ACIT, Kottayam V. M/s.Midas Polymer compounds, Kottayam

ITA 665/COCH/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73842 (ITAT-COCHIN)
• Duration Of Justice: 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2014
• Appeal Filed By: Department
• Bench Allotted: DB
• Next Hearing Date: 09-01-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 30-10-2013
• Court: TRIBUNAL
• Department Lawyers: M ANIL KUMAR
• Section: 80HHC; 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.A. NO. 665/COCH/2013 ASSESSMENT YEAR : 2008-09 THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-1, KOTTAYAM. VS. M/S. MIDAS POLYMER COMPOUNDS PVT. LTD., MIDAS MARKETING BUILDING, VARISSERRY, MARIATHURUTHU P.O., KOTTAYAM-686 027. [PAN: AACCM 0080H] (REVENUE -APPELLANT) (ASSESSEE-RESPONDEN T) REVENUE BY SHRI M. ANIL KUMAR, CIT(DR) ASSESSEE BY SHRI MATHEW JOSEPH, CA DATE OF HEARING 09/01/2014 DATE OF PRONOUNCEMENT 17/01/2014 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 30- 08-2013 PASSED BY LD CIT(A)-IV, KOCHI AND IT RELATE S TO THE ASSESSMENT YEAR 2008-09. 2. THE ONLY ISSUE URGED IN THIS APPEAL IS WHETHER T HE LD. CIT(A) WAS JUSTIFIED IN HOLDING THAT THE JOB WORK INCOME EARNED IN MIXIN G OF RUBBER COMPOUND IS ELIGIBLE FOR DEDUCTION U/S. 80IB OF THE ACT. 3. THE FACTS RELATING TO THE ISSUE ARE STATED IN BR IEF. THE ASSESSEE-COMPANY IS ENGAGED IN MANUFACTURING OF PRE-CURED TREAD RUBB ER AND RUBBER COMPOUND. THE ASSESSEE ALSO EARNS JOB WORK CHARGES ON THE JOB WORK UNDERTAKEN BY IT FOR CONVERTING RAW MATERIALS BELONGING TO OTHER PARTIES INTO RUBBER COMPOUND. THE ASSESSEE HAS ACCOUNTED THE JOB WORK INCOME UNDER TH E HEAD MIXING CHARGES. THE ASSESSEE CLAIMED DEDUCTION U/S. 80IB OF THE ACT ON JOB WORK INCOME ALSO. I.T.A. NO. 665/COCH/2013 2 THE ASSESSING OFFICER TOOK THE VIEW THAT THE JOB WO RK INCOME EARNED BY THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S. 80IB OF THE ACT ON THE REASONING THAT IT IS ONLY ONE OF THE SEVERAL PROCESSES AND FURTHER IT DOES NOT RESULT IN FULL MANUFACTURING OF GOODS. ACCORDINGLY, THE ASSESSI NG OFFICER DISALLOWED THE CLAIM OF DEDUCTION U/S. 80IB OF THE ACT. 4. HOWEVER, THE LD. CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE BY FOLLOWING THE DECISION RENDERED BY THE FULL BENCH OF HONBLE JURISDICTIONAL HIGH COURT OF KERALA RENDERED IN THE ASSESSEES OWN CASE REPORTED IN 331 ITR 68. 5. THE LD. DR SUBMITTED THAT THE REVENUE HAS FILED THE APPEAL BEFORE THE HONBLE SUPREME COURT CHALLENGING THE ORDER PASSED BY HONBLE KERALA HIGH COURT. HE FURTHER SUBMITTED THAT, NO DOUBT, THE HON BLE SUPREME COURT IN THE CASE OF CIT VS. BUDHRAJ & CO. (1998) 204 ITR 412 HA S HELD THAT THE WORD PRODUCTION OR PRODUCE ALSO TAKES IN ALL THE BYE -PRODUCTS, INTERMEDIATE PRODUCTS AND RESIDUAL PRODUCTS WHICH EMERGE IN THE COURSE OF MANUFACTURE OF GOODS. HOWEVER, THE MIXING CHARGES RECEIVED BY THE ASSESSEE CANNOT BE CONSIDERED AS AN INTERMEDIARY PRODUCT GENERATED IN THE COURSE OF ITS MANUFACTURING OPERATIONS, AS THE ASSESSEE HAS ONLY UNDERTAKEN PROCESSING OF RUBBER, I.E., MIXING OF RUBBER WITH CHEMICALS, PROC ESS OIL ETC. FOR OTHERS. 6. ON THE OTHER HAND, THE LD. AR PLACED STRONG RELI ANCE ON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT OF KERALA REN DERED IN THE ASSESSEES OWN CASE. 7. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORD. THE SHORT CONTROVERSY IS WHETHER THE INCOME EARNED BY THE ASS ESSEE ON PROCESSING OF RUBBER ON JOB WORK BASIS FOR OTHERS WOULD FALL UNDE R PRODUCTION OR MANUFACTURING IN ORDER TO BECOME ELIGIBLE FOR DEDU CTION U/S 80IB OF THE ACT. I.T.A. NO. 665/COCH/2013 3 WE NOTICE THAT THE ASSESSEE AS WELL AS THE LD CIT(A ) HAS PLACED RELIANCE ON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN TH E ASSESSEES OWN CASE (REFERRED SUPRA). FOR THE SAKE OF CONVENIENCE, WE EXTRACT BE LOW THE RELEVANT OBSERVATIONS MADE BY THE HONBLE KERALA HIGH COURT IN THE ASSESS EES OWN CASE REFERRED SUPRA. 1.. HOWEVER, THE DIVISION BENCH PRIMA FACIE DOUB TED WHETHER PROCESSING OF GOODS DONE FOR ANOTHER PARTY BY THE A SSESSEE COULD BE TREATED AS MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING FOR THE PURPOSE OF DEDUCTION UNDER SECTION 80IB OF THE ACT. ACCORDINGLY, FOR A DETAILED CONSIDERATION OF CORRECTNESS OF SAID DECIS ION, THE MATTER WAS REFERRED TO THE FULL BENCH. 2. THE ASSESSEE IS ENGAGED IN MANUFACTURE OF PRO CURED TREAD RUBBER AND IS ALSO ENGAGED IN THE JOB WORK OF MIXING OF RU BBER WITH CHEMICALS, PROCESS OILS ETC., TO MAKE COMPOUND RUBB ER FOR TYRE MANUFACTURING COMPANIES.. THE ASSESSING OFFICER H ELD THAT THE JOB WORK DONE BY THE ASSESSEE BY MIXING RUBBER WITH CHE MICALS, PROCESS OILS ETC., TO MAKE COMPOUND RUBBER DOES NOT AMOUNT TO MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING WITHIN THE M EANING OF SECTION 80- IB AND SO MUCH SO ASSESSEE IS NOT ENTITLED TO ANY D EDUCTION 4. THE ONLY QUESTION TO BE CONSIDERED IS WHETHER PR ODUCTION OF COMPOUND RUBBER ON JOB WORK FOR THE TYRE MANUFACTUR ING COMPANIES BY THE ASSESSEE AMOUNTS TO PRODUCTION OF AN ARTICL E OR THING QUALIFYING FOR DEDUCTION U/S. 80IB OF THE ACT. THE DIVISION BENCH DECISION OF THIS COURT ABOVE REFERRED IS CLEARLY ON THE POINT, THOUGH IN THE CONTEXT OF INVESTMENT ALLOWANCE U/S. 32A, BECAU SE ASSESSEE IN THAT CASE ALSO WAS ENGAGED IN MAKING OF COMPOUND RU BBER FOR TYRE MANUFACTURING COMPANIES. THIS COURT HELD THAT COMPO UND RUBBER IS AN ARTICLE OR THING PRODUCED BY THE ASSESSEE IN THEIR FACTORY ENTITLING IT FOR INVESTMENT ALLOWANCE. WE NOTICE THAT SECTION 80IB IS WORDED IN THE SAME WAY AS SECTION 32A AND THEREFORE, THE DIVISION BENCH DECISION OF THIS COURT SQUARELY APPLIES TO THE FACTS OF THIS CA SE ALSO. IT IS ALSO SEEN FROM THE TWO DECISIONS OF THE SUPREME COURT THAT SU PREME COURT HAS GIVEN A WIDE MEANING TO THE EXPRESSIONS MANUFACTUR E OR PRODUCTION OF ANY ARTICLE OR THING, OCCURRING IN SECTION 32A, 80IB, ETC. IN THE SESA GOA LTD.S CASE (SUPRA), THE SUPREME COURT HEL D THAT PROCESSING OF IRON ORE AMOUNTS TO MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING. IN N.C. BUDHARAJA & CO.S CASE (SUPRA), THE SUPREME COURT HELD AS FOLLOWS: I.T.A. NO. 665/COCH/2013 4 THE WORD PRODUCTION OR PRODUCE WHEN USED IN JU XTAPOSITION WITH THE WORD MANUFACTURE TAKES IN BRINGING INTO E XISTENCE NEW GOODS BY A PROCESS WHICH MAY OR MAY NOT AMOUNT TO M ANUFACTURE, IT ALSO TAKEN IN ALL THE BY-PRODUCTS, INTERMEDIATE PRODUCTS AND RESIDUAL PRODUCTS WHICH EMERGE IN THE COURSE OF MAN UFACTURE OF GOODS. WHAT IS MADE CLEAR BY THE SUPREME COURT IS THAT EVE N PRODUCTION OF INTERMEDIARY PRODUCTS IS SUFFICIENT TO ENTITLE THE ASSESSEE FOR DEDUCTION AVAILABLE TO NEW INDUSTRIAL UNIT. COMPOUND RUBBER PRODUCED BY THE ASSESSEE ON JOB WORK FOR THE TYRE MANUFACTURING COM PANIES IS AN INTERMEDIARY FROM WHICH TYRE IS MANUFACTURED. IF P ROCESSING OF IRON ORE WHICH IS ONLY RAW MATERIAL FOR PRODUCING IRON T HEREFROM, AMOUNTS TO MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THIN G, THEN WE SEE NO REASON WHY COMPOUND RUBBER CANNOT BE TREATED AS AN ARTICLE PRODUCED BY THE ASSESSEE THOUGH FOR THE TYRE MANUFA CTURING COMPANY UNDER CONTRACT. IN OTHER WORDS, THERE IS NOTHING IN THE SECTION TO INDICATE THAT ARTICLE OR THING PRODU CED OR MANUFACTURED SHOULD BE FINAL PRODUCT IN ITSELF. SO MUCH SO, THE ACTIVITY OF THE ASSESSEE IN THEIR NEW INDUSTRIAL UN IT, WHICH IS MIXING RUBBER WITH CHEMICALS, PROCESS OIL ETC., MAKING COM POUND RUBBER, IS COVERED BY SECTION 80IB OF THE ACT. WE NOTICE THAT THE TRIBUNAL HAS DISALLOWED THE CLAIM BY FOLLOWING THE DECISION OF T HE SUPREME COURT IN CIT V. K. RAVINDRANATHAN NAIR (2007) 295 ITR 228. W HAT WAS CONSIDERED IN THAT CASE WAS ASSESSEES ENTITLEMENT TO TREAT PROCESSING CHARGES RECEIVED AS PART OF EXPORT PROFIT FOR THE P URPOSE OF DEDUCTION U/S. 80HHC OF THE ACT. WE DO NOT THINK THE SAID DEC ISION HAS ANY APPLICATION TO THE FACTS OF THIS CASE. WE THEREFOR E HOLD THAT ASSESSEE IS ENTITLED TO DEDUCTION UNDER SECTION 80IB IN RESP ECT OF PROFIT DERIVED BY THE INDUSTRIAL UNIT WHERE COMPOUND RUBBER IS MAD E. WE NOTICE THAT THE ISSUE CONTESTED BEFORE US HAS AL READY BEEN DECIDED BY THE FULL BENCH OF HONBLE JURISDICTIONAL KERALA HIGH CO URT IN THE ASSESSEES OWN CASE FOR AN EARLIER ASSESSMENT YEAR. WE HAVE ALREADY NO TICED THAT THE LD CIT(A) HAS FOLLOWED THE ABOVE SAID BINDING DECISION OF HONBLE HIGH COURT. UNDER THESE CIRCUMSTANCES, WE DO NOT FIND ANY REASON TO INTERFE RE WITH HIS ORDER ON THIS ISSUE. I.T.A. NO. 665/COCH/2013 5 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. PRONOUNCED ACCORDINGLY ON 17-01-2014. SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 17TH JANUARY, 2014 GJ COPY TO: 1. M/S. MIDAS POLYMER COMPOUNDS PVT. LTD., MIDAS MA RKETING BUILDING, VARISSERRY, MARIATHURUTHU P.O., KOTTAYAM-686 027. 2. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE -1, KOTTAYAM. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS)-IV, KOCH I. 4. THE COMMISSIONER OF INCOME-TAX, KOTTAYAM 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN