DCIT, Jaipur V. M/S MANGLAM ARTS, Jaipur

ITA 586/JPR/2011

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 7204 (ITAT-JAIPUR)
• Duration Of Justice: 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-11-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 18-10-2011
• Assessment Year: 2008-2009
• Appeal Filed On: 10-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUBHASH CHANDRA
• Assessee Lawyers: DINESH GOYAL; HR LODHA
• Keywords: Business expenditure; Competent authority
• Section: 43B; 80HHC; 133A; 10B; 10

Judgement Text

1 ITA 586(2)-11 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH B JAIPUR BEFORE SHRI R.K. GUPTA AND SHRI N.L. KALRA ITA NO. 586 & 587/JP/2011 ASSTT. YEAR : 2008-09 & 09-10. THE DCIT, CIRCLE-5, VS. M/S. MANGALAM ARTS, JAIPUR. GOVIND NAGAR, AMBER PALACE ROAD, JAIPUR. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUBHASH CHANDRA RESPONDENT BY : SHRI HR LODHA & DINESH GOYAL DATE OF HEARING : 18.10.2011 DATE OF PRONOUNCEMENT : 04.11.2011 ORDER DATE OF ORDER : 04/11/2011. PER R.K. GUPTA, J.M. THESE ARE TWO APPEALS BY THE DEPARTMENT AGAINST TH E ORDER OF LD. CIT (A) RELATING TO ASSESSMENT YEAR 2008-09 AND 09-10. 2. FIRST ISSUE IN BOTH THESE APPEALS IS AGAINST ALL OWING EXEMPTION UNDER SECTION 10BA OF THE ACT. 3 THE AO DISALLOWED DEDUCTION CLAIMED UNDER SECTION 10BA IN RESPECT OF THREE UNITS I.E. KASUM SAROVER (K-1), MAHARANI FARM, JAIP UR, KASUM SAROVER (KS-11), FCI GODOWN, DURGAPURA ROAD, JAIPUR AND LALI UNIT, RAMGA RH ROAD, DELHI BYEPASS, JAIPUR. 4. THE BRIEF FACTS NOTED IN THE ORDER OF LD. CIT (A ) WHICH ARE UNDISPUTED FACT ARE AS UNDER :- 2 THE FACTS OF THE CASE ARE THAT THE ASSESSEE FIRM CL AIMED DEDUCTION U/S 10BA OF THE IT ACT 1961 AMOUNTING TO RS 14,19,4 1,909/- IN THE FOLLOWING THREE UNITS AS UNDER :- I) KUSUM SAROVER UNIT, MAHARANI FARM, NEAR NALA MANSAROVAR, JAIPUR RS 3,85,64,089/- II) KUSUM SAROVAR UNIT-II, FCI GODOWN, DURGAPURA, JAIPUR RS 6,05,77,564/- III) LALI UNIT RAMGARH ROAD, DELHI NATIONAL HIGHWAY, JAIPUR RS 4,28,00,256/- TOTAL RS 14,19,41,909/- A SURVEY U/S 133A WAS CONDUCTED ON 23.12.2005 AT T HE ABOVE THREE UNITS. DURING THE COURSE OF SURVEY, IT WAS FOUND THAT THE ABOVE THREE UNITS DID NOT FULFILL THE CONDITIONS LA ID DOWN U/S 10BA OF THE IT ACT AND THEREFORE THESE UNITS WERE NOT EL IGIBLE FOR CLAIM OF DEDUCTION U/S 10BA OF THE ACT. THE AO HELD THAT THI S SECTION APPLIES TO THE UNDERTAKING, IF THE SALE PROCEEDS OF THE ELIGIBLE ARTICLES OR THINGS EXPORTED OUT OF INDIA ARE RECEIVED IN OR BROUGHT INTO, INDIA BY THE ASSESSEE IN CONVERTIBLE FOREIGN, EXCHANGE, W ITHIN A PERIOD OF SIX MONTHS FROM THE END OF THE PREVIOUS YEAR OR WIT HIN SUCH FURTHER PERIOD AS THE COMPETENT AUTHORITY MAY ALLOW IN THIS BEHALF. DURING THE COURSE OF SURVEY, THE STATEMENTS OF SHRI RAJEND RA KUMAR RAWAT PARTNER OF THE FIRM, SHRI RADHABALABH SHARMA, MANAG ER OF THE LALI UNIT AND SHRI MANISH DANGAYACH, INCHARGE OF KUSUM S AROVAR UNIT WERE RECORDED COVERING ALL THE POINTS RELATING TO M ANUFACTURING PROCESS OF WOODEN ARTICLES, PURCHASES OF RAW MATERI ALS AND SEMI FINISHED GOODS, FINISHING WORK THROUGH CONTRACTORS AND INSTALLATION OF MACHINERIES AT THE ABOVE THREE UNITS. PHOTO COPI ES OF THE PURCHASE BILLS, AGREEMENTS OF CONTRACTORS ETC. AND LIST OF M ACHINERIES INSTALLED 3 WERE ALSO OBTAINED. SOME PURCHASE VOUCHERS, AGREEME NTS OF LABOUR CONTRACTS AND LABOUR REGISTER WERE IMPOUNDED U/S 1 33A (3) OF THE IT ACT. VIDEOGRAPHY OF ARTICLES AND MACHINERY FOUND AT THE PREMISES AND THE PROCESS INVOLVED WAS ALSO TAKEN IN THE PRES ENCE OF AUTHORIZED OFFICERS AT KUSUM SAROVAR UNIT-II, JAIPU R. THE UNIT WISE IRREGULARITIES NOTICED DURING THE SURVEY WERE AS UN DER:- A) KUSUM SAROVAR UNIT-I THE MAIN PERSON NAMELY SHRI MANISH DAN GAYACH, WHO WAS THE FACTORY MANAGER AND PERSON-IN-CHARGE OF THE WHO LE AFFAIRS IN THIS UNIT WAS PRESENT DURING THE COURSE OF SURVEY. DURIN G THE COURSE OF SURVEY, THE STATEMENT OF SHRI MANISH DANGAYACH WAS RECORDED. THE MAIN FEATURES OF THE STATEMENT WERE AS UNDER:- I) OUT OF THE TOTAL GOODS EXPORTED NEARLY ABOUT 90 % ITEMS WERE PURCHASED AS FINISHED GOODS FROM THE SUPPLIERS AND REST OF 10% ITEMS WERE MANUFACTURED BY THE ASSESSEE. II) HE WAS WORKING IN THE FACTORY SINCE MARCH, 200 1 AND THE FACTORY WAS IN EXISTENCE FROM THAT TIME. III) SOME FINISHING WORK WAS DONE BY THE ASSESSE I N RESPECT OF THE GOODS, WHICH WERE PURCHASED OUT RIGHTLY AS STRUCTUR ES. B) THE PURCHASE VOUCHERS FOR THE MONTH OF APIL, JUL Y, SEPTEMBER AND DECEMBER WERE IMPOUNDED. IT WAS CLEAR FROM THE DESCRIPTION IN THE PURCHASE VOUCHERS THAT THE ASSESSEE WAS PURCHAS ING MOST OF THE GOODS IN THE FINISHED FORM. HENCE THERE WAS VERY LI TTLE VALUE ADDITION MADE BY THE ASSESSEE BEFORE EXPORTING GOOD S. SECTION 10BA WAS MADE OPERATIONAL W.E.F. AY 2004-05 ONWARDS. THI S UNIT WAS ALREADY IN EXISTENCE BEFORE THE AY 2004-05. THE OPE NING BALANCE OF PLANT OF MACHINERY AS ON 1.4.2003 WAS RS 2,52,321/- . THERE WAS VERY NOMINAL ADDITION IN PLANT & MACHINERY DURING T HE FY 2003-04, 2004-05 AND 2005-06. THE CLOSING BALANCE OF PLANT & MACHINERY AS 4 ON 31.03.2004 AND 31.03.2005 WAS RS 3,23,945/- AND RS 3,48,151/- RESPECTIVELY. IT WAS CLEAR FROM THE ABOVE DETAILS O F PLANT & MACHINERY THAT THE ASESSEE WAS RUNNING THE UNDERTAK ING FROM OLD PLANT & MACHINERY AND DID NOT FULFILL THE CONDITION S MENTIONED IN SECTION 10BA (2)(C) OF I T ACT, 1961. B) KUSUM SAROVAR, UNIT-II DURING THE COURSE OF SURVEY IRREGULARITIES FOUND IN THIS UNIT WERE AS FOLLOWS- I) THE UNIT PURCHASED SEMI-FINISHED WOODEN AND NON-WOO DEN ARTICLES FROM THE VARIOUS SUPPLIERS LOCATED AT SIKA R, JHUNJHUNU, SHEKHAWATI AND JODHPUR AREA AND GOT IT FINISHED THO UGH CONTRACTORS ON JOB WORK BASIS. AS SUCH THE ASSESSEE DID NOT PER FORM ANY MANUFACTURING ACTIVITY ON ITS OWN BUT GOT IT DONE THROUGH CONTRACTORS ON JOB WORK BASIS. II) AS PER LABOUR REGISTER, THE TOTAL NUMBER OF PERSONS EMPLOYED IN THAT UNIT WERE 18 WHICH WAS LESS THAN THE PRESCR IBED NUMBER OF TWENTY LABOURER. IN VIEW OF ABOVE FACTS, IT WAS CLE ARLY ESTABLISHED THAT ABOVE UNIT WAS NOT ELIGIBLE FOR CLAIM OF DEDUC TION U/S 10BA OF IT ACT AS THE UNIT WAS PERFORMING THE WORK OF MANUFACTURING/PRODUCTION /PROCESSING THROUGH CONTRA CTORS ON JOB WORK BASIS AND ALSO THE WORKERS EMPLOYED WERE LESS THAN THE PRESCRIBED LIMIT OF TWENTY EMPLOYEES. C) LALI UNIT DURING THE COURSE OF SURVEY IRREGULARITIES FOUND IN THIS UNIT WERE AS FOLLOWS- I) THIS UNIT WAS STARTED IN OCTOBER/NOVEMBER 2003. II) IT WAS FOUND THAT SEMI-FINISHED ARTICLES OF WOOD AN D IRON WERE PURCHASED FROM SUPPLIERS AND THEREAFTER THE FINISHI NG WORK OF THE SAME WAS DONE THROUGH CONTRACTORS AT THE BUSINESS P REMISES AS PER 5 WRITTEN CONTRACT/AGREEMENT. THE FINISHING WORK INVO LVED POLISHING, PAINTING, BUFFING ETC. WHICH WAS DONE BY THE USE OF SEVERAL MACHINERIES. THUS, THE ASSESSEE WAS NOT MANUFACTURI NG OR PRODUCING THE ARTICLES AND THEREFORE NOT ELIGIBLE FOR EXEMPTI ON U/S 10BA IN VIEW OF SECTION 10BA (2)(A) OF IT ACT. D) IT WAS NOTICED THAT THERE WERE ONLY SEVEN EMPLOYEES WORKING IN THE UNIT. IN FY 2003-04 AND 2004-05, THERE WERE ONLY FOUR EMPLOYEES AND IN FY 2005-06, THERE WERE ONLY SEVEN EMPLOYEES. AS PER SECTION 10BA (2)(A) THE UNDERTAKING SHOULD EMPL OY 20 OR MORE WORKERS DURING THE PREVIOUS YEAR IN THE PROCESS OF MANUFACTURING OR PRODUCTION. AS THE UNIT DID NOT EMPLOY 20 OR MORE W ORKERS DURING THE PERIOD RELEVANT TO THE AY 2004-05, 2005-06 AND 2006-07 AND ACCORDINGLY IT DID NOT QUALIFY FOR DEDUCTION U/S 10 BA OF THE ACT. ALL THESE MACHINES WERE POWER OPERATED. THE USE OF THES E MACHINES SHOWED THE INVOLVEMENT OF POWER GENERATED MACHINE T O A GREATER EXTENT AND IT COULD NOT BE SAID THAT THESE ARTICLES WERE HANDMADE. E) THE LEARNED CIT(A)-II, JAIPUR HAD GRANTED THE DEDUC TION U/S 10BA OF THE IT ACT TO THE ASSESSEE IN THE APPELLATE ORDER PASSED FOR ASSESSMENT YEAR 2004-05, 2005-06 AND 2006-07 AND TH E HONBLE ITAT HAD ALSO CONFIRMED THE ORDER OF THE CIT(A)-II, JAIPUR. HOWEVER THE DEPARTMENT HAD NOT ACCEPTED THESE ORDER S AND ITS APPEAL WAS PENDING BEFORE HONOURABLE RAJASTHAN HIGH COURT. F) WITHOUT PREJUDICE TO THE ABOVE, IT WAS ALSO NOTED T HAT THE FOLLOWING PAYMENTS/SALES REALIZATION IN CONVERTIBLE FOREIGN EXCHANGE HAD NOT BEEN BROUGHT IN INDIA WITHIN A PERIOD OF SI X MONTHS FROM THE END OF THE PREVIOUS YEAR OR WITHIN SUCH FURTHER PER IOD AS THE COMPETENT AUTHORITY ALLOW IN THIS REGARD. 6 UNIT SALES REALIZATION OUTSTANDING AS PER COLUMN NO . 16 OF AUDIT REPORT IN FORM NO. 56H KS-I NIL KS-II 4,56,421/- LALI UNIT NIL IN VIEW OF THE PROVISIONS OF SUB SECTION 3 OF SEC TION 10BA, THE ASSESSEE WAS NOT ENTITLED TO GET THE DEDUCTION UNDER THIS SECTION FOR THE PROFIT WHICH WERE RELATED TO THE UNREALIZED SALE PROCEEDS AS NOTED ABOVE. HENCE, THE PROFITS TO THAT EXTENT WERE LIABLE TO BE DISALLOWED AS THE ASSESSEE HAD NOT FURNISHED THE EV IDENCE TO THIS EFFECT THAT ENTIRE UNREALIZED SALES PROCEEDS WERE R ECEIVED WITHIN A PERIOD OF SIX MONTHS FROM THE END OF THE PREVIOUS Y EAR OR WITHIN SUCH FURTHER PERIOD AS THE COMPETENT AUTHORITY HAD GRANTED IF ANY. HOWEVER, SINCE THE DEDUCTION CLAIMED BY THE ASSESSE E U/S 10BA HAD BEEN DISALLOWED IN TOTO THEREFORE, NO SEPARATE DISA LLOWANCE WAS CALLED FOR ON THIS ISSUE. G) THE ASSESSEE HAD CLAIMED THE DEDUCTION U/S 10BA OF IT ACT ON THE EXPORT INCENTIVES IE. DUTY DRAW BACK OF RS 3 ,09,21,330/- WHICH WAS NOT ALLOWABLE. AS PER PROVISIONS OF SECTI ON 10BA OF IT ACT, DEDUCTIONS COULD ONLY BE ALLOWED ON SUCH PROFI TS AND GAIN AS DERIVED BY AN UNDERTAKING FROM THE EXPORTS OUT OF I NDIA. THE RECEIPTS OF DUTY DRAW BACK WERE NOT ELIGIBLE PROFIT S IN VIEW OF THE PROVISIONS OF SECTION 10BA OF IT ACT. THE AO RELIED ON THE DECISION OF THE HONBLE SUPREME COURT OF INDIA DATED 31 ST AUGUST, 2009 IN SLP NO. 5827/07 IN THE CASE OF M/S LIBERTY INDIA WH EREIN THE CONCEPT OF REMISSION OF DUTY DRAW BACK AND DEPB WAS ANALYZED. IT WAS HELD THAT THE BENEFITS DERIVED BY THE WAY OF DD B BY THE ASSESSEE COULD NOT BE TREATED AS PROFITS DERIVED FR OM MANUFACTURING 7 ACTIVITY. THEREFORE NO DEDUCTION U/S 10BA OF IT ACT WAS ALLOWABLE ON THESE RECEIPTS. HOWEVER, SINCE THE DEDUCTION CLA IMED BY THE ASSESSEE U/S 10BA HAD BEEN DISALLOWED IN TOTO THERE FORE, NO SEPARATE DISALLOWANCE WAS CALLED FOR ON THIS ISSUE. 5. IT WAS ARGUED BEFORE LD. CIT (A) THAT THE ASSESS ES IS A PARTNERSHIP FIRM ENGAGED IN MANUFACTURE AND PRODUCTION OF WOODEN HANDICRAFTS, C ARPETS, DURRIES, ACCESSORIES, METAL ITEMS, TEXTILE ETC. FOR EXPORT OUT OF INDIA. THE AO HAD GROSSLY ERRED ON FACTS & IN LAW IN DISALLOWING THE CLAIM U/S 10 BA OF THE INCOME TAX ACT 1961, AMOUNTING TO RS. 14,19,41,909/- IN RESPECT OF THE FOLLOWING THREE UNITS, NAMELY:- A. KUSUM SAROVER (K-1), MAHARANI FARM, JAIPUR. B. KUSUM SAROVER UNIT-II (KS-II), FCI GODOWN, DURGAPUR A JAIPUR C. LALI UNIT, RAMGARH ROAD, DELHI BYPASS, JAIPUR FROM THE PERUSAL OF THE ASSESSMENT ORDER (FROM PAGE 2 TO PAGE 9) IT WOULD BE OBSERVED THAT THE AO HAD TAKEN DUE NOTE OF THE FACTS AS NARR ATED IN ASSESSMENT ORDERS FOR THE YEAR 2004-05 AND SUBSEQUENTLY FOLLOWED IN ASSESSMENT ORD ERS FOR AY 2005-06, 2006-07 & 2007-08 ABOUT THE SURVEY OPERATIONS U/S 133A CONDUC TED ON 23.12.2005 AT THE ABOVE- MENTIONED THREE UNITS AND THEN PROCEEDING TO RECORD THE FINDINGS THAT THE SAID UNITS DID NOT FULFILL THE CONDITIONS LAID DOWN U/S 10 BA OF T HE INCOME TAX ACT 1961 AND HOLDING IN ADVANCE THAT THESE UNITS WERE NOT ELIGIBLE FOR CLAI M OF DEDUCTION U/S10 BA OF THE IT ACT. REITERATING THE SAME FINDINGS OF HIS PREDECESSORS F OR ASSESSMENT YEAR 2004-05, 2005-06, 2006-07, TO 2007-08, THE AO HAD COMPLETED THE ASSES SMENT. BESIDES, THE AO TOOK NOTE OF THE DECISION OF THE APEX COURT IN SLP 5827/07 IN CA SE OF M/S LIBERTY INDIA ABOUT 8 REMISSION OF DUTY DRAWBACK VIDE ORDER DT.31.08.09 W HERE IN THE FOLLOWING OBSERVATIONS WERE MADE : AT THE OUTSET WE MAY INDICATE THAT ALTHOUGH IN THE PRESENT JUDGMENT WE HAVE FOCUSED ON THE ANALYSIS OF SEE. 80 1(B), THE B ASIC SCHEME OF SEC. 80- 1, 80-1A, AND 80-1B (AS THEN STOOD) REMAINS THE SAM E. BEFORE ANALYZING SECTION 80-1B, AS A PREFATORY NOTE, IT NEEDS TO BE MENTIONED THAT THE 1961 ACT BROADLY PROVIDES FOR TWO TYPES OF TAX INCENTIVE S, NAMELY, INVESTMENT LINKED INCENTIVES & PROFIT-LINKED INCENTIVES. CHAPT ER VI-A WHICH PROVIDES FOR INCENTIVES IN THAT FORM OF TAX DEDUCTION ESSENT IALLY BELONG TO THE CATEGORY OF PROFIT LINKED INCENTIVES. IN THE CIRCU MSTANCES, WE HOLD THAT THE DUTY DRAWBACK/ RECEIPT / DEPB BENEFITS DO NOT F ORM PART OF THE NET PROFITS OF ELIGIBLE INDUSTRIAL UNDERTAKING FOR THE PURPOSES OF SEC.80 1/, 80 1 A/, 80-1 B, OF THE 1961 ACT. IN THIS CONNECTION, THE FOLLOWING SUBMISSIONS, INTE R-ALIA, ARE MADE: - THE DECISION OF THE APEX COURT REFERRED TO BY THE AO WAS GIVEN REGARDING REMISSION OF TAX UNDER SEC. 80 1(B) OF THE IT ACT. NOW, THE SAID SECTION IS CHAPTER VI A OF THE IT ACT WHICH IS HEADED. DEDUCTION TO BE MADE IS COMPUTING TOTAL INCOME. WHILE SEC. 10 BA OF THE IT ACT IS PART OF CHAPTER I II WHICH IS HEADED. INCOME, WHICH DO NOT FORM PART OF TOTAL INCOME. THE HONBLE APEX COURT DID NOT HAVE THE OCCASION TO TAKE NOTE OF THIS SIGNIFICANT DISTINCTION IN THE CASE CITED BY THE AO. IT IS ALSO TO BE NOTED THAT SEC. 10 BA OF THE I T ACT IS A SPECIAL PROVISION IN RESPECT OF EXPORT OF WOOD BASED ARTICLES OR THINGS OF ARTISTIC 9 VALUE AND PARLIAMENT IN ITS WISDOM HAVE ENACTED THI S SECTION AS A PART OF CHAPTER III & NOT OF CHAPTER VI A OF THE IT ACT. THEREFORE IN ALL FAIRNESS, TILL THE APEX COURT DECIDES ON THIS MARKED DISTINCTION, THE EXISTING POSITION SHOU LD CONTINUE. IT WAS REQUESTED TO FOLLOW THE ORDERS OF CIT(A) AND ITAT FOR EARLIER YEARS FOR ALLOWING EXEMPTION U/S 10BA OF THE I T ACT. 6. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING T HE MATERIAL ON RECORD, THE LD. CIT (A) ALLOWED THE APPEAL IN FAVOUR OF THE ASSESSEE. 7. THE LD. D/R WHO APPEARED ON BEHALF OF THE DEPART MENT STRONGLY OBJECTED THE FINDING OF LD. CIT (A). IT WAS SUBMITTED THAT LD. CIT (A) THOUGH HAVE RECORDED THE FACTS BUT THE FINDING OF LD. CIT (A) IS NOT IN RIGHT PERS PECTIVE. IT WAS FURTHER SUBMITTED THAT THE SURVEY WAS CONDUCTED IN EARLIER YEARS AND EARLIER Y EARS APPEALS OF THE DEPARTMENT HAVE BEEN DISMISSED BY THE TRIBUNAL, BUT THE TRIBUNAL HA S ALSO NOT APPRECIATED THE FACTS IN RIGHT PERSPECTIVE. IT WAS SUBMITTED THAT THERE IS NO VALUE ADDITION IN THE JOB DONE BY ASSESSEE AS ASSESSEE PURCHASED 90% OF ITS MATERIAL FROM MARKET AND AFTER DOING SMALL COSMETIC WORK, THE APPROVED SALE IS MADE AND ON PRO FIT DEDUCTION UNDER SECTION 10BA HAS BEEN CLAIMED WHICH IS NOT CORRECTLY MADE AS ASS ESSEE IS NOT A MANUFACTURER AND THE CONDITIONS ARE ALSO NOT SATISFIED FOR CLAIMING DEDU CTION UNDER SECTION 10BA. IT WAS SUBMITTED THAT AO HAS NOTED ALL THE FACTS AT PAGE 9 ONWARDS AND IF ALL THESE FACTS ARE TAKEN INTO CONSIDERATION THEN IT WILL BE FOUND THAT ASSES SEE IS NOT A MANUFACTURER AND, THEREFORE, DEDUCTION UNDER SECTION 10BA IS NOT ALLOWABLE. IT WAS ALSO MENTIONED THAT ONLY 6 EMPLOYEES HAS BEEN KEPT BY THE ASSESSEE AND AS PER PROVISIONS OF SECTION 10BA THE STRENGTH OF THE EMPLOYEES ARE LESS THAN THE REQUIRE D STRENGTH. ACCORDINGLY IT WAS 10 SUBMITTED THAT THE LD. CIT (A) WAS NOT JUSTIFIED IN ALLOWING DEDUCTION FOR THE YEAR UNDER CONSIDERATION. 8. IN REPLY, THE LD. COUNSEL OF THE ASSESSEE SUBMIT TED THAT THE CONTENTION OF LD. D/R ARE WITHOUT ANY BASIS AS ON THE BASIS OF SURVEY CON DUCTED IN EARLIER YEAR, ON IDENTICAL FACTS, THE DEDUCTION CLAIMED BY ASSESSEE WAS DISALL OWED. THE LD. CIT (A) ALLOWED THE CLAIM OF THE ASSESSEE AND THE ORDER OF LD. CIT (A) HAS BEEN AFFIRMED BY THE TRIBUNAL AFTER PASSING A DETAILED ORDER. WHATEVER THE CONTENTION HAS BEEN RAISED BY LD. D/R, THOSE CONTENTIONS HAVE ALREADY BEEN CONSIDERED BY THE TRI BUNAL WHILE DISPOSING THE APPEAL FOR EARLIER YEAR. ATTENTION OF THE BENCH WAS DRAWN O N THE ORDER OF THE TRIBUNAL. REGARDING THE STRENGTH OF THE EMPLOYEES, IT WAS SUBMITTED THA T THIS ISSUE WAS EXAMINED IN EARLIER YEAR AND THEN LD. CIT (A) HAS ALLOWED THE CLAIM OF THE ASSESSEE WHICH HAS BEEN CONFIRMED BY THE TRIBUNAL. IT WAS FURTHER SUBMITTE D THAT ASSESSEE IS 100% EXPORTER AND TURNOVER OF THE ASSESSEE HAS BEEN INCREASED MANY FO LD. STAFF HAS BEEN ADDED AND, THEREFORE, IT IS INCORRECT TO SAY THAT CONDITIONS F OR CLAIMING DEDUCTION UNDER SECTION 10BA ARE NOT SATISFIED. RELIANCE WAS PLACED ON THE ORDE R OF LD. CIT (A) WHICH IS IN CONSONANCE WITH THE ORDER OF TRIBUNAL FOR EARLIER YEAR I.E. 20 04-05 ONWARDS. IT WAS ALSO SUBMITTED THAT FROM ASSESSMENT YEAR 2004-05 ONWARDS THE APPEA LS OF THE DEPARTMENT HAVE BEEN DISMISSED. 9. WE HAVE HEARD RIVAL SUBMISSIONS AND CONSIDERED T HEM CAREFULLY. AFTER CONSIDERING THE SUBMISSIONS OF THE LD. D/R AS WELL AS OF THE LD. COUNSEL OF THE ASSESSEE, WE FIND THAT THE ISSUE HAS BEEN SQUARELY COVERED BY THE ORDER OF THE TRIBUNAL FOR EARLIER YEAR. NO DOUBT, THE AO HAS DISCUSSED THE CLAIM OF DEDUCTION UNIT-WISE AND IT HAS BEEN MENTIONED IN THE ORDER OF THE AO THAT SURVEY UNDER SECTION 133A(3) WAS CONDUCTED IN 11 EARLIER YEAR I.E. ON 23.12.20205 WHEN CERTAIN MATER IAL WAS IMPOUNDED. IT HAS BEEN ALSO MENTIONED IN THE ORDER OF THE AO AT PAGE 4 THAT FOR ASSESSMENT YEARS 2004-05 AND 2005- 06 THE DEDUCTION CLAIMED WAS DISALLOWED. THEREAF TER, THE AO DISCUSSING THE ISSUE UNIT- WISE AND RECORDING THE FACTS, HELD THAT THE ASSESSE E IS NOT ENTITLED FOR DEDUCTION. THE CONTENTIONS OF THE ASSESSEE ARE THAT FOR ASSESSMENT YEARS 2004-05 TO 06-07 THE TRIBUNAL HAS CONFIRMED THE ORDERS OF THE LD. CIT (A). THERE FORE, CLAIM OF THE ASSESSEE IS ALLOWABLE AS THE FACTS ARE SIMILAR. HOWEVER, THIS CONTENTION WAS NOT ACCEPTED BY THE AO. THEREAFTER THE STATEMENT RECORDED OF THE PARTNER OF THE FIRM DURING THE COURSE OF SURVEY I.E. 23.12.2005 HELD THAT DEDUCTION FOR THE YEAR UN DER CONSIDERATION IS NOT ALLOWABLE. THE AO HAS ALSO CONSIDERED VARIOUS CASE LAWS. HOWEVER, NO REASONING HAS BEEN GIVEN BY THE AO THAT WHY HE HAS NOT FOLLOWED THE ORDER OF THE TR IBUNAL. THE AO HAS OBSERVED IN HIS ORDER THAT VARIOUS INCRIMINATING DOCUMENTS WERE FOU ND AND SEIZED DURING THE COURSE OF SURVEY AND THE PARTNER OF THE FIRM HAS ADMITTED THA T DEDUCTION UNDER SECTION 10BA IS NOT ALLOWABLE. IT WAS ALSO NOTED THAT THE NUMBER OF WO RKERS WHICH ARE 18 IN NUMBER ARE LESS THAN THE REQUIRED STRENGTH OF 20 AS ON 23.12.2005, THE DATE OF SURVEY. ACCORDINGLY, IT WAS HELD THAT THE ARGUMENTS OF THE ASSESSEE ARE NOT TEN ABLE AND THEREFORE, THE CLAIM OF DEDUCTION UNDER SECTION 10BA HAS BEEN DISALLOWED FO R THE YEAR UNDER CONSIDERATION. 10. THESE FACTS WERE CONSIDERED BY THE AO IN RESPEC T TO KUSUM SAROVAR-II AND FINAL FACTS ARE RECORDED IN RESPECT OF LALI UNIT RAMGARH ROAD AND OTHERS AND HAVE DENIED THE DEDUCTION UNDER SECTION 10BA. 11. ON APPEAL BEFORE LD. CIT (A), AGAIN THE DETAILE D SUBMISSIONS WERE FILED AND IT WAS SUBMITTED THAT THE AO HAS DENIED THE CLAIM OF DEDUC TION ON THE BASIS OF SURVEY CONDUCTED IN THE YEAR 2005 AND ON THE BASIS OF SURVEY, THE DE DUCTION UNDER SECTION 10BA WAS 12 DENIED FOR ASSESSMENT YEARS 2004-05 TO 07-08. THE APPEAL OF THE ASSESSEE WAS ALLOWED BY LD. CIT (A) AND ORDER OF LD. CIT (A) HAVE BEEN A FFIRMED BY THE TRIBUNAL FOR ALL THOSE YEARS. ACCORDINGLY IT WAS SUBMITTED THAT THE BASIS ON WHICH THE DEDUCTION HAS BEEN DISALLOWED HAVE ALREADY BEEN CONSIDERED BY LD. CIT (A) AND THEN BY TRIBUNAL WHILE DISPOSING THE APPEAL OF EARLIER YEAR. THEREFORE, AO WAS NOT CORRECT IN DISALLOWING THE CLAIM OF ASSESSEE. THEREAFTER, THE LD. CIT (A) AFT ER CONSIDERING THE SUBMISSIONS AND PERUSING THE MATERIAL ON RECORD, FOUND THAT THE ISS UE IS COVERED BY THE DECISION OF TRIBUNAL FOR EARLIER YEARS. HOWEVER, AGAIN HE HAS D ISCUSSED THE PROVISIONS OF SECTION CONTAINED IN SECTION 10BA WHICH ARE SPECIAL PROVISI ONS TO ENCOURAGE THE EXPORT OF WOODEN HANDICRAFT ARTICLES AND THEREAFTER AFTER DIS CUSSING VARIOUS ORDERS OF THE TRIBUNAL AS WELL AS OF HIGH COURTS, HELD THAT EVEN ON MERITS THE ASSESSEE IS ENTITLED FOR DEDUCTION. THE FINDINGS OF LD. CIT (A) HAVE BEEN RECORDED IN P ARA 3.2 TO 3.3 AT PAGES 8 TO 11, WHICH ARE AS UNDER :- 3.2 I HAVE DULY CONSIDERED THE SUBMISSIONS OF THE APPELLANT. THE APPELLANT IS A PARTNERSHIP FIRM ENGAGED IN MANUFACT URE AND PRODUCTION OF WOODEN HANDICRAFTS, CARPETS, DURRIES, ACCESSORIES, METAL ITEMS, TEXTILE ETC. FOR EXPORT OUT OF INDIA. I FIND THAT THIS ISSUE IS COVERED IN THE FAVOUR OF THE ASSESSEE BY THE ORD ERS OF MY PREDECESSOR FOR AY 2004-05, 2005-06, 2006-07 AND 2 007-08 AND THE HONBLE ITAT HAS ALSO CONFIRMED THE ORDERS OF T HE LEARNED CIT(A)-II JAIPUR. THE OBSERVATIONS OF HONOURABLE IT AT IN ITS ORDER ( ITA NO 815/JP/2007 DATED 20.6.08) FOR AY 2004-05 ARE REPRODUCED AS UNDER: MOREOVER, THE PROVISIONS CONTAINED IN SECTION 10B A ARE SPECIAL PROVISIONS TO ENCOURAGE THE EXPORT OF WOODE N HANDICRAFT 13 ARTICLES WHICH HAVE BEEN INTRODUCED UNDER SPECIAL C IRCUMSTANCES. BOTH THE AUTHORITIES BELOW HAVE INTERPRETED THE PRO VISIONS IN SECTION 10BA DIFFERENTLY AND IN SUCH CIRCUMSTANCES AND FACT S OF THE CASE WHEN THE PROVISION CONTAINED IN SECTION 10BA ARE SP ECIAL PROVISIONS TO ENCOURAGE THE EXPORT OF WOODEN HANDICRAFTS ARTIC LES WHICH CONFER BENEFIT ON THE ASSESSEE AND SUCH PROVISIONS SHOULD BE SO INTERPRETED AND THE WORDS USED THEREIN SHOULD BE ASSIGNED SUCH MEANINGS AS WOULD ENABLE THE ASSESSEE TO SECURE THE BENEFIT INT ENDED TO BE GIVEN BY THE LEGISLATURE TO THE ASSESSEE AND WHERE THERE ARE TWO POSSIBLE INTERPRETATIONS OF A TAXING PROVISION, THE ONE WHIC H IS FAVOURABLE TO THE ASSESSEE SHOULD BE PREFERRED AS DECIDED BY THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF MYSORE MINERALS LTD V S CIT ( 239 ITR 775). THE CASE OF THE ASSESSEE ALSO FINDS SUPPORT F ROM THE DECISION OF HONBLE SUPREME COURT OF INDIA IN THE CASE OF BAJAJ TEMPO LTD. VS CIT (196 ITR 188) WHERE IT HAS BEEN HELD THAT A PRO VISION IN A TAXING STATUTE GRANTING INCENTIVES FOR PROMOTING GR OWTH AND DEVELOPMENT SHOULD BE CONSTRUED LIBERALLY, AND SINC E A PROVISION FOR PROMOTING ECONOMIC GROWTH HAS TO BE INTERPRETED LIB ERALLY, THE RESTRICTION ON IT TOO HAS TO BE CONSTRUED SO AS TO ADVANCE THE OBJECTIVE OF THE PROVISION AND NOT FRUSTRATE IT. TH EREFORE, IN CIRCUMSTANCES AND FACTS OF THE CASE AND THE DECISIO N OF THE VARIOUS COURTS OF LAW MENTIONED HEREINBEFORE, WE FIND THAT THE ASSESSEE HAS NOT VIOLATED THE CONDITIONS LAID DOWN U/S 10BA (2)( A) AND 10BA (2)(B) OF THE ACT AND THE LD CIT(A) RIGHTLY REVERSE D THE DECISION OF THE AO ON THIS ISSUE. FURTHER IN THE CIRCUMSTANCES AND FACTS OF THE PRESENT CASE, DEFINITIONS IN THE VARIOUS ACTS AND D ECISIONS OF VARIOUS COURTS OF LAW, WE ARE OF THE VIEW THAT THE ASSESSEE HAS EMPLOYED MORE THAN 20 WORKERS DURING THE YEAR AND THEREFORE, SATISFIES THE CONDITIONS CONTAINED IN SECTION 10BA (2)(E) OF THE ACT. THE ASSESSEE 14 CATERS TO THE REQUIREMENT OF DIVERSE BUYERS OF EURO PE, USA, JAPAN, AUSTRALIA, SOUTH AFRICA ETC. FOR WOOD BASED HANDICR AFTS AMIDST FIERCE COMPETITION IN THE GLOBAL MARKET. THE ASSESSEE IS E NGAGED IN PROMOTING THOSE TYPES OF MANUFACTURING AND WITH THO SE STEPS WITHIN THE MANUFACTURING VALUE CHAIN THAT REQUIRE MORE PEO PLE INPUTS (LABOUR INTENSIVE) THAT CANNOT BE EASILY PERFORMED BY THE MACHINERY AND REQUIRES LESS CAPITAL. THE CREATIVE TALENT VISU ALIZATION AND ORIGINALITY OF ITS CARPENTERS IN PRODUCTION DEPART MENT, THE DEXTERITY OF ITS WORKMEN DIRECTLY EMPLOYED OR THROU GH CONTRACTORS OR THE JOB WORKERS, THE EXPERTISE OF THE LARGE NUMBER OF LABOURER IN POLISHING ARTISTIC MIRRORS AND BONECHINA FIXING IN WOODEN ARTICLES, SPECIAL PACKING AS PER REQUIREMENT OF MNCS IS THE MAIN STRENGTH OF ARTISTIC WOODEN HANDICRAFTS MANUFACTURED FOR EXPORT . THE USE OF AARA MACHINE FUMIGATION, AID POWER DRIVEN SCREW D RIVERS, GRINDERS, GAUGE MACHINE ARE ONLY AID TO THE WORKMEN AND PLAY A SECONDARY ROLE AND HELP. THE REAL ROLE IS THAT OF T HE EXPERT CREATIVE WORKMEN WITH THEIR DEXTERITY. IN OUR VIEW THE ASSES SEE IS MANUFACTURING THE ITEMS OF ARTISTIC VALUE EVEN AFTE R GETTING SOME PROCESS ON PIECE OR JOB BASIS FROM OUTSIDE BUT UNDE R ITS CONTROL. THE ITEMS SO PRODUCED OR MANUFACTURED WILL BE TREATED A S MANUFACTURE OR PRODUCTION BY THE ASSESSEE EMPLOYING MORE THAN 20 P ERSONS. THEREFORE, IN THE CIRCUMSTANCES AND FACTS OF THE CA SE, WE ARE OF THE VIEW THAT THE ASSESSEE HAS FULFILLED ALL THE CONDIT IONS U/S 10BA(2) OF THE ACT AND THEREFORE, IT IS ENTITLED TO DEDUCTION U/S 10BA(1) OF THE ACT AND WE FIND NO INFIRMITY IN THE ORDER OF THE LD CIT(A) WHO HAS RIGHTLY REVERSED THE DECISION OF THE AO. GROUND NO. 1 OF THE REVENUE IS DISMISSED. 3.3 I FURTHER FIND THAT WHILE DISALLOWING THE CLAIM OF THE ASSESSEE U/S 10 BA, THE AO HAS ALSO RELIED ON THE DECISION O F HONOURABLE 15 JODHPUR TRIBUNAL IN THE CASE OF KWAL PRO EXPORTS VS ACIT (2007- TIOL-223-ITAT-JODH). HOWEVER THE FACTS OF THAT CASE ARE MATERIALLY DIFFERENT. IN THE CITED CASE, THE MAJOR EXPENSES IN MANUFACTURING AND TRADING ACCOUNT WERE TOWARDS PACKAGING AND NO AMOUN T OF WAGES WAS SHOWN. IN THE BACKGROUND OF THESE FACTS, IT WAS CONCLUDED THAT THE ASSESSEE WAS ENGAGED IN TRADING ACTIVITIES, WHI CH COULD NOT BE CALLED AS MANUFACTURING OR PRODUCING ANYTHING. THE CIT ALSO CONSIDERED THE CONDITION LAID DOWN U/S.10B(2)(II), BEING NOT FORMING OF INDUSTRIAL UNDERTAKING BY SPLITTING UP OR THE RE CONSTRUCTION OF BUSINESS ALREADY IN EXISTENCE. IN THIS REGARD, IT W AS NOTED THAT THE UNIT UNDER REFERENCE WAS SIMPLY CREATED ON PAPERS I N THE SAME BUSINESS PREMISES, WITH SAME MANPOWER AND WITH THE SAME EXISTING MACHINERY, IN WHICH THE ASSESSEE WAS ALREADY DOING BUSINESS IN EARLIER YEARS. THIS WAS HELD TO BE A DEVICE TO SWIT CHOVER TO EXEMPTION U/S.10B SINCE DEDUCTION U/S 80HHC WAS DRA STICALLY REDUCED IN THE CASE OF KWAL PRO INTERNATIONAL. IT W AS NOTICED THAT THE ASSESSEE HAD GOT NO MACHINERY OF ITS OWN AND THE GO ODS EXPORTED BY IT WERE MANUFACTURED AND PRODUCED IN THE PLANT AND MACHINERY BELONGING TO OTHERS, WHICH HAD ALREADY BEEN IN USE FOR SO MANY YEARS. IT WAS FOUND FROM THE DETAILS OF OUTSTANDIN G BILLS AS ON 31ST MARCH, 2001 THAT SUCH AMOUNTS REPRESENTED THE TRANS ACTIONS OF THE NON 100% EOU UNIT, WHICH WAS AVAILING BENEFIT U/S 8 0HHC TILL LAST YEAR. IT WAS, THEREFORE, PUT FORTH THAT THE SAID AM OUNT DID NOT REPRESENT THE INCOME OF THE PRESENT ASSESSEE BECAUS E THE TRADING ACTIVITY WAS STARTED ONLY IN THIS YEAR IN AS MUCH A S THE CERTIFICATE 100% EOU WAS GRANTED BY THE COMPETENT AUTHORITY ONL Y AT THE FAG END OF THE PRECEDING YEAR, VIZ, ON 28.3.2000. THIS AMOUNT, BEING A MAJOR CHUNK REPRESENTING 95% OF THE TOTAL INCOME, W AS CLAIMED TO BE NOT THE INCOME DERIVED FROM ELIGIBLE UNDERTAKING AND HENCE AT THE 16 VERY OUTSET, IT WAS INELIGIBLE FOR EXEMPTION U/S. 1 0B, IF ANY. THE ASSESSEE HAD PURCHASED ONLY 2 ITEMS OF MACHINERY IN THAT YEAR AMOUNTING TO RS.10,989/-, WHICH INCLUDED AIR COMPRE SSOR AND HAND GRINDER. IT WAS THEREFORE, ARGUED THAT NO UNDERTAKI NG COULD CLAIM TO CARRY OUT THE MANUFACTURING ACTIVITY WITH THOSE ITE MS. THERE OCCURRED A CHANGE IN CONSTITUTION OF THE ASSESSEE F IRM, WHICH MADE IT INELIGIBLE FOR EXEMPTION. IT WAS ALSO STATED THAT T HE ASSESSEE FIRM WAS FORMED BY SPLITTING/RECONSTRUCTION OF ITS PREDECESS OR FIRM NAMELY KWAL PRO INTERNATIONAL AND HENCE WAS RIGHTLY NOT AC CEPTED TO BE A NEW INDUSTRIAL UNDERTAKING. NONE OF THESE FACTS AND CIRCUMSTANCES EXISTS IN THE PRESENT CASE. AT THE OUTSET, I HOLD T HAT THE AO WAS NOT EMPOWERED TO INTERPOLATE THE FINDINGS OF SURVEY OPE RATION TO THE SUBSEQUENT YEARS. THESE SHOULD HAVE BEEN LIMITED TO THAT YEAR ALONE. IT IS SEEN FROM FORM NO. 56H SUBMITTED BY THE ASSES SEE AND ANNEXURE A RELATING TO CLAIM U/S 10BA, THAT NUMBER OF WORKERS EMPLOYED BY LALI UNIT WERE 198 . SIMILARLY NUMBER OF WORKERS EMPLOYED BY KUSUM SAROVAR UNIT-I AS PER FORM 56H WE RE 167 AND NUMBER OF WORKERS EMPLOYED BY KUSUM SAROVAR UNIT-II AS PER FORM 56H WERE 216. THE SALARIES AND WAGES FOR ALL THE THREE UNITS STO OD AT RS 90,55,688/- AND RS 40,89,684/- RESPECTIVELY. THI S ALSO INCLUDED PF AND ESI CONTRIBUTION OF THE EMPLOYEES. THE FINDI NGS OF THE AO ARE THEREFORE BASELESS. IN SUCH CIRCUMSTANCES, IT W AS IMPERATIVE FOR THE AO TO CONDUCT INDEPENDENT INQUIRIES RATHER THAN PLACING RELIANCE ON THE FINDINGS MADE IN THE ASSESSMENT ORDERS OF EA RLIER YEARS. THE AO COULD HAVE ASCERTAINED THE NUMBER OF EMPLOYEES B Y DEPUTING HIS INSPECTOR OR EXAMINING THE PF/ESI RECORDS. ACCORDIN GLY FOLLOWING THE ORDERS OF MY PREDECESSOR AND HONOURABLE ITAT, I DIRECT THE AO TO ALLOW THE CLAIM OF THE ASSESSEE U/S 10BA SUBJECT TO MY FINDINGS IN PARA 3.4 AND 3.6. THIS GROUND OF APPEAL IS ALLOW ED. 17 12. THESE FINDINGS OF LD. CIT (A) ARE IN CONSONANCE WITH THE FINDINGS OF TRIBUNAL GIVEN FOR ASSESSMENT YEARS 2005-06 TO 2007-08. THE ORDERS OF THE TRIBUNAL ARE PLACED ON RECORD AND WE NOTED THAT TRIBUNAL HAS ALSO DISCUSSE D THE ISSUE IN DETAIL AND THEN ONLY HAS CONFIRMED THE ORDER OF LD. CIT (A). THEREFORE, IT IS INCORRECT TO SAY ON BEHALF OF THE DEPARTMENT THAT TRIBUNAL HAS NOT CONSIDERED ALL THE FACTS ENUMERATED IN THE ORDER OF AO. THE COPY OF ORDER OF TRIBUNAL FOR ASSESSMENT YEAR 2 004-05 DECIDED IN ITA NO. 815/JP/2007 DATED 20.6.2008 IS PLACED IN THE PAPER BOOK AT PAGES 108 TO 130. THE ONLY ISSUE REGARDING GRANTING RELIEF ON ACCOUNT OF DISAL LOWANCE OF DEDUCTION OF CLAIM UNDER SECTION 10BA WAS INVOLVED IN APPEAL FOR ASSESSMENT YEAR 2004-05 BY DEPARTMENT, AND THE TRIBUNAL HAS DEVOTED 23 PAGES TO DECIDE THIS ISSUE. VARIOUS DECISIONS NUMBERING 20 HAS BEEN CONSIDERED BY THE TRIBUNAL. 12.1. THE ISSUE IN RESPECT TO MINIMUM WORKERS HAVE ALSO BEEN DISCUSSED BY THE TRIBUNAL. THE NATURE OF BUSINESS DONE BY THE ASSES SEE HAS ALSO BEEN DISCUSSED BY THE TRIBUNAL. THE SURVEY CONDUCTED ON ASSESSEE ON WHIC H BASIS THE DEDUCTION WAS DISALLOWED HAVE ALSO BEEN DISCUSSED BY THE TRIBUNAL . THEREFORE, THIS IS NOT A CASE THAT THE TRIBUNAL WITHOUT APPLYING MIND HAS DECIDED THE APPE AL AGAINST THE DEPARTMENT BY ACCEPTING THE ORDER OF LD. CIT (A). THIS FACT HAS BEEN CONSIDERED BY LD. CIT (A) ALSO. THE LD. CIT (A) HAS ALSO MENTIONED THAT AO WAS NOT SUPPOSED TO CONSIDER THE SURVEY MATERIAL FOUND IN EARLIER YEAR AND THEN DISALLOWING THE CLAIM OF DEDUCTION OF THE ASSESSEE. THE AO SHOULD HAVE DISALLOWED THE CLAIM OF THE ASSE SSEE OR SHOULD HAVE CONSIDERED THE CLAIM OF THE ASSESSEE INDEPENDENTLY FOR THE YEAR UN DER CONSIDERATION. FROM THE ORDER OF AO, IT IS CLEARLY EMERGES THAT AO HAS DISALLOWED TH E CLAIM OF DEDUCTION UNDER SECTION 10BA ON THE BASIS OF MATERIAL FOUND DURING THE COUR SE OF SURVEY CONDUCTED UNDER SECTION 18 133A ON 23.12.2005. THE MATERIAL FOUND ON 23.12.20 05 HAVE ALREADY BEEN TAKEN INTO CONSIDERATION FIRST BY LD. CIT (A) AND THEN BY THE TRIBUNAL AND IT WAS FOUND THAT AO WAS NOT CORRECT IN DISALLOWING THE CLAIM OF DEDUCTION U NDER SECTION 10BA. THE PROVISIONS OF SECTION 10BA ARE SPECIAL PROVISIONS WHICH ARE FOR E NCOURAGING THE HANDICRAFT BUSINESS. THEREFORE, IN OUR CONSIDERED VIEW, THE DEPARTMENT S HOULD HAVE ADOPTED A LIBERAL VIEW AND INSTEAD OF GOING ON TECHNICALITIES, THE ISSUE SHOUL D HAVE BEEN CONSIDERED ON MERIT. THE ASSESSEE IS 100% EXPORTER AND AFTER GETTING RAW MAT ERIAL FROM THE MARKET AND THEREAFTER COMPLETING THE ENTIRE WORK IN ITS WORK SHOP OR ON J OB WORK BASIS FROM THE PARTIES, EXPORTED THE GOODS, WHICH IS ENTITLED FOR DEDUCTION UNDER SECTION 10BA OF THE ACT. THEREFORE, WE ARE OF THE VIEW THAT THE ORDER OF AO HAS BEEN CONSIDERED BY LD. CIT (A) IN RIGHT PERSPECTIVE AND ACCORDINGLY HAS ALLOWED THE I SSUE IN FAVOUR OF THE ASSESSEE. 12.2. THE CONTENTION OF THE LD. D/R THAT VARIOUS FA CTS NOTED IN THE ORDER OF THE AO AT PAGES 9 ONWARDS HAVE NOT BEEN CONSIDERED BY LD. CIT (A), IN OUR CONSIDERED VIEW, ARE NOT CORRECT. THE FACTS NOTED AT PAGE 9 ONWARDS IN THE ASSESSMENT ORDER ARE IN RESPECT TO SURVEY CONDUCTED ON 23.12.2005 AND THESE FACTS HAVE ALREADY BEEN CONSIDERED BY LD. CIT (A) WHILE ALLOWING THE APPEAL FOR ASSESSMENT YEAR 2 004-05 TO 2007-08. THEREFORE, IT IS NOT NECESSARY THAT AT EVERY TIME THOSE FACTS SHOULD BE DISCUSSED AGAIN. ONCE THOSE FACTS HAVE ALREADY BEEN CONSIDERED, THEREFORE, THERE IS N O QUESTION OF DISCUSSING THE VERY FACTS ONCE AGAIN. IN VIEW OF THESE FACTS AND CIRCUMSTANC ES AND IN VIEW OF THE CONSISTENT APPROACH OF THE TRIBUNAL, WE HOLD THAT LD. CIT (A) WAS JUSTIFIED IN DIRECTING TO ALLOW THE DEDUCTION UNDER SECTION 10BA OF THE ACT. ACCORDING LY WE CONFIRM THE FINDINGS OF LD. CIT (A). 19 13. SIMILAR FACTS ARE INVOLVED IN APPEAL FOR ASSESS MENT YEAR 2009-2010. THEREFORE, FOR THE SAME REASONING THE ORDER OF LD. CIT (A) IS CONF IRMED FOR THIS YEAR ALSO. 14. SECOND ISSUE IN APPEAL OF THE DEPARTMENT FOR AS SESSMENT YEAR 2008-09 AND 2009- 10 ARE AGAINST DELETING THE ADDITION OF RS. 3,077/- AND RS. 94,009/- MADE ON ACCOUNT OF DEPOSITING THE PF/ESI PAYMENT BEYOND THE PRESCRIBED TIME. 15. DEPOSIT ON ACCOUNT OF PF AND ESI WERE DEPOSITED LATE BY FEW DAYS, AND, THEREFORE, THE ADDITION WAS MADE BY THE AO. THE LD. CIT (A) D ELETED THE DISALLOWANCE BY OBSERVING THAT SIMILAR DISALLOWANCES WERE MADE FOR EARLIER YE AR ALSO AND THEY HAVE BEEN DELETED BY HIS PREDECESSOR FOLLOWING THE DECISION OF HONBLE D ELHI HIGH COURT IN CASE OF CIT VS. AIMIL LTD., 321 ITR 508 WHEREIN IT IS HELD THAT NO DISALLOWANCE CAN BE MADE ON ACCOUNT OF PF/ESI UNDER SECTION 43B IF THE PAYMENTS ARE MAD E BEFORE DUE DATE OF FILING OF RETURN. UNDISPUTEDLY, THE PAYMENTS HAVE BEEN MADE BEFORE TH E DUE DATE OF FILING OF RETURN. THEREFORE, THE LD. CIT (A) DELETED THE DISALLOWANCE FOR BOTH THE YEARS AND, WE SEE NO INFIRMITY IN THE FINDINGS OF LD. CIT (A). ACCORDIN GLY WE CONFIRM THE ORDER OF LD. CIT (A) ON THIS ISSUE FOR BOTH THE YEARS. 16. GROUND NO. 3 FOR ASSESSMENT YEAR 2008-09 IS AG AINST DELETING THE DISALLOWANCE OF SCREEN AND BLOCK EXPENSES OF RS. 7,78,770/- INSPITE OF THE FACT THAT 50% OF THE EXPENSES WERE IN THE NATURE OF CAPITAL. 17. SIMILAR ISSUE HAS BEEN INVOLVED IN ASSESSMENT Y EAR 2009-10 ALSO THROUGH GROUND NO. 9. SINCE BOTH THESE GROUNDS ARE COMMON GROUND, THEREFORE, THEY ARE BEING DISPOSED OFF TOGETHER. 18. THE AO DISALLOWED A SUM OF RS. 7.78,770/- ON AC COUNT OF SCREEN AND BLOCK EXPENSES BY GIVING HIS FINDING THAT THE BLOCK AND S CREEN ARE THE ITEMS OF ENDURING NATURE 20 HAVING THE LIFE OF MANY YEARS AND THEREBY DISALLOWI NG 50% OF TOTAL EXPENSES INCURRED BY THE ASSESSEE FOR THESE ITEMS CONSIDERING THEM OF CA PITAL NATURE. IT WAS SUBMITTED BEFORE LD. CIT (A) THAT THESE ITEMS ARE PERISHABLE IN NATU RE WITH A LIMITED LIFE SPAN AND SOMETIMES THEY ALSO GET DISTORTED DURING THE PROCES S OF SAMPLE DEVELOPMENT OR IN THE PRINTING PROCESS OF TEXTILES. THE DETAILED SUBMISS IONS WERE FILED BEFORE THE AO. HOWEVER, THEY HAVE NOT BEEN APPRECIATED IN THE RIGH T PERSPECTIVE. IT WAS SPECIFICALLY SUBMITTED BEFORE THE AO THAT BLOCKS WERE MADE OF WO OD AND SCREENS WERE MADE OF IRON NETTING AND BOTH WERE USED IN PRINTING OF FABRIC AN D THESE WERE MADE ACCORDING TO THE DESIGN OF A SPECIFIED ITEM ORDERED BY SPECIFIC BUYE R. THEREFORE, THIS BLOCK OR SCREEN COULD NOT BE USED IN OTHER EXPORT ORDERS FOR OTHER BUYERS UNLESS THE SAME ITEM OF SAME DESIGN WAS ORDERED BY OTHER BUYER, WHICH WOULD HAVE INFRIN GED COPYRIGHT ACT PROVISIONS. SINCE THESE ARE PERISHABLE AND CONSUMABLE GOODS WHICH HAV E LIMITED LIFE, THEREFORE, THEY ARE ALLOWABLE AS BUSINESS EXPENDITURE. 19. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING THE MATERIAL ON RECORD, THE LD. CIT (A) HAS GIVEN HIS FINDING IN PARA 12.1 AT PAGES 30 TO 31 WHICH ARE AS UNDER :- 12.1. I HAVE DULY CONSIDERED THE SUBMISSIONS OF TH E APPELLANT. ON PERUSAL OF THE ASSESSMENT ORDER, IT IS SEEN THAT THE AO HAD MADE THE IMPUGNED DISALLOWANCE OF RS 7,78,770/- ON ACCOUNT OF SCREEN & WOODEN BLOCK EXPENSES BY HOLDING THAT THES E ITEMS WERE OF ENDURING NATURE HAVING LIFE OF SEVERAL YEARS. HE THEREFORE DISALLOWED 50% OF TOTAL EXPENDITURE INCURRED BY THE ASSESSEE FOR THESE ITEMS CONSIDERING THEM OF CAPITAL IN NATURE. THE COUNSEL OF APPELLANT HAS ARGUED THAT THESE ITEMS WERE PERISHAB LE IN NATURE WITH A LIMITED LIFE SPAN AND SOMETIMES THEY WERE ALSO DI STORTED DURING THE PROCESS OF SAMPLE DEVELOPMENT OR IN THE PRINTING PR OCESS OF TEXTILES. 21 THE BLOCKS WERE MADE OF WOOD AND SCREENS WERE MADE OF IRON NETTING AND BOTH WERE USED IN PRINTING OF FABRIC. T HESE WERE MADE ACCORDING TO THE DESIGN OF A SPECIFIED ITEM ORDERED BY SPECIFIC BUYER. THEREFORE THIS BLOCK OR SCREEN COULD NOT BE USED IN OTHER EXPORTS ORDERS FOR OTHER BUYERS UNLESS THE SAME ITEM OF SAM E DESIGN WAS ORDERED BY OTHER BUYER, WHICH WOULD HAVE INFRINGED COPYRIGHT ACT PROVISIONS. FURTHER DURING THE PROCESS OF PRINTING, CRACKS COULD DEVELOP IN THE WOODEN BLOCKS. THE SCREEN COULD ALSO BE BLOCKED BY THE USE OF HEAVY COLOURS. ACCORDINGLY THERE WAS NO ADVANTAGE OF ENDURING NATURE ACQUIRED BY THE ASSESSEE. I AM INCL INED TO AGREE WITH THE CONTENTIONS OF THE APPELLANT. THERE IS NO DISPU TE THAT ONCE AN EXPORT ORDER WAS EXECUTED, THE WOODEN BLOCKS AND SC REENS WERE REDUNDANT FOR THE APPELLANT AND THEY HAD ONLY THE S CRAP VALUE. THEREFORE IT COULD NOT BE HELD THAT THESE WERE THE ITEMS OF CAPITAL IN NATURE. THE WOODEN BLOCKS AND SCREENS HAD LIMITED U SE BECAUSE THE CHANCES OF OTHER BUYER LIKING THE SAME PATTERN OR D ESIGN WERE REMOTE. THE ASSESSEE WAS REQUIRED TO USE WOODEN BLO CKS AND SCREENS AS PER THE DESIGNS/DRAWING AND SPECIFICATION REQUI RED BY THE CUSTOMER. IN THE CASE OF CHAJJER TEXTILE MILLS VS ITO ( 22 TTJ 87), THE ASSESSEE WAS USING COPPER ROLLERS WHEREIN ENGRA VING WERE MADE FOR PRINTING WORK BECAUSE OF CONSTANT USAGE THE ENG RAVINGS WERE WORN OUT. THE ASSESSEE HAD ARGUED THAT THE COPPER R OLLS AS SUCH WERE NOT MACHINES AND THEY WERE USED FOR THE PURPOSES OF DESIGNING AND PRINTING AND ACTUALLY THE VARIOUS PATTERNS IN THE S AREES WERE PRINTED AS A CONSEQUENCE OF ENGRAVINGS DONE IN THE COPPER R OLLS. THE FREQUENT USE OF COPPER ROLLS RESULTED IN LOSS OF WE IGHT. THE ASSESSEE HAD URGED THAT THE COPPER ROLL HAD A LIFE OF NOT EV EN A YEAR. THE COMMISSIONER (APPEALS) OBSERVED THAT THESE WERE CON SUMABLE ITEMS AS THEY WERE INCAPABLE OF PRODUCING ANYTHING BY THE MSELVES AND 22 ACTUALLY DID NOT PRODUCE ANYTHING BUT WERE USED IN ROLLERS FOR CARRYING ON THE PRINTING ACTIVITY. THE COMMISSIONER (APPEALS) WAS OF THE VIEW THAT COPPER ROLL WAS A CONSUMABLE ITEM AND IN VIEW OF THE FURTHERANCE OF TRADE, HE ALLOWED THIS CLAIM OF THE ASSESSEE. THE HONOURABLE JAIPUR TRIBUNAL HELD THAT COPPER ROLLS W ERE CONSUMABLE ITEMS. THEY WERE TOOLS WHICH WERE USED FOR THE PURP OSE OF PRINTING WORK AND CONSUMPTION OF TOOLS WHILE CARRYING OUT TH E MANUFACTURING ACTIVITY WAS RIGHTLY ALLOWABLE AS A REVENUE EXPENDI TURE. THIS DECISION IS FULLY APPLICABLE TO THE FACTS OF THE CA SE. FURTHER WITH THE EXECUTION OF THE EXPORT ORDER, THESE WOODEN BLOCKS BECAME OBSOLETE. I HOLD THAT THE EXPENDITURE ON WOODEN BLOCKS AND SC REENS BY NO STRETCH OF IMAGINATION COULD BE HELD TO BE CAPITAL IN NATURE. I THEREFORE DIRECT THE AO TO DELETE THE ADDITION OF R S 7,78,770/-. THIS GROUND OF APPEAL IS ALLOWED. THESE FINDINGS OF LD. CIT (A) ARE GIVEN FOR ASSESSM ENT YEAR 2008-09. SIMILAR FINDING HAS BEEN GIVEN BY LD. CIT (A) WHILE DISPOSING THE APPEA L FOR ASSESSMENT YEAR 2009-10. THE ABOVE FINDING OF LD. CIT (A) REMAINED UNCONTROVERTE D AS LD. D/R HAS PLACED RELIANCE ON THE ORDER OF THE AO. WE ARE ALSO IN AGREEMENT WITH THE FINDING OF LD. CIT (A), THEREFORE, WITHOUT GOING INTO MERITS FURTHER, WE CONFIRM THE O RDER OF LD. CIT (A) FOR BOTH THE YEARS. THERE IS NO OTHER GROUND FOR ASSESSMENT YEAR 2008-0 9. 20. THERE IS ONE MORE GROUND IN ASSESSMENT YEAR 200 9-10 WHICH IS AGAINST DELETING THE DISALLOWANCE OF RS. 2,71,207/- OUT OF THE SAMPL ING EXPENSES. 21. SIMILAR DISALLOWANCE WAS MADE FOR ASSESSMENT YE AR 2006-07 ALSO. THE LD. CIT (A) ALLOWED THE CLAIM FOR ASSESSMENT YEAR 2006-07 AND O RDER OF LD. CIT (A) HAS BEEN 23 CONFIRMED BY TRIBUNAL IN ITA NO. 1001/JP/2008 DATED 23.10.2009. THE LD. CIT (A) ALLOWED THE CLAIM OF THE ASSESSEE FOLLOWING THE ORD ER OF TRIBUNAL. 22. SINCE LD. CIT (A) HAS ALLOWED THE CLAIM OF THE ASSESSEE FOLLOWING THE ORDER OF THE TRIBUNAL, THEREFORE, WE SEE NO REASON TO INTERFERE WITH THE FINDING OF LD. CIT (A) IN THIS RESPECT ALSO. ACCORDINGLY WE CONFIRM THE ORDER OF LD. CIT (A) FOR THE YEAR UNDER CONSIDERATION. 23. IN THE RESULT, APPEALS OF THE DEPARTMENT ARE DI SMISSED FOR BOTH THE YEARS. 24. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 04 .11.2011. SD/- SD/- ( N.L. KALRA ) ( R.K. GUPTA ) ACCOUNTANT MEMBER JUDICIAL MEMBER JAIPUR, D/- COPY FORWARDED TO :- THE DCIT, CIRCLE-5, JAIPUR. M/S. MANGALAM ARTS, JAIPUR. THE CIT (A) THE CIT THE D/R GUARD FILE (ITA NO. 586(2)/JP/2011) BY ORDER, AR ITAT JAIPUR.