The DCITNavsari Circle, Navsari V. M/s. Artistic Tiles Pvt.Ltd., Navsari

ITA 3597/AHD/2008

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6053 (ITAT-AHMEDABAD)
• Duration Of Justice: 8 year(s) 5 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-04-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 23-03-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 30-10-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ORS ASST YEAR
• Keywords: Rejection of books of accounts; Depreciation; Opportunity of being heard; Principle of natural justice; Competent authority; Tax effect
• Section: 143(3); 133A; 10B; 10

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD , , BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER SL. NOS. IITA NO(S). ASSESSMENT YEAR (S) APPEAL(S) BY APPELLANT VS. RESPONDENT APPELLANT RESPONDENT 1. 3597/AHD/2008 2005-06 DCIT NAVSARI CIRCLE NAVSARI ARTISTIC TILES PVT.LTD. AT BORIACH, PO ASTAGAM TA. DI.NAVSARI PAN: AAACU 7344J 2. 3726/AHD/2008 2001-02 ARTISTIC STONE PVT.LTD. C/O.SHRI MANOJ C.PATEL AT BORIACH, POST.ASTAGAM PAN:AACCA 3987H JCIT, NAVSARI CIRCLE NAVSARI 3. 3727/AHD/2008 2002-03 -DO-ASSESSEE -DO-REVENUE 4. 3728/AHD/2008 2005-06 -DO-ASSESSEE -DO-REVENUE 5. 3729/AHD/2008 2005-06 ARTISTIC TILES P.LTD., NAVSARI -DO-REVENUE 6. 1502/AHD/2011 2004-05 DCIT NAVSARI CIRCLE, NAVSARI ARTISTIC TILES P.LTD. NAVSARI 7. 1503/AHD/2011 2006-07 -DO-REVENUE -DO-ASSESSEE 8. 1504/AHD/2011 2006-07 -DO-REVENUE -DO-ASSESSEE 9. 1542/AHD/2011 2003-04 ARTISTIC STONE P.LTD., NAVSARI THE ACIT NAVSARI 10. 1543/AHD/2011 2004-05 -DO-ASSESSEE JCIT NAVSAR I 11. 1545/AHD/2011 2006-07 -DO-ASSESSEE DCIT NAVSAR I 12. 940/AHD/2014 2007-08 ACIT NAVSARI ARTISTIC STO NE PVT.LTD. 13. 1026/AHD/2014 2003-04 ARTISTIC STONE ACIT NAVSA RI ITA NO.3597/AHD/2008 & 14 ORS. DCIT VS. ARTISTIC TILES PVT.LTD. & ORS. ASST.YEAR 2005- 06 & ORS. - 2 - P.LTD. 14. 1027/AHD/2014 2004-05 ARTISTIC STONE P.LTD. ACIT NAVSARI 15. 1030/AHD/2014 2006-07 ARTISTIC TILES P.LTD. ACIT NAVSARI A SSESSEE BY : SHRI SAKAR SHARMA, AR REVENUE BY : SHRI JAMES KURIAN ADDL.CIT-DR !' / DATE OF HEARING 24/03/2017 #$%& !' / DATE OF PRONOUNCEMENT 28/04/2017 / O R D E R PER PRADIP KUMAR KEDIA, AM: THE ABOVE CAPTIONED BUNCH OF APPEALS RELATE TO VA RIOUS ASSESSMENT YEARS (AYS) RANGING FROM 2001-02 TO 2007 -08 IN THE CASE OF TWO CONNECTED-ASSESSEES AGAINST THE RESPECTIVE ORDE RS OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-VALSAD [CIT(A) IN SHORT]. THE REVENUE HAS ALSO FILED APPEALS AS CAPTIONED. SINC E THE ISSUES INVOLVED ARE BROADLY SIMILAR, ALL THE APPEALS WERE HEARD TOG ETHER AND ARE BEING DISPOSED OF BY WAY OF CONSOLIDATED ORDER FOR THE S AKE OF CONVENIENCE. 2. THE ITA NO.1542/AHD/2011 FOR ASSESSMENT YEAR (A Y) 2003-04 IS TAKEN AS A LEAD YEAR FOR THE ADJUDICATION PURPO SES. ITA NO.3597/AHD/2008 & 14 ORS. DCIT VS. ARTISTIC TILES PVT.LTD. & ORS. ASST.YEAR 2005- 06 & ORS. - 3 - ITA NO.1542/AHD/2011 AY 2003-04 ASSESSEES APP EAL 3. THE CAPTIONED APPEAL ARISES FROM THE ORDER OF T HE CIT(A)-VALSAD DATED 28/01/2011. THE GROUNDS OF APPEAL RAISED BY T HE REVENUE READ AS UNDER:- 1. THE LD.CIT(A) ERRED ON FACTS AND IN LAW IN CONF IRMING DISALLOWANCE OF DEDUCTION CLAIMED U/S.10B OF THE ACT AMOUNTING T O RS.2,90,55,980/-. 2. THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN CON FIRMING THE DISALLOWANCE OF TRAVELLING EXPENSES AND CAR EXPENSE S AMOUNTING TO RS.9,00,000/-. 3. THE CIT(A) ERRED ON FACTS AND IN LAW IN NOT ADJ UDICATING GROUND RELATING TO REJECTION OF BOOKS OF ACCOUNT BY ASSESS ING OFFICER. 3. GROUND NO.1 CONCERNS DISALLOWANCE OF DEDUCTION C LAIMED UNDER S.10B OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFE RRED TO AS 'THE ACT') AMOUNTING TO RS.2,90,55,980/-. 4. BRIEFLY STATED, THE ASSESSEE-COMPANY IS STATED T O BE 100% EXPORT ORIENTED UNIT (EOU). IT IS STATED TO BE ENGAGED IN MANUFACTURING OR PRODUCTION OF MOSAIC, BORDERS AND PATTERS OF MARBLE , GRANITES AND STONES ON ITS MANUFACTURING FACILITY SITUATED AT NAVSARI I N THE STATE OF GUJARAT. APART FROM EXPORT OF TILES AND MOSAIC ETC. THE ASSE SSEE IS ALSO STATED TO HAVE EXPORTED PLANT & MACHINERY AMOUNTING TO RS.69, 45,780/- AFTER FABRICATING THE SAME IN FACTORY SHADE IN THIS ASSES SMENT YEAR. THE ASSESSEE CLAIMS TO HAVE REGISTERED ITSELF AS 100% E OU WITH THE ITA NO.3597/AHD/2008 & 14 ORS. DCIT VS. ARTISTIC TILES PVT.LTD. & ORS. ASST.YEAR 2005- 06 & ORS. - 4 - COMPETENT AUTHORITY AS PER APPROVAL DATED 28/06/1 999 FOR EXPORT OF MOSAIC TILES, GRANITES ETC. THE ASSESSING OFFICER (AO) CONTROVERTED THE CLAIM OF THE ASSESSEE TOWARDS DEDUCTION UNDER S.10B OF THE ACT. THE AO TOOK NOTE OF THE FINDINGS OF THE SURVEY OFFICIAL S IN SURVEY CONDUCTED UNDER S.133A OF THE ACT ON 24/02/2006 AND CONCLUDED THAT ASSESSEE WAS NOT ENGAGED IN ANY MANUFACTURING/PRODUCTION ACTIVIT Y AS CLAIMED. THE AO OBSERVED THAT 15-25% OF ITS TOTAL PRODUCE CONSTI TUTE CASE OF MERE CUTTING OF TILES OF BIGGER SIZE INTO SMALLER PIECES AND SMOOTHENING OF ITS EDGES WHICH IS THEN EXPORTED. THIS DOES NOT INVOLV E ANY MANUFACTURING ACTIVITY PER SE . THE AO ALSO OBSERVED THAT THE ASSESSEE HAS EXPOR TED PLANT & MACHINERY AMOUNTING TO RS.69,45,780/- FOR W HICH SURVEY PARTY COULD NOT NOTICE ANY EVIDENCE OF MANUFACTURING ACTI VITIES. THE ASSESSEE NEITHER IN THE PAST NOR IN THE FUTURE EVEN PRODUCED AND EXPORTED SUCH ITEM AND, HENCE, CLAIM OF THE ASSESSEE IS NOT TENABLE. THE ASSESSEE, AT BEST, HAS ASSEMBLED THE MACHINERY WITH SOME COSMETIC CHAN GE AND EXPORTED THE PLANT & MACHINERY. AS DURING THE SURVEY, NO TEC HNICAL EXPERT TEAM OR ANY MACHINES FOR FABRICATION WERE FOUND AS ATTRI BUTABLE TO PLANT & MACHINERY CLAIMED TO BE EXPORTED. THE AO ALSO REJE CTED BOOKS OF ACCOUNTS BY INVOKING SECTION 145(3) OF THE ACT AFTE R POINTING OUT DISCREPANCIES IN THE FORM OF UNACCOUNTED STOCKS, U NRECORDED WITHDRAWAL OF CASH, NON-ACCOUNTING OF PURCHASES FROM SISTER-CO NCERNS FOR SEVERAL MONTHS ETC. IN THE YEAR OF SURVEY AS PER PARA-13 OF ITS ORDER. THE AO, IN SHORT, QUESTIONED THE BONAFIDES OF CLAIM OF DEDUCTI ON UNDER S.10B OF THE ITA NO.3597/AHD/2008 & 14 ORS. DCIT VS. ARTISTIC TILES PVT.LTD. & ORS. ASST.YEAR 2005- 06 & ORS. - 5 - ACT. THE AO OBSERVED THAT THE ASSESSEE-COMPANY HAS FAILED TO JUSTIFY THE CLAIM OF DEDUCTION UNDER S.10B OF THE ACT AS THE PR ODUCTION OF TILES/BORDERS OF DIFFERENT DESIGNS FROM THE SINGLE PIECE OF DIFFERENT SIZE AND DIMENSIONS, CUTTING THEM INTO SMALL PIECES OF DIFFERENT SIZES, TUMBLING/SMOOTHENING THE SAME IN WATER TUB AND MAKI NG SOME COSMETIC CHANGES AND EXPORTING THEM AFTER NECESSARY PACKING DOES NOT TANTAMOUNT TO ANY MANUFACTURING PROCESS. THE AO ALSO NOTE D THAT THERE IS HARDLY ANY BIOLOGICAL/CHEMICAL REACTION INVOLVED IN THE PR OCESS OF MANUFACTURING OF TILES/BORDERS/MOSAIC FROM THE TILE S AFTER CUTTING THEM INTO SMALLER PIECES OF DIFFERENT SIZES WITH CUTTERS AND FIXING THEM WITH ADHESIVES. THE AO IN ESSENCE, OBSERVED THAT ARTICL ES WERE EXPORTED WITHOUT CHANGING PROPERTIES OR CHEMICAL COMPOSITION S AND THUS THE ACTIVITY DOES NOT TANTAMOUNT TO MANUFACTURE OR PROD UCTION OF ARTICLE OR THINGS AS CONTEMPLATED UNDER S.10B OF THE ACT. THE RAW-MATERIAL PURCHASES ARE ALMOST THE SAME LIKE THE FINISHED GOO DS AND WAS MARKETABLE PER SE . THE TILES OR STONES REMAINS TILES OR STONES ONLY WITH SOME COSMETIC CHANGES. IT WAS ALSO OBSERVED THAT NO MAJOR SOPHISTICATED MACHINES WERE FOUND TO HAVE BEEN INSTALLED TO SUPPO RT THE PURPORTED MANUFACTURING/PRODUCTION PROCESS. THUS, IT WAS OBS ERVED THAT IN THE ABSENCE OF ANY MANUFACTURE/PRODUCTION OF ARTICLES O R GOODS EXPORTED, THE ASSESSEE IS NOT QUALIFIED FOR CLAIM OF DEDUCTION MA DE UNDER S.10B OF THE ACT. IN CONCLUSION, THE DEDUCTION UNDER S.10B AMOU NTING TO ITA NO.3597/AHD/2008 & 14 ORS. DCIT VS. ARTISTIC TILES PVT.LTD. & ORS. ASST.YEAR 2005- 06 & ORS. - 6 - RS.2,90,55,980/- CLAIMED BY THE ASSESSEE ON EXPORT OF ARTICLES OR THINGS WAS DENIED BY THE AO. 5. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). THE CIT(A) UPHELD THE FINDINGS OF THE AO AS PER PARA-9 OF ITS APPELLATE ORDER. THE RELEVANT OPERATIVE PARA OF THE ORDER OF THE CIT (A) FOR DENIAL THE DEDUCTION IS REPRODUCED HEREUNDER:- 9. DECISION : I HAVE CAREFULLY CONSIDERED THE ENTIRE FACTS ON THE RECORDS AND BROUGHT TO MY NOTICE DURING THE CURRENT APPELLATE PROCEEDINGS. ON GOING THROUGH THE REMAND REPORT IT WAS CLEARLY E VIDENT THAT THE ASSESSING OFFICER HAS METICULOUSLY BROUGHT OUT THE FOLLOWING IMPORTANT FACTS EMANATING FROM THE PARA 8 R.W.SUB-PARA I TO XII SOME OF WHICH THE LD.AR HAD NOT REBUTTED. 1) APPELLANT HAS NOT FULFILLED CONDITION OF LETTER OF APPROVAL AS AND EOU. 2) VIOLATION OF LEGAL AGREEMENT FOR EOU WITH GOVERNMEN T OF INDIA. 3) NO ASSESSMENT U/S 143(3) AND HENCE NO APPLICATION O F PRINCIPLE OF RE-JUDICATA IN THIS CASE. 4) THE APEX COURT DECISION IN THE CASE OF LUCKY MINMAT PVT.LTD. IS DIRECTLY APPLICABLE TO THIS CASE. 5) THE APPELLANT IS ONLY A RESELLER AS PER CENTRAL SAL ES TAX REGISTRATION AND ACTED AS RESELLER BY PURCHASING GO ODS AGAINST FORM H UNDER THE CENTRAL SALES TAX ACT. 6) EXPLANATION 4 OF SECTION 10B NOT APPLICABLE TO APPE LLANT. 7) APPELLANT HAS USED MACHINERY ALREADY USED IN INDIA BY THIRD PARTY WHILE FORMING THE INDUSTRIAL UNDERTAKING AND THERE AFTER AND THE PERCENTAGE OF SUCH MACHINERY IN THE TOTAL M ACHINERY OF APPELLANT IS MORE THAN 20%. ITA NO.3597/AHD/2008 & 14 ORS. DCIT VS. ARTISTIC TILES PVT.LTD. & ORS. ASST.YEAR 2005- 06 & ORS. - 7 - 8) THE APPELLANT HAS GIVEN MISLEADING STATEMENTS IN THE SUBMISSION TO THE ASSESSING OFFICERS. 9) THE PARTNERS OF M/S. FOREVER STONE HAS FILED AN AFFIDAVIT BEFORE THE HON'BLE LABOUR COURT NAVSARI STATING THAT MACHI NERY USED BY SISTER CONCERN OF THE APPELLANT WAS SHIFTED TO APPE LLANTS FACTORY. 9.1. SEC. 10B (2) OF THE ACT APPLIES TO ANY UNDE RTAKING WHICH FULFILLS ALL THE FOLLOWING CONDITIONS, NAMELY :- I) IT MANUFACTURES OR PRODUCES ANY ARTICLE OR THINGS OR COMPUTER SOFTWARE. II) IT IS NOT FORMED BY THE SPLITTING UP, OR TH E RECONSTRUCTION, OF A BUSINESS ALREADY IN EXISTENCE PROVIDED THAT THIS CONDITION SHALL NOT APPLY IN RESPECT OF A NY UNDERTAKING WHICH IS FORMED AS A RESULT OF THE RE-ESTABLISHMENT , RECONSTRUCTION OR REVIVAL BY THE ASSESSEE OF THE BUSINESS OF ANY SUC H UNDERTAKING AS IS REFERRED TO IN SECTION 336, IN CIRCUMSTANCES AND WI THIN THE PERIOD SPECIFIED IN THAT SECTION. III) IT IS NOT FORMED BY THE TRANSFER TO A NEW B USINESS OF MACHINERY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE. EXPLANATION. - THE PROVISIONS OF EXPL. 1 AND EXPL. 2 TO SUB-SECT ION(2) OF SEC. 80I SHALL APPLY FOR THE PURPOSE OF CLAUSE (III) OF THIS SUB-S ECTION AS THEY APPLY FOR THE PURPOSE OF CLAUSE (II) OF THAT SUB-SE CTION. IN THIS SUB-SECTION THE EXPLANATION IS AN IMPORTANT PROVISION TO GIVE THE EFFECTIVE MEANING TO THE SAID SUBSECTION. AS CLARIF IED IN EXPLANATION-1 TO SECTION 80-1(2), FOR THE PURPOSE OF THIS CONDITION, ANY MACHINERY OR PLANT WHICH WAS USED OUTSIDE INDIA BY ANY PERSON OTHER TH AN THE ASSESSEE, IT IS NOT REGARDED AS MACHINERY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE, IF HE FOLLOWING CONDITIONS ARE FULFILLED, NAMELY ;- - SUCH MACHINERY OR PLANT WAS NOT ,AT ANY TIME PREV IOUS TO THE DATE F THE INSTALLATION BY THE ASSESSEE, USED IN INDIA ;- ITA NO.3597/AHD/2008 & 14 ORS. DCIT VS. ARTISTIC TILES PVT.LTD. & ORS. ASST.YEAR 2005- 06 & ORS. - 8 - - SUCH MACHINERY OR PLANT IS IMPORTED INTO INDIA FR OM ANY COUNTRY OUTSIDE INDIA, AND - NO DEDUCTION ON ACCOUNT OF DEPRECIATION, IN RESPE CT OF SUCH MACHINERY OR PLANT HAS BEEN ALLOWED OR IS ALLOWABLE UNDER THE PR OVISIONS OF THE 1961 ACT IN COMPUTING THE TOTAL INCOME OF AIRY PERSON F OR ANY PERIOD PRIOR TO- THE DATE OF THE INSTALLATION OF THE MACHINERY OR PL ANT BY THE ASSESSEE. EXPLANATION 2. TO SECTION 8OL(2) TAKES CARE OF A SITUATION WHERE I N THE CASE OF AN INDUSTRIAL UNDERTAKING, - ANY MACHINERY OR PLANT ANY PART THEREOF PREVIOUSL Y USED FOR ANY PURPOSE IS TRANSFERRED TO A NEW BUSINESS AND - THE TOTAL VALUE OF MACHINERY OR PLANT SO TRANSFER RED DOES NOT EXCEED 20 PER CENT , OF THE TOTAL VALUE OF THE MACHINERY OR PLANT USED IN THE BUSINESS. 9.2 THE TWO OMITTED SS. 80-I/IA AND 80J HAVE RELEV ANCE IN UNDERSTANDING THE PROVISIONS OF SEC. 10B(2) WHICH HAS IMPORT OF T HESE SECTIONS BECAUSE EXCEPTING THE FORM AND QUANTUM OF DEDUCTION, THE SC HEME OF TAX-HOLIDAY RELIEF U/S.80-I/IA IS BROADLY ON THE SAME LINES AS THAT OF SEC.80J. THAT MEANS 10B IS PARI - PASSU WITH SS. 80-I/IA & 80 J OF THE ACT. 9.3 THERE IS NO DOUBT THAT THE SCHEME OF THE SE CTION IS TO ENCOURAGE NEW INDUSTRIAL UNDERTAKINGS PROVIDED THEY FULFILL ALL T HE CONDITIONS MENTIONED THEREIN. IT IS TRUE THAT IN ORDER TO BE ENTITLED TO THE EXEMPTION, AN ASSESSEE MUST STRICTLY COME WITHIN THE TERMS OF THE PROVISIO N UNDER WHICH SUCH EXEMPTION IS BEING CLAIMED, BUT IN CONSTRUING THE P ROVISION OF THIS SECTION, ONE MUST CONSTRUE THE SECTION REASONABLY IN THE CON TEXT OF THE PURPOSE FOR WHICH THE SECTION HAS BEEN INTRODUCED. THE EXPRESSI ON 'TRANSFER' IS USED IN VARYING SENSES IN DIFFERENT STATUTES, DEPENDING ON THE CONTEXT. IN A BROAD SENSE, IT WILL CERTAINLY INCLUDE AN ACQUISITION OF AN ASSET BY ONE PERSON FROM WHATEVER SOURCE. BUT THE SCHEME OF THE SECTION INDI CATES THAT WHAT IS BEING AIMED AT IS TO PREVENT EXEMPTION TO THOSE INDUSTRIA L UNDERTAKINGS WHICH ARE FORMED BY THE SPLITTING UP OR BY RECONSTRUCTION OR BY TRANSFER TO A NEW BUSINESS OF PLANT OR MACHINERY OF THE OLD BUSINESS. ITA NO.3597/AHD/2008 & 14 ORS. DCIT VS. ARTISTIC TILES PVT.LTD. & ORS. ASST.YEAR 2005- 06 & ORS. - 9 - 9.4 IN THIS SECTION THE MEANING OF TRANSFER OF 'ASSETS PREVIOUSLY USED' AND 'FOR ANY PURPOSE' CAN BE EXPLAINED / UNDERSTOOD AS UNDER; SECTION 80B WILL NOT APPLY TO AN INDUSTRIAL UNDERTA KING, EVEN IF IT CLAIMS TO BE A NEWLY ESTABLISHED INDUSTRIAL UNDERTAKING, IF I T IS FORMED BY THE TRANSFER OF MACHINERY OR PLANT PREVIOUSLY USED FOR ANY PU RPOSE. THE WORDS 'PREVIOUSLY USED FOR ANY PURPOSE' ARE WIDE AND CO VER ALL OLD AND USED MACHINERY, NO MATTER WHO USED SUCH MACHINERY PREVIO USLY AND FROM WHICH SOURCE IT WAS ACQUIRED. EXPLANATION TO THIS SUB-SEC TION HAS OBVIOUSLY BEEN INSERTED BY WAY OF AN EXCEPTION TO PROVIDE THE TAX RELIEF TO ANY ASSESSEE WHO ACQUIRES OLD MACHINERY FROM ANOTHER PERSON WHO HAD USED IT OUTSIDE INDIA. IN CIT VS. SUBRAMANIAM & CO. (1988) 149 CTR (MAD) 2 56, THE MADRAS COURT FOLLOWING THE SUPREME COURT DECISION IN BAJAJ TEMPO LTD. VS. CIT (1992) 196 ITR 188 (SC) HAS HELD THAT SEC. 80J PLAC ES AN EMBARGO THAT THE DEDUCTION WILL BE DENIED IF THE ASSETS WERE USED AN D IF THE RESTRICTION OF PRIOR USER IS CONFINED TO THE ASSESSEE ALONE, THE O BJECT BEHIND THE GRANT OF DEDUCTION U/S. 80J FOR THE ESTABLISHMENT OF A NEW I NDUSTRIAL UNDERTAKING WOULD BE EASILY DEFEATED. THEREFORE, EVEN IF A THIR D PARTY HAD USED THE MACHINERIES AND THOSE MACHINERIES WERE USED FOR THE FORMATION OF A NEW INDUSTRIAL UNDERTAKING BY TRANSFER OF THOSE MACHINE RIES, THE INDUSTRIAL WOULD BE INELIGIBLE TO CLAIM THE RELIEF U/S, 80J. S IMILAR ANALOGY WILL APPLY IN THE PROVISIONS OF SEC.10B(2)(III). THEREFORE, THE P LANT AND MACHINERY MUST NOT ONLY NOT HAVE BEEN USED IN ANY BUSINESS, BUT IT SHOULD NOT HAVE BEEN USED FOR ANY PURPOSE. EVEN THE EXPRESSION 'TRANSFER ' IN THE CONTEXT, MEANS NOT TRANSFER AS USED IN THE TRANSFER OF PROPERTY AC T, BUT TRANSFER BY THE ASSESSEE OF THE ASSETS USED BY HIM PREVIOUSLY FOR A NY PURPOSE. 9.5 ONE OF THE CONDITIONS FOR AVAILING OF THE B ENEFIT UNDER SECTION 10B(2)(III) PROVIDED THAT THE UNDERTAKING MUST NOT HAVE BEEN FORMED BY THE TRANSFER TO THE NEW BUSINESS OF MACHINERY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE EXCEPT I) IN CERTAIN CASES OF IMPORTED SECO ND-HAND MACHINERY AS REFERRED TO IN THE EXPLANATION TO THE SECTION 10B(2 ) R.W. EXPLANATION 1 TO SEC.80-I(2), AND II) WHERE THE TOTAL VALUE OF THE M ACHINERY OR PLANT REFERRED TO THE NEW BUSINESS DOES NOT EXCEED 20% OF THE TOTA L VALUE OF THE MACHINERY OR PLANT USED IN THAT BUSINESS [EXPLANATION TO 10B(2) R.W. E XPLANATION 2 TO ITA NO.3597/AHD/2008 & 14 ORS. DCIT VS. ARTISTIC TILES PVT.LTD. & ORS. ASST.YEAR 2005- 06 & ORS. - 10 - SEC.80-1(2)]. THAT MEANS WHERE THE VALUE OF THE OLD MACHINERY OR PLANT THAT HAS BEEN TRANSFERRED IS 20 PER CENT OR LESS THAN 20 PER CENT OF THE TOTAL VALUE OF THE MACHINERY OR PLANT USED IN THE BUSINESS, THE N THIS CONDITION IS DEEMED TO HAVE BEEN COMPLIED WITH. READING.CL.(II) WITH EX PLN. 2 MAKES IT CLEAR THAT THE ASSESSEE CAN BE-DENIED THE EXEMPTION ONLY WHERE THE ASSETS TRANSFERRED TO THE NEW UNDERTAKING CONSTITUTE MORE THAN 20 PER CENT OF THE TOTAL VALUE OF THE ASSETS USED IN THE NEW BUSINESS. 9.6 THE ADMITTED FACTS ON RECORD ARE THAT THE P LANT AND MACHINERY USED BY THE ASSESSEE WAS PREVIOUSLY BEING USED BY M/S. F OREVER STONE AND- M/S. LOWDOWN MARBLE & GRANITE P LTD. THE TERM 'TRANSFER IN CL. (III) SUB- SEC.10B(2) IS NOT USED IN THE RESTRICTED SENSE OF T RANSFER OF OWNERSHIP. ONCE IT IS FOUND THAT IN FACT THE ASSESSEE WAS CARRYING ON THE BUSINESS TO MANUFACTURE THE SAME PRODUCTS BY TAKING THE BUILDI NG, PLANT AND MACHINERY ETC. ON LEASE, IT COULD BE ELIGIBLE FOR GRANT OF DE DUCTION UNDER THE SECTION ONLY IN CASE CONDITIONS PUT IN EXPLN,2 TO S. 80I(2) ARE SATISFIED, WHICH PROVIDES THAT THE VALUE OF SUCH PLANT AND MACHINERY SHOULD NOT EXCEED 20 PER CENT OF THE TOTAL VALUE OF THE PLANT AND MACHIN ERY USED FOR THE BUSINESS BUT THAT IS NOT SO IN THE PRESENT CASE. THE AO HAS GIVEN CATEGORICAL FINDINGS THAT HOW THE TRANSFER OF ASSETS TOOK PLACE AND WHAT WAS THE VALUE OF THOSE PLANT AND MACHINERY TRANSFERRED WHICH IS IN EXCESS OF PRESCRIBED 20% IN THIS INSTANT CASE. THE FINDINGS OF THE AO ON THESE TWO ACCOUNTS ARE WORTH MENTIONING HERE; A. 15.5(I) THIS OFFICE HAD OBTAINED INFORMATION FRO M LABOUR COURT, NAVSARI. IN THE LABOUR COURT, NAVSARI, THERE IS A CASE PENDING AGAINST M/S. FOREVER STONE AND M/S. ARTISTIC STONE PVT. LTD. ON PERUSAL OF THE SUBMISSION MADE BY M/S. FOREVER STONE AS WELL AS THE AFFIDAVIT FILED BY THE WORKERS IT WAS OBSERVED THAT M/S. FOREVER STONE WAS WORKING IN F.Y. 2000-01 AND 2001-02. M/S. FOREVER STONE WAS DOING BUSINESS OF CUTTING, POLISHING GRAN ITE, MARBLE.. THERE WERE AROUND 45 WORKERS AS PER THE AFFIDAVIT OF M/S. FORE VER STONE. 15.5(II) IN THE AFFIDAVIT FILED BEFORE HON'BLE LA BOUR COURT BY MR, BHUPENDRA HIRALAL SHAH, IN PAFA-7, PAGE 4, (ENCLOSED AS ANNEX URE-K TO THIS REPORT)HAS CATEGORICALLY STATED THAT MACHINERY OWNED BY M/S. F OREVER STONE WAS SHIFTED TO M/S. ARTISTIC STONE PVT. LTD. ON 23.8.2002. ITA NO.3597/AHD/2008 & 14 ORS. DCIT VS. ARTISTIC TILES PVT.LTD. & ORS. ASST.YEAR 2005- 06 & ORS. - 11 - B. THUS, IT IS CLEAR THAT M/S, FOREVER STONE HAD US ED THE MACHINERY DURING THE F.Y.2000-01 AND 2001-02. AS PER THE STATEMENT OF RA JESH I. PATEL, M/S. FOREVER STONE SOLD MACHINERY TO M/S. ARTISTIC STONE PVT. LT D. HOWEVER, ASSESSEE CLAIMS THAT M/S. FOREVER STONE HAD SOLD MACHINERY TO M/S. LOWDOWN MARBLES AND GRANITE MINES PVT. LTD., WHICH, IN TURN, WAS GIVEN ON LEASE TO M/S. ARTISTIC STONE PVT. LTD. THUS, THE MACHINERY WHICH IS BEING USED B Y M/S. ARTISTIC STONE PVT. LTD. IS OLD MACHINERY WHICH WAS PREVIOUSLY USED BY M/S. FOREVER STONE. THE TOTAL VALUE OF THE MACHINERY AS SUBMITTED BY ASSESSEE WAS RS.47,36,000 /-. WHEREAS, VALUE OF MACHINERY OWNED BY M/S. ARTISTIC STONE PV T. LTD. WAS RS. 28,93,915/-. IN THIS RS.28,93,915/-, THE MACHINERY PURCHASED FRO M M/S. ASHA TILES, BILIMORA RS. 35,000/- IS ALSO USED MACHINERY. IT CAN BE SEEN THAT THE VALUE OF USED MACHINERY IS RS. 47,71,000/- ( RS.47,36,000 + 35,00 0) WHICH OVER EXCEEDS THE VALUE OF NEW MACHINERY OF THE ASSESSEE.. 9.7 IN THIS ABOVE BACKGROUND, LET US APPLY THE PR OVISIONS OF SEC. 10B IN THE PRESENT CASE. IT IS NOT DISPUTED THAT TO GET THE BE NEFITS U/S.10B, THE UNDERTAKING HAS TO FULFILL ALL THE CONDITIONS SET O UT IN SUB-SEC.2 OF SEC.10B. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE, THE APPELLANT HAS FULFILLED CONDITIONS (I) AND (II) IN SUB-10B(2). THE DISPUTE ON MANUFACTURING OR PROCESSING OF ARTICLE OR THING WAS SETTLED BY THE D ECISION OF THE HON'BLE SC IN THE CASE OF ITO VS. ARIHANT TILES AND MARBLE PVT . LTD 320 ITR 79 (SC). NO DISPUTE CAN BE RAISED BY THE AO WITH REGARDS TO THE CONDITION (II) IN SUB- 10B(2). HOWEVER, THE CONDITION (III) OF THE SAID SE CTION WAS NOT FULFILLED BY THE APPELLANT IN THIS CASE. IT WAS ADMITTED FACTS T HAT PLANT & MACHINERY USED BY THE APPELLANT WAS TRANSFERRED FROM M/S. FOR EVER STONES - A FIRM OF THE SAME GROUP TO THE INDUSTRIAL UNIT. THIS WAS IND EPENDENTLY CONFIRMED BY THE AFFIDAVIT FILED BY THE PARTNERS OF M/S. FOREVER STONES BEFORE THE HON'BLE LABOUR COURT, NAVASARI. THE AO ALSO GAVE A CATEGORI CAL FINDINGS THAT THE VALUE OF THE TRANSFERRED PLANT & MACHINERY EXCEEDED 20% LIMIT PRESCRIBED IN THE EXPLANATION TO THE SEC. 10B(2)(III) R.W. EXP L. 1 & 2 OF SEC. 80-I OF THE ACT. THE OBSERVATIONS OF THE AO WHY THE APPELLANT I S NOT ELIGIBLE FOR THE DEDUCTION U/S. 10B HAS BEEN SUFFICIENTLY MENTIONED IN PARA 8 & 9 OF THIS ORDER. IN THIS CIRCUMSTANCES, I AM INCLINED TO AGRE E WITH THE FINDINGS OF THE AO AND HELD THAT THE APPELLANT IS NOT ELIGIBLE FOR THE BENEFIT U/S.10B OF THE ACT. ACCORDINGLY, THIS GROUND OF APPEAL RAISED BY T HE APPELLANT IS DISMISSED. ITA NO.3597/AHD/2008 & 14 ORS. DCIT VS. ARTISTIC TILES PVT.LTD. & ORS. ASST.YEAR 2005- 06 & ORS. - 12 - 6. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 7. THE LD.AR FOR THE ASSESSEE MR.SAKAR SHARMA POINT ED OUT AT THE OUTSET THAT DETAILED WRITTEN SUBMISSIONS AND TABULA TED CHARTS HAVE BEEN FILED. IN FURTHERANCE, HE SUBMITTED THAT THE AO AN D THE CIT(A) HAS DENIED THE DEDUCTION CLAIMED UNDER S.10B OF THE ACT ON MISAPPRECIATION OF FACTS AND LAW. THE LD.AR SUBMITTED THAT EOU REG ISTRATION AS 100% EXPORT ORIENTED UNDERTAKING WAS GRANTED TO THE ASSE SSEE ON 28/06/1999. THE COMMERCIAL PRODUCTION KICKED OFF AND EXPORT WA S MADE FOR THE FIRST TIME IN THE FINANCIAL YEAR ON 28/01/2000 RELEVANT T O AY 2000-01. CONSEQUENTLY, THE INITIAL ASSESSMENT YEAR FOR THE P URPOSE OF CLAIM OF DEDUCTION UNDER S.10B COMMENCES FROM AY 2000-01. T HE LD.AR CLAIMED THAT ASSESSEE HAS SATISFIED ALL THE CONDITI ONS OF 10B IN THE INITIAL ASSESSMENT YEAR. HAVING SATISFIED THE CONDITIONS O F SECTION 10B IN THE INITIAL YEAR, THE ASSESSEE IS ENTITLED TO DEDUCTION IN ALL 10 ASSESSMENT YEARS. THE LD.AR OBSERVED THAT ONE OF THE MAJOR OB JECTIONS OF THE CIT(A) FOR COMING TO THE CONCLUSION IS THAT THE CON DITIONS SPECIFIED IN THE APPROVAL LETTER HAS NOT BEEN FULFILLED AND FORE IGN PARTICIPATION AS NOTED IN THE 100% EOU REGISTRATION WAS NOT SATISFIE D. IN THIS CONNECTION, THE LD.AR POINTED OUT THAT THERE IS NO MANDATE UNDE R S.10B OF THE ACT THAT CONDITIONS SPECIFIED IN 100% EOU APPROVAL MUST BE AND COMPLETELY FULFILLED. THE ONLY REQUIREMENT TO GRANT DEDUCTIO N IS THAT THE ASSESSEE ITA NO.3597/AHD/2008 & 14 ORS. DCIT VS. ARTISTIC TILES PVT.LTD. & ORS. ASST.YEAR 2005- 06 & ORS. - 13 - CLAIMING DEDUCTION UNDER S.10B OF THE ACT MUST BE A N APPROVED 100% EOU. THE 100% EOU REGISTRATION REMAINED VALID IN A LL THE YEARS IN WHICH DEDUCTION UNDER S.10B HAS BEEN CLAIMED. REFE RRING TO CBDT CIRCULAR NO.528 DATED 16/12/1988, THE LD.AR SUBMITT ED THAT 100% EOU MEANS UNDERTAKING APPROVED BY THE BOARD APPOINTED U NDER S.14 OF IDRA, 1951. REFERRING TO THE OBJECTION OF CIT(A) T HAT THE ASSESSEE IS ONLY RESELLER AS PER CST REGISTRATION AND ACTED AS A RESELLER BY PURCHASING GOODS AGAINST PRESCRIBED FORM-H UNDER THE CST ACT , THE LD.AR SUBMITTED THAT THE CST REGISTRATION WAS GRANTED FOR RESALE AS WELL AS FOR PRODUCTION AND ITS PROCESSING. IT WAS SUBMITTED TH AT NO CST (CENTRAL SALES TAX) WAS REQUIRED TO BE PAID IN VIEW OF DECLA RATION IN FORM-H I.E. EXEMPTION AGAINST EXPORT SALES. THE LD.AR NEXT CON TENDED THAT THE ACTIVITY OF THE ASSESSEE IS COVERED BY THE EXPRESSI ON MANUFACTURE OR PRODUCTION WHICH IS A CONDITION PRECEDENT FOR CLA IMING DEDUCTION UNDER S.10B OF THE ACT. THE LD.AR SUBMITTED THAT THE ASS ESSEE DID NOT SIMPLY PURCHASE AND SOLD TILES BUT PURCHASED BLOCKS, CUT A ND PROCESSED THEM INTO PIECES AS TILES. THE LD.AR REFERRED TO EXPLANTION- 4 TO SECTION 10B OF THE ACT WHICH WAS INSERTED BY THE FINANCE ACT 2003 W.E. F. 01/04/2004. THE LD.AR SUBMITTED THAT BY VIRTUE OF EXPLANATION-4, FO R THE PURPOSE OF SECTION 10B, MANUFACTURE OR PRODUCE SHALL INCLUD E THE CUTTING AND POLISHING PRECIOUS AND SEMI-PRECIOUS STONES. THE LD.AR SUBMITTED THAT THE AFORESAID EXPLANATION IS INCLUSIVE AND THUS CAN BE APPLIED TO THE CASE OF ASSESSEE FOR THE YEARS PRIOR TO AY 2004-05 AS WE LL. THE LD.AR ITA NO.3597/AHD/2008 & 14 ORS. DCIT VS. ARTISTIC TILES PVT.LTD. & ORS. ASST.YEAR 2005- 06 & ORS. - 14 - CONTENDED THAT EXPLANATION-4 TO SECTION 10 SQUARELY COVERS PROCESSING OF MARBLE, STONES AND GRANITES ETC. FOR THE PURPOSE OF AVAILABILITY OF DEDUCTION UNDER S.10B OF THE ACT. THE LD.AR NEXT S UBMITTED THAT THE OWNERSHIP OF ENTIRE MACHINERY IS NOT A PRE-REQUISIT E. IT WAS SUBMITTED THAT NO OLD MACHINERY WAS USED. THE MACHINERIES US ED FOR THE MANUFACTURE OF PRODUCT OF THE ASSESSEE WERE FUNDED BY THE ASSESSEE. FOR OTHER FACETS OF THE APPREHENSIONS RAISED BY THE CIT (A), THE LD.AR RELIED ON TABULATED STATEMENT AND CONTENDED THAT THE RIGH TFUL CLAIM OF DEDUCTION UNDER 10B HAS BEEN DENIED BY THE REVENUE ON TENUOUS GROUNDS. 8. THE LD.DR, ON THE OTHER HAND, RELIED UPON THE DE TAILED FINDINGS GIVEN BY THE CIT(A) ON THE ISSUE AND SUBMITTED IN F URTHERANCE THAT THE ASSESSEE HAS NOT FULFILLED CONDITIONS LATER OF APPR OVAL FOR 100% EOU. 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS, PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND CASE-LAW CITED. THE ASSESSEE HAS RAISED ITS GRIEVANCE AGAINST THE DENIAL OF DEDUCTIO N UNDER S.10B OF THE ACT. AS NOTED EARLIER, THE ASSESSEE IS A 100% EXP ORT ORIENTED UNIT APPROVED BY THE COMPETENT AUTHORITY I.E. BOARD OF A PPROVAL MINISTRY OF COMMERCE AND INDUSTRIES OF THE GOVERNMENT OF INDIA . THE ASSESSEE CLAIMS TO BE ENGAGED IN THE BUSINESS OF MANUFACTURI NG OR PRODUCTION OF MOSAIC, BORDERS AND PATTERNS OF MARBLE, GRANITE, ST ONE ETC. THE ASSESSEE CLAIMS THAT IT HAS FULFILLED ALL THE CONDITIONS OF SECTION 10B OF THE ACT AND ITA NO.3597/AHD/2008 & 14 ORS. DCIT VS. ARTISTIC TILES PVT.LTD. & ORS. ASST.YEAR 2005- 06 & ORS. - 15 - THEREFORE IT IS ENTITLED FOR DEDUCTION OF RS.2,90,5 5,980/- UNDER S.10B OF THE ACT. THE REVENUE HAS CONTROVERTED THE ENTITLEM ENT OF DEDUCTION UNDER S.10B OF THE ACT ON THE GROUND THAT CONDITION S STIPULATED THEREIN HAS NOT BEEN COMPLIED WITH. 9.1. BROADLY SPEAKING, SECTION 10B PROVIDES TAX I NCENTIVE IN THE FORM OF DEDUCTION IN RESPECT OF PROFITS AND GAINS DERIVED B Y UNDERTAKING FROM EXPORT OF ARTICLES OR THINGS ETC. FOR A PERIOD OF 1 0 CONSECUTIVE ASSESSMENT YEARS BEGINNING WITH THE ASSESSMENT YEAR RELEVANT T O THE PREVIOUS YEAR IN WHICH THE UNDERTAKING BEGINS TO MANUFACTURE OR PROD UCE SUCH ARTICLE OR THINGS ETC SUBJECT TO CERTAIN CONDITIONS STIPULATED IN THE AFORESAID PROVISION. 9.2. IN THE ASSESSMENT OF THE ASSESSEE, A CONTROVE RSY HAS BEEN RAISED BY THE REVENUE ABOUT THE CLAIM OF THE ASSESSEE THAT IT S ACTIVITY BEARS THE CHARACTER OF MANUFACTURE OR PRODUCTION IS NOT TENAB LE. ACCORDING TO THE REVENUE, CUTTING OR POLISHING OF MARBLES, GRANITES, STONES ETC. DOES NOT BRING A NEW AND DIFFERENT ARTICLE AND THEREFORE DOE S NOT TANTAMOUNT TO MANUFACTURING ACTIVITY. AT THIS JUNCTURE, WE NOTIC E THAT EXPLANATION-4 HAS BEEN INSERTED TO SECTION 10B WHICH PROVIDES THA T FOR THE PURPOSES OF SECTION 10B, MANUFACTURE OR PRODUCE SHALL INCLU DE THE CUTTING AND POLISHING OF PRECIOUS AND SEMI-PRECIOUS STONES. IT IS THE ARGUMENT ON BEHALF OF THE REVENUE THAT THE AFORESAID EXPLANATIO N HAS BEEN INSERTED BY ITA NO.3597/AHD/2008 & 14 ORS. DCIT VS. ARTISTIC TILES PVT.LTD. & ORS. ASST.YEAR 2005- 06 & ORS. - 16 - FINANCE ACT, 2003 W.E.F. 01/04/2004 AND THEREFORE I S APPLICABLE TO AY 2004-05 ONWARDS. THUS, IT IS THE CASE OF THE REVEN UE THAT IN SO FAR AS AY 2003-04 IS CONCERNED, THE EXPLANATION-4 IS OF NO HE LP TO THE ASSESSEE. WE DO NOT FIND SUBSTANCE IN THIS PLEA. WE SUBSCRIB E TO THE ARGUMENT RAISED ON BEHALF OF ASSESSEE THAT THE AFORESAID EXP LANATION-4 INSERTED BY FINANCE ACT, 2003, IS CLARIFICATORY AND DECLARATORY IN NATURE AND THEREFORE APPLICABLE RETROSPECTIVELY. WE ALSO SUBSCRIBE TO THE ARGUMENT OF THE ASSESSEE THAT THE EXPLANATION IS INCLUSIVE AND SEEK S TO REMOVE ANY KIND OF AMBIGUITY IN THE UNDERSTANDING OF EXPRESSION MA NUFACTURE OR PRODUCTION. THEREFORE, IN VIEW OF THE EXPRESS CL ARIFICATION AVAILABLE IN THE STATUTE, WE ARE CONVINCED THAT THE ARTICLES AN D GOODS DEALT WITH BY THE ASSESSEE FALLS WITHIN THE EXPRESSION MANUFACTURE O R PRODUCTION. ACCORDINGLY, WE HOLD THAT THE ACTIVITY OF CUTTING A ND POLISHING OF MARBLES, GRANITES, STONES ETC. FALLS WITHIN THE AMB IT OF THE EXPRESSION MANUFACTURE OR PRODUCTION IN SO FAR AS SECTION 1 0B OF THE ACT IS CONCERNED. 9.3. THE ASSESSEE HAS RAISED ANOTHER LINE OF ARGUM ENT TO SUPPORT ITS PLEA THAT THE ACTIVITY UNDERTAKEN BY THE ASSESSEE IS COV ERED BY THE DEFINITION OF THE EXPRESSION MANUFACTURE AS THEN PREVAILING AS PER EXPLANATION-(III) TO SECTION 10B IN THE INITIAL YEAR WHEREBY THE EXPR ESSION MANUFACTURE INCLUDES, AMONG OTHERS, THE ACT OF PROCESS. IT W AS CONTENDED ON BEHALF OF THE ASSESSEE THAT CONVERSION OF A RAW-MATERIAL ( BLOCK/SLAB) INTO FINAL ITA NO.3597/AHD/2008 & 14 ORS. DCIT VS. ARTISTIC TILES PVT.LTD. & ORS. ASST.YEAR 2005- 06 & ORS. - 17 - PRODUCT NAMELY MOSAIC, BORDERS, PATTERNS OF MARBLES , GRANITES, STONES ETC. WHICH EXPERIENCE SUBSTANTIAL CHANGES DEFINITELY FAL L WITHIN THE EXPRESSION PROCESS AND THUS IS DEEMED TO BE MANUFACTURE FO R THE PURPOSE OF SECTION 10B OF THE ACT. 9.4. IT IS NEXT CONTENDED THAT THE FINAL PRODUCT W HICH IS BROUGHT INTO EXISTENCE IS ESSENTIALLY DIFFERENT FROM RAW-MATERIA L ORIGINALLY EXISTED IN THE SENSE THAT THE FINAL PRODUCT IS A COMMERCIAL CO MMODITY AND IS ACCEPTABLE AS SUCH OF BEING SOLD AND SUPPLIED. THE ORIGINAL ARTICLE LOSSES ITS IDENTITY AND CHARACTER SUBSTANTIALLY ON CONVERS ION. THE MANUFACTURED ARTICLE IS COMMERCIALLY KNOWN TO BE DIFFERENT THAN THE RAW-MATERIAL. WE FIND MERIT IN THIS PLEA OF THE ASSESSEE AS WELL. W E NOTE THAT THE WORD MANUFACTURE IS ACCOMPANIED WITH THE WORD PRODUCE IN SECTION 10B OF THE ACT. THE WORD PRODUCE IS TO BE TAKEN IN WIDE R SENSE. THE RAW- MATERIAL IS APPARENTLY CONDITIONED IN MANY WAYS. I T HAS TO BE BROKEN, GRADED, SHIFTED, CUT INTO VARIOUS SIZES AND SHAPES, POLISHED, CALIBRATED AND SO ON AND SO FORTH. THEREFORE, IT IS ENTIRELY CORR ECT TO SAY THAT A NEW AND DIFFERENT ARTICLE EMERGE HAVING A DISTINCTIVE NAME, CHARACTER AND USE WHICH SURELY COVERS THE ACTIVITY OF THE ASSESSEE AT LEAST WITHIN THE AMBIT OF EXPRESSION PRODUCTION. THEREFORE, LOOKING FRO M ANY ANGLE, THE ACTIVITY OF THE ASSESSEE CANNOT BE EXCLUDED FROM TH E EXPRESSION MANUFACTURE OR PRODUCTION EMPLOYED FOR THE PURP OSES OF SECTION 10 B OF THE ACT. ITA NO.3597/AHD/2008 & 14 ORS. DCIT VS. ARTISTIC TILES PVT.LTD. & ORS. ASST.YEAR 2005- 06 & ORS. - 18 - 10. THE SECOND OBJECTION OF THE REVENUE IS THAT T HE TERMS AND CONDITIONS STIPULATED IN THE LETTER OF APPROVAL FOR THE PURPOSES OF ELIGIBILITY AS 100% EOU HAS NOT BEEN FULFILLED. WE DO NOT FIND ANY WEIGHT IN THIS LINE OF ARGUMENT OF REVENUE EITHER. SECOND 10B CONTEMPLATES TAX INCENTIVE TO A 100% EXPORT ORIENTE D UNDERTAKING ON PROFITS AND GAINS DERIVED FROM THE EXPORT OF ARTICL ES OR THINGS ETC. AN APPROVAL FROM THE COMPETENT AUTHORITY IS IN RECORD. THE APPROVAL SO GIVEN HAS NOT BEEN WITHDRAWN AT ANY STAGE BY THE CO MPETENT AUTHORITY FOR ALLEGED BREACH OF CONDITIONS. THIS BEING SO, THE S UBSTANTIVE CONDITION AS AN APPROVED 100% EOU STANDS COMPLIED WITH. IT IS F OR THE COMPETENT AUTHORITY GRANTING APPROVAL TO ENSURE THE COMPLIANC E OF THE CONDITIONS SUBJECT TO WHICH APPROVAL HAS BEEN GRANTED AND FOR NOBODY ELSE. THE REMEDY FOR THE FAILURE TO COMPLY WITH THE CONDITION S OF APPROVAL IS PROBABLY AVAILABLE TO THE AUTHORITY ISSUING SUCH AP PROVAL. IN THE ABSENCE OF ANY DOCUMENT TO SHOW THAT THE COMPETENT AUTHORIT Y HAS ACTED ADVERSELY FOR ALLEGED FAILURE OF THE TERMS AND COND ITIONS OF THE LETTER OF APPROVAL, IT WILL BE DIFFICULT TO HOLD AGAINST THE ASSESSEE. 