DCIT 4(2), MUMBAI V. KANDOI POLYSTEX P. LTD, MUMBAI

ITA 4590/MUM/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 8917 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-01-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 10-01-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 06-08-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 80IB

Judgement Text

I.T.A NO.4590/ MUM/2009 ASSESSMENT YEAR: 2006-07 1 IN THE INCOME TAX APPELLATE TRIBUNAL, G BENCH, MUMBAI. [ CORAM: PRAMOD KUMAR, AM AND V. DURGA RAO, JM ] I.T.A NO.4590/ MUM/2009 ASSESSMENT YEAR: 2006-07 DY. COMMISSIONER OF INCOME TAX 4(2) .. APPELLAN T R.NO.642, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI. VS KANDOI POLYSTEX P.LTD. ,. RESPONDEN T 66-A, GOKUL BUILDING, FLAT NO.13, DR. A.M.ROAD, BHULESWHAR, MUMBAI-02. PA NO.AAACK 4306 N A.K. NAYAK, FOR THE APPELLANT NONE, FOR THE RESPONDENT O R D E R PER PRAMOD KUMAR: 1. BY WAY OF THIS APPEAL, THE ASSESSING OFFICER HAS CALLED INTO QUESTION CORRECTNESS OF CIT(A)S ORDER DATED 12 TH MAY, 2009, FOR THE ASSESSMENT YEAR 2006-07, ON THE FOLLOWING GROUNDS: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) ERRED IN ALLOWING DEDUCTION U/S. 80-IB IGNORING THE FACT THAT TEXTURISING AND TWISTING OF YARN DOES NOT CONSTITUTE MANUFACTUR ING ACTIVITY. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE IMPUGNED ORDER OF THE LD CIT (A) IS CONTRARY TO LAW AND CONS EQUENTLY MERITS TO BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE REST ORED. I.T.A NO.4590/ MUM/2009 ASSESSMENT YEAR: 2006-07 2 3. NONE APPEARED ON BEHALF OF THE RESPONDENT-ASSESS EE DESPITE ISSUE OF NOTICE THROUGH RPAD. WE, THEREFORE, DECIDE THE APPEAL OF THE REVENUE EXPARTE QUA-RESPONDENT ASSESSEE AFTER HEARING THE LEARNED DEPARTMENTAL REP RESENTATIVE AND ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. 3. BRIEFLY STATED THE MATERIAL FACTS ARE LIKE THIS. IN THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE COMPANY WAS ENGAGED IN THE BUSINESS OF MANUFACTURING OF HDPE/PP WOVEN B AGS AND SACKS, FABRICS TEXTURISING YARD. DURING THE PREVIOUS YEAR RELEVAN T TO THE ASSESSMENT YEAR UNDER APPEAL, THE ASSESSEE COMPANY HAD CLAIMED DEDUCTION OF RS. 77,69,788/- UNDER SECTION 80-IB. THE AO REQUIRED TO ASSESSEE TO JUST IFY THE CLAIM OF DEDUCTION UNDER SECTION 80 IB ON THE GROUND THAT THE TEXTURISING OF YARN IS NOT MANUFACTURE. SINCE THE ASSESSEE DID NOT FURNISH ANY EXPLANATION, THE A SSESSING OFFICER DISALLOWED THE ENTIRE DEDUCTION OF ` . 77,69,788/- U/S. 80IB CLAIMED BY THE ASSESSEE. B EING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEA L BEFORE THE CIT (A). LEARNED CIT(A) FOLLOWING THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V. M/S. EMPTEE POLY-YARN PVT LTD., AND THE ITAT MUMBAI IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2004-05 DIRECTED THE AO TO TREAT TH E TEXTURING OF YARN AS MANUFACTURE ELIGIBLE FOR DEDUCTION UNDER SECTION 80 -IB. AGGRIEVED THE STAND SO TAKEN BY THE CIT (A), THE REVENUE IS IN APPEAL B EFORE THE TRIBUNAL. 4. HAVING HEARD THE LEARNED DEPARTMENTAL REPRESENTA TIVE, WE FIND THAT THE ISSUE UNDER CONSIDERATION IS SQUARELY COVERED BY HO NBLE SUPREME COURT IN THE CASE OF CIT VS. EMPTEE POLYYARN (P)LTD., 320 ITR 665(SC) , WHEREIN, IT HAS, INTER ALIA, HELD AS UNDER:- . WE FIND THAT POY IS A SEMI FINISHED YARN NOT CA BLE OF BEING PUT IN WARP OR WEFT; IT CAN ONLY BE USED FOR MAKING A T EXTURIZED YARN, WHICH, IN TURN, CAN BE USED IN THE MANUFACTURE OF F ABRIC. IN OTHER WORDS, POY CANNOT BE USED DIRECTLY TO MANUFACTURE F ABRIC. ACCORDING TO THE EXPERT, CRIMPS, BULKINESS ETC, ARE INTRODUCED BY A PROCESS, CALLED AS THERMO MECHANICAL PROCESS, INTO POY WHICH CONVERTS POY INTO A TEXTURIZED YARN. IF ONE EXAMIN ES THIS THERMO MECHANICAL PROCESS IN DETAIL, IT BECOMES CLEAR THAT TEXTURISING AND I.T.A NO.4590/ MUM/2009 ASSESSMENT YEAR: 2006-07 3 TWISTING OF YARN CONSTITUTES MANUFACTURE IN THE C ONTEXT OF CONVERSION OF POY INTO TEXTURIZED YARN. IN THIS VIEW OF THE MATTER, RESPECTFULLY FOLLOWING THE ABOVE DECISION, WE HOLD THAT THE CIT(A) HAS RIGHTLY ALLOWED THE DEDUCTION U/S. 80IB TO THE ASSESSEE. WE, ACCORDINGLY, CONFIRM THE SAME. 5. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. PRONOUNCED IN THE OPEN COURT ON 14 TH JANUARY, 2011 SD/- (V. DURGA RAO ) (JUDICIAL MEMBER) SD/- (PRAMOD KUMAR) (ACCOUNTANT MEMBER) MUMBAI, DATED 14 TH JANUARY, 2011 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS),IV MUMBAI 4. COMMISSIONER OF INCOME TAX, 4 , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH G, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI I.T.A NO.4590/ MUM/2009 ASSESSMENT YEAR: 2006-07 4 I.T.A NO.4590/ MUM/2009 ASSESSMENT YEAR: 2006-07 5