ACIT, Central Circle-5, Hyderabad V. M/s Shiva Shankar Minerals Ltd., Hyderabad

ITA 773/HYD/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 98484 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2015
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 01-09-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 28-04-2014
• Court: TRIBUNAL
• Department Lawyers: NIVEDITA BISWAS
• Assessee Lawyers: D V ANJANEYULU; PRAVALLIKA ARS
• Keywords: Additional evidence
• Section: 10B; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 773/HYD/2014 ASSESSMENT YEAR: 2010-11 ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-5, HYDERABAD VS M/S. SHIVA SHANKAR MINERALS PVT. LTD., HYDERABAD [PAN: AACCS5388N] (APPELLANT) (RESPONDENT) C.O. NO. 25/HYD/2015 (IN ITA NO. 773/HYD/14) ASSESSMENT YEAR: 2010-11 M/S. SHIVA SHANKAR MINERALS PVT. LTD., HYDERABAD [PAN: AACCS5388N] VS ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-5, HYDERABAD ( CROSS - OBJECTOR ) (RESPONDENT) FOR REVENUE : SMT NIVEDITA BISWAS, CIT-DR FOR ASSESSEE : SHRI D.V. ANJANEYULU & MISS PRAVALLIKA, ARS DATE OF HEARING : 01-09-2015 DATE OF PRONOUNCEMENT : 09-09-2015 O R D E R PER B. RAMAKOTAIAH, A.M. : THIS IS A REVENUES APPEAL AGAINST THE ORDER OF TH E COMMISSIONER OF INCOME TAX (APPEALS)-VII, HYDERABAD DATED 25-02- 2014. ASSESSEE I.T.A. NO. 773/HYD/14 C.O. NO. 25/HYD/15 M/S. SHIVA SHANKAR MINERALS PVT. LTD., :- 2 -: FILED CROSS OBJECTION IN SUPPORT OF THE ORDERS OF C IT(A). WE HAVE HEARD LD. DR AND LD. COUNSEL. 2. BRIEFLY STATED, ASSESSEE IS A COMPANY AND HAS CL AIMED DEDUCTION U/S. 10B ON THE UNIT ESTABLISHED IN SEZ. IN THE SC RUTINY ASSESSMENT, THE ASSESSING OFFICER (AO) DISALLOWED THE DEDUCTION U/S. 10B ON THE REASON THAT IN EARLIER YEARS, THE DEDUCTION CLAIMED U/S. 10B WAS NOT ALLOWED. THERE WAS NO DISCUSSION ABOUT THE ELIGIBI LITY OR OTHERWISE OF ASSESSEES CLAIM DURING THE YEAR. THE ONLY REASON FOR DISALLOWANCE IS THAT THE DECISIONS OF THE CIT(A) IN AYS. 2006-07 TO 2009-10 ARE NOT ACCEPTED BY THE DEPARTMENT AND FURTHER APPEALS WERE FILED BEFORE THE ITAT AND TO MAINTAIN CONSISTENCY, THE CLAIM WAS DIS ALLOWED. IN ADDITION TO THE ABOVE, THE AO ALSO DISALLOWED AN AMOUNT OF R S. 2,55,34,208/- BEING 25% OF EXPENDITURE ON EARTH DEVELOPMENT EXPEN SES TAKING INTO ACCOUNT THE NON-VERIFIABLE NATURE OF THE EXPENDITUR E. LD. CIT(A) FOLLOWING HIS OWN ORDERS IN EARLIER YEARS, ALLOWED ASSESSEES CLAIM U/S. 10B. FURTHER, ON ENQUIRY FROM ASSESSEE, WHO FURNISHED TH E SAME DOCUMENTS FURNISHED BEFORE THE AO, NOTICED THAT ASSESSEE HAS ENGAGED M/S. GVPR ENGINEERS LTD., FOR LAYING ROADS AND DOING EARTH DE VELOPMENT WORK AND THE SAID COMPANY HAS ALSO ACCOUNTED FOR THE RECEIPT S AS INCOME AND ASSESSEE MADE TDS WHICH WAS ALSO CLAIMED THEREON. O N EXAMINATION OF THE ACCOUNT OF ASSESSEE AS WELL AS GVPR ENGINEERS L TD, LD. CIT(A) DID NOT APPROVE DISALLOWANCE OF EXPENDITURE AND DELETED THE SAME. REVENUE IS AGGRIEVED AND RAISED THE FOLLOWING TWO GROUNDS: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING THE DEDUCTION U/S. 10B WITHOUT GIVING AN INDEPENDENT FINDING AS TO WHETHER THE ACTIVITIES OF THE ASSESSEE DURING THE AY. 2010-11 QUALIFY AS MANUFACTURER. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) IN ALLOWING RELIEF OF RS. 2,55,34,208/- BY ADMITTING ADDITIONAL EVIDENCE IN THE FORM OF THE AGREEMENT WI TH GVPR I.T.A. NO. 773/HYD/14 C.O. NO. 25/HYD/15 M/S. SHIVA SHANKAR MINERALS PVT. LTD., :- 3 -: ENGINEERS LTD., AND THE WORK ORDER WITHOUT GIVING A N OPPORTUNITY TO THE AO TO EXAMINE THE SAME IN VIOLATION OF 46A. 3. ON THE ISSUE OF GROUND NO.1, THE ORDERS OF CIT(A ) IN EARLIER YEARS WERE UPHELD BY THE ITAT VIDE ITA NOS. 256 TO 261/HY D/2012 DT. 08-08- 2014 WHEREIN ELIGIBILITY OF ASSESSEES CLAIM U/S. 1 0B WAS EXAMINED IN DETAIL AND LD. CIT(A)S ORDER WAS UPHELD. THE DETA ILED ORDER IN EARLIER YEAR IS AS UNDER: 23. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PART IES AND PERUSED THE MATERIALS ON RECORD AS WELL AS THE ORDE RS OF THE REVENUE AUTHORITIES. THE FACT THAT ASSESSEE IS AN APPROVED 100% EOU HAS NOT BEEN CONTROVERTED BY THE DEPARTMENT AT ANY STAG E. THUS, ASSESSEE SATISFIES THE PRIMARY CONDITION FOR AVAILI NG EXEMPTION U/S 10B. FROM THE ASSESSMENT ORDER, IT IS CLEAR THAT TH E AO HAS DENIED DEDUCTION U/S 10B BASICALLY FOR THE FOLLOWING REASO NS. 1) ASSESSEE DURING THE SEARCH PROCEEDING HAD VOLUNTARILY ADMITT ED UNDISCLOSED INCOME OF RS. 1817.05 LAKHS WITHOUT CLAIMING DEDUCT ION U/S 10B. 2) ASSESSEE HAS NOT CLAIMED DEDUCTION U/S 10B FOR TEN CONSECUTIVE ASSESSMENT YEARS BEGINNING FROM AY 2006-07 AND 3) A SSESSEE IS NOT ENGAGED IN ANY MANUFACTURING OR PRODUCTION ACTI VITY. SO FAR AS THE OBSERVATION THAT ASSESSEE HAS VOLUNTARILY OFFE RED NOT TO CLAIM ANY DEDUCTION U/S 10B IS CONCERNED, ON A PERUSAL O F THE STATEMENT RECORDED FROM SRI V.B VEERA REDDY, DATED 12/09/2008 , WE DO NOT FIND ANY SUCH SPECIFIC REPLY GIVEN BY HIM THAT NO D EDUCTION WOULD BE CLAIMED U/S 10B OF THE ACT. IN ANY CASE OF THE M ATTER, IT IS CLEAR FROM THE ASSESSMENT ORDER THAT THE ASSESSEE HAS SHO WN MORE INCOME IN THE RETURN OF INCOME FILED BY HIM THAN WH AT WAS OFFERED AT THE TIME OF SEARCH AND IN FACT THE AO HAS ACCEPT ED THE PROFIT DECLARED BY THE ASSESSEE IN P&L A/C. THEREFORE, AO S OBSERVATION THAT THE ASSESSEE HAS OFFERED NOT TO CLAIM ANY DEDU CTION U/S 10B IS OF LITTLE RELEVANCE AND AS OTHERWISE IS ALSO NOT BO RNE OUT FROM THE FACTS ON RECORD. SO FAR AS THE SECOND ALLEGATION OF THE AO THAT ASSESSEE HAS NOT CLAIMED DEDUCTION U/S 10B FOR 10 C ONSECUTIVE ASSESSMENT YEARS IS CONCERNED, ON A PERUSAL OF FACT S ON RECORD, IT BECOMES CLEAR THAT THE IRON ORE MINING ACTIVITY WAS STARTED BY THE ASSESSEE IN FY 2007-08 CORRESPONDING TO THE AY UNDE R CONSIDERATION. THEREFORE, THE AO WAS NOT CORRECT IN OBSERVING THAT THE ASSESSEE HAS NOT CLAIMED ANY DEDUCTION IN AY 20 06-07. THE THIRD GROUND FOR DENIAL OF DEDUCTION U/S 10B IS, A SSESSEE IS NOT ENGAGED IN MANUFACTURING ACTIVITY. AS CAN BE SEEN F ROM THE ELABORATE DISCUSSION IN THE ORDER OF THE CIT(A), TH E MINING OF IRON ORE I.T.A. NO. 773/HYD/14 C.O. NO. 25/HYD/15 M/S. SHIVA SHANKAR MINERALS PVT. LTD., :- 4 -: AS UNDERTAKEN BY THE ASSESSEE PASSES THROUGH VARIOU S PROCESSES AND THE FINAL PRODUCT IS NOT SIMILAR TO IRON ORE IN ITS NATURAL FORM AS FOUND UNDER THE EARTH. THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. SESA GOA LTD. (SUPRA) HAD AN OCCASION TO EXAMIN E THE IMPORT OF THE TERM MANUFACTURE OR PRODUCE WHILE CONSIDERIN G THE ISSUE AS TO WHETHER PLANT INSTALLED FOR EXTRACTING MINING AND P ROCESSING IRON ORE WOULD QUALIFY FOR INVESTMENT ALLOWANCE HELD AS UNDE R: 9. THE REASONING GIVEN BY THE HIGH COURT, IN THE DECISIONS NOTED BY US EARLIER, IS, IN OUR OPINION, UNIMPEACHABLE. THIS COURT HAD, AS EARLY AS IN 1961, IN CHRESTIAN MICA INDUSTRIES LTD. VS. STATE OF BIHAR ( 1961) 12 STC 150 (SC), DEFINED THE WORD 'PRODUCTION', ALBEIT , IN CONNECTION WITH THE BIHAR SALES-TAX ACT, 1947. THE DEFINITION WAS ADOPTED FROM THE MEANING ASCRIBED TO THE WORD I N THE OXFORD ENGLISH DICTIONARY AS MEANING 'AMONGST OTHER THINGS THAT WHICH IS PRODUCED; A THING THAT RESULTS FROM A NY ACTION, PROCESS OR EFFORT, A PRODUCT; A PRODUCT OF HUMAN AC TIVITY OR EFFORT'. FROM THE WIDE DEFINITION OF THE WORD 'PROD UCTION', IT HAS TO FOLLOW THAT MINING ACTIVITY FOR THE PURPOSE OF PRODUCTION OF MINERAL ORES WOULD COME WITHIN THE AMBIT OF THE WORD 'PRODUCTION' SINCE ORE IS 'A THING', WHICH IS THE R ESULT OF HUMAN ACTIVITY OR EFFORT. IT HAS ALSO BEEN HELD BY THIS COURT IN CIT VS. N.C. BUDHARAJA & CO. & ANR. (1993) 114 CTR (SC) 420 : (1993) 204 ITR 412 (SC) THAT THE WORD 'PRODUCTION ' IS MUCH WIDER THAN THE WORD 'MANUFACTURE'. IT WAS SAID : 'THE WORD PRODUCTION HAS A WIDER CONNOTATION THAN THE WORD MANUFACTURE. WHILE EVERY MANUFACTURE CAN BE CHARACTERISED AS PRODUCTION, EVERY PRODUCTION NE ED NOT AMOUNT TO MANUFACTURE .......... THE WORD PRODUCTION OR PRODUCE WHEN USED IN JUX TAPOSITION WITH THE WORD MANUFACTURE TAKES IN BRINGING INTO EXIST ENCE NEW GOODS BY A PROCESS WHICH MAY OR MAY NOT AMOUNT TO MANUFAC TURE. IT ALSO TAKES IN ALL THE BY-PRODUCTS, INTERMEDIATE PRODUCTS AND RESIDUAL PRODUCTS WHICH EMERGE IN THE COURSE OF MANUFACTURE OF GOODS.' IT IS, THEREFORE, NOT NECESSARY, AS HAS BEEN SOUGHT TO BE CONTENDED BY LEARNED COUNSEL FOR THE REVENUE, THAT THE MINED ORE MUST BE A COMMERCIALLY NEW PRODUCT. THE DECISIONS AND OTHER A UTHORITIES ON THE DEFINITION OF THE WORD 'ORE', AS CITED BY THE A PPELLANT, ARE IRRELEVANT. I.T.A. NO. 773/HYD/14 C.O. NO. 25/HYD/15 M/S. SHIVA SHANKAR MINERALS PVT. LTD., :- 5 -: 10. LEARNED COUNSEL APPEARING ON BEHALF OF THE ASSESSEE , CORRECTLY SUBMITTED THAT THE OTHER PROVISIONS OF TH E ACT, PARTICULARLY S. 33(1)(B)(B) R/W ITEM NO. 3 OF THE FIFTH SCHEDULE TO THE ACT, WOULD SHOW THAT MINING OF ORE IS TREATED AS 'PRODUCTION'. SEC. 35E ALSO SPEAKS OF PRODUCTION IN THE CONTEXT OF MINING ACTIV ITY. THE LANGUAGE OF THESE SECTIONS IS SIMILAR TO THE LANGUAGE OF S. 32A(2). THERE IS NO REASON FOR US TO ASSUME THAT THE WORD 'PRODUCTION' WAS USED IN A DIFFERENT SENSE IN S. 32A. WE ARE, THEREFORE, OF THE OPINION THAT EXTRACTION A ND PROCESSING OF IRON ORE AMOUNTS TO 'PRODUCTION' WITH IN THE MEANING OF THE WORD IN S. 32A(2)(B)(III) OF THE ACT AND, CONSE QUENTLY, THE ASSESSEE IS ENTITLED TO THE BENEFIT OF S. 32A(1) OF THE ACT. THE QUESTION WHETHER THE HIGH COURT WAS CORRECT IN HOLD ING THAT THE ACTIVITY DID NOT AMOUNT TO 'MANUFACTURE' IS LEFT OP EN. 24. FURTHER, BOARDS INSTRUCTION NO. 2 OF 2009 DATE D 09/03/2009, ALSO CLARIFIES THAT 100% EXPORT ORIENTE D UNITS ARE ELIGIBLE FOR DEDUCTION U/S 10B OF THE ACT IF THEY A RE CERTIFIED BY DEVELOPMENT COMMISSIONERS. THERE IS NO DISPUTE TO T HE FACT THAT ASSESSEE HAS BEEN CERTIFIED BY THE DEVELOPMENT COMM ISSIONER. THEREFORE, CONSIDERED IN THE AFORESAID CONTEXT AND APPLYING THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN CASE OF C IT VS. SESA GOA LTD. (SUPRA) WE ARE OF THE VIEW THAT CIT(A) HAS CORRECTLY HELD THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 10B OF THE ACT. SO FAR AS DECISIONS RELIED UPON BY THE LEARNED DR ARE CONC ERNED, BOTH OF THEM ARE FOUND TO BE FACTUALLY DISTINGUISHABLE AND DO NOT APPLY TO THE FACTS OF THE PRESENT CASE. IN CASE OF B.M. SALG AONKAR BROTHERS VS. CIT(SUPRA), THE HONBLE KARNATAKA HIGH COURT WH ILE CONSIDERING ASSESSEES ENTITLEMENT TO DEDUCTION U/S 80J FOUND T HAT THE PLANT ON WHICH DEDUCTION WAS CLAIMED WAS FOR SIZING AND WASH ING OF IRON ORE. THEREFORE, THE HONBLE HIGH COURT HELD THAT SI NCE THERE IS NO MANUFACTURE OR PRODUCTION OF NEW ARTICLE OR THING D EDUCTION CANNOT BE ALLOWED. HOWEVER, IN THE PRESENT CASE, ASSESSEE IS ENGAGED IN THE MINING AS WELL AS PROCESSING ACTIVITY. IT NOT O NLY EXTRACTS IRON ORE FROM BENEATH THE EARTH BUT ALSO CONVERTS IT TO A SPECIFIC GRADE THROUGH CERTAIN PROCESSES. THEREFORE, CERTAINLY AS SESSEE CAN BE CONSIDERED TO BE ENGAGED IN PRODUCTION OF ARTICLE O R THING. SO FAR AS THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT I N CASE OF DECCAN CEMENTS VS. CIT (SUPRA) IS CONCERNED, THERE THE ISS UE BEFORE THE HONBLE HIGH COURT WAS CLAIM OF DEDUCTION U/S 80HH IN RESPECT OF THE CEMENT MANUFACTURING ACTIVITY. THE HONBLE HIGH COURT, THEREFORE, HELD THAT CEMENT MANUFACTURING ACTIVITY AND MINING OF LIME STONE ARE TWO DIFFERENT AND DISTINCTIVE ACTIVI TIES, HENCE, MINING I.T.A. NO. 773/HYD/14 C.O. NO. 25/HYD/15 M/S. SHIVA SHANKAR MINERALS PVT. LTD., :- 6 -: OF LIME STONE CANNOT BE CONSIDERED AS PART OF MANUF ACTURING OF CEMENT. FURTHER, SUB-SECTION (10) OF SECTION 80HH S PECIFICALLY EXCLUDES MINING ACTIVITIES FROM AVAILING DEDUCTION. THE HONBLE JURISDICTIONAL HIGH COURT KEEPING IN VIEW THE AFORE SAID STATUTORY PROVISION HELD THAT ASSESSEE IS NOT ENTITLED FOR BE NEFIT U/S 80HH. WHEREAS, THERE IS NO SUCH PROVISION AKIN TO SECTION 80HH(10) UNDER SECTION 10B OF THE ACT RESTRICTING BENEFIT TO MININ G ACTIVITY. ON THE CONTRARY, EXPLANATION 4 OF SECTION 10B MAKES IT CLE AR THAT THE TERM MANUFACTURE AND PRODUCE AS CONTEMPLATED UNDER SEC TION 10B IS INCLUSIVE AND NOT EXHAUSTIVE. THEREFORE, CONSIDER ING THE FACTS OF THE ASSESSEES CASE IN THE CONTEXT OF PROVISION CON TAINED U/S 10B AS WELL AS IN THE LIGHT OF RATIO LAID DOWN BY THE HON BLE SUPREME COURT IN THE CASE OF SESA GOA LTD. (SUPRA) AND INSTRUCTIO N ISSUED BY THE CBDT, WE ARE OF THE OPINION THAT THE CIT(A) WAS CO RRECT IN ALLOWING THE CLAIM OF DEDUCTION U/S 10B OF THE ACT. ACCORDIN GLY, WE UPHOLD THE SAME BY DISMISSING GROUNDS RAISED BY THE DEPART MENT. THERE IS NO MERIT IN REVENUE GROUND, HENCE REJECTED . 4. COMING TO THE NEXT ISSUE OF ALLOWING RELIEF BY A DMITTING ADDITIONAL EVIDENCE IN THE FORM OF AGREEMENT WITH M/S. GVPR EN GINEERS LTD, WE ARE OF THE OPINION THAT THERE IS NO ADDITIONAL EVID ENCE ACCEPTED BY THE CIT(A) IN THE ORDER. IN FACT AS SEEN FROM THE ASSE SSMENT ORDER ITSELF, THE AO NOTES THAT ASSESSEE HAS CLAIMED THAT THE INCREAS E IS ATTRIBUTABLE TO RS. 10.21 CRORES SPENT ON ROAD DEVELOPMENT WORK AT MINES AND TDS WAS DEDUCTED ACCORDINGLY. IT WAS THE SUBMISSION OF THE LD. COUNSEL THAT ASSESSEE HAS FURNISHED THE SAME INFORMATION WHICH W AS FURNISHED BEFORE THE AO IN THE COURSE OF ASSESSMENT PROCEEDIN GS AND NO ADDITIONAL INFORMATION HAS BEEN FURNISHED BEFORE THE CIT(A). NOTHING WAS BROUGHT ON RECORD TO SUPPORT THE GROUND THAT ADDITIONAL EVI DENCE WAS FURNISHED BY ASSESSEE BEFORE THE LD. CIT(A). SINCE THE CIT(A ) HAS CORRECTLY APPRECIATED THE FACTS ALREADY PLACED ON RECORD, AND SINCE THE EXPENDITURE WAS A SUB-CONTRACT EXPENDITURE WHICH WA S ALREADY ACCOUNTED BY THE OTHER PARTY ALSO AND AS MENTIONED BY THE CIT(A) ASSESSED BY THE SAME OFFICER, WE DO NOT FIND ANY RE ASON TO ENTERTAIN THE I.T.A. NO. 773/HYD/14 C.O. NO. 25/HYD/15 M/S. SHIVA SHANKAR MINERALS PVT. LTD., :- 7 -: GROUND. ACCORDINGLY, THE GROUND IS REJECTED. IN T HE RESULT, REVENUES APPEAL IS DISMISSED. 5. CROSS OBJECTION, AS STATED EARLIER, IS IN SUPPOR T OF THE ORDER OF THE CIT(A), THEREFORE DOES NOT REQUIRE ANY ADJUDICATION . ACCORDINGLY, THE SAME IS ALSO CONSIDERED DISMISSED. 6. IN THE RESULT, REVENUES APPEAL AND C.O. BOTH AR E DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 9 TH SEPTEMBER, 2015 SD/- SD/- (P. MADHAVI DEVI) (B.RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 9 TH SEPTEMBER, 2015 TNMM COPY TO : 1. ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CI RCLE-5, 8 TH FLOOR, AAYAKAR BHAVAN, L.B. STADIUM ROAD, BASHEERBA GH, HYDERABAD. 2. M/S. SHIVA SHANKAR MINERALS PVT. LTD., 8-2-276, 1 ST FLOOR, PAVANI ESTATES, ROAD NO. 2, BANJARA HILLS, HYDERABA D. 3. CIT(APPEALS)-VII, HYDERABAD. 4. CIT-(CENTRAL), HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.