11. THE THIRD SUBSTANTIVE OBJECTION OF THE REVENUE IS THAT THE ASSESSEE HAS EMPLOYED USED MACHINERY FOR ALLEGED MANUFACTURE /PRODUCTION OF ARTICLES OR THINGS IN ITS EXPORT UNDERTAKING. IT I S ACCORDINGLY ALLEGED THAT THE ASSESSEE HAS VIOLATED THE CONDITIONS LAID DOWN IN SECTION 10B(2)(III) ITA NO.3597/AHD/2008 & 14 ORS. DCIT VS. ARTISTIC TILES PVT.LTD. & ORS. ASST.YEAR 2005- 06 & ORS. - 19 - OF THE ACT. IN REPLY, THE ASSESSEE HAS CONTENDED THAT MAJORITY OF PLANT AND MACHINERY WERE TAKEN ON LEASE/HIRE FROM THE SIS TER-CONCERN M/S. LOW DOWN MARBLES & GRANITES MINES PVT.LTD. (LGM). THE SAID MACHINERIES SO LEASED WERE PURCHASED BY LGM FROM ANOTHER SISTER -CONCERN M/S. FOREVER STONES. THE TOTAL VALUE OF MACHINERY OWNED BY FOREVER STONES WAS RS.47.36 LAKHS WHICH WAS SOLD TO THE LESSOR LGM WHO IN TURN LEASED THE SAME TO THE ASSESSEE. IN REBUTTAL TO THE CLAIM OF THE REVENUE THAT MACHINERIES WERE EARLIER USED BY FOREVER STONES AND THEREAFTER TRANSFERRED TO THE ASSESSEE, THE ASSESSEE HAS CONTE NDED THAT THE DETAILS OF PLANT & MACHINERY AS PER AUDITED BOOKS OF ACCOUNTS OF THE ASSESSEE WERE MADE AVAILABLE IN THE COURSE OF ASSESSMENT PROCEEDI NGS. AS PER THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE, THE P ERCENTAGE OF OLD PLANT & MACHINERY TO THE TOTAL VALUE OF PLANT & MA CHINERY REMAINS WELL BELOW THE PERMISSIBLE LIMIT OF 20% AND THEREFORE TH ERE IS NOT EXPRESS VIOLATION OF PROVISION OF SECTION 10B(2)(III) OF TH E ACT. IT IS ALSO CONTENDED ON BEHALF OF THE ASSESSEE THAT EVEN IF TH E VALUE OF PLANT & MACHINERY PRESUMABLY OWNED BY THE ASSESSEE BUT ACCO UNTED FOR IN THE BOOKS OF FOREVER STONES ADMITTEDLY FUNDED BY THE AS SESSEE IS TAKEN INTO ACCOUNT, THE POSITION WILL NOT ALTER. THE COMPO NENT OF OLD MACHINERY VIS--VIS THE TOTAL MACHINERY WILL BE LESS THAN 1% BY SUCH CALCULATION. THE WORKING OF SUCH PERCENTILE IS TABULATED IN WRIT TEN SUBMISSIONS FILED. THE ASSESSEE HAS PAID RENTAL FOR THE FACTORY PREMIS ES TAKEN ON RENT. IT IS NOT IN DISPUTE THAT WORK DONE AT THE PREMISES OF FO REVER STONES WAS ITA NO.3597/AHD/2008 & 14 ORS. DCIT VS. ARTISTIC TILES PVT.LTD. & ORS. ASST.YEAR 2005- 06 & ORS. - 20 - EXCLUSIVELY FOR THE ASSESSEE. IT IS FURTHER CONTEN TION OF THE ASSESSEE THAT WITH REGARD TO SALE OF OLD MACHINERY TO THE LESSOR LGM BY THE PARTNERSHIP-FIRM FOREVER STONES, THE FACTUAL POSITI ON IS THAT M/S.FOREVER STONES PURCHASED REQUIRED MACHINERY PARTS FROM THE MARKET, FABRICATED THE MACHINERY AT ITS PREMISE AND SOLD THE SAME TO L GM FOR CONSIDERATION OF RS.47.36 LAKHS WHO IN TURN LET THEM OUT TO THE A SSESSEE WHICH THE ASSESSEE USED FOR THE PURPOSE OF MANUFACTURING OF T ILES ETC. IT WAS SPECIFICALLY HIGHLIGHTED THAT NEITHER THE PARTNERSH IP-FIRM NOR THE LESSOR HAVE USED SUCH MACHINERY FOR THEIR OWN BUSINESS B UT WERE USED SOLELY FOR THE BUSINESS OF ASSESSEE AND THEREFORE TREATING SUCH MACHINERIES TO BE OLD FOR THE PURPOSES OF PROVISIONS OF SECTION 10B I S NOT JUSTIFIED MERELY BECAUSE OWNERSHIP OF SUCH MACHINERY HAS CHANGED WIT HIN THE GROUP ALBEIT WITH THE FUNDS OF THE ASSESSEE. IN ELABORAT ION, IT IS THE CONTENTION OF THE ASSESSEE THAT IT HAD ADVANCED CERTAIN FUNDS TO FOREVER STONES FROM WHICH CERTAIN MACHINERIES WERE PURCHASED IN THE NAM E OF THE ASSESSEE AND WERE USED AT THE PREMISES OF FOREVER STONES. NO JOB-WORK CHARGES WERE PAID TO FOREVER STONES AT ALL. THUS, IMPLIEDLY , MACHINERIES BELONGED TO THE ASSESSEE ONLY. IT IS THE CONTENTION OF THE ASSESSEE THAT THIS FACT IS BORNE FROM THE ASSESSMENT ORDER PASSED IN THE CASE OF FOREVER STONES WHEREIN NO INCOME HAS BEEN ASSESSED TOWARDS JOB-WOR K INCOME. SIMILARLY, NO JOB-WORK INCOME HAS BEEN ASSESSED IN THE HANDS OF LGM EITHER EXCEPT RECEIPT OF RENTAL INCOME FROM THE ASS ESSEE. IT IS THE CASE OF THE ASSESSEE THAT THERE IS NO RESTRICTION ON THE US E OF NEW MACHINERY NOT ITA NO.3597/AHD/2008 & 14 ORS. DCIT VS. ARTISTIC TILES PVT.LTD. & ORS. ASST.YEAR 2005- 06 & ORS. - 21 - USED BY ANYONE EARLIER IF TAKEN ON LEASE OR ON HIRE . WE FIND FORCE IN THE PLEA RAISED BY THE ASSESSEE. THE REVENUE HAS RELI ED UPON THE AFFIDAVIT FILED BY THE PARTNER OF FOREVER STONES BEFORE THE L ABOUR COURT STATING THAT MACHINERY USED BY SISTER-CONCERN OF THE ASSESS EE WAS SHIFTED TO THE FACTORY OF THE ASSESSEE. WE FIND THAT NOTHING TURN S ON THIS LINE OF ARGUMENT. AS NOTED, THE MACHINERY WERE OWNED IN TH E NAME OF THE ASSESSEE AND SHIFTED TO THE PREMISES OF THE ASSESSE E. THE MACHINERIES WERE NOT EMPLOYED FOR USE OF THIRD PARTY AT ANY POI NT OF TIME. ON OBJECTIVE ANALYSIS OF THE OBSERVATIONS MADE BY THE CIT(A) AND ON CONSIDERATION OF REPLY OF THE ASSESSEE BROADLY AS R ECORDED ABOVE, WE FIND THAT, IN ESSENCE, IT IS THE FUNDS OF THE ASSESSEE W HICH HAVE BEEN USED FOR THE PURPOSE OF ACQUISITION OF PLANT AND MACHINERY W HETHER RECORDED IN THE BOOKS OF THE ASSESSEE OR IN THE BOOKS OF FOREVE R STONES AS THE CASE MAY BE. THE LESSOR/PARTNERSHIP SIMPLY COLLECTED TH E HIRE CHARGES AND THUS THE MACHINERIES ARE OBVIOUSLY NOT USED IN ITS MANUFACTURE IN THEIR OWN ACCOUNT. THIS BEING SO, WE DO NOT FIND ANY INF RINGEMENT OF CLAUSE NO.10B(2)(III) OF THE ACT. 12. ANOTHER OBJECTION ON BEHALF OF THE REVENUE FOR DENIAL OF THE TAX INCENTIVE UNDER S.10B WAS RAISED CONTENDING THAT CE RTAIN AMOUNT OF SALE (RS.1,55,36,872/-) WAS MADE IN THE DOMESTIC MARKET AND THEREFORE THE ASSESSEE DID NOT REALIZE PART OF SALE PROCEEDS IN C ONVERTIBLE FOREIGN EXCHANGE AS CLAIMED. WITH REFERENCE TO THE AFORESA ID OBJECTION, WE NOTE ITA NO.3597/AHD/2008 & 14 ORS. DCIT VS. ARTISTIC TILES PVT.LTD. & ORS. ASST.YEAR 2005- 06 & ORS. - 22 - THE CONTENTION ON BEHALF OF THE ASSESSEE THAT AS PE R THE PROVISIONS OF EXIM POLICY, THE 100% EOU UNDERTAKING IS ENTITLED T O MAKE EXPORT THROUGH THIRD PARTY AND IN SUCH A SCENARIO, AMOUNT RECEIVED COULD BE IN INDIAN CURRENCY AS EXPORT IS ULTIMATELY MADE THROUG H A THIRD PARTY. IN SUCH A SITUATION, IT WAS CONTENDED THAT EXEMPTION U NDER S.10B OF THE ACT CANNOT BE DENIED TO THE ASSESSEE AS IT HAS NOT VIOL ATED ANY EXIM POLICY. FOREIGN EXCHANGE REALIZED BY THIRD PARTY ON EXPORT OF GOODS MANUFACTURED BY THE ASSESSEE WOULD BE CONSIDERED IN THE HANDS OF ASSESSEE FOR THE PURPOSE OF MAINTAINING 100% EOU ST ATUS. IN THE ABSENCE OF RELEVANT FACTS ON RECORD AS TO WHETHER T HE SALES MADE IN THE DOMESTIC MARKET WERE ULTIMATELY EXPORTED BY THE THI RD PARTY AND CONVERTIBLE FOREIGN EXCHANGE WAS RECEIVED IN INDIA IN TERMS OF EXIM POLICY AS CLAIMED, WE ARE UNABLE TO ADJUDICATE THIS ASPECT OF THE MATTER. ACCORDINGLY, WE CONSIDER IT EXPEDIENT THAT THIS ASP ECT OF ELIGIBILITY OF DOMESTIC SALES FOR THE PURPOSES OF SECTION 10B IN T HE LIGHT OF PROVISIONS OF THE INCOME TAX ACT AS WELL AS READ WITH EXIM POL ICY, IS REMITTED BACK TO THE FILE OF AO. THE AO SHALL BE AT LIBERTY TO SATISFY ITSELF ON THIS ASPECT OF THE CONTROVERSY IN ACCORDANCE WITH LAW AF TER AFFORDING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE CER TIFICATE OF CHARTERED ACCOUNTANT OBTAINED IN THIS REGARD MAY ALSO BE EXA MINED. SUBJECT TO AO BEING SATISFIED WITH THE REPRESENTATION OF THE A SSESSEE ON THIS ASPECT, THE CLAIM OF DEDUCTION UNDER S.10B IS ALLOWED IN SO FAR PROFITS DERIVED ITA NO.3597/AHD/2008 & 14 ORS. DCIT VS. ARTISTIC TILES PVT.LTD. & ORS. ASST.YEAR 2005- 06 & ORS. - 23 - FROM EXPORT OF MOSAIC BORDERS, MARBLES AND GRANITE STONES SO MANUFACTURED. 13. HOWEVER, IN THE SAME VAIN, WE NOTICE THAT THE ASSESSEE HAS ALSO CLAIMED DEDUCTION TOWARDS PROFIT DERIVED FROM EXPOR T OF CERTAIN PLANT AND MACHINERY AMOUNTING TO RS.69,45,780/-. THE PROFIT COMPONENT FROM THE EXPORT OF AFORESAID PLANT AND MACHINERY IS NOT KNOW N TO US. IN THIS CONNECTION, WE TAKE NOTE OF THE APPROVAL DATED 28/0 6/1999 GRANTED BY THE COMPETENT AUTHORITY WHEREBY THE PERMISSION WAS CONF INED UNDER THE 100% EXPORT ORIENTED SCHEME WHICH WAS RESTRICTED TO MANUFACTURE OF MOSAIC BORDERS, PATTERNS OF MARBLE, GRANITE STONES ETC. THUS, APPARENTLY EXPORT OF IMPUGNED PLANT & MACHINERY IS NOT COVERED BY THE APPROVAL. CONSEQUENTLY, THE CONDITIONS OF SECTION 10B IS NOT FULFILLED IN SO FAR AS THE PROFIT DERIVED FROM EXPORT OF PLANT AND MACHINE RY ARE CONCERNED. CONSEQUENTLY, THE AO IS DIRECTED TO EXCLUDE THE PRO FITS ARISING OUT OF THE EXPORT OF THE PLANT & MACHINERY FOR THE PURPOSE OF COMPUTATION OF DEDUCTION ELIGIBLE UNDER S.10B OF THE ACT. AS A RE SULT, GROUND NO.1 OF ASSESSEES APPEAL IS PARTLY ALLOWED. 14. CONSEQUENTLY, GROUND NO.1 OF ASSESSEES APPEAL CONCERNING DEDUCTION OF CLAIM UNDER S.10B OF THE ACT IS PARTLY ALLOWED IN TERMS OF DIRECTIONS NOTED ABOVE. ITA NO.3597/AHD/2008 & 14 ORS. DCIT VS. ARTISTIC TILES PVT.LTD. & ORS. ASST.YEAR 2005- 06 & ORS. - 24 - 15. SECOND GROUND OF THE APPEAL CONCERNS DISALLOW ANCE OF TRAVELLING EXPENSES AND CAR EXPENSES OF RS.9 LAKHS. WE FIND MERIT IN THE CONTENTION OF THE ASSESSEE THAT ANY DISALLOWANCE OF THIS NATURE WILL LEAD TO CORRESPONDING INCREASE IN QUANTUM OF TAX INCENTI VE ELIGIBLE UNDER S.10B OF THE ACT DEDUCTION UNDER S.10B OF THE ACT A S PER SPECIFIED PERCENTAGE OF DEDUCTION. WE ALSO NOTE THAT THE AO HAS NOT BEEN ABLE TO PINPOINT ANY SOUND BASIS FOR DISALLOWING TRAVELLING EXPENSES AND HAS RESORTED TO ADHOC DISALLOWANCE. CONSIDERING THE NA TURE OF ACTIVITY THAT THE ASSESSEE IS ENGAGED IN, THE DISALLOWANCE DOES N OT APPEAR TO BE JUSTIFIED. GROUND NO.2 OF ASSESSEES APPEAL IS ALL OWED. 16. GROUND NO.3 CONCERNS NON-DISPOSAL OF OBJECTION S TOWARDS REJECTION OF BOOKS OF ACCOUNTS BY THE CIT(A). IN THE LIGHT OF AFORESAID DISCUSSION CONCERNING GROUND NO.1, THIS G ROUND IS ONLY ACADEMIC IN NATURE AND DOES NOT CALL FOR ANY SPECIF IC ADJUDICATION. 17. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO .1542/AHD/2011 FOR AY 2003-04 IS PARTLY ALLOWED IN TERMS OF DIRECTIONS NARRATED ABOVE. 18. SIMILAR ISSUES TOWARDS DENIAL OF DEDUCTION UNDE R S.10B AND RENTAL AND HIRE CHARGES HAVE BEEN RAISED IN OTHER CAPTIONE D APPEALS NAMELY, ITA NO.3726/AHD/2008 (AY 2001-02), ITA NO.3727/AHD/ 2008 (AY 2002-03), ITA NO.1543/AHD/2011 (AY 2004-05), ITA ITA NO.3597/AHD/2008 & 14 ORS. DCIT VS. ARTISTIC TILES PVT.LTD. & ORS. ASST.YEAR 2005- 06 & ORS. - 25 - NO.1545/AHD/2011 (AY 2006-07) AND ITA NO.1502/AHD/2 011 (AY 2004-05). THE FACTS AND ISSUES INVOLVED IN ALL TH ESE APPEALS ARE ANALOGOUS TO ITA NO.1542/AHD/2011 FOR AY 2003-04 WH EREIN THE GROUNDS RAISED IN THESE APPEALS HAVE BEEN DISCUSSED IN EARLIER PARAS IN GREAT LENGTH. ACCORDINGLY, OUR OBSERVATIONS MADE IN ITA NO.1542/AHD/2011 SHALL APPLY MUTATIS MUTANDIS TO THE AFORESAID APPEALS. FOR THE PARITY OF REASONS, WE ALLOW THE A BOVEMENTIONED APPEALS OF THE ASSESSEE IN TERMS OF DIRECTIONS NOTE D IN ITA NO.1542/AHD/2011. ITA NOS.940/AHD/2014 (AY 2007-08) , 1026/AHD/2014 ( AY 2003-04), 1027/AHD/2014 (AY 2004-05) AND 1030/AHD/2014 (AY 20 06-07). 19. IN THESE APPEALS, CONSEQUENTIAL PENALTY UNDER S .271(1)(C) OF THE ACT IS IN QUESTION. IN VIEW OF THE DETAILED REASON INGS GIVEN IN THE QUANTUM APPEAL WHEREBY THE ADDITIONS HAVE BEEN DELE TED, THE PENALTY UNDER S.271(1)(C) OF THE ACT ARE SET ASIDE AND QUAS HED. ACCORDINGLY, ALL THESE APPEALS IN ITA NOS.940/AHD/2014 (REVENUES AP PEAL), 1026/AHD/2014, 1027/AHD/2014 AND 1030/AHD/2014 ARE DECIDED IN FAVOUR OF ASSESSEE. 20. AS A RESULT, APPEAL OF THE REVENUE IN ITA NO .940/AHD/2014 IS DISMISSED, WHEREAS ITA NOS.1026/AHD/2014, 1027/AHD/ 2014 & 1030/AHD/2014 (ALL THREE APPEALS OF THE ASSESSEE) A RE ALLOWED. ITA NO.3597/AHD/2008 & 14 ORS. DCIT VS. ARTISTIC TILES PVT.LTD. & ORS. ASST.YEAR 2005- 06 & ORS. - 26 - ITA NO.3597/AHD/2008 (AY 2005-06) REVENUES APPE AL 21. THE CAPTIONED APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-VALSAD [CIT(A) IN SHORT] DATED 14/07/2008 FOR THE ASSESSMENT YEAR (AY) 2005-06. 22. THE GROUND OF APPEAL RAISED BY THE REVENUE REA DS AS UNDER:- I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 20,55,241/- MADE ON ACCOUNT OF UNDER VALUATION OF ASSETS. II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 8,02,428/- MADE ON ACCOUNT OF DISALLOWANCES U/S.40A(3) OF THE I.T.ACT. III) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 75,438/- MADE ON ACCOUNT OF BELATED PAYMENTS OF PF. IV) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD.CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE A.O . AND DISMISSED THE PLEA OF THE ASSESSEE. 23. AT THE TIME OF HEARING, IT WAS SUBMITTED BY THE LD.AR FOR THE ASSESSEE THAT APPEAL FILED BY THE REVENUE IS HIT BY CBDT CIRCULAR NO.21 OF 2015 DATED 10/12/2015. AS PER AFORESAID CIRCULA R, ALL PENDING APPEALS FILED BY REVENUE ARE LIABLE TO BE DISMISSED AS A ME ASURE FOR REDUCING LITIGATION WHERE THE TAX EFFECT DOES NOT EXCEED THE PRESCRIBED MONETARY LIMIT WHICH IS RS.10 LAKHS. IN THE INSTANT CASE, T HE TAX EFFECT ON THE DISPUTED ISSUE RAISED BY THE REVENUE IS STATED TO B E LESS RS.10 LAKHS AND THEREFORE APPEAL OF THE REVENUE IS REQUIRED TO BE D ISMISSED IN LIMINE . ITA NO.3597/AHD/2008 & 14 ORS. DCIT VS. ARTISTIC TILES PVT.LTD. & ORS. ASST.YEAR 2005- 06 & ORS. - 27 - 24. THE LD.DR FOR THE REVENUE COULD NOT DISTINGUISH THE APPLICABILITY OF THE CBDT CIRCULAR NO.21 OF 2015. ACCORDINGLY, APPEAL OF THE REVENUE IS DISMISSED AS NOT MAINTAINABLE. HOWEVER, IT WILL BE OPEN TO THE REVENUE TO SEEK RESTORATION OF ITS APPEAL ON SH OWING INAPPLICABILITY OF THE AFORESAID CBDT CIRCULAR IN ANY MANNER. 25. IN THE RESULT, THE APPEAL OF THE REVENUE IN IT A NO.3597/AHD/2008 IS DISMISSED. ITA NO.3728/AHD/2008 AY 2005-06 ASSESSEES APPE AL 26. IN THIS APPEAL, THE ASSESSEE HAS RAISED TWO GRO UNDS; (I) TOWARDS ELIGIBILITY OF DEDUCTION UNDER S.10B OF THE ACT AND (II) TOWARDS DISALLOWANCE OF FREIGHT CHARGES BY INVOKING THE SEC TION 40(A)(IA) OF THE ACT. 26.1. THE FIRST GROUND CONCERNING ELIGIBILITY OF CL AIM OF DEDUCTION UNDER S.10B OF THE ACT IS COVERED IN FAVOUR OF ASSESSEE I N VIEW OF OUR FINDINGS GIVEN IN ITA NO.1542/AHD/2011 FOR AY 2003-04 (SUPRA ). THEREFORE GROUND NO.1 OF ASSESSEES APPEAL IS ALLOWED. 26.2. GROUND NO.2 CONCERNS DISALLOWANCE OF FREIGHT CHARGES UNDER S.40(A)(IA) OF THE ACT. THE ASSESSEE HAS NOT ADVAN CED ANY ARGUMENT AT THE TIME OF HEARING IN REBUTTAL OF THE ACTION OF TH E CIT(A). ACCORDINGLY, ITA NO.3597/AHD/2008 & 14 ORS. DCIT VS. ARTISTIC TILES PVT.LTD. & ORS. ASST.YEAR 2005- 06 & ORS. - 28 - WE DECLINE TO INTERFERE WITH THE ORDER OF THE CIT(A ) ON THIS ISSUE. HOWEVER, WE MY ADD THAT THE ASSESSEE SHALL BE ENTIT LED TO CORRESPONDING ADJUSTMENT FOR COMPUTATION OF DEDUCTION UNDER S.10B OF THE ACT IN ACCORDANCE WITH LAW TOWARDS SUCH DISALLOWANCE. 26.3. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO.3728/AHD/2008 IS PARTLY ALLOWED. ITA NO.3729/AHD/2008 AY 2005-06 ASSESSEES APPE AL 27. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS O F APPEAL:- 1. THE LEARNED CIT(APPEALS) ERRED ON FACTS AND IN LAW IN CONFIRMING THE ACTION OF ASSESSING OFFICER HOLDING THAT THE APPELLANT IS NOT ELIGIBLE FOR DEDUCTION U/S.10B OF THE I.T.ACT. 2. THE LEARNED CIT(APPEALS) ERRED ON FACTS AND IN LAW IN MAKING DISALLOWANCE OF RS.85,48,787/- BY INVOKING SECTION 40(A)(IA) ON PAYMENT OF FREIGHT CHARGES. 27.1. IN THIS APPEAL, GROUND NO.1 IS IDENTICAL TO G ROUND NO.1 OF ITA NO.1542/AHD/2011(SUPRA). IN THE LIGHT OF DISCUSSIO N IN THAT APPEAL, GROUND NO.1 OF ASSESSEES APPEAL IN ITA NO.3729/AHD /2008 IS ALLOWED. 27.2. THE ASSESSEE ALSO HAS RAISED GRIEVANCE AS PER GROUND NOS.2, 3 & 4 NOTED ABOVE. HOWEVER, THE ASSESSEE HAS NOT CONTEST ED BEFORE US ON THESE ITA NO.3597/AHD/2008 & 14 ORS. DCIT VS. ARTISTIC TILES PVT.LTD. & ORS. ASST.YEAR 2005- 06 & ORS. - 29 - GROUNDS TILL AT THE TIME OF HEARING. ACCORDINGLY, WE DECLINE TO INTERFERE WITH THE FINDINGS OF THE CIT(A) ON THESE ISSUES. H OWEVER, WE MAY ADD THAT THE ASSESSEE WILL BE ENTITLED TO ELIGIBILITY O F NET PROFITS FOR THE PURPOSE OF CLAIM OF DEDUCTION UNDER S.10B OF THE AC T IN ACCORDANCE WITH LAW. ACCORDINGLY, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 73. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO .3729/AHD/2008 IS PARTLY ALLOWED. ITA NO.1503/AHD/2011 AY 2006-07 REVENUES APPEA L 28. THE REVENUE HAS RAISED FOLLOWING TWO SUBSTANTIV E GROUNDS:- [1] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE HONBLE CIT(A) ERRED IN DELETING THE ADDITION OF RS .1,15,00,000/- MADE ON ACCOUNT OF PROFIT FROM UNACCOUNTED SALES TO ITS SISTER CONCERN. [2] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE HONBLE CIT(A) ERRED IN DELETING THE ADDITION OF RS .1,10,86,264/- MADE BY INVOKING SECTION 40(A)(IA) OF THE IT ACT FOR NOT DEDUCTING TDS ON FREIGHT CHARGES PAID. 28.1. GROUND NO.1 OF REVENUYE APPEAL HAS BEEN DEALT WITH BY CIT(A) AS UNDER: 6. GROUND NO.2 : THIS GROUND IS AGAINST THE ADDITION OF RS.1,15,00,000/- ON ACCOUNT OF PROFIT ON UNACCOUNTE D SALES MADE TO THE SISTER CONCERNS. THIS MATTER WAS DISCUSSED IN PARA -4 OF THE ASSESSMENT ORDER BY THE AO. ITA NO.3597/AHD/2008 & 14 ORS. DCIT VS. ARTISTIC TILES PVT.LTD. & ORS. ASST.YEAR 2005- 06 & ORS. - 30 - 6.1. SUBMISSION BY APPELLANT : THE APPELLANT SUBMITTED THAT THE SALE WAS EFFECTED UNDER CT3 ISSUED BY CENTRAL EXCISE, BI LLIMORA FOR EXPORT BY THE SISTER CONCERN. FURTHER, THE APPELLANT CONT ENDED THAT THE AO DID NOT ASK FOR THE INFORMATION REGARDING THIS ISSUE. THE ADDITION MADE BY THE AO IS PRESUMPTUOUS AND THEREFORE DESERVED TO BE DELETED AS CONTENDED BY THE APPELLANT. DECISION: I HAVE CAREFULLY CONSIDERED THE FINDINGS OF THE A O AND THE SUBMISSIONS MADE BY THE APPELLANT. AT THE OUTS ET IT IS NOTED THAT THIS GROUP OF CASES HAS BEEN BADLY REPRESENTED BEFORE TH E AO AS WELL AS DURING THE APPELLATE PROCEEDING. IN THE INTEREST O F JUSTICE, THE APPELLANT WAS GIVEN ENOUGH OPPORTUNITY TO MAKE EFFECTIVE REPR ESENTATION BEFORE ME BECAUSE THE STAKE OF THE APPELLANT IS HIGH. HOW EVER, FOR THE REASONS BEST KNOWN TO THEM, THE REPRESENTATION WAS INADEQUA TE. THEREFORE, NOT ONLY THIS GROUND BUT ALSO ALL OTHER GROUNDS ARE DEA LT WITH UTMOST CARE ON THE BASIS OF MATERIALS ON RECORDS AND SUBMISSION S MADE BY THE APPELLANT IN THE INTEREST OF FAIRNESS AND JUSTICE. 6.2. IT WAS FOUND DARING THE COURSE OF SURVEY U/S. 133A THAT THE APPELLANT HAD SOLD FINISHED GOODS WORTH RS.6,69,60, 800/- TO ONE OF ITS SISTER CONCERNS NAMELY M/S. ARTISTIC STONE PVT. LTD FOR EXPORT. AS PER THE AO, THE PROFITS OUT OF THIS SALE WAS NOT REFLEC TED IN THE REGULAR BOOKS OF THE A/C. THEREFORE, THE AO ESTIMATED THE PROFITS AT RS.1,15,00,000/- AND WANTED TO TAX ON THAT AMOUNT. THE AO ALSO STATE D THAT THE DIRECTOR OF THE COMPANY DISCLOSED THIS AMOUNT FOR TAXATION I N THE STATE MENT RECORDED BY HIM IN THE COURSE OF ASSESSMENT PROCEED ING. I HAVE CAREFULLY CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE FINDINGS OF THE AO. MY OBSERVATIONS IN DECIDING THE APPEAL IN THE CASE OF M/S. ARTISTIC STONE PVT. LTD FOR THE A.Y. 2006-0 7 VIDE APPEAL NO. CIT(A)/VLS/SAS/34/10-11 DATED. 28.01.2011 WAS AS UNDER, 'THE PROFITS ON SALE BY THIS FACT WAS NOT DISPUTED BY THE APPELLANT WHICH IS APPARENT FROM THE STATEMENT OF M R. MANOJ C PATEL, DIRECTOR OF THE COMPANY, RECORDED ON 24.03.2 006. THE AO ESTIMATED THE NET PROFIT MARGIN @ 14.60% AND ARRIVE D AT RS. 8:1.15 LACS. THE DIRECTOR OF THE COMPANY AGREED TO PAY TAX ON THIS PROFIT OF RS. 81.15 LACS IN THE ASSESSMENT PRO CEEDING. BEFORE ITA NO.3597/AHD/2008 & 14 ORS. DCIT VS. ARTISTIC TILES PVT.LTD. & ORS. ASST.YEAR 2005- 06 & ORS. - 31 - ME THE APPELLANT CONTENDED THAT THE COMPANY SUFFERE D A NET-LOSS, THEREFORE, THE ESTIMATE OF 14.60% PROFITS FROM THE SAID EXPORT BY THE AO IS VERY HIGH AND DESERVES TO BE DELETED. THE APPELLANT DID NOT CONTEST THE UNACCOUNTED EXPORT OF RS.6,69,60,80 0/-. FURTHER, THE APPELLANT DID NOT FURNISH WHY THE ESTIMATE OF 1 4.60% BY AO WAS HIGHER. I HAVE VERIFIED THE B/S AND P&L A/C. TO SATISFY MYSELF WHETHER THE CONTENTION OF THE APPELLANT CAN BE ACCE PTED BUT THERE IS NOTHING. IN FEET THE AUDIT REPORT DOES NOT MENTI ON OF SURVEY ACTION AND THE DISCREPANCY NOTICED DURING THE SURVE Y. SCHEDULE TO THE P&L A/C WITH REGARDS TO THE SALE WAS ALSO NO T FURNISHED BEFORE ME. IN THE AUDIT REPORT, THOUGH CONSUMPTION OF MATERIALS ARE MENTIONED BUT THERE IS A SILENCE ON THIS PARTIC ULAR TRANSACTIONS. IN VIEW OF THIS, I AM CONSTRAINED TO AGREE WITH THE FIR DINGS OF THE AO BECAUSE THE APPELLANT FAILED TO REBUT THE FINDINGS OF THE AO ALTHOUGH HE GOT ENOUGH OPPORTUNI TY TO EXPLAINED/DEFEND HIS CASE. THUS, THIS GROUND OF APP EAL IS DISMISSED'. 6.3.IN THE INSTANT CASE THE APPELLANT: BROUGHT TO M Y NOTICE THAT THE SALE WAS EFFECTED UNDER CT3 ISSUED BY CENTRAL EXCISE, BI LLIMORA FOR EXPORT BY THE SISTER CONCERN. THE ESTIMATED PROFITS ARRIVE D BY THE AO IN THIS SALE IS ABOUT 17.16%. AT THE SAME TIME THE PURCHASE R MADE PROFITS ON EXPORT 14.60%. THAT MEANS, ON THE SAME MATERIALS BO TH THE PARTIES MADE 31.76% PROFITS. THE PROBABILITY OF EARNING SUC H PROFITS DOES NOT ARISE. IN MY VIEW BOTH THE PARTIES CANNOT MAKE SUCH HUGE MARGIN. AS I HAVE CONFIRMED THE ADDITIONS IN THE HANDS OF THE EX PORTING COMPANY WHO REALLY HAS MADE PROFIT, ADDITION AGAIN IN THE H ANDS OF THE APPELLANT IS UNSUSTAINABLE. TAX SHOULD BE LEVIED ON INCOME AN D NOT ON THE BASIS OF PRESUMPTION AND SURMISE. THERE IS A POSSIBILITY THA T ARTISTIC STONE HAS EXPORT ORDER BUT THE APPELLANT HAS NOT. THE APPELLA NT HAD STOCK BUT THE SAME WAS NOT WITH ARTISTIC STONES. IN THIS CIRCUMST ANCES, THE APPELLANT TRANSFERRED THE GOODS WITH THE PERMISSION OF CENTRA L EXCISE DEPTT. TO THE SISTER CONCERN. IN THE PROCESS, I AM SURE THE A PPELLANT HAD NOT EARNED SUCH HUGE PROFITS JUST FOR TRANSFERRING GOOD S TO A SISTER CONCERN. IN MY VIEW, THE ESTIMATE OF SUCH HUGE PROFITS FROM INTERNAL TRANSFER IS UNWARRANTED. THEREFORE, THE AO IS DIRECTED TO DELET E THE ADDITION MADE ON THIS COUNT. THE APPELLANT SUCCEEDS IN THIS GROUND OF APPEAL. ITA NO.3597/AHD/2008 & 14 ORS. DCIT VS. ARTISTIC TILES PVT.LTD. & ORS. ASST.YEAR 2005- 06 & ORS. - 32 - 28.2. THE LD.DR HAS NOT POINTED OUT ANY DEFECT IN THE ORDER OF THE CIT(A) DEALING WITH THE ISSUE. ACCORDINGLY, WE DEC LINE TO INTERFERE WITH THE ORDER OF THE CIT(A). THEREFORE, GROUND NO.1 IS DISMISSED. 28.3. GROUND NO.2 CONCERNS DISALLOWANCE UNDER S.40( A)(IA) OF THE ACT. THE CIT(A) FOUND THAT TDS HAS BEEN DEDUCTED AS APPL ICABLE AND THEREFORE NO DISALLOWANCE IS CALLED FOR. THE RELEV ANT OPERATIVE PARA OF THE ORDER OF THE CIT(A) READS AS UNDER:- GROUND NO. 3 : THIS GROUND IS RAISED AGAINST THE DISALLOWANCE OF RS.1,10,86,2647- BY THE AO BY INVOKING PROVISI ONS U/S. 4O(A)(IA) OF THE I.T. ACT. 7.1. SUBMISSION BY APPELLANT : AS REGARDS GROUND 5, THE LEARNED AO ERRED IN MAKING DISALLOWANCE OF RS. 110862647-/- FREIGHT CHARGES U/SEC.4O(A)(IA) MENTIONING THAT: NO TDS WAS DONE. IN THIS CONNECTION IT IS TO SUBMIT YOUR HONOUR THAT ARTISTI C TILES PVT. LTD. A 100% EOU IS SITUATED IN A VILLAGE BODVANK, TALUKA C HKHLI DISTRICT NAVSARI, IS THE TRIBAL AREA. THERE IS NO B ANKING FACILITY AND THE DRIVERS OF THE TRUCKS DEMAND FREIGHT AND OC TROI IN CASH. THE DRIVERS OF THE CONTAINER CARGOES FOR EXPORT WER E ONLY PAID A PART PAYMENT IN CASH. THEY ASKED FOR CASH SO AS TO MAINTAIN THEIR VEHICLES ON THEIR WAY BACK. THUS WE USED TO MAKE CA SH PAYMENT IN GENUINE REASONS AND THERE ISN'T ANY MELAFIDE INTENT ION IN DOING SO. THE CASH PAYMENTS MADE EXCEEDING RS.20000/- HAS BEE N ALREADY DISALLOWED IN THE AUDITED BOOKS OF ACCOUNTS FOR THE F.Y.2005-2006. MOREOVER THE LEARNED AO ERRED IN DISALLOWING THE SA ME MENTIONING THAT NO TDS HAS BEEN DONE. FURTHER THE A PPELLANT SUBMITTED THAT YOUR APPELLANT HAS DONE TDS THE DETA ILS ALONGWITH ITA NO.3597/AHD/2008 & 14 ORS. DCIT VS. ARTISTIC TILES PVT.LTD. & ORS. ASST.YEAR 2005- 06 & ORS. - 33 - COPIES OF CHALLANS HAVE BEEN GIVEN AS ASKED FOR BY POINT NO. 16 OF THE NOTICE U/SEC.142(1). YOUR APPELLANT ATTACHES A COPY OF THE SAME BY ANNEXURE-B YOUR HONOUR IS REQUESTED TO CONS IDER ALL THESE FACTS AND TO ALLOW THE DISALLOWANCE OF FREIGH T CHARGES OF RS.11086264/- MADE U/SEC.40(A)(IA) OF THE ACT IN TH E INTEREST OF NATURAL JUSTICE. 7.2 DECISION : __I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT AND THE OBSERVATION MADE BY T HE AO. THE APPELLANT HAD ALSO SUBMITTED THE LIST OF PAYMENTS M ADE AND THE TDS EFFECTED THEREON. FURTHER THE APPELLANT CONTEND ED THAT SAME DETAILS WERE FURNISHED TO THE AO BUT IGNORED BY HIM . I HAVE PERUSED THE INCOME COMPUTATION FURNISHED WITH THE R /I BY THE APPELLANT. THE AUDITOR HAS DISALLOWED CERTAIN CASH PAYMENTS IN EXCESS OF RS.20,000/-. THE DETAILS SUBMITTED BEFORE ME SUFFICIENTLY INDICATE THAT THE APPELLANT HAD DEDUCTED TDS AS APP LICABLE ON THE SAID PAYMENTS MADE. IN THIS CIRCUMSTANCES, THE />0 IS DIRECTED TO DELETE THE ADDITION MADE IN THIS GROUND. THUS, THIS GROUND OR APPEAL IS ALLOWED. 28.4. THE LD.DR HAS NOT CONTROVERTED THE FINDINGS O F THE CIT(A). ACCORDINGLY GROUND NO.2 IS ALSO DISMISSED. 28.5. IN THE RESULT, APPEAL OF THE REVENUE IN ITA N O.1503/AHD/2011 IS DISMISSED. ITA NO.1504/AHD/2011 AY 2006-07 REVENUES APPEA L 29. THE REVENUE HAS RAISED FOLLOWING TWO SUBSTANTIV E GROUNDS:- ITA NO.3597/AHD/2008 & 14 ORS. DCIT VS. ARTISTIC TILES PVT.LTD. & ORS. ASST.YEAR 2005- 06 & ORS. - 34 - [1] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE HONBLE CIT() ERRED IN DELE4TING THE ADDITION OF RS .71,79,672/- MADE ON ACCOUNT OF DISALLOWANCE OF RENT AND HIRE CHARGES CL AIMED TO HAVE PAID. [2] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE HONBLE CIT(A) ERRED IN DELETING THE ADDITION OF RS .55,78,477/- MADE ON ACCOUNT OF DISALLOWANCE U/S.40(A)(IA) OF THE I.T .ACT. 29.1. GROUND NO.1 OF REVENUE APPEAL HAS BEEN DEALT WITH BY CIT(A) AS UNDER:- 11.1. SUBMISSION BY APPELLANT: IN THIS REGARD S THE APPELLANT CONTENDED THAT THE LEARNED AO ERRED IN MAKING DISAL LOWANCE OF RS.71,79, 672/- ON ACCOUNT OF RENT/HIRE CHARGES PAI D TO M/S.LOWDON MARBLE & GRANITE MINES (P) LTD. FURTHER THE APPELLANT SUBMITTED THAT THE LEARNED AO HAS TAKEN I NTO ACCOUNT THE WHOLE OF THE LEDGER ACCOUNT OF M/S.LOWDON MARBLE & GRANITE MINES (P) LTD. IN FACT THE BUILDING RENT OF RS.15, 00,000/- AND THE MACHINERY HIGHER CHARGES OF RS.6,00,000/- HAVE BEEN TAKEN INTO ACCOUNT AND BALANCE SHEET OF THE FY.2005-06 WHICH I S ALLOWABLE. THIS MAY PLEASE BE NOTED AND THE DISALLOWANCE SO M ADE MAY PLEASE BE DELETED AND ALLOW THE SAME IN THE INTERET OF NATURAL JUSTICE. 11.1. DECISION : THIS ISSUE HAS COME UP WHILE DE CIDING THE APPEAL FOR THE A.Y. 2003-04 & 2004-05 AND I HAVE DE CIDED IN FAVOUR OF THE APPELLANT BECAUSE THE MATERIAL FACTS ARE SAME I AM INCLINED TO GIVE RELIEF IN THIS YEAR ALSO. ACCORDI NGLY, THIS GROUND OF APPEAL IS ALLOWED. 29.2. THE LD.DR HAS NOT POINTED OUT ANY DEFICIT IN THE FINDINGS OF THE CIT(A). THEREFORE, WE DECLINE TO INTERFERE WITH TH E ORDER OF THE CIT(A). ITA NO.3597/AHD/2008 & 14 ORS. DCIT VS. ARTISTIC TILES PVT.LTD. & ORS. ASST.YEAR 2005- 06 & ORS. - 35 - 29.3. ACCORDINGLY, GROUND NO.1 OF REVENUES APPEA L IS DISMISSED. 30. GROUND NO.2 IS AGAINST DISALLOWANCE MADE UNDER S.40(A)(IA) OF THE ACT. THE CIT(A) HAS DECIDED THE ISSUE BY OBSERVIN G AS UNDER:- 12.1 SUBMISSION BY APPELLANT: THE APPELLANT SUB MITTED THAT THE AO ERRED IN MAKING DISALLOWANCE OF RS.5,78,477/- ON FREIGHT CHARGES BY INVOKING SEC.40(A)(IA) OF THE ACT. IN T HIS CONNECTION IT IS TO SUBMIT YOUR HONOUR THAT WE HAVE MADE TDS THE DETAILS WHEREOF ALREADY SUBMITTED ON 24.11.2008 TO THE LEAR NED AO IN SUBMISSION OF DETAILS ASKED FOR U/SE.142 POINT NO .19 ALONG WITH OTHER DETAILS (COPY OF TDS DETAILS-ANNEXURE-G), YOU R HONOUR IS REQUESTED TO CONSIDER THIS AND THE ADDITION OF RS.5 5,78,477/-. FREIGHT CHARGES MADE ERRONEOUSLY BY THE LEARNED AO MAY PLEASE BE DELETED AND ALLOW US. NOT ONLY THIS BUT 20% OF THE CASH PAYMENT MADE BEYOND RS.20000/- HAS BEEN ALSO DISALL OWED IN THE AUDITED ACCOUNTS FOR THE F.Y. 2005-06. 12.1. DECISION: I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT AND THE OBSERVATION MADE BY T HE AO, THE APPELLANT HAD ALSO SUBMITTED THE LIST OF PAYMENTS M ADE AND THE TDS EFFECTED THEREON. FURTHER THE APPELLANT CONTEN DED THAT SAME DETAILS WERE FURNISHED TO THE AO BUT IGNORED BY HIM . I HAVE PERUSED THE INCOME COMPUTATION FURNISHED WITH THE R /I BY THE APPELLANT. THE AUDITOR HAS DISALLOWED CERTAIN CASH PAYMENTS IN EXCESS OF RS.20,000/-. THE DETAILS SUBMITTED BEFOR E ME SUFFICIENTLY INDICATE THAT THE APPELLANT HAD DEDUCTED TDS AS APP LICABLE ON THE SAID PAYMENTS MADE. IN THIS CIRCUMSTANCES, THE AO IS DIRECTED TO DELETE THE ADDITION MADE IN THIS GROUND. THUS, THI S GROUND OF APPEAL IS ALLOWED. ITA NO.3597/AHD/2008 & 14 ORS. DCIT VS. ARTISTIC TILES PVT.LTD. & ORS. ASST.YEAR 2005- 06 & ORS. - 36 - 30.1. THE LD.DR HAS NOT CONTROVERTED THE ABOVE FIND INGS OF THE LD.CIT(A). THEREFORE, WE DECLINE TO INTERFERE WITH THE ORDER OF THE CIT(A). THUS, GROUND NO.2 OF REVENUES APPEAL IS DISMISSED. 27.5. IN THE RESULT, APPEAL OF THE REVENUE IN ITA N O.1504/AHD/2011 IS DISMISSED. 22. WE SUMMARIZE THE RESULT AS UNDER:- (I) ASSESSEES APPEALS IN ITA NO.1542/AHD/2011 IS PARTLY ALLOWED. (II) ITANO.3726/AHD/2008,3727/AHD/2008, ITA NO.1543/AHD/2011 AND ITA NO.1545/AHD/11 ARE ALLOWED . (II) ASSESSEES APPEAL IN ITA NO. ITA NO.1026/AHD/2 014, ITA NO.1027/AHD/2014 & 1030/AHD/2014 ARE ALLOWED. (IV) ASSESSEES APPEAL IN ITA NO.3728/AHD/2008 & IT A NO.3729/AHD/2008 ARE PARTLY ALLOWED. (III) REVENUES APPEAL IN ITA NO.940/AHD/2014, ITA NO.3597/AHD/2008, ITA NO.1502/AHD/2011, ITA NO.1503/AHD/2011 & ITA NO.1504/AHD/2011 ARE DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 28 / 0 4 /201 7 SD/- SD/- ( ) ( ) ( MAHAVIR PRASAD ) ( PRADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 28/ 04 /2017 ,..,.../ T.C. NAIR, SR. PS ITA NO.3597/AHD/2008 & 14 ORS. DCIT VS. ARTISTIC TILES PVT.LTD. & ORS. ASST.YEAR 2005- 06 & ORS. - 37 - !'./01/%'/ COPY OF THE ORDER FORWARDED TO : 1. 023 / THE APPELLANT 2. 423 / THE RESPONDENT. 3. 567' 8' / CONCERNED CIT 4. 8' ( 0 ) / THE CIT(A)-VALSAD 5. /9:'67 , 0067 & , 0 5 / DR, ITAT, AHMEDABAD 6. :; / GUARD FILE. / BY ORDER, 4/'' //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 20/26.4.17(DICTATION-PAD 6 9- PAGES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 21/27.4.17 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.28.4.17 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 28.4.17 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER