ITO WD 18(3)(4), MUMBAI V. INTERNATIONAL CORPORATION, MUMBAI

ITA 3978/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9146 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 03-10-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 13-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3); 80IB

Judgement Text

ITA NO.3978 OF 2011 INTERNATIONAL CORPORATION MUMBA I PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL 'I' BENCH, MUMBAI BEFORE SHRI D.K. AGARWAL, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. 3978/MUM/2011 (ASSESSMENT YEAR: 2007-08) INCOME TAX OFFICER WARD 18(3)4 2 ND FLOOR, ROOM NO.206 PIRMAL CHAMBERS, LALBAUG, MUMBAI 400012 VS. INTERNATIONAL CORPORATION, B-7 NAHAR SETH INDL. ESTATE, PANNALAL SILK MILL COMPOUND, LBS MARG, BHANDUP (W) MUMBAI 400078 PAN: AACFI 0772 R (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI MANOJ KUMAR, DR ASSESSEE BY: NONE DATE OF HEARING: 10/12/2012 DATE OF PRONOUNCEMENT: 14/12/2012 O R D E R PER B. RAMAKOTAIAH, A.M. THIS IS A REVENUE APPEAL AGAINST THE ORDERS OF THE CIT (A)-29 MUMBAI, DATED 15.02.2011 ON THE ISSUE OF DELETION M ADE BY AO UNDER SECTION 80IC AMOUNTING TO ` .1,02,27,395. WHEN THE WAS CALLED FOR HEARING NONE APPEARED ON BEHALF OF ASSES SEE, EVENTHOUGH THE NOTICE WAS SERVED. THE APPEAL WAS DECIDED EXPAR TE ASSESSEE AFTER HEARING THE LD. DR. THE REVENUE HAS RAISED THE FOLLOWING GROUND: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A) HAS ERRED IN DELETING AN ADDITION OF ` .1,02,27,395 MADE ON ACCOUNT OF DISALLOWANCE OF DEDUCTION UNDER SECTION 80IC WITHOU T APRPECIATING THE FACT THAT ASSESSEE IS NOT ENGAGED IN AN ACTIVITY OF MANUFACTURING OR PRODUCING, BUT IT IS P URELY ENGAGED IN AN ACTIVITY OF ASSEMBLING, THEREFORE ASSESSEE DOES NOT FULFIL THE BASIC CONDITION UNDER SECTION 80IC(2)(A) TO AVAIL THE DEDUCTION UNDER SEC TION 80IC . ITA NO.3978 OF 2011 INTERNATIONAL CORPORATION MUMBA I PAGE 2 OF 4 2. BRIEFLY STATED, ASSESSEE FIRM WAS INCORPORATED ON 1 4.12.2005 AND IS ENGAGED INTO MANUFACTURING AND ASSEMBLING OF AIR- CONDITIONERS AND ITS PARTS AT ITS FACTORY AT KHASRA NO.62/63, VILLAGE DHEROWAH IN SOLAN DISTRICT OF HIMACHAL PRADESH. ASS ESSEE IS REGISTERED WITH MINISTRY OF SMALL SCALE INDUSTRY, H IMACHAL PRADESH WITH A VALID SALES TAX REGISTRATION. WHEN AO ASKED ASSESSEE TO FURNISH NECESSARY PROOF TO JUSTIFY THE CLAIM OF DED UCTION UNDER SECTION 80IC, ASSESSEE SUBMITTED THAT VARIOUS RAW M ATERIALS LIKE COMPRESSOR, COPPER TUBING, BLADES AND OTHER PARTS & SPARES ARE IMPORTED FROM HAIKAWA, SRI LANKA AND MANUFACTURING PROCESS INVOLVES MOUNTING OF COMPRESSOR ON SHEET METAL TRAY AND SHEET METALLED PARTS ARE ASSEMBLED WITH THERMOCOL INSULAT ION AND CONDENSERS & EVAPORATOR COILS ARE FITTED. AFTER COM PLETION OF THE ASSEMBLING AND FITTING OF MOTOR, BLADE BLOWERS ETC. , GAS IS CHARGED AND TESTED FOR LEAKAGES. AO DID NOT AGREE WITH THE CONTENTION OF ASSESSEE AND OBSERVED THAT ASSESSEE IS NEITHER MANU FACTURING NOR PRODUCING ANY ARTICLE OR THING AND ASSESSEE IS SIMP LY IMPORTING FULLY MANUFACTURED AIR-CONDITIONERS KIT AND SELLING THE S AME PRODUCT AND WAS USING ONLY SCREW DRIVER TECHNOLOGY. AO DISA LLOWED THE CLAIM AND ASSESSED THE TOTAL INCOME OF ` .1,02,27,395/- UNDER SECTION 143(3) OF THE I.T. ACT. 3. BEFORE THE CIT (A) ASSESSEE FILED WRITTEN SUBMISSIO NS AND SUBMITTED THAT THERE IS ELABORATE MANUFACTURING PRO CESS UNDERTAKEN BY ASSESSEE AND OTHER EXPENSES INCURRED. THE FINISHED PRODUCT IS MANUFACTURED FROM IMPORTED RAW MATERIAL AND PARTS OBTAINED FROM LOCAL MARKET. HENCE ASSESSEE IS ENTIT LED FOR DEDUCTION UNDER SECTION 80IC. 4. THE LEARNED CIT (A) AFTER CONSIDERING THE FACTS OF THE CASE, DELETED THE ADDITION MADE BY AO BY STATING AS UNDER : 5. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CA SE, ARGUMENTS OF AO AND THE WRITTEN SUBMISSIONS OF THE AUTHORIZED REPRESENTATIVE OF THE APPELLANT. I FIND THAT ITA NO.3978 OF 2011 INTERNATIONAL CORPORATION MUMBA I PAGE 3 OF 4 DEDUCTION UNDER SECTION 80IC HAS TO BE ALLOWED TO T HE APPELLANT FOR THE FOLLOWING REASONS: I) THE APPELLANT IS UNDERTAKING ELABORATE PROCESS OF MANUFACTURING WHICH IS DISCUSSED IN THE PARAGRAPH ABOVE. RAW MATERIALS HAVE BEEN IMPORTED. PARTS FROM LOCAL MARKET TO THE TUNE OF ` .75,94,425/- FROM VARIOUS VENDORS, THESE LOCAL PARTS INCLUDE MOTORS, COOLING UNITS, CAPACITORS ETC . II) THERE IS NO IMPORT OF READYMADE UNIT. III) THE FINISHED PRODUCT IS RADICALLY DIFFERENT FROM TH E RAW MATERIALS AN THERE IS SUBSTANTIAL VALUE ADDITION. IV) ACCORDING TO CERTIFICATE OF REGISTRATION ISSUED BY HIMACHAL PRADESH SALES TAX AUTHORITIES THE BUSINESS OF THE APPELLANT IS WHOLLY MANUFACTURING OF WINDOW AND SPLIT AIR CONDITIONERS. V) THE REGISTRATION WITH SMALL SCALE INDUSTRY DEPARTMENT ALSO STATES THE APPELLANT AS A MANUFACTURER OF WINDOW AND SPLIT AIR CONDITIONERS. VI) THERE IS NO NEED TO HAVE ANY INDEPENDENT TECHNOLOGY FOR MANUFACTURING. VII) VARIOUS DECISIONS SUPPORT THE CASE OF THE APPELLANT. IN THE CASE OF TATA LOCOMOTIVE ENGG. CO. LTD 68 ITR (BOM.) THE HIGH COURT HAS HELD THAT ASSEMBLING OF AUTOMOTIVE BUS/TRUCK CHASSIS FROM IMPORTED PARTS IN KNOCKDOWN CONDITION WOULD GIVE RISE TO AN ARTICLE WHICH IS TOTALLY DIFFERENT FROM PARTS AND ARTICLE IS MANUFACTURED OR PRODUCED. SIMILARLY IN THE CASE OF UP STATE HANDLOOM CORPORATION 188 ITR 377 (ALL.) IT WAS HELD THAT ASSEMBLY OF PARTS IN A COMPONENT AND OF VARIOUS COMPONENTS IN THE FORMATION OF TRACTOR AMOUNTS TO MANUFACTURING AND APPELLANT WAS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB OF THE I.T. ACT. IN TH E CASE OF CHIRANJEEVE WIND ENERGY LTD 2011-TIOL- 91-MAD-IT, HON'BLE MADRAS HIGH COURT HAS HELD THAT DIFFERENT PARTS PROCURED BY THE APPELLANT FOR A WINDMILL WILL BE TREATED DIFFERENT FROM THE END PRODUCT BEING THE WINDMILL. THOSE DIFFERENT PARTS BEAR DIFFERENT DISTINCTIVE NAMES AND WHEN ASSEMBLED TO WHETHER, THEY GET TRANSFORMED INTO A FINAL PRODUCT, WHICH IS COMMERCIALLY KNOWN AS THE WINDMILL. HOWEVER, THERE CAN BE NO DIFFICULTY IN HOLDING THAT SUCH AN ACTIVITY CARRIED OUT BY ITA NO.3978 OF 2011 INTERNATIONAL CORPORATION MUMBA I PAGE 4 OF 4 ASSESSEE WOULD AMOUNT TO MANUFACTURE AS WELL AS PRODUCTION OF THE THING OR ARTICLE AS SET OUT IN SECTION 80IB(2)(III). FROM THE F ACTS ABOVE AND ALSO FROM THE DECISION OF VARIOUS JUDICIAL AUTHORITIES IT CAN BE SEEN THAT AP PELLANT IS MANUFACTURING AND IS ELIGIBLE FOR DEDUCTION UNDE R SECTION 80IC. THE DISALLOWANCE MADE BY AO TO THE TU NE OF ` .1,02,27,395 IS DELETED. 5. AFTER CONSIDERING THE FACTS OF THE CASE AND ARGUMEN TS OF LD. DR, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) ON THIS ISSUE. NOTHING WAS BROUGHT ON RECORD BY REVENUE TO COUNTER THE FINDINGS OF CIT(A). WE AGREE WITH THOSE FINDINGS AND APPROVE THE ORDER. ACCORDINGLY THE GROUND RAISED BY THE REVENUE IS DISMISSED. 6. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH DECEMBER, 2012. SD/- SD/- (D.K. AGARWAL) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 14 TH DECEMBER, 2012. VNODAN/SPS COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, I BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI