ITO, New Delhi V. M/s. A V Agritech Agro Machinery (P) Ltd., New Delhi

ITA 4767/DEL/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3428 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 02-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AGAINST PASSED

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A: NEW DELHI BEFORE SHRI B.P. JAIN, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO.:- 4767/DEL /2014 ASSESSMENT YEAR: 2010-11 ITO, WARD-2(2), NEW DELHI. VS. A V AGRITECH AGRO MACHINE RY (P) LTD. 351/1, OPPOSSITE GOLAK DHAM, MAIN ROAD BIJWASAN, NEW DELHI 110 061 PAN AAGCA1598Q (APPELLANT) (RESPONDENT) O R D E R PER SUDHANSHU SRIVASTAVA, J.M. THIS APPEAL HAS BEEN PREFERRED BY THE DEPAR TMENT AGAINST THE ORDER PASSED BY THE LD. CIT (A)-V, NEW DELHI FOR AS SESSMENT YEAR 2010- 11 WHEREIN, VIDE ORDER DATED 10.6.2014, THE LD. CIT (A) HAS ALLOWED ASSESSEES APPEAL BY HOLDING THE ACTIVITY OF ASSEMB LING ENGINES/RE- DEPARTMENT BY: SHRI ARUN KUMAR YADAV , SR. DR ASSESSEE BY : NONE DATE OF HEARING 2 7 /11 /2017 DATE OF PRONOUNCEMENT 21/02/2018 ITA NO. 4767/DEL/2014 ITO VS. A V A GRITECH AGRO MACHINERY (P) LTD. 2 ERECTION OF ENGINES AS MANUFACTURING ACTIVITY AND, THEREBY, ELIGIBLE FOR DEDUCTION U/S 80IC OF THE INCOME TAX, ACT 1961 (HER EINAFTER CALLED THE ACT). 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS IN BUSINESS OF MANUFACTURING OF PETROL START KEROSENE RUN ENGINES, IRRIGATION PUMPS AND MOTOR POWER SPRAYERS. THE RETURN OF INCOME WAS FILE D AT AN INCOME OF RS. 15,93,900/-. THE RETURN WAS SUBSEQUENTLY REVISE D AT AN INCOME OF NIL AFTER CLAIMING DEDUCTION U/S 80IC OF THE ACT AM OUNTING TO RS. 50,30,823/-. SUBSEQUENTLY, THE ASSESSEES CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSEE WAS REQUIRED TO JUSTIFY THE ELIGIBI LITY FOR DEDUCTION U/S 80IC AS A MANUFACTURER. THE ASSESSEE SUBMITTED BEFO RE THE AO THAT THE ASSESSEE COMPANY PURCHASED DIFFERENT TYPES OF RAW M ATERIALS LIKE COMPLETE KNOCKED DOWN (CKD) ENGINES AND IRRIGATION WATER PUMPS AND SEMI KNOCKED DOWN (SKD) ENGINES ALSO WHICH WERE ASS EMBLED WITH THE HELP OF VARIOUS MACHINES, TOOLS, LABOUR AND VARIOUS PROCESSES TO SHAPE THE PRODUCT AT THE WORKS OF THE COMPANY WITH THE AD DITION OF THE PROMINENT PARTS LIKE PIPES, HOSE PIPES, HARDWARE, F RAMES/CHASIS ETC. IT WAS THE SUBMISSION OF THE ASSESSEE BEFORE THE AO TH AT THE ACTIVITY OF THE ASSESSEE FELL WITHIN THE DEFINITION OF MANUFACTURE OR PRODUCING ANY ARTICLE OR THING AND, THEREFORE, THE ASSESSEE WAS ELIGIBLE FOR DEDUCTION ITA NO. 4767/DEL/2014 ITO VS. A V A GRITECH AGRO MACHINERY (P) LTD. 3 U/S 80IC. HOWEVER, THE AO WAS OF THE OPINION THAT T HE ACTIVITY UNDERTAKEN BY THE ASSESSEE WAS ONLY ERECTION OF COM PLETE KNOCKED DOWN (CKD) ENGINES AND ASSEMBLY WHICH DID NOT TANTA MOUNT TO MANUFACTURE OR PRODUCING OF ANY DISTINCT ARTICLE OR THING. THE AO PROCEEDED TO DISALLOW THE ASSESSEES CLAIM OF DEDUC TION U/S 80IC AND COMPLETED THE ASSESSMENT AT AN INCOME OF RS. 50,30, 825/-. 2.1 AGGRIEVED, THE ASSESSEE PREFERRED AN APPEA L BEFORE THE LD. CIT (A) WHO ACCEPTED THE ASSESSEES CONTENTION AND HELD THAT THE ASSESSEE HAD UNDERTAKEN MANUFACTURING AS DEFINED IN SECTION 2(29BA) OF THE ACT AS A NEW DISTINCT OBJECT HAVING A DIFFERENT NAME, C HARACTER AND USE CAME INTO EXISTENCE RESULTING IN TRANSFORMATION OF THE ORIGINAL MACHINERY WHICH WAS IMPORTED IN CKD/SKD FORM. NOW, THE DEPART MENT HAS APPROACHED THE ITAT AND HAS CHALLENGED THIS FINDING OF THE LD. CIT (A). 3. NONE WAS PRESENT ON BEHALF OF THE ASSESSEE WHEN THE APPEAL WAS CALLED OUT FOR HEARING NOR WAS ANY ADJOURNMENT APPLI CATION RECEIVED ON BEHALF OF THE ASSESSEE. HOWEVER, LOOKING INTO THE F ACTS OF THE CASE WE ARE PROCEEDING TO DECIDE THE APPEAL EX PARTE QUA THE ASSESSEE. 4. THE LD. SR. DR PLACED RELIANCE ON THE ORDER OF THE AO AND VEHEMENTLY ARGUED THAT THE AO HAS GIVEN DETAILED FI NDINGS ON THE ISSUE ITA NO. 4767/DEL/2014 ITO VS. A V A GRITECH AGRO MACHINERY (P) LTD. 4 AS TO WHY THE ACTIVITY CARRIED OUT BY THE ASSESSEE DID NOT FALL INTO THE REALM OF MANUFACTURING / PRODUCING ARTICLE OR THING . IT WAS ALSO SUBMITTED THAT THE LD. CIT (A) HAS DISREGARDED THE FINDINGS OF THE AO. RELIANCE WAS PLACED ON THE JUDGMENT OF HONBLE HIGH COURT OF CALCUTTA IN THE CASE OF CIT VS. BABCOCK & WILCOX OF INDIA LT D. REPORTED IN 241 ITR 583 (CALCUTTA) FOR THE PROPOSITION THAT WHEN THE AS SESSEE ERECTS BY WAY OF ASSEMBLING THE PARTS SUPPLIED, NO NEW PRODUCT CA ME INTO EXISTENCE. 5. WE HAVE HEARD THE LD. SR. DR AND HAVE PERUS ED THE MATERIAL ON RECORD AS WELL AS THE IMPUGNED ORDER. IT IS SEEN TH AT THE AO HAS DISALLOWED DEDUCTION U/S 80IC OF THE ACT ON THE GRO UND THAT THE ASSESSEE HAS NOT MANUFACTURED ENGINE OR PUMPS ITSEL F. HOWEVER, THE LD. CIT (A) HAS GIVEN DUE CONSIDERATION TO THE FACTS SU RROUNDING THE CONTROVERSY. THE LD. CIT (A)HAS NOTED THAT THE ACTI VITY IS UNDERTAKEN AT THE FACTORY PREMISES LOCATED AT DISTT. SOLAN, HIMAC HAL PRADESH WHERE THE ASSESSEE ASSEMBLES PETROL START KEROSENE RUN ENGINE S, IRRIGATION PUMPS AND MOTOR POWER SPRAYERS FOR WHICH PURPOSE THE ASSE SSEE IMPORTS ENGINES IN CKD OR SKD FROM OUTSIDE INDIA AND AFTER IMPORT THE FOLLOWING ACTIVITIES ARE CARRIED OUT FOR MAKING IT SUITABLE FOR SALE :- ITA NO. 4767/DEL/2014 ITO VS. A V A GRITECH AGRO MACHINERY (P) LTD. 5 1. INSPECTION OF RAW MATERIAL AND COMPONENTS WITH VARIOUS TYPES OF EQUIPMENTS LIKE TECO METER, GRAVIMETRIC FUEL CON SUMPTION METER, STOP WATCH, COMPARATOR, FILLAR GAUGE, BAROME TER ETC. 2. ASSEMBLY OF ENGINE - THIS PROCESS INCLUDES ER ECTION, DRILLING ETC. TO MAKE IT SUITABLE FOR FITTING WITH FRAMES AN D PROMOS. THIS PROCESS INVOLVES USE OF MACHINERY SUCH AS COMPRESSO R, AIR PIPELINE, PUNTIC GUN, DYNOMETER, DRILL MACHINE, RUBBER MOLDIN G DIE, DIES AND MOULDS, PIPE BEND MACHINE ETC. THIS PROCESS ALSO IN VOLVES USE OF OTHER CONSUMABLES LIKE HOSES, STAINER, CLAMP, PACKI NG STRIP, WASHERS, STICKERS ETC. 3. FITTING OF ENGINES ON FRAMES 4. TESTING AND PACKING 5.1 THE LD. CIT (A) HAS GIVEN A FINDING THAT I N VIEW OF THE ELABORATE ACTIVITY CARRIED OUT BY THE ASSESSEE, WHICH WAS ALS O DEMONSTRATED BY WAY OF PHOTOGRAPHS SHOWING THE VARIOUS ACTIVITIES U NDERTAKEN AT THE PLANT, AS WELL AS THE DETAILED BREAKUP OF THE MANUF ACTURING EXPENSES, IT WAS APPARENT THAT A DISTINCT OBJECT HAVING A DIFFERE NT NAME, CHARACTER AND USE CAME INTO EXISTENCE WHICH WOULD SQU ARELY FALL WITHIN THE ITA NO. 4767/DEL/2014 ITO VS. A V A GRITECH AGRO MACHINERY (P) LTD. 6 DEFINITION OF SECTION 2(29BA) OF THE ACT. THE LD. C IT (A) HAS ALSO PLACED RELIANCE ON THE ORDER OF ITAT IN AQUAMALL WATER SOL UTIONS PVT. LTD. WHICH WAS UPHELD BY THE HONBLE ANDRA PRADESH HIGH COURT IN ITA NO. 289 OF 2014 ON AN IDENTICAL ISSUE OF ASSEMBLING / T RANSFORMATION OF MACHINERY IMPORTED IN CKD /SKD FORM. THE LD. SR. DR COULD NOT NEGATE THESE FINDINGS OF THE LD. CIT (A). THE DEPARTMENTS RELIANCE ON THE CASE OF CIT VS. BABCOCK & WILCOX OF INDIA LTD. (SUPRA) D OES NOT HELP THE CASE OF THE DEPARTMENT AS IN THAT CASE THE ISSUE AT HAND WAS ERECTION OF A BOILER AND THE PARTS BEING USED FOR ASSEMBLING THE BOILER WERE KNOWN AS PARTS OF BOILER AND NOT IN THE DIFFERENT NAMES IN T HE COMMERCIAL MARKET. HOWEVER, IN THE CASE BEFORE US THE CKD / SKD ENGINE S CAN BE USED FOR MAKING/MANUFACTURING DIFFERENT PRODUCTS LIKE PETROL START KEROSENE RUN ENGINES, IRRIGATION PUMPS AND MOTOR POWER SPRAYERS ETC. THUS, ON FACTS OF THE CASE AND IN VIEW OF THE SPECIFIC FINDINGS OF THE LD. CIT (A), WE FIND NO REASON TO INTERFERE WITH THE FINDINGS AS RECORDE D BY THE LD. CIT (A) AND WE DISMISS THE GROUNDS RAISED BY THE DEPARTMENT . ITA NO. 4767/DEL/2014 ITO VS. A V A GRITECH AGRO MACHINERY (P) LTD. 7 6. IN THE FINAL RESULT APPEAL OF THE DEPARTMENT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21.2.2018. SD/- SD/- (B.P. JAIN) (SU DHANSHU SRIVASTAVA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 21.2.2018 VEENA COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI