ITO 4(3)(3), MUMBAI V. VAIBHAVLAXMI FILAMENTS P. LTD, MUMBAI

ITA 3591/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7853 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-02-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2006-2007
• Appeal Filed On: 02-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S PAL
• Assessee Lawyers: N M AGARWAL
• Keywords: Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F : MUMBAI BEFORE SHRI D.K. AGARWAL, (JM) AND SHRI RAJENDRA SINGH ,(AM) ITA NO.3591/MUM/2009 ASSESSMENT YEAR : 2006-07 INCOME TAX OFFICER-4(3)(3) 6 TH FLOOR, ROOM NO.637 AAYAKAR BHAVAN MUMBAI-400 020. ..( APPELLANT ) VS. M/S. VAIBHAVLAXMI FILAMENTS PVT. LTD. SHRI MANSION, 3 RD FLOOR 259 KALBADEVI ROAD MUMBAI-400 002. ..( RESPONDENT ) P.A. NO. (AAACV 4074 A) APPELLANT BY : MS. S. PAL RESPONDENT BY : SHR I N.M. AGARWAL O R D E R PER D.K. AGARWAL (JM). THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 16.3.2009 PASSED BY THE LD. CIT(A) FOR TH E ASSESSMENT YEAR 2006-07 TAKING FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN HOLDING THAT T WISTING AND TEXTURISING OF YARN AMOUNTED TO MANUFACTURING F OR THE PURPOSE OF GRANTING DEDUCTION U/S.80IB. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE IMPUGNED ORDER OF THE LD. CIT(A) IS CONTR ARY TO LAW AND CONSEQUENTLY MERITS TO BE SET ASIDE AND THA T OF THE ASSESSING OFFICER BE RESTORED. ITA NO.3591/M/09 A.Y: 06-07 2 2. AT THE TIME OF HEARING BOTH PARTIES HAVE AGREED T HAT THE IMPUGNED ISSUE IS FULLY COVERED BY THE JUDGMENT OF HON BLE JURISDICTIONAL HIGH COURT IN CIT VS. EMPTEE POLY-YARN P. LTD.(2008) 305 ITR 309(BOM.), THEREFORE THE ISSUE MAY BE DECIDED ACCORDINGLY. 3. HAVING CAREFULLY HEARD THE RIVAL PARTIES AND PERUSI NG THE MATERIAL AVAILABLE ON RECORD WE FIND THAT THERE IS NO DISPUTE THAT THE ASSESSEE COMPANY IS A MANUFACTURING COMPANY AND IS ENGAGED IN T HE MANUFACTURING OF SYNTHETICS YARN. IT CLAIMED DEDUCTION OF RS.44,50,087/- U/S.80IB OF THE INCOME TAX ACT, 1961(TH E ACT), ON THE GROUND THAT TEXTURISED AND TWISTED YARN IS COMPLETEL Y A NEW PRODUCT AS COMPARED TO PARTLY ORIENTED YARN(POY) WHICH IS JUST A N INPUT MATERIAL OR FEED-BACK MATERIAL. HOWEVER, THE AO WAS O F THE VIEW THAT THERE IS NO CHANGE IN THE FORM OF THE YARN, IT WAS A Y ARN PRIOR TO THESE ACTIVITIES AND IT CONTINUES TO REMAIN YARN AT THE END OF THE ACTIVITY. THE ONLY DIFFERENCE IS THAT IT CAN BE DESCRIBED AS TEXTU RISED YARN. THIS IN NO MANNER CAN BE DESCRIBED TO BE A MANUFACTURING ACT IVITY AND ACCORDINGLY HE DISALLOWED THE CLAIM OF DEDUCTION U/S.80 IB OF THE ACT. HOWEVER, ON APPEAL THE LD. CIT(A) FOLLOWING THE DECISI ON OF HONBLE JURISDICTIONAL HIGH COURT IN EMPTEE POLY-YARN P. LTD .(SUPRA), HAS HELD THAT THE PROCESS APPLIED TO THE POY EITHER FOR THE PUR POSES OF TEXTURING OR TWISTING CONSTITUTES MANUFACTURE AS THE ARTICLE PRODUCE D IS ITA NO.3591/M/09 A.Y: 06-07 3 RECOGNISED AS A NEW AND DISTINCT COMMODITY IN THE TRADE A ND ACCORDINGLY HE DIRECTED THE AO TO ALLOW DEDUCTION U/S.8 0IB. 4. IN EMPTEE POLY-YARN P. LTD.(SUPRA), IT HAS BEEN H ELD (PAGE310 HEAD NOTES) .........THE PROCESS WHICH POY UNDERGOES IN THE PROCESS OF TEXTURISING AND TWISTING RESULTS IN A NEW AND DISTINCT PRODUCT AND REGARDED IN THE TRADE AS DISTINCT FROM THE COMMODITY INVOLVED IN THE MANUFACTURE. THE PROCESS AMOUNTS TO MANUFACTURE AS T HE ORIGINAL COMMODITY LOSSES ITS IDENTITY. THE ASSESSEE WAS ENT ITLED TO SPECIAL DEDUCTION U/S.80IA. IN THE ABSENCE OF ANY DISTINGUISHING FEATURE BROUGHT O N RECORD BY THE REVENUE WE RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT(SUPRA), HOLD THAT THE PROCESS OF TEXTURISING AND TWISTING YARN AMOUNTS TO MANUFACTURE AS THE ORIGI NAL COMMODITY LOOSES ITS IDENTITY AND ACCORDINGLY THE ASSESSEE IS ENTITLED TO THE DEDUCTION U/S.80IB OF THE ACT. THE ORDER PASSED BY THE LD. CIT(A) IN ALLOWING THE SAME DOES NOT CALL FOR ANY INTERFERENCE. THE GROUNDS RAISED BY THE REVENUE ARE, THEREFORE, REJECTED. 5. IN THE RESULT, THE REVENUES APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 01.02.2010. SD/- SD/- (RAJENDRA SINGH) ( D.K. AGARWAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED:01.02.2010. JV. ITA NO.3591/M/09 A.Y: 06-07 4 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR F BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI. ITA NO.3591/M/09 A.Y: 06-07 5 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 7.1.10 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 8.1.10 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON 01-02-10 SR.PS/PS 7. FILE SENT TO THE BENCH CLERK 03-02-10 SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER