The ITO, Ward-2(4), Surat V. M/s. Globstar Marine Services, Surat

ITA 2620/AHD/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 67608 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 12-08-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 21-10-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: J P JANGID
• Assessee Lawyers: S N SOPARKAR
• Keywords: Additional evidence
• Section: 143(3); 10AA

Judgement Text

, , , , C, IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, C BENCH . .. . . .. . , !' !' !' !', , , , #$ %&'( #$ %&'( #$ %&'( #$ %&'(, , , , )* + ) ' )* + ) ' )* + ) ' )* + ) ' BEFORE S/SHRI G.C. GUPTA, VICE-PRESIDENT AND ANIL CHATURVEDI, ACCOUNTANT MEMBER) ITA NO.2620/AHD/2011 [ASSTT.YEAR : 2008-2009] AND ITA NO.1896/AHD/2012 [ASSTT.YEAR : 2009-2010] ITO, WARD-2(4) SURAT. /VS. M/S.GLOBSTAR MARINE SERVICES PLOT NO.181, SURAT SPECIAL ECONOMIC ZONE SACHIN, DIST. SURAT. PAN : AAGFG 4714 M ( (( (-. -. -. -. / APPELLANT) ( (( (/0-. /0-. /0-. /0-. / RESPONDENT) + 1 2 )/ REVENUE BY : SHRI J.P. JANGID, SR.DR 4& 1 2 )/ ASSESSEE BY : SHRI S.N.SOPARKAR 5 1 &(*/ DATE OF HEARING : 12 TH AUGUST, 2013 678 1 &(*/ DATE OF PRONOUNCEMENT : 23-08-2013 )9 / O R D E R PER ANIL CHATURVEDI, ACCOUNTANT MEMBER: THESE ARE TWO APPEALS BY THE REVENUE FOR THE ASSESSMENT YEARS 200 8-2009 AND 2009-2010 AGAINST THE ORDERS OF THE CIT(A)-II, SURAT DATED 5 .8.2011 AND 28.6.2012 RESPECTIVELY. 2. AT THE OUTSET, BOTH THE PARTIES BEFORE US SUBMIT TED THAT FACTS ARE IDENTICAL IN BOTH THE APPEALS, AND THEREFORE, SUBMI SSIONS MADE IN ONE APPEAL ARE EQUALLY APPLICABLE TO OTHER APPEAL, AND MAY BE ADJUDICATED ACCORDINGLY. ITA NO.2620/AHD/2011 AND ITA NO.1896/AHD/2012 -2- IN VIEW OF THIS SUBMISSION OF THE PARTIES, WE FIRST TAKE UP ITA NO.2620/AHD/2010 FOR A.Y.2008-2009. 3. THE ASSESSEE IS A FIRM ENGAGED IN THE BUSINESS O F RECONDITIONING OF USED SHIP MACHINERY AND PARTS. THE ASSESSEE FILED ITS RETURN OF INCOME FOR A.Y.2008-2009 ON 29.9.2008 OF RS.NIL AFTER CLAIMING EXEMPTION UNDER SECTION 10AA OF RS.50,23,000/-. THE CASE WAS SELEC TED SCRUTINY, AND THEREAFTER THE ASSESSMENT WAS FRAMED UNDER SECTION 143(3) OF THE I.T.ACT VIDE ORDER DATED 15.12.2010 AND THE TOTAL INCOME WA S DETERMINED AT RS.50,23,000/-. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A). CIT(A) VIDE HIS ORDER DA TED 5.8.2011 ALLOWED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE AFORE SAID ORDER OF THE CIT(A), THE REVENUE IS IN APPEAL BEFORE US AND RAISED THE F OLLOWING EFFECTIVE GROUND. 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 50,23,000/- ON ACCOUNT OF DISALLOWANCE OF EXEMPTION CLAIMED U/S.10 AA OF THE I.T.ACT WITHOUT APPRECIATING THE FACT THAT THE ASSE SSEE FAILED TO SUBSTANTIATE ITS CLAIM THAT THE ACTIVITIES CARRIED OUT BY IT FALL IN THE DEFINITION OF MANUFACTURING MENTIONED IN SUB-SECT ION (1) OF SECTION 18(R) OF SEZ ACT, 2005. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO NOTED THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS RECONDITIONING OF USED SHIP MACHINERY AND PARTS , AND THE ASSESSEE HAD ALSO CLAIMED DEDUC TION UNDER SECTION 10AA OF THE ACT TO THE TUNE OF RS.50,23,000/-. THE AO W AS OF THE VIEW THAT THE BASIC ELIGIBILITY FOR CLAIMING THE DEDUCTION UNDER SECTION 10AA OF THE ACT WAS THAT THE ASSESSEE SHOULD HAVE BEEN ENGAGED IN B USINESS OF MANUFACTURING OR PRODUCTION OR PROCESSING OF SUCH A RTICLES OR THINGS OR SERVICES IN SUCH FREE TRADE ZONE OR EXPORT PROCESSI NG ZONE AS PRESCRIBED IN THE SECTION. THE ASSESSEE WAS, THEREFORE, ASKED TO SUBSTANTIATE ITS CLAIM FOR DEDUCTION UNDER SECTION 10AA. AFTER CONSIDERING TH E SUBMISSIONS MADE BY ITA NO.2620/AHD/2011 AND ITA NO.1896/AHD/2012 -3- THE ASSESSEE, THE AO CONCLUDED THAT THE ASSESSEE WA S NOT ENGAGED IN MANUFACTURING ACTIVITIES AND PRODUCING ANY ARTICLES . HE FURTHER OBSERVED THAT NO NEW PRODUCT WITH DISTINCTIVE NAME, CHARACTE R OR USE HAS COME INTO EXISTENCE FROM THE ACTIVITIES CARRIED OUT BY THE AS SESSEE. HE FURTHER NOTED THAT THE BUSINESS IN SPECIAL ECONOMIC ZONE (SEZ) CO MMENCED W.E.F. 8 TH JAN, 2007, HOWEVER, THE ASSESSEE HAD SHOWN THE OPEN ING STOCK OF RS.12,61,155 PRIOR TO THAT DATE. HE THEREFORE CONC LUDED THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS ACTIVITIES PRIOR TO 1.4 .2007, AND THEREFORE, THE BUSINESS OF THE ASSESSEE AT SURAT WAS NOT A NEW ONE AND SAME WAS SHIFTED FROM MUMBAI. HE ACCORDINGLY CONCLUDED THAT THE ASS ESSEE WAS NOT ENTITLED FOR EXEMPTION UNDER SECTION 10AA, AS HE DID NOT FUL FILL THE CONDITIONS PRESCRIBED, AND ACCORDINGLY DISALLOWED THE CLAIM UN DER SECTION 10AA OF THE ACT OF RS.50,23,000/-. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A). THE CIT(A) A FTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE ALLOWED THE APPEAL OF T HE ASSESSEE BY HOLDING AS UNDER: '5.5 THE ISSUE, THEREFORE, LEFT TO BE DECIDED IS WH ETHER THE TERM RECONDITIONING OF USED SHIP MACHINERY AND PARTS CON STITUTES MANUFACTURE OF ARTICLE OR THING. IN THIS REGARD, I FIND THAT THE DEVELOPMENT COMMISSIONER, SEZ, SURAT VIDE LETTER DA TED 06.02.2006 RECOGNIZES THAT THE ACTIVITY OF 'RECONDITIONING OF SHIP MACHINERY AND PARTS LIKE ENGINE PARTS, AUXILIARY POWER GENERATOR, TURBO CHARGERS, OIL PURIFIERS, SEA WATER PUMPS, CARGO PUMPS, BOILER FEED PUMPS, CRANE HYDRAULIC PARTS, LARGE CAPACITY AIR COMPRESSO RS, ETC.', IS MANUFACTURING ACTIVITY IN THE SEZ AND ELIGIBILITY C ERTIFICATE DATED 03.04.2006 ISSUED BY THE ASSTT DEVELOPMENT COMMISSI ONER, SURAT ALSO STATES THAT M/S. GLOBSTAR MARINE SERVICES WHIC H HAS BEEN ALLOTTED PLOT NO.181, IN SURAT SEZ, SACHIN IS ELIGI BLE FOR TAX EXEMPTION AS PER THE GOVERNMENT NOTIFICATION, FINAN CE DEPARTMENT NO.(GHN-17) GST-2003/(S.49)-(375)-TH DATED 27TH MAY 2003. THE ASSESSING OFFICER HAS DISMISSED THESE DOCUMENTS AND HELD THAT RECONDITIONING OF USED SHIPS MACHINERIES AND PARTS IS NOT MANUFACTURING OR PRODUCTION, AS IT DID NOT FALL IN THE DEFINITION OF 'MANUFACTURING' MENTIONED IN SUB SECTION (1) OF SEC TION 18(R) OF SEZ ACT, 2005 AND THE APPELLANT IS APPARENTLY INVOLVED IN TRADING OF USED SHIPS MACHINERIES OR PARTS. THE ASSESSING OFFICER H AS HOWEVER, NOT ITA NO.2620/AHD/2011 AND ITA NO.1896/AHD/2012 -4- SOUGHT ANY CLARIFICATION AS TO WHETHER THE ACTIVITY CARRIED ON BY THE APPELLANT IS MANUFACTURING UNDER THE SEZ ACT, FROM THE DEVELOPMENT COMMISSIONER, SEZ, SURAT IRRESPECTIVE O F THE SAME, THE MEANING OF 'RECONDITION' IN THE OXFORD DICTIONARY I S TO BRING BACK TO A GOOD CONDITION. RENOVATE. THE APPELLANT'S SUBMISS ION IS THAT RECONDITIONING IS SAME AS REPAIR OR REMAKING, WHICH ARE INCLUDED IN THE DEFINITION OF MANUFACTURE UNDER SUB SECTION (1) OF THE SECTION 18(R) OF SEZ ACT, 2005. THE MEANING OF THE WORD 'RE MAKE' IN THE OXFORD DICTIONARY IS TO MAKE AGAIN OR DIFFERENTLY. THE APPELLANT HAS VIDE WRITTEN SUBMISSION DATED 20.05.2011 FURNISHED LIST OF MACHINERY REQUIRED, AS ALSO THE LIST OF USED MACHINERY PARTS WHICH ARE EXPORTED AFTER THEY ARE RECONDITIONED. A PERUSAL OF THE SAME AS WELL AS THE SHIPPING BILLS OF GOODS EXPORTED BY THE APPELLANT S HOW THAT THE APPELLANT HAS REMADE THE USED SHIPS MACHINERIES PAR TS, I.E. IT HAS BROUGHT ALL MACHINERIES WHICH WERE NOT IN A WORKING CONDITION TO A GOOD CONDITION AND EXPORTED ITEM IN OTHER WORDS, IT HAS RESORTED THE USED MACHINERY PARTS TO A GOOD CONDITION OR IN WORK ING CONDITION, WITHIN THE MEANING OF THE WORD 'REPAIR' 5. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENU E IS IN APPEAL BEFORE US. 6. BEFORE US, THE LEARNED DR SUBMITTED THAT THE ASS ESSEE WAS NOT ENGAGED IN THE BUSINESS OF MANUFACTURING, BUT WAS O NLY ENGAGED IN THE BUSINESS OF TRADING, AND FURTHER THE EXISTING BUSIN ESS WAS SHIFTED FROM MUMBAI TO SURAT. HE POINTED OUT TO THE PROFIT & LOSS ACCOUNT AT PAGE NO.14 OF THE PAPER BOOK, AND FROM IT, HE POINTED TO THE FACT THAT THE NATURE OF EXPENDITURE DOES NOT SUGGEST ANY MANUFACTURING A CTIVITIES CARRIED OUT BY THE ASSESSEE, MORE SO, IN VIEW OF MEAGRE ELECTRICIT Y EXPENSES OF RS.49,000/- , CONSUMABLE STORES OF RS.12,000/- AND RECONDITIONI NG EXPENSES OF RS.2,22,517/-. HE FURTHER POINTED OUT TO THE FIXED ASSETS SCHEDULE AT PAGE NO.16 OF THE PAPER BOOK. FROM THE AFORESAID SCHEDU LE, HE POINTED OUT THAT THE TOTAL MACHINERY OF THE ASSESSEE WAS TO THE TUNE OF RS.50,000/- AND WITH THE HELP OF THESE MACHINERIES IT WOULD NOT BE POSSI BLE TO DO RE-CONDITIONING WORK WHICH WOULD HAVE A TURNOVER OF RS.85.78 LAKHS. HE FURTHER POINTED OUT TO THE CERTIFICATE OF CHARTERED ACCOUNTANT IN F ORM NO.56F WHICH WAS PLACED AT PAGE NO.18 TO 20 OF THE PAPER BOOK. FRO M THE ANNEXURE-A TO THE ITA NO.2620/AHD/2011 AND ITA NO.1896/AHD/2012 -5- AFORESAID FORM, HE SUBMITTED THAT THE DATE OF COMME NCEMENT OF MANUFACTURING OR PRODUCTION HAS BEEN STATED TO BE 8 .1.2007. HE THUS SUBMITTED THAT THE ASSESSEE HAS NOT FULFILLED THE C ONDITIONS PRESCRIBED UNDER SECTION 10A, AND THEREFORE, THE AO HAS RIGHTLY DISA LLOWED THE CLAIM OF THE ASSESSEE. HE, THEREFORE, SUBMITTED THAT THE ORDER OF THE AO BE UPHELD. 7. THE LEARNED AR ON THE OTHER HAND, SUBMITTED THAT THE REQUIREMENT OF SECTION 10AA IS THAT THE ASSESSEE SHOULD MANUFACTUR E OR PRODUCE OF AN ARTICLE OR THING OR PROVIDE ANY SERVICES. HE FURTH ER SUBMITTED THAT AS PER EXPLANATION 1 TO SECTION 10AA THE WORD MANUFACTURE HAS BEEN EXPLAINED TO HAVE THE SAME MEANING AS ASSIGNED TO IN CLAUSE ( R) OF SUB-SECTION (2) OF SECTION 18 OF SEZ ACT, 2005. HE FURTHER POINTED OUT TO THE MEANING OF MANUFACTURE AS PER SECTION 2(R) OF SEZ ACT, 2005, ACCORDING TO WHICH, THE MANUFACTURE MEANS, TO MAKE, PRODUCE, FABRICAT E, ASSEMBLE. PROCESS OR BRING INTO EXISTENCE, BY HAND OR BY MACHINE, A NEW PRODUCT HAVING A DISTINCTIVE NAME, CHARACTER OR USE AND SHALL INCLUD E PROCESSES SUCH AS REFRIGERATION, CUTTING, POLISHING, BLENDING, REPAIR , REMAKING, RE-ENGINEERING AND INCLUDES AGRICULTURE, AQUACULTURE, ANIMAL HUSBA NDRY, FLORICULTURE, HORTICULTURE, PISCICULTURE, POULTRY, SERICULTURE, V ITICULTURE AND MINING. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS RECEIVED CE RTIFICATE FROM VARIOUS GOVERNMENT AUTHORITIES AND MINISTRIES TO PROVE THAT THE ASSESSEE HAS ESTABLISHED AN INDUSTRY IN SURAT, SEZ. HE POINTED OUT TO ELIGIBILITY CERTIFICATE AT PAGE NO.41 AND 36 SHOWING APPLICATIO N FOR PERMISSION UNDER SEZ HE ALSO POINTED OUT TO THE CHRONOLOGY OF EVENT S PRIOR TO THE START OF THE MANUFACTURING WHICH HAS BEEN LISTED AT PAGE NO. 12 OF THE CIT(A)S ORDER. HE FURTHER PLACED ON RECORD A LETTER DATED 2.1.2012 ISSUED BY THE MINISTRY OF COMMERCE & INDUSTRY, OFFICE OF THE DEVE LOPMENT COMMISSIONER, WHEREIN A CLARIFICATION WITH RESPECT TO EXEMPTION FROM INCOME TAX WAS ISSUED. FROM THE AFORESAID LETTER, HE POINTED OUT TO THE RELEVANT PARA WHERE IT WAS STATED THAT THE PROVISIO N OF SECTION SEZ ACT, ITA NO.2620/AHD/2011 AND ITA NO.1896/AHD/2012 -6- 2005 HAVE OVERRIDING EFFECT OVER ANY OTHER LAWS BY VIRTUE OF SECTION 51 OF THE SEZ ACT, 2005, AND THEREFORE, EVEN IN THE CASE OF CONTRADICTIONS VIS-- VIS THE PROVISIONS OF THE INCOME TAX ACT, 1961 AND SEZ ACT, 2005, THE PROVISION OF SEZ ACT, 2005 SHALL PREVAIL BY VIRTUE OF THE ABOVE SALUTATORY PROVISION. HE FURTHER POINTED OUT TO THE PARA IN T HE SAID LETTER WHEREIN IT WAS STATED THAT RECONDITIONING, REPAIR AND RE-ENGIN EERING ACTIVITIES ARE ALSO PERMITTED AS MANUFACTURING ACTIVITY IN TERMS OF RUL ES OF SEZ RULES. HE ALSO PLACED RELIANCE ON THE DECISION IN THE CASE OF GIRN AR INDUSTRIES VS. CIT, 338 ITR 277 (KER). HE THUS SUPPORTED THE ORDER OF THE CIT(A). 8. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS ABOUT THE ALLOWABILITY OF DEDUCTION UNDER SECTION 10AA OF THE I.T.ACT. IT IS UNDISPUTE D FACT THAT THE ASSESSEE IS STATED TO BE IN THE BUSINESS OF RECONDITIONING, REP AIR AND RE-ENGINEERING ACTIVITIES. BEFORE US, THE LEARNED AR HAS PLACED HE AVY RELIANCE ON THE LETTER DATED 2.1.2012 ISSUED BY THE MINISTRY OF COMMERCE & INDUSTRIES, OFFICE OF THE DEVELOPMENT COMMISSIONER, SURAT SPECIAL ECONOMI C ZONE, WHEREIN IT HAS BEEN STATED THAT THE ASSESSEE IS ENTITLED TO DE DUCTION UNDER SECTION 10AA OF THE ACT. WE FURTHER FIND THAT HE AFORESAID LETTER IS IN THE NATURE OF ADDITIONAL EVIDENCE WHICH WAS NEITHER BEFORE THE AO NOR BEFORE THE CIT(A). WE, THEREFORE, FEEL THAT THE ISSUE OF DEDU CTION U/S.10AA NEEDS RE- EXAMINATION IN LIGHT OF THE AFORESAID LETTER ISSUED BY MINISTRY OF COMM. & INDUSTRIES AT THE END OF CIT(A). WE, THEREFORE, RE MIT THE ISSUE BACK TO THE FILE OF THE CIT(A) FOR HIS EXAMINATION OF THE CONTE NTS OF THE LETTER, AND DIRECT TO THE CIT(A) TO GIVE A FINDING W.R.T ALLOWA BILITY IN THE LIGHT OF THE ABOVE LETTER ISSUED BY THE MINISTRY OF COMMERCE AND INDUSTRIES AND AFTER OBTAINING A REMAND REPORT FROM THE AO. NEEDLESS TO MENTION, THE CIT(A) SHALL PROVIDE REASONABLE OPPORTUNITY OF HEARING TO BOTH THE SIDES. ACCORDINGLY, THIS GROUND OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSE. ITA NO.2620/AHD/2011 AND ITA NO.1896/AHD/2012 -7- 9. ITA NO.1896/AHD/2012 FOR A.Y.2009-2010 10. BEFORE US, BOTH THE PARTIES HAVE SUBMITTED THAT THE ISSUE RAISED IN THE PRESENT APPEAL IS IDENTICAL TO THAT OF ASSTT .YEAR 2008-09 EXCEPT FOR THE AMOUNT. SINCE THE ISSUE RAISED IN THIS AP PEAL OF THE REVENUE IS ALSO IDENTICAL, EXCEPT QUANTUM, WE FOR THE REASO NS GIVEN IN ITA NO.2620/AHD/2001, IN THE FOREGOING PARAS, ALSO REMI T THE ISSUE TO THE FILE OF THE CIT(A) WITH SIMILAR DIRECTIONS. 11. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONED HEREINABOVE. SD/- SD/- ( . .. . . .. . /G.C. GUPTA) !' !' !' !' /VICE-PRESIDENT ( %&'( %&'( %&'( %&'( / ANIL CHATURVEDI) )* + )* + )* + )* + /ACCOUNTANT MEMBER C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD