The DCIT, Circle-4, Ahmedabad V. M/s. E-mall Infotech Pvt.Ltd., Ahmedabad

ITA 573/AHD/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 9264 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 08-03-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 04-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S L CHANDEL
• Assessee Lawyers: UKTI PARIKH
• Section: 143(3); 80IB

Judgement Text

ITA NO. 573 /AHD/201 3 ASSESSMENT YEAR: 200 8 - 09 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL, AHMEDABAD C BENCH, AHMEDABAD [CORAM : PRAMOD KUMAR AM AND S S GODARA JM ] ITA NO . 573 /AHD/ 20 1 3 ASSESSMENT YEAR : 200 8 - 09 DY . COMMISSIONER OF INCOME TAX .. .APPELLANT CIRCLE - 4 , AHMEDABAD . VS. E MALL INFOTECH PVT. LTD. .. . RESPONDENT SUPER PLAZA, NR. SANDESH PRESS, VASTRAPURA, AHMEDABAD. [PAN: A ADCS 0300 B ] APPEARANCES BY: S.L. CHANDEL , FOR THE APPELLANT UKTI PARIKH , FOR THE RESPONDENT D ATE OF CONCLUDING THE HEARING : MARCH 8 TH , 201 6 DATE OF PRONOUNCING THE ORDER : MARCH 9 TH , 201 6 O R D E R PER PRAMOD KUMAR , AM : 1. BY WAY OF THIS APPEAL, THE ASSESSING OFFICER HAS CHALLENGED CORRECTNESS OF THE ORDER DATED 6 TH DECEMBER, 2012, PASSED BY THE LD. CIT(A), IN TH E MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 ( THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR 2008 - 09. 2. GRIEVANCES RAISED BY THE ASSESSING OFFICER ARE AS FOLLOWS : - 1. TH E ID . CIT(A ) HAS ERRED IN LAW AND ON FACTS IN DELETING DI SALLOWANCE MADE U/S. 80 - IC OF THE ACT AMOUNTING TO RS.3,31,05,455/ - WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE IS NOT ENGAGED IN THE BUSINESS, ELIGIBLE FOR CLAIM OF DEDUCTION U/S. 80IC OF THE ACT, WHICH IS AVAILABLE FOR MANUFACTURING OF GOODS WHEREAS ASSESSEE IS ENGAGED IN THE BUSINESS OF ASSEMBLING COMPUTER PARTS. ITA NO. 573 /AHD/201 3 ASSESSMENT YEAR: 200 8 - 09 PAGE 2 OF 4 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE ID . CIT(A ) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 3 . IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LD. CIT (A ) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED TO THE ABOVE EXTENT. 3. LD. REPRESENTATIVES FAIRLY AGREE THAT THE ISSUE AS TO WHETHER, WHAT HAS BEEN TERMED AS, ASSEMBLING OF COMPUTER IS TO BE TREATED AS MANUFACTURING OF COMPUTE S SO AS TO BE ELIGIBLE FOR DEDUCTION AS UNDER SECTION 80IB, NOW STANDS COVERED BY HON BLE JURISDICTIONAL HIGH COURT S JUDGEMENT IN THE CASE OF CIT VS. SUNILBHAI S . KAKAD (TAX APPEAL NO.1287 OF 2010; JUDGEMENT DATED 27.09.2011) WHEREIN THEIR LORDSHIPS HAVE , INTER ALIA, OBSERVED AS FOLLOWS : - 10. AS CAN BE NOTED FROM THE ORDER OF THE TRIBUNAL, THE ASSESSING OFFICER WAS OF THE OPINION THAT ACTIVITY OF ASSESSEE DID NOT FALL WITHIN THE AMBIT OF MANUFACTURE OR PRODUCTION. HOWEVER, CTT ( APPEALS ) ALLOWED THE CL AIM BY RELYING ON VARIOUS JUDGEMENTS ON THE ISSUE. ONE OF THEM IS THE CASE OF ARI HANT T ILES & MARBLES ( P ) LTD. (SUPRA). THE TRIBUNAL NOTED THAT CLAIM FOR DEDUCTION UNDER THE PROVISION OF 80IB WAS ALLOWED IN CASE OF THIS VERY ASSESSEE UNDISPUTED L Y IN THE YE AR 2001 - 2002 AND THE ASSESSEE CARRIED THE MANUFACTURING ACTIVITY AND THERE HAD BEEN NO CHANGE IN THE MANUFACTURING PROCESS NOR HAS ANY CONTRARY MATERIAL PRODUCED IN THE YEAR UNDER CONSIDERATION. TRIBUNAL NOTED THUS : 3.3 WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. UNDISPUTEDLY, CLAIM FOR DEDUCTION U/S 80IB HAS BEEN ALLOWED IN THE A.Y. 2001 - 02, ON THE GROUND THAT THE ASSESSEE HAS CARRIED ON MANUFACTURING ACTIVITY WHILE THERE HAS BEEN NO CHANGE IN THE MANUFACTURING PROCESS OR TH E ARTICLES PRODUCED IN THE YEAR UNDER CONSIDERATION. THE ID. CIT(A) CONCLUDED IN THE IMPUGNED ORDER THAT ASSEMBLING VARIOUS COMPONENTS BY CARRYING ON 'QUALITY CONTROL THROUGH TESTING EQUIPMENTS, THE ASSESSEE MANUFACTURED COMPUTERS AND SERVERS, WHICH ARE E NTIRELY NEW AND DISTINCT PRODUCTS DIFFERENT FROM THE VARIOUS COMPONENTS UTILIZED. THE SAME NUMBER OF WORKERS RENDERED THEIR SERVICES IN EARLIER YEAR WHILE THE ASSESSE E IS ALSO SUBJECT TO EXCISE DUTY WHICH SHOWS THAT THE ACTIVITY CARRIED ON BY THE ASSESSEE IS MANUFACTURING. THE ID. CIT(A) FURTHER OPINED IN THE LIGHT OF VARIOUS JUDICIAL PRECEDENTS THAT THE AVERAGE NUMBER OF EMPLOYEES SHOULD NOT BE LESS THAN TEN, AND IT WOULD SUFFICE IF, ON AN AVERAGE, THERE ARE AT LEAST TEN WORKERS EMPLOYED IN THE UNDERTAKING , EVEN THOUGH THE NUMBER OF WORKERS EMPLOYED DURING SOME PART OF THE PREVIOUS YEAR IS LESS THAN TEN. THE REVENUE HAVE NOT PLACED BEFORE US ANY MATERIAL, CONTROVERTING THE AFORESAID FINDINGS OF THE ID. CIT(A) . ITA NO. 573 /AHD/201 3 ASSESSMENT YEAR: 200 8 - 09 PAGE 3 OF 4 3.31 IN A RECENT DECISION IN THE CASE OF ARIH ANT TILES AND MARBLES P . LTD.(SUPRA), HON'BLE APEX COURT WHILE ADJUDICATING AN ISSUE AS TO WHETHER CONVERSION OF MARBLE BLOCKS BY SAWING IN TO SLABS AND TILES AND POLISHING AMOUNTS TO 'MANUFACTURE OR PRODUCTION' WITHIN THE MEANING OF PROVISIONS OF SEC. 80I A OF THE ACT, CONCLUDED AS UNDER: 'IN THE CASE OF COMMISSIONER OF INCOME TAX VS. SESA GOA LTD., REPORTED IN 271 ITR 331 (SC), THE MEANING OF THE WORD 'PRODUCTION' CAME UP FOR CONSIDERATION. THE QUESTION WHICH CAME BEFORE THIS COURT WAS WHETHER THE ITAT W AS JUSTIFIED IN HOLDING THAT THE ASSESSEE WAS ENTITLED TO DEDUCTION UNDER SECTION 32A OF THE INCOME TAX ACT, 1961, IN RESPECT OF MACHINERY USED IN MINING ACTIVITY IGNORING THE FACT THAT THE ASSESSEE WAS ENGAGED IN EXTRACTION AND PROCESSING OF IRON ORE, NOT AMOUNTING TO MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING. THE HIGH COURT IN THAT CASE, WHILE DISMISSING THE APPEAL PREFERRED BY THE REVENUE, HELD THAT EXTRACTION AND PROCESSING OF IRON ORE DID NOT AMOUNT TO 'MANUFACTURE'. HOWEVER, IT CAME TO THE CON CLUSION THAT EXTRACTION OF IRON ORE AND THE VARIOUS PROCESSES WOULD INVOLVE 'PRODUCTION' WITHIN THE MEANING OF SECTION 32A(2)(B) (III) OF THE INCOME TAX ACT, 1961 AND CONSEQUENTLY, THE ASSESSEE WAS ENTITLED TO THE BENEFIT OF INVESTMENT ALLOWANCE UNDER SECTI ON 32A OF THE INCOME TAX ACT. IN THAT MATTER, IT WAS ARGUED ON BEHALF OF THE REVENUE THAT EXTRACTION AND PROCESSING OF IRON ORE DID NOT PRODUCE ANY NEW PRODUCT WHEREAS IT WAS ARGUED ON BEHALF OF THE ASSESSEE THAT IT DID PRODUCE A DISTINCT NEW PRODUCT. THE VIEW EXPRESSED BY THE HIGH COURT THAT THE ACTIVITY IN QUESTION CONSTITUTED 'PRODUCTION' HAS BEEN AFFIRMED BY THIS COURT IN SESA GOA'S CASE SAYING THAT THE HIGH COURT'S OPINION WAS UNIMPEACHABLE. IT WAS HELD BY THIS COURT THAT THE WORD 'PRODUCTION' IS WIDER IN AMBIT AND IT HAS A WIDER CONNOTATION THAN THE WORD 'MANUFACTURE'. IT WAS HELD THAT WHILE EVERY MANUFACTURE CAN CONSTITUTE PRODUCTION, EVERY PRODUCTION DID NOT AMOUNT TO MANUFACTURE. 11. ON THE BASIS OF THESE OBSERVATIONS, THE TRIBUNAL HAS HELD T HAT WHILE ASSEMBLING VARIOUS COMPONENTS BY CARRYING ON QUALITY CONTROL THROUGH TESTING EQUIPMENTS, THE ASSESSEE MANUFACTURED COMPUTERS AND SERVER WHICH IS A NEW AND DISTINCT P RODUCT O T HER T HAN THE COMPONENTS OF WHICH IT IS MADE. BOTH ON THE GROUNDS OF PRINCIP LE OF CONSISTENCY AS ALSO REQUIREMENT TO FOLLOW THE RATIO LAID DOWN BY THE APEX COURT, THE TRIBUNAL CONCURRED WITH THE FINDING OF CIT(APPEALS) TO HOLD THAT IT WAS A NEW AND DISTINCT PRODUCT WHICH WAS COMING OUT, ENTITLING THE ASSESSEE DEDUCTION UNDER SECTI ON 80IB OF THE ACT FOR THE YEAR UNDER CONSIDERATION . 12. AS CAN BE NOTED FROM THE E LABORATE DISCUSSION OF BOTH THE AUTHORITIES WHO HAVE CONCURRENTLY HELD IN FAVOUR OF THE ASSESSEE THAT THEY HAVE FOLLOWED THE RATIO LAID DOWN BY THE APEX WHICH IS OF - COURSE IN RESPECT OF MANUFACTURING OF POLISHED SLABS AND T ILES FROM MARBLE BLOCKS BUT, THE PRINCIPLES LAID DOWN IS APTLY GRASPED BY BOTH THE AUTHORITIES WHO HAVE RIGHTLY HELD THAT ENTIRE L Y NEW AND DISTINCT PRODUCT COMES INTO BEING WHICH IS DIFFERENT FROM THE COM PONENTS UTILI Z ED FOR PREPARING THE ITA NO. 573 /AHD/201 3 ASSESSMENT YEAR: 200 8 - 09 PAGE 4 OF 4 NEW PRODUCT AND WHEN THE SAID PROCESS IS CARRIED ON EMPLOYING MORE THAN TEN WORKERS, THERE DOES NOT APPEAR TO BE ANY ERROR IN SUCH CONCLUSION. 4. RESPECTFULLY FOLLOWING THE ESTEEMED VIEWS OF THEIR LORDSHIPS, WE REJECT T HE GRIEVANCE OF THE ASSESSING OFFICER. THE O R DER OF THE LD . CIT(A) IS, THEREFORE, APPROVED AND CONFIRMED ON THAT ASPECT OF THE MATTER. 5 . IN THE RESULT, THE APPEAL IS DISMISSED. P RONOUNCED IN THE OPEN COURT ON THIS 9 TH DAY OF MARCH, 2016 . SD/ - SD/ - S.S. GODARA PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) PBN/* DATED: THE 9 TH DAY OF MARCH, 201 6 . COPIES TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT ( 4) CIT(A) (5) DR (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD