ACIT, New Delhi V. M/s. U.S. Granites, New Delhi

ITA 706/DEL/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69208 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 31-07-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 05-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T VANSANTHAN
• Section: 80HHC; 80IB; 10B

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH H : NEW DELHI BEFORE SHRI U. B. S. BEDI , JUDICIAL MEMBER AND SHRI S. V MEHROTRA, ACCOUNTANT MEMBER ITA NO. 705/DEL/2013 ( ASSESSMENT YEAR: 2008 - 09) ITA NO. 706/DEL/2013 ( ASSESSMENT YEAR: 2009 - 10) ACIT CIRCLE - 23(1), ROOM NO. 1302, 13 TH FLOOR, E - 2, PRATYAKSH KAR BHAWAN, SHAYAMA PRASAD MUKHERJEE CIVIC CENTER, JAWAHAR LAL NEHRU MARG, MINTO ROAD NEW DELHI 110002 VS. M/S. U. S. GRANITES, O BLOACK, 24B LGF, JANGPURA EXTENSION (OPPOSITE EROS CINEMA) NEW DELHI 110014 PAN AAFU0211E (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI T. VANSANTHAN, SR. DR RESPONDENT BY: NONE O R D E R PER BENCH BOTH THESE APPEALS HAVE BEEN FILED AGAINST THE TWO SEPARATE ORDER S OF LD. CIT(A), XXIII, NEW DELHI DATED 21.11.2012 FOR THE ASSESSMENT YEARS 2008 - 09 AND 2009 - 10 RESPECTIVELY . THE ISSUE IS COMMON IN BOTH THE SE APPEALS AND, THEREFORE, FOR THE SAKE OF CONVENIENCE BOTH THE APPEALS ARE BEING DISPOSED OFF BY THIS COMMON ORDER . AS THE FACTS ARE IDENTICAL IN BOTH THE YEARS , WE REFER TO THE FACTS AS OBTAINING IN ASSESSMENT YEAR 2008 - 09. PAGE NO. 2 ITA NO. 705/DEL/2013 (A Y: 2008 - 09) ITA NO. 706/DEL/2013 (A Y: 2009 - 10) 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FIRM IS A 100% EXPORT UNIT ENGAGED IN THE EXPORT OF POLISH GRANITE MARBLE AND MONUMENT. THE ASSE SSING OFFICER NOTICED THAT THE ASSESSEE HAD CLAIMED EXEMPTION OF RS. 30,44,726/ - UNDER SECTION 10B OF THE INCOME TAX ACT. HE FURTHER NOTED THAT THE ASSESSEE HAD CLAIMED SIMILAR DEDUCTION IN ASSESSMENT YEAR 2006 - 07 AND 2007 - 08 ALSO . THE EXEMPTION CLAIMED BY THE ASSESSEE WAS WITHDRAWN FOR THOSE TWO YEARS. THEREFORE, HE REQUIRED THE ASSESSEE TO EXPLAIN AS TO WHY THE DEDUCTION UNDER SECTION 10B MAY NOT BE DISALLOWED AS DONE IN PREVIOUS YEAR TREATING THE BUSINESS OF ASSESSEE AS A JOB WORK INSTEAD OF MANUFACTURIN G PROCESS . 3. AFTER CONSIDERING THE DETAILED SUBMISSIONS OF THE ASSESSEE AND VARIOUS CASE LAWS , THE ASSESSING OFFICER CONCLUDED AS UNDER: 6. TO SUM UP THE CONTENTION OF THE ASSESSEE FOR DEDUCTION U/S 10 B OF THE INCOME TAX ACT, 1961 IS NOT ACCEPTABLE DUE TO FOLLOWING REASONS: - I. THE ASSESSEE IS DOING THE BUSINESS OF CUTTING AND POLISHING OF GRANITE AND THAT IS NOT A MANUFACTURING ACTIVITY AS HELD BY HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS. VIJAY GRANITES PVT. LTD. 267 ITR (606) MADRAS. II . HON'BLE SUPREME COURT HAS TRIED TO DEFINE WHAT IS A MANUFACTURING ACTIVITY IN CIT VS. TARA AGENCIES 292 ITR 444 (SC) AND AFTER APPLYING THE JUDGMENT OF HON'BLE SUPREME COURT THE CUTTING AND POLISHING OF GRANITE DOES NOT COME INTO MANUFACTURING ACTIVITY. III. IN 245 ITR 830 (SC) IN THE CASE OF LUCKY MINMAT PVT. LTD., IT HAS BEEN HELD BY THE APEX COURT THAT MINING OF LIMESTONE AND MARBLE BLOCKS AND CUTTING AND SIZING THEM DOES NOT AMOUNT TO MANUFACTURE OR PRODUCTION OF ARTICLE FOR THE PURPOSE OF 80 HHC OF THE INCOME - TAX ACT, 1961. OUR CASE IS SQUARELY COVERED BY THIS JUDGMENT OF HON'BLE SUPREME COURT. IV. CIRCULAR NO. 693 DATED 17.11.1994 AND CIRCULAR NO. 729 DATED 01.11.1995 OF THE CBOT ARE NO HELP TO OUR ASSESSEE BECAUSE THEY WERE BROUGHT TO GIVE DEDUCTION U/S 80HHC TO THE POLISHED GRANITE SO THAT VALUE ADDITION BEFORE PAGE NO. 3 ITA NO. 705/DEL/2013 (A Y: 2008 - 09) ITA NO. 706/DEL/2013 (A Y: 2009 - 10) EXPORT IS HIGH AND TO DISCOURAGE EXPORT OF RAW BLOCKS WHERE VALUE ADDITION IS LOW. THESE TWO CIRCULARS OF THE CBOT HAVE NEVER TALKED ABOUT THE FACT THAT THE POLISHING OF GRANITE IS A MANUFACTURING ACTIVITY FOR THE PURPOSE OF SECTIONS 80IA, 80IB OR LOB OF THE INCOME - TAX ACT, 1961. V. THE JUDGMENT OF HON'BLE RA JASTHAN HIGH COURT IN THE CASE OF ARIHANT TITLES & MARBLES PVT. LTD. VS. ITO 295 ITR 148 (RAJ) CANNOT BE AT ALL APPLIED HERE AND IT HAS BEEN DISCUSSED IN DETAILS IN EARLY PART OF THE ORDER. IT IS FURTHER TO MENTION THAT THE RATIO OF THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF LUCKY MINMAT PVT. LTD. 245 ITR 830 (SC) HAS NOT BEEN APPRECIATED WELL BY THE RAJASTHAN HIGH COURT. FURTHER THE CIRCULAR NO. 729 OF THE CBDT WAS FOR DEDUCTION U/S 80 HHC ON THE POLISHED GRANITE AND NOT FOR THE PURPOSE OF SECTION 80IA, 80IB OR LOB OF THE INCOME - TAX ACT, 1961. HENCE, THIS JUDGMENT IS NOT AT ALL APPLICABLE IN THE CASE OF THE ASSESSEE. VI. EVEN THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. SESA GOA LTD. 271 ITR 331 (SC) CANNOT BE APPLIED IN THE PRESENT CASE BECAUSE FIRSTLY THAT IS FOR SECTION 32A(2)(B) OF THE INCOME - TAX ACT, 1961 AND NOT FOR 10B OF THE INCOME - TAX ACT, 1961 AND SECONDLY WHEN THERE IS A DIRECT JUD GMENT OF HON'BLE SUPREME COURT AVAILABLE IN THE CASE OF LUCKY MINMAT PVT. LTD. 245 ITR 830 (SC) ON THIS SUBJECT, THERE IS NO NEED TO DIGRESS FROM THAT. THE HON'BLE SUPREME COURT HAS NOT CONSIDERED THE JUDGMENT OF LUCKY MINMAT LTD. IN THE JUDGMENT OF CIT VS . SESA GOA LTD. VII. IN CIT VS. RELISH FOODS 237 ITR 59 (. C) THE ASSESSEE WAS BUYING SHRIMPS, PEELING THEM AND FREEZING THEM. THE ASSESSEE WAS NOT ALLOWED DEDUCTION U/S 80 HH OF THE INCOME - TAX ACT, 1961 AS HON'BLE SUPREME COURT DID NOT FIND IT EITHER MANUFACTURE OR PRODUCTION BECAUSE SHRIMPS REMAINED SHRIMPS ONLY AF TER ALL THE PROCESSING ON IT. SIMILARLY, GRANITE REMAINS GRANITE AFTER ALL THE WORKS ON IT. VIII. IN SACS EAGLES CHICORY VS. CIT 255 ITR 1789 (SC), THE ASSESSEE CLAIMED THAT THE CONVERSION OF CHICORY ROOTS INTO POWDER IS A MANUFACTURING ACTIVITY BUT THE HON'BLE SUPREME COURT GAVE THE VERDICT AGAINST THE ASSESSEE THAT THE SAME IS NOT A MANUFACTURING ACTIVITY. IX. IN CIT VS. GEM INDIA MANUFACTURING CO. 249 ITR 307 (SC), THE CONVERSATION OF RAW DIAMONDS INTO CUT AND POLISHED DIAMONDS WAS NOT TREATED AS MANUFACTURE OR PRODUCTION BY HON'BLE SUPREME COURT. X. SECTION LOB WAS AMENDED AND SUBSTITUTED BY FINANCE ACT, 2000. BEFORE THE AMENDMENT, THE MA NUFACTURE AND PRODUCTION HAVE BEEN DEFINED. HERE, THE PRODUCTION HAS BEEN DEFINED ONLY IN RELATION TO PRODUCTION OF COMPUTER PROGRAMMES. SO, PRODUCTION HAS BEEN GIVEN STRICTER INTERPRETATION. SO, THE ASSESSEE CAN CLAIM THE BENEFIT OF MANUFACTURE ONLY IN RE LATION TO SECTION 10B AND AS PAGE NO. 4 ITA NO. 705/DEL/2013 (A Y: 2008 - 09) ITA NO. 706/DEL/2013 (A Y: 2009 - 10) DISCUSSED EARLIER, THE CUTTING AND THE DRESSING OF GRANITE IS NOT A , MANUFACTURING ACTIVITY AS EMANATING FROM A LARGE NUMBER OF DECISIONS OF VARIOUS HIGH COURTS AND HON'BLE SUPREME COURT. 4. HE, THEREFORE, DENIED THE DEDUCTI ON CLAIME D BY ASSESSEE UNDER SECTION 10B, INTER ALIA, OBSERVING OBSERVED THAT IN THE YEAR UNDER CONSIDERATION ALSO THERE IS NO CHANGE IN THE FACTS OF THE CASE. LD. CIT(A) ALLOWED THE ASSESSEES APPEAL , INTER ALIA FOLLOWING THE DECISION OF TRIBUNAL FOR EARLIER YEARS. 5. LD. DR RELIED ON THE ASSESSMENT ORDER . NONE HAS APPEARED ON BEHALF OF THE ASSESSEE. 6. WE HAVE CONSIDERED THE SUBMISSIONS OF LD DR AND HAVE PERUSED THE RECORD OF THE CASE , LD CIT(A) , INTER ALIA, FOLLOWED THE DECISIONS OF THE TRIBUNAL, DELHI BENCH, 13 TH SEPTEMBER, 2009 FOR THE ASSESSMENT YEAR 2006 - 07 AND THE ORDER DATED 20 TH OCTOBER, 2010 FOR THE ASSESSMENT YEAR 2007 - 08. HE HAS OBSERVED AS UNDER: (4) THE ABOVE WRITTEN SUBMISSIONS HAVE BEEN CAREFULLY CONSIDERED. ALL THE GROUNDS OF APPEAL PERTAIN TO DISALLOWANCE OF THE CLAIM OF EXEMPTION UNDER SECTION 10 B OF RS. 30,44,726/ - . IT IS OBSERVED THAT THE ABOVE ISSUE OF CLAIM OF EXEMPTION UNDER SECTION 10 B HAS BEEN DECIDED IN FAVOUR OF THE APPE LLANT BY MY LEARNED PREDECESSOR FOR THE ASSESSMENT YEARS 2006 - 07 & 2007 - 08 VIDE ORDERS DATED 12.5.2009 AND 30.9.2010 RESPECTIVELY. A DETAILED FINDING HAS BEEN RECORDED BY THE CIT(A) AFTER DEALING WITH ALL THE CASE LAWS REFERRED BY THE ASSESSING OFFICER AND AFTER REFERRING TO MORE RECENT JUDICIAL PRONOUNCEMENTS WHEREIN THE CONCEPT OF MANUFACTURE OR PRODUCTION HAS BEEN ELABORATELY DEALT WITH, PARTICULARLY WITH REFERENCE TO THE CASE OF ARIHANT TILES & MARBLES 320 ITR 79 (SC). MOREOVER, THE ORDERS OF THE CIT(A) XXIII HAVE BEEN UPHELD BY THE HON'BLE TRIBUNAL, DELHI BENCH, BY ORDER DATED 30.9.2009 FOR THE ASSESSMENT YEAR 2006 - 07, AND BY ORDER DATED 20.10.2010 FOR THE ASSESSMENT YEAR 2007 - 08. RESPECTFULLY PAGE NO. 5 ITA NO. 705/DEL/2013 (A Y: 2008 - 09) ITA NO. 706/DEL/2013 (A Y: 2009 - 10) FOLLOWING THE ABOVE JUDGMENTS OF THE ITAT IN THE APPELLANT'S OWN CASE, IT IS HELD THAT THE APPELLANT IS ENTITLED TO THE CLAIM OF EXEMPTION UNDER SECTION 10 B. THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE CLAIM UNDER SECTION 10B AMOUNTING TO RS. 30,44,726/ - . 7. LD DR HAS NOT CONTROVERTED THESE FACTS AND HAS NOT BROUGHT ANY CONTRARY DECISION FOR OUR CONSIDERATION. HE, HOWEVER, POINTED OUT THAT TRIBUNALS ORDER FOR EARLIER YEARS HAS BEEN ASSAILED BEFORE HONBLE HIGH COURT. WE , THEREFORE, RESPECTFULLY FOLLOWING THE DECISIONS OF THE TRIBUNAL (SUPRA) , UPHOLD THE ORDER OF THE LD CIT(A) , FOR BOTH THE YEARS UNDER CONSIDERATION. . IN THE RESULT BOTH THE DEPARTMENTAL APPEAL S ARE DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 1 4 . 0 8 .2013 - S D / - - S D / - ( U. B. S. BEDI ) (S. V MEHROTRA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED 1 4 / 0 8 / 2013 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI