIBE TO THAT VIEW. IN THE CASE OF THE ASSESSEE THE GROSS PROFIT RATE FOR THE LAST YEAR IS 26.1% COMPARED TO 26.57 % IN THIS YEAR. THEREFORE, THE ASSESSEE HAS SHOWN PROGRESSIVE GROSS PROFIT. IN THE AUDIT REPORT PRODUCED BEFORE US, IT HAS BEEN CERTIFIED BY THE AUDITOR THAT ASSESSEE HAS VALUED CLOSING STOCK AS PER T HE VALUATION METHOD CONSISTENTLY FOLLOWED. IT IS ALSO MENTIONED IN THE SAME REPORT THAT PHYSICAL VERIFICATION OF THE INVENTORY HAS BEEN CARRIED OUT AND NO MATERIAL DISCREPANCY IS FOUND . AO OR LD. DR HAS NOT DISPUTED THIS FACT . FURTHER, IF THE ASSESSEE HAS NOT MAINTAIN ED THE DETAILS OF THE CLOSING STOCK THEN AO SHOULD HAVE MADE A DEFINITE ASCERTAINABLE ADDITIONS / DISALLOWANCE AND NOT ADHOC ADDITION/DISALLOWANCES . THE MANNER OF MAKING ADDITIONSON ADHOC BASIS IS A SHORT CUT ADOPTED BY AO, WHICH CANNOT BE APPROV ED MERELY BECAUSE STOCK REGISTER IS NOT AVAILABLE IN ABSENCE OF ANY LATENT, PATENT AND GLARING DEFECTS IN THE BOOKS OF ACCOUNT OR IN THE DETAILS PRODUCED BY THE ASSESSEE . IN SIMILAR CIRCUMSTANCES HONOURABLE DELHI HIGH COURT HAS HELD IN CASE OF CIT V JACKS ON HOUSE [ 195 TAXMAN 385 ] THAT WHERE BOOKS OF ACCOUNT OF ASSESSEE WERE DULY AUDITED, ASSESSING OFFICER HAD NOT POINTED OUT ANY SPECIFIC DEFECT OR DISCREPANCY THEREIN AND INCOME OF ASSESSEE WAS CLEARLY DISCERNIBLE FROM ACCOUNTING METHOD FOLLOWED BY IT, ACCOUNTS OF ASSESSEE COULD NO T BE SAID TO BE DEFECTIVE OR INCOMPLETE, MERELY BECAUSE STOCK PAGE 25 OF 28 EVERGREEN PUBLICATIO NS PRIVATE LIMITED V ADDL. CIT & ADDL CIT V EVERGREEN PUBLICATIONS PRIVATE LIMITED [ITA NO. 237/ASR/2011 & ITA NO. 256/ASR/2011 ] ( ASSESSMENT YEAR: 200 8 - 09) REGISTER WAS NOT MAINTAINED. IN THE CASE OF THE ASSESSEE BILLS, SUPPORTED PURCHASES, SALES, AND ACCOUNTS ARE AUDITED, NONE OF THE EXPENSES WAS FOUND TO BE INFLATED OR UNSUPPORTED. FURTHER ASSESS EE IS IN THE BUSINESS OF PUBLICATION WHERE LOOKING TO THE SIZE AND NATURE OF THE BUSINESS IT MAY NOT BE POSSIBLE TO MAINTAIN MINUTE QUANTITY DETAILS OF THE PAPERS , INKS AND OTHER COLOUR MATERIAL ETC. IN VIEW OF THIS WE DELETE THIS ADDITION OF RS.5 LAC MA DE BY AO AND CONFIRMED BY THE CIT (A) , REVERSE THE ORDER OF THE LEARNED COMMISSIONER OF INC OME - TAX (APPEALS) ON THIS COUNT AND ALLOW GROUND NO 2 OF THE APPEAL. 27 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. 28 . NOW WE COME TO THE APPEAL OF REVENUE WHICH IS AGAIN ST DELETION OF DISALLOWANCE U/S 40A(IA) OF THE ACT OF RS.6 , 84 , 56 , 374/ - . THE AO HAS MADE THE ADDITION BECAUSE OF THE REASON THAT THE ASSESSEE HAS INCURRED EXPENSES OF JOB WORK CHARGES ON WHICH ACCORDING TO HIM TAX SHOULD HAVE BEEN DEDUCTED U/S 19 4 C OF THE ACT AND ADMITTEDLY, NO SUCH TAX IS DEDUCTED. P AYMENT OF RS.6.84 CRORES HAVE BEEN MADE TO CONTRACTOR FOR WHICH THE MATERIAL HAS NOT BEEN GIVEN BY THE ASSESSEE BUT IT IS PRINTED ON MATERIAL OF THE CONTRACTOR ONLY. THE MAIN REASON FOR DISALLOWANCE THAT ACCORDING TO CIRCULAR NO.715 DATED 08.08.1995 SUPPLY OF PRINTING MATERIALS AS PER PRESCRIBED SPECIFICATION IS COVERED U/S 194C OF THE ACT AND FURTHER THE WORK HAS BEEN DONE UNDER THE EXCLUSIVE SUPERVISION PAGE 26 OF 28 EVERGREEN PUBLICATIO NS PRIVATE LIMITED V ADDL. CIT & ADDL CIT V EVERGREEN PUBLICATIONS PRIVATE LIMITED [ITA NO. 237/ASR/2011 & ITA NO. 256/ASR/2011 ] ( ASSESSMENT YEAR: 200 8 - 09) AND CONTROL OF THE ASSESSEE.AGGRIEVED BY THIS THE ASSESSEE CARRIED THE MATTER BEFORE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) WHO DELETED THE ADDITION. ON APPEAL BEFORE ITAT , CO - ORDINATE BENCH IN THE CASE OF ASSESSEE HAS DEALT WITH THIS ISS UE FOR ASSESSMENT YEAR 2006 - 07 .I T WAS ADMITTED BY BOTH THE PARTIES THAT THERE IS NO CHANGE IN THE FACTS OF THE CASE. THE COORDINATE BENC H IN PARA 6.2 OF THAT DECISION HAS HELD AS UNDER: - 6.2 WE HAVE GONE THROUGH THE RELEVANT PROVISIONS OF SECTION 194C ARI D, THE PROVISIONS OF SECTION 40A(IA) OF THE ACT, RIVAL SUBMISSIONS OF THE PARTIES, RELEVANT RECORDS INCLUDING ASSESSMENT ORDER AND IMPUGNED APPELLATE ORDER. THE ID. CIT ( A) HAS DISCUSSED THE CBDT CIRCULAR NO. 715 DATED 08.08.1995 AND CIRCULAR NO.681 DATED 08.03.1994. SIMILARLY CIRCULAR NO.13 OF 2006 DATED 13.11.2006 HAS ALSO BEEN APPRECIATED BY THE LD. CIT ( A) IN THE CONTEXT OF PROVISIONS OF SECTION 194C OF THE ACT. THE AS SESSEE HAS ENTERED INTO TWO DIFFERENT ARRANGEMENTS WITH ITS SISTER CONCERN. ONE SUCH CONTRACT PERTAIN TO SUPPLY OF BOOKS AS PER TEXT PROVIDED AND THE OTHER IS FOR PROCESSING OF TEXT PREPARATION OF PLATES PRINTING OF BOOKS PASTING AND BINDING AS PER THE QUA NTITY AND RAW MATERIAL PROVIDED. THE FIRST TYPE OF ARRANGEMENT WHERE THE SUPPLIER PROCURES RAW MATERIAL ITSELF IS OF SALE AND NOT OF WORKS CONTRACT. THE LD : CIT ( A) HAS APPRECIATED SUCH FACTUAL POSITION IN PARA 6.4. OF THE IMPUGNED APPELLATE ORDER IN FACT SECTION 194C OF THE ACT, HAS BEEN AMENDED BY THE FINANCE ACT 2009 AND THIS AMENDED DEFINITION IS IN LINE WITH THE CLARIFICATION IN CIRCULAR NO.681 DATED 8.3.1994. THE - LD. CIT ( A) IN PARAS 6.6 & 6.7 HAS GIVEN CLEAR FINDINGS ON THE ISSUE IN QUESTION. CONSEQU ENTLY WE ARE IN AGREEMENT WITH THE CONCLUDED FINDINGS OF THE LDCIT ( A) AS CONTAINED IN PARAS 6.6. & 6.7 ON THE ISSUE INQUESTION . IT IS FURTHER ADDED THAT WE DO NOT FIND ANY NEW GROUND OR ARGUMENT TO SUPPLEMENT THE FINDINGS OF THE CIT ( A). HENCE, WE RELY ON THE FINDINGS OFTHE CIT ( A) AS QUOTED AND EXTRACTED ABOVE, ON THE ISSUE, IN QUESTION. IN THIS CONTEXT T HE DECISION OF THE HON'BLE SUPREMECOURT, IN THE CASE OF CIT VS: K.Y. PILLIAH AND SONS, 63 ITR 411, IS FULLY APPLICABLE, WHEREIN IT WAS HELD THAT WHERE TH E .TRIBUNAL FU LLY AGREES WITH THE VIEW EXPRESSED BY THE. APPELLATE ASSISTANT COMMISSIONER, REASONS NEED NOT BE REPEATED. 6. 3. HAVING REGARD TO THE FACTS AND CIRCUMSTANCES, OF THE CASE AND THE DETAILED DISCUSSIONS AND WELL REASONED FINDINGS GIVEN BY THE LD . CIT ( A ) WE ARE OF THE FIRM OPINION THAT THE LD. CIT ( A), WAS JUSTIFIED IN DELETING THE ADDITION IN DISPUTE. HENCE WE DO NOT FIND ANY INFIRMITY IN THE FINDINGS OF THE LD. GIT ( A) AND THE SAME ARE UPHELD. ACCORDINGLY, THIS GROUND OF APPEAL REVENUEIS DISMIS SED . PAGE 27 OF 28 EVERGREEN PUBLICATIO NS PRIVATE LIMITED V ADDL. CIT & ADDL CIT V EVERGREEN PUBLICATIONS PRIVATE LIMITED [ITA NO. 237/ASR/2011 & ITA NO. 256/ASR/2011 ] ( ASSESSMENT YEAR: 200 8 - 09) 29 . LD. DR COULD NOT POINT OUT ANY DEVELOP MENT AFTER THE DECISION OF ITAT. W E HAVE ALSO PERUSED THE REASON GIVEN BY THE COORDINATE BENCH AND WE F IND THAT THE FACTS OF BOTH THE YEARS ARE IDENTICAL. FURTHER, IT WAS ALSO STATED THAT THIS DECISION HAS NOT BEEN CONTESTED BY REVENUE AT HIGHER FORUMS. THEREFORE, RESPECTFULLY FOLLOWING DECISION OF THE COORDINATE BENCH WE CONFIRM THE ORDER OF CIT (A) DELETING DISALLOWANCE U/S 40 (A ) ( IA ) WHEN PRINTED PUBLISHING MATERIAL IS TO BE SUPPLIED BY THE CONTRACTOR. ACCORDING TO US IT IS CONTRACT OR SALE OF GOODS AND NOT CONTRACT FORWORK . 30 . IN THE RESULT, THE APPEAL OF THE REVENUE FOR AY 2008 - 09 IS DISMISSED. 31 . NOW WE PROCEED TO DECIDE APPEAL OF THE ASSESSEE FOR AY 2009 - 10. 32 . GROUND NO ONE OF THE APPEAL IS AGAINST THE CONFIRMATION OF DISALLOWANCE OF DEDUCTION U/S 80IB OF THE ACT OF RS. 1,31,98,452/ - . FACTS OF THIS YEAR ARE IDENTICAL TO THE FACTS OF APPEAL GROUND 1 OF AY 2008 - 09, WHICH IS CONFIRMED BY BOTH THE PARTIES. AS WE HAVE ALREADY HELD THAT ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT IN AY 2008 - 09, FOLLOWING OUR THAT REASONING AND THE CONSEQUENT DECISION, WE ALSO HOLD THAT ASSESSEE COMPANY IS ELIGIBLE FOR DEDUCTI ON U/S 80IB OF THE ACT FOR THIS YEAR. HENCE REVERSING THE ORDER OF CIT (A), WE ALLOW GROUND NO ONE OF THE APPEAL ACCORDINGLY. PAGE 28 OF 28 EVERGREEN PUBLICATIO NS PRIVATE LIMITED V ADDL. CIT & ADDL CIT V EVERGREEN PUBLICATIONS PRIVATE LIMITED [ITA NO. 237/ASR/2011 & ITA NO. 256/ASR/2011 ] ( ASSESSMENT YEAR: 200 8 - 09) 33 . GROU ND NO 2 OF APPEAL IS AGAINST THE ADDITION OF RS 5,00,000/ - FACTS OF THIS YEAR ARE IDENTICAL TO THE FACTS OF APPEAL GROUND NO 2 OF AY 2008 - 09, WHICH IS CONFIRMED BY BOTH THE PARTIES. AS WE HAVE ALREADY DELETED THE ADDITION OF RS 5,00,000/ - IN ABSENCE OF ANY DEFECTS IN THE BOOKS OF ACCOUNTS , ON THE SAME REASONING AND CONSEQUENT DECISION , WE ALSO DELETE ADDITION OF RS 5, 00,000/ - IN THIS YEAR TOO AND REVERSE THE ORDER OF LD. CIT (A). HENCE, WE ALLOW GROUND NO TWO OF THE APPEAL ACCORDINGLY. 34 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR AY 2009 - 10. ORDER PRONOUNCED IN THE OPEN COURT ON 07 .02.2016. - S D / - - S D / - ( A.T.VARKEY ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 0 7 /02/2016 A K KEOT COPY FORWARDED TO 1 . APPLICANT 2 . RESPONDENT 3 . CIT 4 . CIT (A) 5 . DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI