The ACIT, Navsari Circle, Navsari, Navsari V. M/s Om Sai Metal , Navsari

ITA 296/SRT/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 3159 (ITAT-SURAT)
• Duration Of Justice: 2 year(s) 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-10-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2015-2016
• Appeal Filed On: 22-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANUPAMA SINGLA
• Keywords: Depreciation; Additional depreciation
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER ITA NO.296/SRT/2019 (AY 2015-16) (H EARING IN VIRTUAL COURT) THE ASSISTANT COMMISSIONER OF INCOME TAX, NAVSARI. VS M/S.OM SAI METAL, VANSDA ROAD, VILLAGE-ALIPORE, TAL-CHIKHLI, NAVSARI. PAN: AABFO 7092 H ASSESSEE / APPELLANT REVENUE /RESPONDENT ASSESSEE BY SHRI PAR I M A L SINH B. PARMAR AR REVENUE BY MS. ANUPAMA SINGLA SR. DR DATE OF HEARING 01 . 10 .2021 DATE OF PRONOUNCEMENT 04 . 10 .2021 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER: 1. THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORDER OF LD.COMMISSIONER OF INCOME TAX(APPEALS), VALSAD UNDER SECTION 143(3) OF THE ACT, 1961 DATED 30.03.2019 FOR ASSESSMENT YEAR (AY) 2015-16. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ORDER OF THE LD.CIT(A) IS PERVERSE AS THE LD.CIT(A) ERRED IN DELETING THE ADDITION OF RS. 1,59,15,085/- MADE ON ACCOUNT OF DISALLOWANCE OUT OF CARTING EXPENSES WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE FAILED TO PRODUCE THE CONCERNED PARTIES AND FURTHER THE ASSESSEE AS WELL AS THE KARTAS OF HUFS IN WHOSE NAMES THE CARTING EXPENSES WERE BOOKED, FAILED TO SUBSTANTIATE THEIR CLAIM WITH SUITABLE DOCUMENTARY EVIDENCES. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ORDER OF THE LD.CIT(A) IS PERVERSE AS THE LD.CIT(A) ERRED IN APPRECIATING THE FACT THAT THOUGH THERE WAS ONLY SLIGHT INCREASE IN TURNOVER IN THE A.Y. 2015-16 AS COMPARED TO A.Y. 2011-12, THE RATIO OF CARTING EXPENSES TO TURNOVER HAD ABNORMALLY INCREASED FROM 5.28% IN A.Y. 2011-12 TO 8.67% IN A.Y. 2015-16. 2 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ORDER OF THE LD.CIT(A) IS PERVERSE AS THE LD.CIT(A) ERRED IN DELETING THE ADDITION OF RS. 99,63,517/- MADE ON ACCOUNT OF DISALLOWANCE OF ADDITIONAL DEPRECIATION WITHOUT APPRECIATING THE FACT THAT THE BENEFIT OF ADDITIONAL DEPRECIATION IS AVAILABLE ONLY FOR MANUFACTURING ACTIVITIES WHEREAS THE BUSINESS ACTIVITY OF ASSESSEE I.E. FORMING STONES FROM BOULDERS DOES NOT QUALIFY FOR THE SAME. 4. THE APPELLANT CRAVES TO ADD, MODIFY OR ALTER ANY GROUNDS DURING THE COURSE OF APPEAL PROCEEDINGS. 2. AT THE OUTSET OF HEARING, THE LD. AUTHORISED REPRESENTATIVE (LD.AR) OF THE ASSESSEE SUBMITS THAT THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE COVERED BY THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y. 2014-15 IN ITA348/SRT/2018 DATED 21.06.2021. THE LD.AR SUBMITS THAT THE ASSESSING OFFICER MADE SIMILAR DISALLOWANCE ON ACCOUNT OF CARTING EXPENSES AND ADDITION ON DISALLOWANCE OF ADDITIONAL DEPRECIATION WAS MADE IN A.Y. 2014-15. AGGRIEVED BY THE ADDITIONS IN THE ASSESSMENT ORDER, THE ASSESSEE FILED APPEAL BEFORE THE LD.CIT(A). THE LD.CIT(A) ALLOWED RELIEF TO THE ASSESSEE BY REVERSING THE ADDITION ON ACCOUNT OF DISALLOWANCE OF CARTING EXPENSES AND DISALLOWANCES ADDITIONAL DEPRECIATION 32. THE REVENUE FILED APPEAL BEFORE THE TRIBUNAL AND THE VIDE APPEAL NO.348/SRT/2018, WHEREIN THE ORDER OF LD.CIT(A) WAS UPHELD AND BOTH THE DISALLOWANCES VIDE ORDER DATED 21.06.2021. THE LD.AR FOR THE ASSESSEE SUBMITS THAT THERE IS NO VARIATION IN THE FACTS, THUS, THE GROUNDS OF APPEAL RAISED BY THE REVENUE IS SQUARELY COVERED BY THIS TRIBUNAL IN ITA NO.348/SRT/2018 DATED 21.06.2021. 3 3. ON THE OTHER HAND, THE LD. SENIOR DEPARTMENTAL REPRESENTATIVE (SR. DR) FOR THE REVENUE AFTER GOING THROUGH THE GROUNDS OF APPEAL AND THE CONTENTS OF DECISION OF TRIBUNAL FOR THE A.Y. 2014-15 (SUPRA) SUBMITS THAT SHE RELIED ON THE ORDER OF ASSESSING OFFICER(AO). 4. WE HAVE CONSIDERED THE SUBMISSION OF BOTH THE PARTIES AND HAVE GONE THROUGH THE CONTENTS OF DECISION OF THIS BENCH IN A.Y. 2014-15 DATED 21.06.2021. THE GROUND NO.1 AND 2 RELATES TO DELETING THE DISALLOWANCE OF CARTING EXPENSES OF RS.1.59 CRORE. WE FIND THAT ON ALMOST SIMILAR FACT IN ASSESSEES OWN CASE FOR THE A.Y. 2014-15, THE TRIBUNAL PASSED THE FOLLOWING ORDER: 10. WE HAVE CONSIDERED THE SUBMISSION OF BOTH THE PARTIES AND PERUSED THE ORDER OF LOWER AUTHORITIES. WE HAVE ALSO DELIBERATED ON THE WRITTEN NOTES FURNISHED BY ASSESSEE. DURING THE ASSESSMENT THE AO DISALLOWED THE CARTING EXPENSES BY TAKING VIEW THAT CARTING EXPENSES WAS PAID TO THE PERSONS COVERED UNDER SECTION 40A(2)(B) OF THE ACT. THERE IS NO WRITTEN CONTRACT BETWEEN THE ASSESSEE AND THE SAID THREE HUFS OF KARTAS OF PARTNERS OF THE ASSESSEE OR ANY EVIDENCE IN THE FORM OF ORDERS. THE ASSESSING OFFICER ALSO FOUND VARIOUS DISCREPANCIES IN THE DOCUMENTARY EVIDENCES FURNISHED ON BEHALF OF HUFS. THE HUFS COULD NOT PROVE THAT THE VEHICLES WERE OWNED BY THEM. THE VEHICLES USED TO FERRY THE STONES ARE IN THE NAME OF INDIVIDUALS. THE OTHER SISTER CONCERN OF ASSESSEE NAMELY PATEL METALS HAVE ALSO SHOWN SIMILAR PAYMENT OF CARTING EXPENSE TO THE SAME HUFS. ALL THE HUFS HAVE NOT CARRIED OUT ANY OTHER WORKS FOR THIRD PARTY, EXCEPT FOR THESE TWO SISTERS CONCERN. THE ASSESSING OFFICER ALSO NOTED THAT NO EVIDENCE ABOUT THE DRIVING LICENCE OF THREE DRIVERS WAS FURNISHED. FURTHER, THE DETAILS PROVIDED WITH REGARD TO HELPERS AND 4 SUPERVISORS WERE ALSO NOT VERIFIABLE. ON HIS ABOVE OBSERVATION THE ASSESSING OFFICER DISALLOWED (100%)/ THE ENTIRE CARTING / TRANSPORTATION EXPENSES. 5. CONSIDERING THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y. 2014-15, WHEREIN NO VARIATION OF FACTS FOR THE YEAR UNDER CONSIDERATION IS BROUGHT TO OUR NOTICE, THEREFORE, RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL THE GROUND NO. 1 & 2 OF THE APPEAL IS DISMISSED. 6. GROUND NO.3 RELATES TO DELETING THE DISALLOWANCE OF ADDITIONAL DEPRECIATION. WE FIND THAT ON SIMILAR GROUND OF APPEAL IN ASSESSEES OWN CASE FOR THE A.Y. 2014-15 THE TRIBUNAL PASSED THE FOLLOWING ORDER: 17. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PARTIES AND HAVE GONE THROUGH THE ORDERS OF THE LOWER AUTHORITIES. THE AO DISALLOWED THE CLAIM OF ADDITIONAL DEPRECIATION OF RS.28,27,116/- BY TAKING VIEW THAT THE ACTIVITIES CARRIED BY ASSESSEE CANNOT BE TERMED AS MANUFACTURE AND PRODUCTION. THE LD CIT(A) ALLOWED THE CLAIM OF ADDITIONAL DEPRECIATION BY FOLLOWING THE DECISION OF MADHYA PRADESH HIGH COURT IN G.R KULKARNI VS STATE (AIR 1957 MP 45), WHEREIN IT WAS HELD THAT PROCESS INDULGED TO SHAPE STONE INTO METAL IS A MANUFACTURING PROCESS. THE LD CIT(A) ALSO REFERRED THE DECISION OF TRIBUNAL IN J.P. STONE LTD (ITA NO. 3872/DELHI/2009) AND OF HONBLE SUPREME COURT IN CIT VS SESA GOA LTD ( 271 ITR 331). BEFORE US THE LEARNED SENIOR COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED THAT THE ASSESSEE IS TRANSFORMING FROM LARGE STONE DRILLED AND EXTRACTED FROM MINES AND CONVERTING INTO A DIFFERENT MARKETABLE PRODUCT, WHICH HAS ITS OWN COMMERCIAL APPLICATION AND IDENTITY. IN OUR VIEW THE PROCESS OF MANUFACTURE CAN BE SAID TO HAVE TAKEN PLACE IS WHEN THE COMMODITY, WHICH IS SUBJECTED TO A PROCESS IS NO LONGER REMAINED THE 5 SAME AS IT WAS AS THE ORIGINAL COMMODITY BUT IS RECOGNISED A NEW AND DISTINCT COMMODITY IN TRADE. IN OTHER WORDS 'PRODUCTION', WHEN USED IN JUXTAPOSITION WITH THE WORD 'MANUFACTURE', TAKES IN BRINGING INTO EXISTENCE NEW GOODS BY A PROCESS WHICH MAY OR MAY NOT AMOUNT TO MANUFACTURE. 18. WE FIND THAT THE HONBLE SUPREME COURT IN ITO VS ARIHANT TILES & MARBLES (P) LTD (SUPRA) WHILE RELYING IN SESA GOA LTD.'S CASE (SUPRA) AND IN THE CASE OF CIT V. N.C. BUDHARAJA & CO. [1993] 204 ITR 412 (SC), HELD THAT THE WORD 'MANUFACTURE' AND THE WORD 'PRODUCTION' HAVE RECEIVED EXTENSIVE JUDICIAL ATTENTION BOTH UNDER THE INCOME-TAX AS WELL AS UNDER THE CENTRAL EXCISE AND THE SALES TAX LAWS. THE TEST FOR DETERMINING WHETHER 'MANUFACTURE' CAN BE SAID TO HAVE TAKEN PLACE IS WHETHER THE COMMODITY, WHICH IS SUBJECTED TO A PROCESS CAN NO LONGER BE REGARDED AS THE ORIGINAL COMMODITY BUT IS RECOGNISED IN TRADE AS A NEW AND DISTINCT COMMODITY. THE WORD 'PRODUCTION', WHEN USED IN JUXTAPOSITION WITH THE WORD 'MANUFACTURE', TAKES IN BRINGING INTO EXISTENCE NEW GOODS BY A PROCESS WHICH MAY OR MAY NOT AMOUNT TO MANUFACTURE. THE WORD 'PRODUCTION' TAKES IN ALL THE BY-PRODUCTS, INTERMEDIATE PRODUCTS AND RESIDUAL PRODUCTS WHICH EMERGE IN THE COURSE OF MANUFACTURE OF GOODS. IT WAS ALSO HELD THAT APPLYING THE ABOVE TESTS LAID DOWN BY THIS COURT IN N.C. BUDHARAJA & CO.'S CASE (SUPRA) TO THE FACTS OF THE PRESENT CASES, WE ARE OF THE VIEW THAT BLOCKS CONVERTED INTO POLISHED SLABS AND TILES AFTER UNDERGOING THE PROCESS INDICATED ABOVE CERTAINLY RESULTS IN EMERGENCE OF A NEW AND DISTINCT COMMODITY. THE ORIGINAL BLOCK DOES NOT REMAIN THE MARBLE BLOCK; IT BECOMES A SLAB OR TILE. IN THE CIRCUMSTANCES, NOT ONLY THERE IS MANUFACTURE BUT ALSO AN ACTIVITY WHICH IS SOMETHING BEYOND MANUFACTURE AND WHICH BRINGS A NEW PRODUCT INTO EXISTENCE AND, THEREFORE, ON THE FACTS OF THESE CASES, WE ARE OF THE VIEW THAT THE HIGH COURT WAS RIGHT IN COMING TO THE CONCLUSION THAT THE ACTIVITY 6 UNDERTAKEN BY THE RESPONDENTS-ASSESSEE DID CONSTITUTE MANUFACTURE OR PRODUCTION IN TERMS OF SECTION 80-IA OF THE INCOME-TAX ACT, 1961. NOW ADVERTING TO THE FACTS OF THE PRESENT CASE THE ASSESSEE IS ENGAGED IN ENGAGED IN OPERATION IN EXTRACTING METAL, KAPCHI, GREET AND DUST BY OPERATION OF SAND OR GRAVEL PITS BASALT CLAY CRUSHING AND BREAKING THE STONE. IN THE AFORESAID VARIOUS PROCESS LARGE STONE DRILLED AND EXTRACTED FROM MINES AND CONVERTING INTO A DIFFERENT MARKETABLE PRODUCT, WHICH HAS ITS OWN COMMERCIAL APPLICATION AND IDENTITY THUS, THE ASSESSEES OPERATION CONSTITUTE MANUFACTURE OR PRODUCTION AND IS ENTITLED FOR ADDITIONAL DEPRECIATION AS ALLOWED BY LD CIT(A), WHICH WE AFFIRMS. 19. THE CASE LAW RELIED BY LEARNED SENIOR DR FOR THE REVENUE IN STATE OF MAHARASHTRA VS MAHALAXMI STORES (SUPRA), IS NOT HELPFUL TO THE REVENUE AS THE SAID DECISION IS BASED ON THE DEFINITION OF TERM MANUFACTURE IN SALES TAX ACT, WHICH IS DIFFERENT THAN THE DEFINITION PRESCRIBED UNDER SECTION 2(29BA) OF INCOME TAX ACT. THUS, IN VIEW OF THE ABOVE FACTUAL AND LEGAL DISCUSSIONS THE GROUND NO.3 OF THE APPEAL IS DISMISSED. 7. CONSIDERING THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y. 2014-15, WHEREIN NO VARIATION OF FACTS FOR THE YEAR UNDER CONSIDERATION IS BROUGHT TO OUR NOTICE, THEREFORE, RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL THE GROUND NO. 3 OF THE APPEAL IS ALSO DISMISSED 8. IN VIEW OF THE AFORESAID FACTUAL AND LEGAL DISCUSSION, WE FIND THAT GROUNDS OF APPEAL RAISED BY THE ASSESSEE IS COVERED BY THE DECISION OF CO-ORDINATE BENCH, IN ASSESSEES OWN CASE (SUPRA). THEREFORE, WE FIND MERIT IN THE SUBMISSION OF THE LD.AR OF THE ASSESSEE. SINCE THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE 7 ASSESSEE BY THE ORDER OF CO-ORDINATE BENCH, IN ASSESSEES OWN CASE (SUPRA) AND THEREFORE, RESPECTFULLY FOLLOWING THE BINDING PRECEDENT OF THE TRIBUNAL IN ASSESSEES OWN CASE, WE DISMISS THE APPEAL OF THE REVENUE. 9. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER ANNOUNCED ON 04 OCTOBER, 2021 AT THE TIME OF HEARING IN VIRTUAL COURT HEARING. SD/- SD/- (DR ARJUN LAL SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER SURAT, DATED: 04/10/2021 / SGR* COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR 6. GUARD FILE BY ORDER / / TRUE COPY / / SR.PVT. SECRETARY, ITAT, SURAT