SILVASSA WOODEN DRUMS, MUMBAI V. PR CIT 30, MUMBAI

ITA 3123/MUM/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3869 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 8 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2010-2011
• Appeal Filed On: 25-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R MANJUNATHA SWAMY
• Assessee Lawyers: RISHABH S HAH
• Keywords: Question of law
• Section: 143(3); 80IB; 263; 63

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL E BENC H MUMBAI BEFORE SHRI G. S. PANNU, VICE- PRESIDENT AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.3123/MUM/2015 (ASSESSMENT YEAR 2010-11) SILVASSA WOODEN DRUMS (SWD INDUSTRIES), C-202, PANCHWATI GARDENS, RAHEJA TOWNSHIP, MALAD (E), MUMBAI-400097. P AN: AAOFS8319L VS. PR. COMMISSIONER OF INCOME- TAX-30, ROOM NO. 507, 5 TH FLOOR, C-13, PRATYAKASH KAR BHAVAN, BANDRA KURLA COMPLEX, MUMBAI. APPELLANT RESPONDENT APPELLANT BY : SHRI RISHABH SHAH (AR) RESPONDENT BY : SHRI R. MANJUNATHA SWAMY (DR) DATE OF HEARING : 24.01.2019 DATE OF PRONOUNCEMEN T : 30.01.2019 ORDER UNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. THIS APPEAL BY ASSESSEE UNDER SECTION 253 OF THE IN COME-TAX ACT (THE ACT) IS DIRECTED AGAINST THE ORDER OF LD. PR. COMMI SSIONER OF INCOME-TAX- 30, MUMBAI (THE LD. PCIT) PASSED UNDER SECTION 263 DATED 24.03.2015 FOR ASSESSMENT YEAR 2010-11. THE ASSESSEE HAS RAISED TH E FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER U/S 263 PASSED BY THE LEARNED PR. COMM ISSIONER OF INCOME TAX IS CONTRARY TO THE FACTS OF THE CASE, BASED ON ERRO NEOUS UNDERSTANDING OF THE FACTS AND LAW AND PREJUDICIAL TO THE ASSESSEE. 2. ON APPRECIATION OF THE FACTS AND IN THE CIRCUMST ANCES OF THE CASE THE LEARNED PR. COMMISSIONER OF INCOME TAX HAS ERRED IN ASSUMIN G JURISDICTION U/S. 263 OF THE ACT AND INVOKING THE POWERS THERE UNDER. ITA NO. 3123 MUM 201 5-SILVASSA WOODEN DRUMS 2 3. ON APPRECIATION OF THE FACTS AND CIRCUMSTANCES O F THE CASE AND INTERPRETATION OF LAW, THE LEARNED PR. COMMISSIONER OF INCOME TAX HAS ERRED IN HOLDING THAT THE ORDER U/S. 143(3) IN RESPECT OF A. Y. 2010-2011 DATED 05.12.2012 PASSED BY THE LEARNED ASSESSING OFFICER IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF REVENUE. 4. ON APPRECIATION OF THE FACTS AND CIRCUMSTANCES O F THE CASE AND INTERPRETATION OF LAW, THE LEARNED PR. COMMISSIONER OF INCOME TAX WHILE PASSING THE ORDER U/S. 263 OF THE ACT HAS ERRED IN HOLDING THAT THE APPELLANT'S BUSINESS ACTIVITY INVOLVING GALVANIZATION OF STEEL TAPES AND (COLD ROLLED) STRIPS IS NOT A MANUFACTURING ACTIVITY NOT ENTITLED FOR DEDUCTION U/S. 80LB AND ALSO ERRED IN DIRECTING THE LEARNED ASSESSING OFFIC ER TO COMPLETE THE ASSESSMENT DE-NOVO. 5. ON APPRECIATION OF THE FACTS AND CIRCUMSTANCES O F THE CASE AND INTERPRETATION OF LAW, THE LEARNED PR. COMMISSIONER OF INCOME TAX WHILE PASSING THE ORDER U/S. 263 OF THE ACT HAS ERRED IN CONSIDERING THAT THE BUSINESS ACTIVITY OF THE APPELLANT INVOLVES ONLY GALVANIZATI ON OF STEEL TAPES AND CR (COLD ROLLED) STRIPS INSTEAD OF CONSIDERING THAT TH E APPELLANT'S BUSINESS INVOLVES MANUFACTURING AND / OR PRODUCTION OF GALVA NIZED STEEL TAPES AND CR (COLD ROLLED) STEEL & STRIPS. 6. ON APPRECIATION OF THE FACTS AND CIRCUMSTANCES O F THE CASE AND INTERPRETATION OF LAW, THE LEARNED PR. COMMISSIONER OF INCOME TAX WHILE PASSING THE ORDER U/S. 263 OF THE ACT HAS ERRED IN NOT TREATING THE BUSINESS OF THE APPELLANT FIRM AS MANUFACTURING AND / OR PRODUC TION OF GALVANIZED STEEL TAPES AND CR (COLD ROLLED) STEEL & STRIPS FOR THE P URPOSE OF AVAILING DEDUCTION U/S 801B OF THE INCOME TAX ACT, 1961. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-FIRM IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF COLD ROLLED COILS, SLI TES FROM HOT ROLLED COILS, GALVANIZED TAPE FROM COLD ROLLED SLITS AND G ALVANIZED WIRE & STRIPS FROM M S WIRE ROD. THE ASSESSEE FILED ITS RE TURN OF INCOME FOR ASSESSMENT YEAR 2010-11 ON 27.09.2010. THE RETURN O F INCOME WAS SELECTED FOR SCRUTINY AND ASSESSMENT ORDER WAS PASS ED UNDER SECTION ITA NO. 3123 MUM 201 5-SILVASSA WOODEN DRUMS 3 143(3) ON 05.12.2012. THE ASSESSING OFFICER WHILE P ASSING THE ASSESSMENT ORDER ALLOWED DEDUCTION UNDER SECTION 80IB. THE ASS ESSMENT ORDER WAS REVISED UNDER SECTION 263 BY LD. PCIT VIDE ITS ORDE R DATED 24.03.2015. THE LD. PCIT WHILE REVISING THE ASSESSMENT ORDER OB SERVED THAT ORIGINALLY THE CLAIM OF ASSESSEE UNDER SECTION 80IB WAS ACCEPT ED IN ASSESSMENT YEAR 2005-06, WHICH WAS SUBSEQUENTLY REVISED UNDER SECTION 263 OF THE ACT. THE ASSESSMENT FOR ASSESSMENT YEAR 2005-06 TRA VELLED UP TO SUPREME COURT AND THE ISSUE WAS DECIDED IN FAVOUR O F ASSESSEE. THE HONBLE SUPREME COURT DECIDED THE ISSUE OF JURISDIC TION UNDER SECTION 263, LEAVING THE QUESTION OF LAW WHETHER THE ASSESS EES ACTIVITY AMOUNTS TO MANUFACTURING/PRODUCTION. BY FOLLOWING THE ORDER OF ASSESSMENT YEAR 2005-06, THE TRIBUNAL DECIDED THE ISSUE IN FAVOUR O F ASSESSEE FOR ASSESSMENT YEAR 2004-05, 2006-07 & 2007-08. THE ASS ESSMENT FOR THE YEAR UNDER CONSIDERATION WAS COMPLETED AFTER THE DE CISION OF HONBLE SUPREME COURT BUT BEFORE THE ORDER, THE DEDUCTION F OR ASSESSMENT YEAR 2004-05, 2006-07 & 2007-08 WAS ACCEPTED BY ASSESSIN G OFFICER. ON THE ABOVE OBSERVATION, THE LD. PCIT ISSUED SHOW-CAUSE N OTICE DATED 29.10.2013. 3. THE ASSESSEE CONTESTED THE REVISION PROCEEDING BEFO RE LD PCIT AND CONTENDED THAT THE ISSUE HAS BEEN DECIDED BY HONBL E BOMBAY HIGH COURT IN FAVOUR OF ASSESSEE THAT NEW AND DISTINCT P RODUCT EMERGES IN THE COURSE OF MANUFACTURING PROCESS, THEREFORE, THE ORD ER PASSED BY ASSESSING ITA NO. 3123 MUM 201 5-SILVASSA WOODEN DRUMS 4 OFFICER IS NOT ERRONEOUS. THE CONTENTION OF ASSESSE E WAS NOT ACCEPTED BY LD PCIT AND THE ASSESSMENT WAS SET-ASIDE HOLDING TH AT THE ISSUE WHETHER THE ASSESSEE ACTIVITIES IS AMOUNTING TO MANUFACTURI NG OR NOT IS YET TO BE FINALLY DECIDED. THUS, AGGRIEVED BY THE ORDER OF LD . PCIT, THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. 4. AT THE OUTSET OF HEARING, THE LD. AUTHORIZED REPRES ENTATIVE (AR) OF THE ASSESSEE SUBMITS THAT THE GROUNDS OF APPEAL RAISED BY ASSESSEE IS COVERED IN FAVOUR OF ASSESSEE IN ASSESSEES OWN CASE FOR AS SESSMENT YEAR 2005- 06 IN ITA NO. 7235/MUM/2008 DATED 20.08.2010. IT W AS SUBMITTED THAT THE DECISION OF TRIBUNAL WAS CHALLENGED BY THE REVE NUE BEFORE THE HONBLE BOMBAY HIGH COURT VIDE ITA NO. 2504 OF 2011 AND THE APPEAL OF REVENUE WAS DISMISSED VIDE ORDER DATED 19.04.201 2. FURTHER, SLP FILED BY THE REVENUE BEFORE THE HONBLE SUPREME COURT IS ALSO DISMISSED VIDE ORDER DATED 10.09.2012. THE LD. AR OF THE ASSESSEE FURTHER SUBMITS THAT SIMILAR DISALLOWANCE WAS MADE FOR ASSESSMENT YEAR 2 004-05, 2006-07 & 2007-08 IN ASSESSMENT ORDER PASSED UNDER SECTION 14 3(3) R.W.S. 147 OF THE ACT. HOWEVER, ON APPEAL BEFORE THE LD. CIT(A), THE ASSESSEE WAS ALLOWED THE DEDUCTION UNDER SECTION 80IB. AND ON FU RTHER APPEAL BY THE REVENUE BEFORE THE TRIBUNAL, THE APPEAL OF THE REVE NUE WAS DISMISSED IN ITA NO. 8333 TO 8336/MUM/2010 DATED 02.01.2013. FUR THER, APPEAL OF THE ASSESSEE BEFORE THE HONBLE BOMBAY HIGH COURT W AS ALSO DISMISSED ITA NO. 3123 MUM 201 5-SILVASSA WOODEN DRUMS 5 VIDE ITA NO. 1364 OF 2013 DATED 07.04.2015. THE LD. AR OF THE ASSESSEE PLACED ON RECORD THE COPY OF ALL THE ORDER/DECISION S REFERRED ABOVE. 5. THE LD. AR OF THE ASSESSEE FURTHER SUBMITS THAT THE HONBLE JURISDICTIONAL HIGH COURT WHILE DECIDING THE APPEAL OF REVENUE FOR ASSESSMENT YEAR 2005-06 HAS AFFIRMED THE FINDING OF TRIBUNAL OBSERV ING THAT UNDER THE CENTRAL EXCISE ACT, HR COILS, CRCA COILS/STRIPS AND GALVANIZING STEEL TAPES ARE CLASSIFIED UNDER DIFFERENT HEADS. MOREOVE R, UPON THE EVIDENCE BEFORE IT, THE TRIBUNAL HAS NOTED THAT THE USES OF THE FINAL PRODUCT ARE DISTINCT IN RESPECT OF VARIOUS INDUSTRIES AND THAT THE RAW MATERIAL AND END PRODUCTS HAVE A DIFFERENT COMMERCIAL CONNOTATION AN D USE. A NEW AND DISTINCT PRODUCT EMERGES DURING THE COURSE OF THE M ANUFACTURING PROCESS. 6. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTAT IVE (DR) FOR THE REVENUE AFTER GOING THROUGH THE VARIOUS ORDER PLACE D ON RECORD SUBMITS THAT HE RELY UPON THE ORDER OF LD. PCIT. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE IMPUGNED ORDER PASSED BY LD. PCIT DATED 24.03.2015. WE HAVE NOTED THAT ON IDENTICAL ISSUE FOR ASSESSMENT Y EAR 2005-06, THE TRIBUNAL PASSED THE FOLLOWING ORDER: 18. THE ABOVE DISCUSSION CLEARLY SHOWS THAT THE AS SESSEE WAS NOT CARRYING OUT MERELY A PROCESS. THE RAW MATERIAL AND END PROD UCT WERE DIFFERENT HAVING DIFFERENT COMMERCIAL NAME AND DIFFERENT COMM ERCIAL USE. GALVANISING IS ONE OF THE INTERMEDIARY PROCESS AND NOT THE ONLY PROCESS .THE CONCLUSION OF THE CIT THAT THE ASSESSEE WAS MERELY CARRYING ON GALVANIZING PROCESS IN OUR VIEW IS WITHOUT ANY BASIS. IN OUR VIEW, LEARNED CIT(A) HAS TAKEN A VERY ITA NO. 3123 MUM 201 5-SILVASSA WOODEN DRUMS 6 NARROW VIEW AND HAD CONCLUDED THAT THE ASSESSEE WAS MERELY CARRYING ON A PROCESS. WE HAVE ALREADY SEEN THAT THE APPROACH OF THE COURT ON THIS ISSUE HAS NOW CHANGED. APART FROM THE ABOVE IN CASES OF T HIS NATURE WHERE TWO VIEWS ARE POSSIBLE AND THE AO HAS TAKEN ONE OF THE POSSIBLE VIEWS, THE CIT CANNOT EXERCISE POWER OF REVISION JUST BECAUSE THE OTHER VIEW WILL BENEFIT THE REVENUE. ON THE FACTS AND CIRCUMSTANCES OF THE CASE , WE ARE SATISFIED THAT THE ASSESSEE WAS MANUFACTURING OF AN ARTICLE OR THING. THE INPUT MATERIAL AND OUTPUT MATERIAL WAS DIFFERENT AND IT HAD DIFFERENT COMMERCIAL USE AND NAME. IT HAD DIFFERENT END USE. THE ACTIVITY CARRIED ON B Y THE ASSESSEE CANNOT BE SAID TO BE A MERE PROCESS. WE THEREFORE HOLD THAT T HE ASSESSEE WAS MANUFACTURING AN ARTICLE OR THING. THE ORDER U/S. 2 63 IS THEREFORE SET ASIDE AND THE ORDER OF THE ASSESSING OFFICER ALLOWING CLA IM OF THE ASSESSEE FOR DEDUCTION U/S. 80IB OF THE ACT IS HELD TO BE PROPER . IN OTHER WORDS, THE ORDER U/S. 263 IS QUASHED. 8. AGGRIEVED BY THE ORDER OF TRIBUNAL, THE REVENUE FIL ED APPEAL BEFORE THE HONBLE JURISDICTIONAL HIGH COURT AND THE REVENUE H AS RAISED ONE OF THE QUESTION OF LAW THAT WHETHER GALVANIZATION AND CR (COLD ROLLED) STRIPS ACTIVITY DOES AMOUNT TO MANUFACTURING A THING OR AR TICLE AS ENVISAGED IN SECTION 80IB OF THE INCOME TAX ACT, 1961. THE APPEAL OF THE REVENUE WAS DISMISSED HOLDING THAT NO SUBSTANTIAL QUESTION OF LAW ARISES. THE HONBLE HIGH COURT AFFIRMED THE FINDING OF TRIBUNAL THAT UNDER THE CENTRAL EXCISE ACT, HR COILS, CRCA COILS/STRIPS AND GALVANIZING STEEL TAPES ARE CLASSIFIED UNDER DIFFERENT HEADS. MOREOVE R, UPON THE EVIDENCE BEFORE IT, THE TRIBUNAL HAS NOTED THAT THE USES OF THE FINAL PRODUCT ARE DISTINCT IN RESPECT OF VARIOUS INDUSTRIES. IT WAS H ELD THAT TRIBUNAL HAS ENTERED TWO FOLD FINDINGS. FIRSTLY, THE RAW MATERIA L AND END PRODUCTS HAVE A DIFFERENT COMMERCIAL CONNOTATION AND USE. A NEW A ND DISTINCT PRODUCT ITA NO. 3123 MUM 201 5-SILVASSA WOODEN DRUMS 7 EMERGES DURING THE COURSE OF THE MANUFACTURING PROC ESS. SECONDLY, EVEN IF TWO VIEWS ARE POSSIBLE THE LD. CIT OUGHT NOT TO HAVE EXERCISED JURISDICTION UNDER SECTION 263. 9. WE HAVE NOTED THAT THE SLP OF REVENUE WAS ALSO DISM ISSED BY HONBLE SUPREME COURT VIDE SLP (CIVIL) 26047/2012 DATED 10. 09.2012. WE HAVE ALSO NOTED THAT BY FOLLOWING THE DECISION OF TRIBUN AL FOR ASSESSMENT YEAR 2005-06, THE SIMILAR RELIEF WAS ALLOWED TO THE ASSE SSEE FOR ASSESSMENT YEAR 2004-05 TO 2007-08 VIDE ORDER DATED 02.01.2013 AND APPEAL FILED BY REVENUE WAS AGAIN DISMISSED BY HONBLE JURISDICTION AL HIGH COURT ON 07.04.2015. IN VIEW OF THE ABOVE DISCUSSION, WE ARE OF THE VIEW THAT GROUNDS OF APPEAL RAISED BY ASSESSEE ARE COVERED IN FAVOUR OF ASSESSEE. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30/ 01/2019. SD/ SD/- G.S. PANNU PAWAN SINGH VICE-PRESIDENT JUD ICIAL MEMBER MUMBAI, DATE: 30.01.2019 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR E BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI