ACIT, New Delhi V. M/s. U.S. Granite, New Delhi

ITA 3212/DEL/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 6983 (ITAT-DELHI)
• Duration Of Justice: 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-10-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 19-10-2010
• Assessment Year: 2007-2008
• Appeal Filed On: 29-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMRENDRA KUMAR
• Assessee Lawyers: S D KAPILA; R R MAURYA
• Section: 143(3); 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH H : NEW DELHI BEFORE SHRI A.D.JAIN, JM AND SHRI R.C.SHARMA, AM ITA NO.3212/DEL/2010 ASSESSMENT YEAR : 2007-08 ASSTT.COMMISSIONER OF INCOME TAX, CIRCLE-23(1), NEW DELHI. VS. M/S U.S.GRANITE, 2A, SHANKAR MARKET, CONNAUGHT CIRCUS, NEW DELHI. PAN NO.AABFU0211E. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AMRENDRA KUMAR, SR.DR. RESPONDENT BY : SHRI S.D.KAPILA AND SHRI R.R.MAURYA , ADVOCATES. ORDER PER R.C.SHARMA, AM : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) DATED 29.4.2010 FOR THE AY 2007-08, IN THE MATTER OF ORDE R PASSED U/S 143(3) OF THE IT ACT, WHEREIN FOLLOWING GROUND HAS BEEN TAKEN BY THE REVENUE :- ON THE FACTS AND ON THE CIRCUMSTANCES OF THE CASE THE LD.CIT(A) HAS ERRED IN LAW AND ON THE FACTS IN DELETING THE DISAL LOWANCE OF RS.1,97,89,776/- CLAIMED BY THE ASSESSEE AS DEDUCTI ON U/S 10B OF THE I.T.ACT. 2. AT THE OUTSET, LEARNED AR PLACED ON RECORD THE O RDER OF THE TRIBUNAL IN ASSESSEES OWN CASE WHEREIN EXACTLY SIMILAR ISSUE H AS BEEN DECIDED IN FAVOUR OF THE ASSESSEE FOR THE AY 2006-07, ORDER DATED 30.9.2 009. 3. ON THE OTHER HAND, LEARNED DR SHRI AMRENDRA KUMA R VEHEMENTLY CONTENDED THAT THE FINANCE ACT 2009 HAS INSERTED SE CTION 2(29BA) W.E.F. 1.4.2009 TO WIDEN THE DEFINITION OF MANUFACTURE/PRODUCTION. AS PER LEARNED DR, AFTER INSERTION OF SUB-SECTION 2(29BA), THE DEFINITION OF THE WORD PRODUCTION HAS BEEN ITA-3212/DEL/2010 2 WIDENED. HE FURTHER SUBMITTED THAT EVEN THOUGH SEC TION 2(29BA) WAS INSERTED W.E.F. 1.4.2009, BUT IN TERMS OF DECISION OF HON'BL E KERALA HIGH COURT REPORTED AT 36 DTR 402, THE AMENDMENT IS RETROSPECTIVE AND THER EFORE APPLICABLE EVEN FOR THE AY 2007-08 UNDER CONSIDERATION. 4. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND GON E THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE ISSUE AS TO WHETHER ASS ESSEE FIRM ENGAGED IN THE BUSINESS OF MANUFACTURE AND EXPORT OF GRANITE AND M ARBLE MONUMENTS WAS ELIGIBLE FOR CLAIM OF DEDUCTION U/S 10B, HAS BEEN CONSIDERED BY THE TRIBUNAL AND AFTER APPLYING THE DECISION OF HON'BLE SUPREME COURT IN T HE CASE OF INDIA CINE AGENCIES 308 ITR 98, THE TRIBUNAL IN ITS ORDER DA TED 30.9.2009 FOR THE AY 2006- 07, HELD AS UNDER:- 3.4 WE HAVE CONSIDERED THE RIVAL CONTENTIONS IN TH E LIGHT OF MATERIAL PLACED BEFORE US AND ALSO GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. FROM THE RECORD WE FOUND THAT A SSESSEE WAS ENGAGED IN BUSINESS OF MANUFACTURING AND EXPORT OF GRANITE MARBLES AND GRANITE MONUMENTS. FOR THIS PURPOSE, THE ASSES SEE USED TO PROCURE ROUGH BLOCKS FROM QUERIES, THEN THESE ARE T HE DRESSED, CUT INTO SLABS. WHICH ARE THEN RESINED AND POLISHED TO GIVE SLABS ETC. 3.5 MONUMENTS WERE ALSO MANUFACTURED OUT OF GRANITE AND MARBLES WHICH ARE DISTINCTLY DIFFERENT FROM MARBLES AND GRANITE SO CUT AND POLISHED WERE USED FOR CONSTRUCTION. MANUF ACTURING BY THE ASSESSEE INVOLVED THE FOLLOWING PROCESS:- 1. BLOCKS ARE CUT FOR SLABS BY GANGSAW. 2. THE NEXT PROCESS IS GRINDING. 3. AFTER GRINDING, RESIN IS APPLIED TO SEAL CRACKS ETC . 4. THE NEXT PROCESS IS POLISHING. 5. AFTER POLISHING, TRIMMING IS DONE. 6. PACKING AS PER CUSTOMER REQUIREMENT. 7. NEW MATERIAL READY TO EXPORT AND SALE. 3.6 AFTER CARRYING OUT THESE OPERATIONS, THE FOLLOW ING ARE THE DIFFERENT TYPES OF PRODUCTS WHICH ARE SOLD TO THE C LIENTS AS PER THEIR REQUIREMENTS:- 1. POLISHED GRANITE TABLE TOPS 2. POLISHED GRANITE TILES. 3. POLISHED GRANITE SLABS. 4. POLISHED GRANITE MONUMENTS. ITA-3212/DEL/2010 3 5. POLISHED GRANITE FOR CUT TO SIZE PROJECTS. 3.7 THESE FINISHED PRODUCTS ARE ABSOLUTELY DIFFEREN T FROM THE ROUGH BLOCKS OF THE GRANITES PROCURED WHICH IS BEIN G CONVERTED INTO DIFFERENT TYPES OF PRODUCTS AND THEN SOLD BY THE AS SESSEE FIRM. THUS, THE OUT PUT OF THE FINISHED PRODUCT IS TOTALLY A DI FFERENT COMMERCIAL PRODUCT AS COMPARED TO THE RAW GRANITE BLOCKS WHICH CONSTITUTED THE INPUT. 3.8 THE RELEVANT ASSESSMENT YEAR UNDER CONSIDERATIO N, IS 2006-07, WHILE DISALLOWING THE ASSESSEES CLAIM OF DEDUCTION U/S 10B, THE ASSESSING OFFICER HAS IGNORED EXPLANATION-4 OF SECT ION 10B, WHICH WAS INSERTED BY FINANCE ACT, 2003 AND IS EFFECTIVE FROM 01.04.2004 AND CLARIFIES THAT MANUFACTURE OR PRODUCE IN RELA TION TO 10B SHALL INCLUDE CUTTING AND POLISHING OF PRECIOUS AND SEMI PRECIOUS STONES. THE CASE LAW REFERRED BY THE ASSESSING OFFICER PERT AINS TO THE ASSESSMENT YEAR PRIOR TO THE INSERTION OF EXPLANATI ON-4 OF SECTION 10B, THEREFORE, NOT RELEVANT AT ALL. A DETAILED FI NDING HAS BEEN RECORDED BY LEARNED CIT(A) AFTER DEALING WITH ALL T HE CASE LAWS REFERRED BY THE ASSESSING OFFICER, AND AFTER REFERR ING TO THE RECENT JUDICIAL PRONOUNCEMENTS AS WELL AS DECISION OF HON BLE SUPREME COURT IN THE CASE OF CINE AGENCIES (SUPRA) WHEREIN CONCEPT OF MANUFACTURE OF THE PRODUCTION HAS BEEN ELABORATELY DEALT WITH. IT WAS HELD BY HONBLE SUPREME COURT THAT ONCE THE GOO DS THAT EMERGED AFTER SEVERAL STEPS OF PROCESSING HAS A DIS TINCT NAME, USE AND CHARACTER, THE SAME OUGHT TO BE CONSIDERED AS M ANUFACTURE. THE MOMENT THERE IS TRANSFORMATION INTO AN NEW COMMODIT Y COMMERCIALLY KNOWN AS A DISTINCT AND SEPARATE COMMO DITY HAVING ITS OWN CHARACTER ITS USE AND NAME, THE SAME HAS TO BE CONSIDERED AS MANUFACTURE. 3.9 IN VIEW OF THE ABOVE DISCUSSION AND KEEPING IN VIEW THE DETAILED FINDING RECORDED BY THE CIT(A), WHICH COUL D NOT BE CONTROVERTED BY DR, WE DO NOT FIND ANY INFIRMITY I N HIS ORDER. 5. IT IS CLEAR FROM THE ABOVE THAT MARBLE AND GRANI TE MONUMENTS MANUFACTURED OUT OF GRANITE AND MARBLE BLOCKS WERE DIFFERENT FRO M MARBLES AND GRANITES. THE ACTIVITY OF ASSESSEE WAS HELD TO BE MANUFACTURE FOR THE PURPOSE OF CLAIM OF DEDUCTION U/S 10B. WITH REGARD TO OBJECTION OF THE LEARNED DR THAT SITUATION HAS CHANGED AFTER INSERTION OF SECTION 2(29BA) VIDE FIN ANCE ACT, 2009, WHICH IS RETROSPECTIVE IN VIEW OF THE DECISION OF HON'BLE KE RALA HIGH COURT REPORTED AT 36 DTR 402, WE ARE UNABLE TO AGREE WITH THIS CONTENTIO N OF LEARNED DR INSOFAR AS THIS AMENDMENT HAS ALREADY BEEN CONSIDERED BY THE HON'BL E SUPREME COURT IN THE CASE ITA-3212/DEL/2010 4 OF ARYAN TILES & MARBLES 320 ITR 79 WHEREIN THIS AMENDMENT WAS CONSIDERED AND HON'BLE SUPREME COURT OBSERVED THAT IN VIEW OF THE NUMEROUS JUDGMENTS OF COURTS WITH REGARD TO DEFINITION OF WORD PRODUCTIO N WHICH IS WIDER IN SCOPE AS COMPARED TO THE WORD MANUFACTURE, THE PARLIAMENT ITSELF HAS TAKEN NOTE OF THE GROUND REALITY AND HAS AMENDED THE PROVISIONS OF IN COME-TAX ACT, 1961 BY INSERTING SECTION 2(29BA) VIDE FINANCE ACT 2009 W.E .F. 1.4.2009. THUS, NO QUESTION ARISES FOR TREATING THIS AMENDMENT AS RETR OSPECTIVE IN NATURE. 6. AS THE ISSUE IS SQUARELY COVERED BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE IMMEDIATELY PRECEDING ASSESSMENT Y EAR, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A) WHO HAS FOLLOWED THE ORDER OF THE TRIBUNAL IN ITS ORDER DATED 29.4.2010. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 20 TH OCTOBER, 2010. SD/- SD/- (A.D.JAIN) (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 20.10.2010. VK. COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR ITA-3212/DEL/2010 5