THE ITO 9(2)(1), V. M/S. HEAVEN DIMONDS P. LTD,

ITA 2817/MUM/2004

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84622 (ITAT-MUMBAI)
• Duration Of Justice: 10 year(s) 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-12-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 25-09-2014
• Assessment Year: 2000-2001
• Appeal Filed On: 19-04-2004
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AKHILENDRA YADAV
• Assessee Lawyers: SARBJIT SHARMA
• Section: 260A; 80IB

Judgement Text

F IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F, MUMBAI BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER, AND SHRI VIVEK VARMA, JUDICIAL MEMBER ITA NO. : 2504/MUM/2004 (ASSESSMENT YEAR: 2000-01) HEAVEN DIAMONDS PVT LTD., 3/211, VIRWANI INDUSTRIAL ESTATE, W.E. HIGHWAY, GOREGAON(EAST), MUMBAI - 400 063 PAN: AAACH 7095 K VS INCOME TAX OFFICER-WARD 9(2)(1), AAYAKAR BHAVAN, MUMBAI - 400 020 (APPELLANT) (RESPONDENT) ITA NO. : 2817/MUM/2004 (ASSESSMENT YEAR: 2000-01) INCOME TAX OFFICER-WARD 9(2)(1), AAYAKAR BHAVAN, MUMBAI -400 020 VS HEAVEN DIAMONDS PVT LTD., MUMBAI - 400 063 PAN: AAACH 7095 K APPELLANT-ASSESSEE BY : SHRI SARBJIT SHARMA RESPONDENT-REVENUE BY : !' # $% SHRI AKHILENDRA YADAV /DATE OF HEARING : 22-12-2014 /DATE OF PRONOUNCEMENT : 22-12-2014 O R D E R , , , , PER VIVEK VARMA, JM: CROSS APPEALS HAD BEEN FILED BY THE ASSESSEE AND THE DEPARTMENT AGAINST THE ORDER OF CIT(A) IX, MUMBAI, DATED 10.02.2004, WHICH WERE REGISTERED AS 2504/MUM/2004 AND 2817/MUM/2004, BY THE ASSESSEE AND THE DEPARTMENT RESPECTIVELY. 2. IN THE ASSESSEES APPEAL, THE ITAT SUSTAINED THE DISALLOWANCE OF DEDUCTION U/S 80IB AND IN THE DEPARTMENTA L APPEAL, THE ISSUE PERTAINED TO PART ALLOWANCE OF DEDUCTION U/S 80HHC. HEAVEN DIAMONDS PVT LTD. ITA 2504/M/2004 ITA 2817/M/2004 2 3. AGAINST THE ORDER OF ITAT SUSTAINING THE DISALLOWANCE U/ S 80IB, THE ASSESSEE APPROACHED THE HONBLE BOMBAY HIGH C OURT U/S 260A AS ITA 1759 OF 2009. THIS APPEAL BY THE ASSESS EE WAS DISMISSED BY THE HONBLE BOMBAY HIGH COURT, FOLLOWING THE CA SE OF CIT VS GEM INDIA MANUFACTURING CO., REPORTED IN 249 IT R 307. 4. AGGRIEVED THE ASSESSEE APPROACHED THE HON SC AND FILE D SPECIAL LEAVE PETITION (SLP) UNDER ARTICLE 136 OF THE CONST ITUTION OF INDIA, WHICH WAS ADMITTED BY THE HONBLE SUPREME COURT OF INDIA AND WHILE DISPOSING OF THE CA NO. 9936 OF 2011, THE HONBLE SUPREME COURT OBSERVED, HEARD LEARNED COUNSEL ON BOTH SIDES. LEAVE GRANTED. WE FIND FROM THE IMPUGNED ORDER OF THE INCOME TAX APPELLATE TRIBUNAL ['TRIBUNAL, FOR SHORT] THAT THE RE IS NO DISCUSSION ON THE PROCESS UNDERTAKEN BY THE ASSESSE E, WHO CLAIMS BENEFIT OF SECTION 80IB OF THE INCOME TA X ACT, 1961 [ACT', FOR SHORT]. THE ASSESSEE IMPORTS RAW DIAMONDS AND APPLIES THEREON THE PROCESS OF SAWING, TURNING, PROFILING, CUTTING, DRILLING, POLISHING, E TC., BY THE USE OF SOPHISTICATED MACHINERIES RESULTING IN PRODU CTION OF A SUPERIOR MARKETABLE COMMODITY. DETAILED PROCED URE HAS BEEN SET OUT IN THE PAPER BOOK. THE TRIBUNAL OU GHT TO HAVE EXAMINED THE PROCESS AS TO WHETHER SUCH PROCES S WOULD CONSTITUTE 'MANUFACTURE' UNDER SECTION 80IB O F THE ACT. THAT EXERCISE HAS NOT BEEN UNDERTAKEN. THE REL IANCE ON THE JUDGMENT OF THIS COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. GEM INDIA MANUFACTURING COMPANY, REPORTED IN [2001] 249 I.T.R . 307, MAY NOT BE CORRECT FOR THE SIMPLE REASON THAT, IN THAT CASE, THE REVENUE SUCCEEDED AS GEM INDIA MANUFACTURING COMPANY WAS NOT ABLE TO DEMONSTRATE THE PROCESS UNDERTAKEN BY IT TO CONVERT RAW DIAMOND S INTO A SUPERIOR COMMODITY. MOREOVER, THE HIGH COURT HAS ALSO NOT GONE INTO THAT ASPECT. THE HIGH COURT SHOU LD HAVE REMITTED THE CASE TO THE TRIBUNAL TO CONSIDER WHETHER THE PROCESS UNDERTAKEN BY CONSTITUTED MANUFACTURE. UNDER THE ABOVE CIRCUMSTANCES, THE IMPUGNED ORDERS OF THE HIGH COURT AND THE TRIBUNAL ARE SET ASIDE AND THE MATTER IS REMITTED TO THE TRIBUNA L FOR DE NOVO CONSIDERATION IN THE LIGHT OF WHAT WE HAVE STATED HEREINABOVE. THE CIVIL APPEAL FILED BY THE ASSESSEE IS, ACCORDIN GLY, ALLOWED WITH NO ORDER AS TO COSTS. HEAVEN DIAMONDS PVT LTD. ITA 2504/M/2004 ITA 2817/M/2004 3 5. HENCE THE INSTANT PROCEEDINGS. 6. BEFORE US, THE AR SUBMITTED THAT THE HONBLE SUPREME COURT HAS GIVEN DIRECTION TO THE ITAT TO EXAMINE IN DETA IL THE PROCESS ADOPTED BY THE ASSESSEE TO CONVERT THE ROCK FORM OF DIAMOND INTO A SPARKLING DIAMOND TO BE USED AS A PRECIOUS PIECE OF JEWELLERY AND THEREBY DIGRESSING FROM THE ORDER O F GEM INDIA ( SUPRA ). 7. AT THIS INSTANCE, THE AR SUBMITTED THAT IN THE LIGHT OF T HE ORDER OF HONBLE SUPREME COURT, IF THE ASSESSEE IS AFFORDED AN OPPORTUNITY, IT SHALL PROVE TO THE REVENUE AUTHORITIES THA T THE CLAIM OF DEDUCTION U/S 80IB WAS GENUINE AND CORRECT AND THAT THE ASSESSEE HAD EMPLOYED DETAILED AND SOPHISTICATED MACHINERY TO CONVERT DIAMOND IN THE ROUGH AND ROCK FORM, TO A PIEC E OF PRECIOUS JEWELLERY. THE AR ALSO POINTED OUT THAT THOUGH T HE DIAMOND PROCESSING UNIT AT DAMAN, FOR WHICH THE DEDUCTION WAS CLAIMED IS SHUT BUT, THE MACHINERY AND PROCESS LINE IS STILL THERE, WHICH CAN BE PHYSICALLY EXAMINED. THE AR IN CONSULTA TION WITH THE REPRESENTATIVE OF THE ASSESSEE ASSURED THE BE NCH THAT GIVEN THE OPPORTUNITY, THE ASSESSEE SHALL SATISFY THE RE VENUE AUTHORITIES THAT THE CLAIM WAS CORRECTLY/RIGHTLY MADE. 8. THE DR, IN THE LIGHT OF THE ABOVE MENTIONED ORDER, ACCEPTED THE PROPOSITION OF THE AR, FOR THE CASE TO BE R ESTORED TO THE FILE OF THE AO. 9. WE HAVE HEARD THE ARGUMENTS FROM EITHER SIDE AND HA VE GONE THROUGH THE ORDER OF THE HON SC GIVING CLEAR CUT D IRECTION TO THE ASSESSEE TO DEMONSTRATE THE PROCESS UNDERTAKEN BY THE ASSESSEE TO CONVERT RAW DIAMONDS IN A SUPERIOR COMMODITY . 9. IN THE LIGHT OF THE ABOVE, WE SET ASIDE THE ORDER OF TH E CIT(A) AND DIRECT THE AO TO ADJUDICATE AND PASS FRESH OR DER OF HEAVEN DIAMONDS PVT LTD. ITA 2504/M/2004 ITA 2817/M/2004 4 ASSESSMENT AND ADJUDICATE ON THE CLAIMS AS MADE BY THE ASSESSEE ON MERITS AND AS AN LAW. 10. SINCE WE HAVE SET ASIDE THE ORDER OF THE CIT(A) WITH THE DIRECTION TO THE AO TO PASS FRESH ORDER OF ASSESSMENT DE NOVO , THE APPEAL AS FILED BY THE DEPARTMENT IS TREATED AS ALLOW ED FOR STATISTICAL PURPOSES. 11. IN THE RESULT, ITA NO. 2504/MUM/2004 FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES ITA NO. 2817/MUM/2004 FILED BY THE DEPARTMENT IS ALLOWED FO R STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND DECEMBER, 2014 SD/- SD/- ( ) ( ) (N.K. BILLAIYA) ( VIVEK VARMA ) ACCOUNTANT MEMBER J UDICIAL MEMBER MUMBAI, DATE: 22 ND DECEMBER, 2014 / COPY TO:- 1) / THE APPELLANT. 2) / THE RESPONDENT. 3) THE CIT(A)-IX, MUMBAI. 4) THE CIT- IX, MUMBAI. 5) )%*+ , F , , / THE D.R. F BENCH, MUMBAI. 6) +- . COPY TO GUARD FILE. $', / BY ORDER HEAVEN DIAMONDS PVT LTD. ITA 2504/M/2004 ITA 2817/M/2004 5 / / TRUE COPY / / / / 0 , DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN, SR.PS