The Assistant Commissioner of Income Tax, Srinagar V. Sh. Lakesh Handa M/s. Shree Handa Ornaments, Jammu

ITA 332/ASR/2015

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1442 (ITAT-AMRITSAR)
• Duration Of Justice: 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-12-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 22-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K V K SINGH
• Assessee Lawyers: PARVEEN JAIN
• Keywords: Business income
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH; AMRITSAR (SMC) (CAMP : JAMMU) BEFORE SH. A.D. JAIN, JUDICIAL MEMBER AND SH. T.S. KAPOOR, ACCOUNTANT MEMBER ITA NO.332(ASR)/2015 ASSESSMENT YEAR:2010-11 PAN: ASSISTANT COMMISSIONER OF INCOME TAX, VS. SH.LOKESH HANDA, CIRCLE, SRINAGAR. M/S. SHREE HANDA ORNAMENTS, JAIN BAZAR, JAMMU. (APPELLANT) (RESPONDENT) APPELLANT BY:SH. K.V.K. SINGH, DR RESPONDENT BY:SH. PARVEEN JAIN, ADVOCATE DATE OF HEARING: 04/12/2015 DATE OF PRONOUNCEMENT: 10/12/2015 ORDER PER A.D. JAIN, JM THIS IS THE DEPARTMENTS APPEAL FOR THE ASSESSMENT YEAR 2010-11 AGAINST THE ORDER DATED 18/02/2015, PASSED BY THE L D. CIT(A), JAMMU. THE DEPARTMENT HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. WHETHER THE CIT(A), JAMMU WAS RIGHT IN LAW IN D ELETING THE ADDITION MADE BY THE AO U/S 80IB OF THE ACT. 2. WHETHER THE CIT(A), JAMMU WAS RIGHT IN LAW IN DE LETING THE ADDITION MADE BY THE AO U/S 80IB OF THE ACT, AS THE CONVERSION OF 24K GOLD INTO 22K GOLD DOESNT AMOUNT THE MANUFACTURE AND AS IS NOT ENTITLED TO DEDUCTION U/S 80IB OF THE ACT. 3. WHETHER THE CIT(A), JAMMU WAS RIGHT IN LAW IN DE LETING THE ADDITION MADE BY THE AO U/S 80IB OF THE ACT., IN VI EW OF THE JUDGMENT IN THE CASE OF DELHI CLOTH AND GENERAL MIL LS CO. ITA NO.332(ASR)/2015 2 LTD. WHEREIN IT HAS BEEN QUOTED THAT MANUFACTURE IMPLIES CHANGE BUT EVERY CHANGE IS NOT MANUFACTURE AND YET EVERY CHANGE OF AN ARTICLE IS THE RESULT OF TREATMENT LAB OUR AND MANIPULATION. 4. WHETHER THE CIT(A), JAMMU WAS RIGHT IN LAW IN DE LETING THE ADDITION MADE BY THE AO U/S 80IB OF THE ACT., IN VI EW OF THE JUDGMENT IN THE CASE OF DY. CIT VS. PIO FOOD PACKER WHEREIN THE HONBLE APEX COURT HAS LAID DOWN THAT WHERE THE RE IS NO ESSENTIAL DIFFERENCE IN THE IDENTITY OR ORIGINAL C OMMODITY HAS BEEN CONSUMED IN THE MANUFACTURE OF ANOTHER ALTHOUG H IT HAS UNDERGONE A DEGREE OF PROCESSING IT MUST BE REG ARDED AS STILL RETAINING THE ORIGINAL IDENTITY. 5. WHETHER THE CIT(A), JAMMU WAS RIGHT IN LAW IN DE LETING THE ADDITION MADE BY THE AO U/S 80IB OF THE ACT., IN VI EW OF THE JUDGMENT IN THE CASE OF M/S. VASANTHA & CO. VS. STA TE OF MADRAS (1963) 14 STC 696 TO 701 (MAD.) WHEREIN IT W AS HELD THAT SUGAR CANDY IS PURER FORM OF SUGAR AND IS NOT A NEW COMMODITY MADE. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS IN THE BUSINESS OF MAKING GOLD ORNAMENTS FROM RAW GOLD(24 KT TO 22 KT) AND DURING THE YEAR UNDER CONSIDERATION, HAD SHOWN TOTAL SALES OF RS.28,20,43,265/- AND PURCHASES OF RS.27,34,11,675/- AND CLAIMED DEDU CTION U/S 80IB OF THE I.T. ACT, OF RS.1,08,53,115/-, SHOWING ITS ACTI VITY AS MANUFACTURE OF GOLD ORNAMENTS. DURING ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO EXPLAIN AND SHOW CAUSE AS TO HOW DEDUCTION U/S 8 0IB HAD BEEN CLAIMED ON CONVERSION OF GOLD INTO ORNAMENTS AND WH Y THE SAME MAY NOT BE DISALLOWED. IN RESPONSE, THE ASSESSEE FILED A RE PLY, STATING THEREIN, THAT THE ASSESSEE PURCHASES 24 KT. GOLD WHICH IS CO NVERTED INTO 22 KT GOLD BY ADDING 7% COPPER AND 3% SILVER IN IT AND IS THUS MANUFACTURING GOLD ORNAMENTS. THE ASSESSEE ALSO PLACED RELIANCE O N VARIOUS JUDICIAL PRONOUNCEMENTS. THE AO, AFTER CONSIDERING THE SUBMI SSIONS OF THE ASSESSEE AND JUDICIAL PRONOUNCEMENTS, HELD THAT CO NVERSION OF 24 KT GOLD INTO 22 KT GOLD DOES NOT AMOUNT TO MANUFACTURE AND, AS SUCH, THE ASSESSEE IS NOT ENTITLED TO DEDUCTION U/S 80IB OF T HE ACT. ACCORDINGLY, THE AO DISALLOWED THE DEDUCTION U/S 80IB OF THE ACT, CL AIMED BY THE ITA NO.332(ASR)/2015 3 ASSESSEE AND AN AMOUNT OF RS.1,08,53,115/- WAS SUBJ ECTED TO TAX. THE LD. CIT(A) DELETED THE DISALLOWANCE. 3. THE LD. DR PLACED RELIANCE ON THE ORDER OF THE A SSESSING OFFICER AND CONTENDED THAT THE CONVERSION OF 24KT GOLD INTO 22 KT GOLD DID NOT AMOUNT THE MANUFACTURE AND WAS NOT ENTITLED TO DEDU CTION U/S 80-IB OF THE ACT. 4. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER H AND, PLACED STRONG RELIANCE ON THE ORDER OF THE LD. CIT(A). HE FURTHER CONTENDED THAT THE ISSUE UNDER CONSIDERATION IS SQUARELY COVERED BY TH E DECISION OF THE ITAT, AMRITSAR BENCH, IN THE CASE OF ITO, WARD-2( 3), JAMMU VS. SH. SANJAY JAIN, PROP. GANESH JEWELLERS, JAMMU, PASSED IN ITA NO.407(ASR)/2012, DATED 19.02.2013. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE PER USED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ISSUE INVOLV ED IN THE PRESENT APPEAL IS SQUARELY COVERED BY THE ORDER OF THIS BENCH OF T HE TRIBUNAL IN ITA NO.407(ASR)/2012, DATED 19.02.20913, IN THE CASE OF ITO WARDS 2(3), JAMMU VS. SH. SANJAY JAIN, JAMMU (SUPRA). THE LD. C IT(A) HAS ALSO FOLLOWED THE AFORESAID ORDER OF THE TRIBUNAL. THE R ELEVANT FINDINGS OF THE TRIBUNAL ARE AS FOLLOWS: 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED RELEVANT RECORD AVAILABLE WITH US. WE ARE OF THE VIEW THAT T HE LD. FIRST APPELLATE AUTHORITY HAS DECIDED THE ISSUE IN DISPUT E IN FAVOUR OF THE ASSESSEE BY RESPECTFULLY FOLLOWING THE VARIOUS DECI SIONS RENDERED BY THE VARIOUS BENCHES OF THE TRIBUNAL AND THE HONB LE HIGH COURTS. FOR THE SAKE OF CONVENIENCE, THE FINDINGS OF THE L D. CIT(A) GIVEN AT PAGES 3 & 4 OF THE ORDER ARE REPRODUCED AS UNDER: 4. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MAD E AND FIND THAT ASSESSEE IS TO SUCCEED. EVEN BEFORE THE DEFINITION OF MANUFACTURING WAS NOT ON THE STATUTE THE DIRECT DECISION ITA NO.332(ASR)/2015 4 OF HONBLE DELHI HIGH COURT AND HONBLE ITAT, MUMBA I AS REFERRED ABOVE HELD THAT CONVERSION OF GOLD INTO OR NAMENTS AMOUNTED TO MANUFACTURE. IN THE CASE OF M/S. LOV ELESH JAIN AND OTHERS 204 TAXMAN 134 THE ISSUE WAS ELAB ORATELY DISCUSSED BY THE HONBLE DELHI HIGH COURT AS UNDER: THE ACTIVITY FOR CONVERTING GOLD BRICKS, BISCUITS OR BARS, INTO JEWELLERY AMOUNTS TO PRODUCTION OR MANUFACTURE OF A NEW ARTICLE. THE GOLD, SILVER OR PLATINUM IN BAR, BISC UITS OR BRICK FORM, IS CONVERTED BY MANUAL LABOUR AND BY THE USE OF IMPLEMENTS/TOOLS OR BY MACHINERY, CULMINATING INTO AN ENTIRELY NEW ARTICLE/THING CALLED JEWELLERY OR ORNA MENTS. JEWELLERY IS A WEARABLE ITEM AND IS USED BY BOTH ME N AND WOMEN. THIS PROCESS HAS BEEN REFERRED TO ABOVE IN P ARAGRAPH 6.4, WHILE ADVERTING TO THE FACTUAL MATRIX IN THE C ASE OF SHASHI KANT MITTAL.JEWELLERY/ORNAMENTS IN COMMON PARLANCE OR IN COMMERCIAL TERMS HAS A DISTINCT IDENTITY, TREATED A S A NEW ARTICLE AND NOT THE SAME AS RAW OR STANDARD GOLD IN THE FORM OF BRICKS, BISCUITS OR BARS. AS A RESULT OF THE SAI D PROCESSING A COMMERCIALLY DIFFERENT SALEABLE PRODUCT COMES INTO EXISTENCE. JEWELLERY HAS A DISTINCTIVE NAME, CHARACTER AND USE . IT CAN NO LONGER BE REGARDED AS THE ORIGINAL COMMODITY, HAS SEPARATE CONSUMERS AND IS A NEW COMMERCIAL COMMODITY. THE AC TIVITY OF THE RESPONDENT ASSESSEE AMOUNTS TO MANUFACTURE OR PRODUCTION AND, THEREFORE, QUALIFIES FOR DEDUCTION U/S 10A/10B. 4.1. ALSO, IN THE CASE OF M/S. TRIBHUWAN DASS BHIMJ EE JHAVERI 110 TTJ 942, THE HONBLE ITAT, MUMBAI HAS HELD AS UNDER: DEDUCTION U/S 80IB ALLOW ABILITY INDUSTRIAL UN DERTAKING OR BRANCH OFFICE-ASSESSEES UNIT AT HYDERABAD IS GE TTING THE JEWELLERY MADE FROM KARIGARS AT MUMBAI UNDER THE SUPERVISION AND CONTROL OF ITS EMPLOYEES WITH THE H ELP OF MUMBAI OFFICE (HEAD OFFICE) OF THE ASSESSEE- OPERA TIONS CARRIED ON BY THE HYDERABAD UNIT CANNOT BE IGNORED MERELY BECAUSE THE MUMBAI OFFICE IS FACILITATING ITS ACT IVITIES THEREFORE, ASSESSEE IS ENTITLED TO DEDUCTION UNDER SECTION 80IB IN RESPECT OF HYDERABAD UNIT. 4.2. IN THE CASE OF PUNEET SACHDEVA IN APPEAL NO.25 3/10-11 DATED 29.02.2012, I HAVE ALSO HELD THAT THE CONVERSION O F GOLD INTO GOLD ORNAMENTS WAS MANUFACTURING, RELYING ON THE O RDER OF HONBLE HIGH COURT AND HONBLE ITAT, MUMBAI AS REFERRED AB OVE. ITA NO.332(ASR)/2015 5 4.3. FURTHER, THE DEFINITION OF MANUFACURE IS IN SERTED W.E.F. 01.04.2009 IN SECTION 2(24BA) OF I.T.ACT AS UNDER: MANUFACTURE WITH ITS GRAMMATICAL VARIATIONS MEANS A CHANGE IN NON-LIVING PHYSICAL OBJECT OR ARTICLE OR THING:- A) RESULTING IN TRANSFORMATION OF THE OBJECT OR ARTICL E OR THING INTO A NEW AND DISTINCT OBJECT OR ARTICLE OR THING HAVING A DIFFERENT NAME, CHARACTER AND USE, OR B) BRINGING INTO EXISTENCE OF A NEW AND DISTINCT OBJEC T OR ARTICLE OR THING WITH DIFFERENT CHEMICAL COMPOSITIO N OR INTEGRAL STRUCTURE. 4.4. THE CONDITIONS ARE ALTERNATE TO EACH OTHER AND ON S ATISFYING ANY ONE OF THE TWO THE ACTIVITY WOULD BE TREATED A S MANUFACTURE . IN THE PRESENT CASE 2(29BA)(A) OF I .T. ACT IS CLEARLY SATISFIED AS THERE IS TRANSFORMATION OF24 K GOLD INTO NEW AND DISTINCT OBJECT AS ORNAMENT WHICH HAS DIFFE RENT NAME, CHARACTER IN AND USAGE. 4.5. THE AO HAS NOT COMMENTED IN HIS ORDER AS TO HOW THE ACTIVITY OF ASSESSEE IS NOT COVERED BY THE DEFINITION OF MA NUFACTURE. HIS RELIANCE IS ON CASE LAWS WHICH ARE NOT DIRECT O N THE ISSUE WHEREAS THE DECISION OF HONBLE DELHI HIGH COURT A ND HONBLE ITAT, MUMBAI ARE DIRECT ON THE ISSUE WHICH ARE RELI ED BY ME IN CASE OF PUNEET SACHDEV IN APPEAL NO.253/10-11 DA TED 29.02.2012. FOLLOWING THE ABOVE, I HOLD THAT ASSESS EE WAS ENGAGED IN MANUFACTURE AND WAS ENTITLED TO DEDUCT ION U/S 80IB OF I.T.ACT. I AM NOT GOING INTO THE ISSUE OF CONSISTENCY AS RAISED BY THE LD. REPRESENTATIVE OF ASSESSEE AS THE MATTER STANDS DECIDED ON MERITS. GROUND NO. 1 TO 6 STANDS DISCLOSED. 5. KEEPING IN VIEW THE AFORESAID FINDINGS, WE ARE O F THE VIEW THAT NO INTERFERENCE IS CALLED FOR IN THE WELL REASONED ORDER PASSED BY THE LD. FIRST APPELLATE AUTHORITY, WHO HAS DECIDED THE ISSUE IN DISPUTE IN FAVOUR OF THE ASSES SEE, BY RESPECTFULLY FOLLOWING THE DECISIONS OF THE HONBLE HIGH COURT AS WELL AS ITAT, MUMBAI BENCH. THEREFORE, WE UPHOLD THE IMPUGNED ORDER BY DISMISSING THE APPEAL FILED BY TH E REVENUE. ITA NO.332(ASR)/2015 6 6. THE SAID TRIBUNAL ORDER HAS NOT BEEN SHOWN TO HA VE BEEN EITHER UPSET, OR EVEN STAYED ON APPEAL. THE FACTS THEREIN HAVE ALSO NOT BEEN STATED TO BE ANY DIFFERENT FROM THOSE BEFORE US. 7. THUS, RESPECTFULLY FOLLOWING THE AFORESAID ORDER OF THE TRIBUNAL IN THE CASE OF ITO, WARD-2(3), JAMMU VS. SANJAY JAIN, JAMMU (SUPRA) WHICH HAS ALSO BEEN FOLLOWED BY THE LD. CIT(A), AND IS SQUARELY APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WE DISMISS THE APPEAL OF THE REVENUE. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 10TH DECE MBER, 2015. SD/- SD/- (T.S.KAPOOR) (A.D. JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 10/12/2015 /SKR/ COPY OF ORDER FORWARDED TO: 1. THE ASSESSEE:SH. LOKESH HANDA, JAIN BAZAR, JAMMU . 2. THE ACIT, CIRCLE SRINAGAR. 3. THE CIT(A), JAMMU 4. THE CIT, JAMMU 5. THE SR. DR, ITAT, ASR.