KAUSHAL ARTS, MUMBAI V. ITO 18(2)(3), MUMBAI

ITA 796/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3453 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2005-2006
• Appeal Filed On: 28-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEERAJ PRADHAN
• Assessee Lawyers: SANJEEV V JOSHI
• Keywords: Depreciation; Additional depreciation

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - I BENCH. . .. . . .. . , ,, , / !'# !'# !'# !'# , ' ' ' ' BEFORE S/SH. B.R. MITTAL, JUDICIAL MEMBER & RA JENDRA, ACCOUNTANT MEMBER ./ ITA NO.796/MUM/2011, $ $ $ $ % % % % / ASSESSMENT YEAR-2005-06 KAUSHAL ARTS 266, A TO Z INDUSTRIAL ESTATE, G.K. MARG, LOWER PAREL, MUMBAI-400020 VS. ITO 18(2)(3) PIRAMAL CHAMBERS, LALBAUG, MUMBAI- 400012. PAN: AAAFK0931G ( &' / APPELLANT ) ( ()&' / RESPONDENT ) &' &' &' &' * * * * ' '' ' / APPELLANT BY : SANJEEV V. JOSHI ()&' + * ' / RESPONDENT BY : MS. NEERAJ PRADHAN $ $ $ $ + ++ + ,- ,- ,- ,- / DATE OF HEARING : 13-06-2013 ./% + ,- / DATE OF PRONOUNCEMENT : 19-06-2013 $ $ $ $ , 1961 + ++ + 254(1) ' '' ' ,0, ,0, ,0, ,0, '1 '1 '1 '1 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, A.M. CHALLENGING THE ORDER DT.10-11-2010 OF THE CIT(A)-2 9, MUMBAI,ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1) THE LEARNED COMMISSIONER (APPEALS)-29, MUMBAL (THE LEARNED CIT(A)) ERRED IN HOLDING THAT THE APPELLANT WAS NOT ENTITLED TO ADDITIONAL EXTRA DEPRECIATION OF RS.21,81 , 602/- U/S 32(1 )(IIA) IN RESPECT OF PLANT & MACHINERY INSTALLED FOR ITS P RINTING PRESS. 2)THE LEARNED CIT(A) ERRED IN HOLDING THAT THE APPE LLANTS ACTIVITY OF PRINTING OF LABELS FOR ITS CUSTOMERS DOES NOT AMOUNT TO MANUFACTURE OR PRODUCT ION AS REQUIRED BY SEC.32(1)(IIA) 3)THE APPELLANT CRAVES LEAVE TO ADD TO, ALTER, DELE TE OR MODIFY ANY OF THE ABOVE GROUNDS OF APPEAL. ASSESSEE-FIRM,ENGAGED IN THE BUSINESS OF PRINTING,F ILED ITS RETURN OF INCOME ON 27.10.2005 SHOWING INCOME AT RS.(-)9.27 LAKHS.ASSESSMENT WAS F INALISED U/S. 143 OF THE ACT DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS. 13.15 LAKHS. 2. DURING THE ASSESSMENT PROCEEDINGS,AO FOUND THAT ASS ESSEE HAD CLAIMED DEPRECIATION AT RS.67. 22 LAKHS,INCLUSIVE OF EXTRA-DEPRECIATION OF RS.21.8 1LAKHS,U/S.32(1)(IIA) OF THE ACT,ON NEW PLANT & MACHINERY ACQUIRED AND INSTALLED DURING THE YEAR UNDER CONSIDERATION.AO ASKED THE ASSESSEE 2 ITA NO.796/MUM/2011,(AY-2005-06) KAUSHAL ARTS TO EXPLAIN AS TO WHY SUCH CLAIM SHOULD NOT BE DISAL LOWED.AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE,AO HELD THAT THE ASSESSEE EXECUTED ORD ERS OF CUSTOMERS FOR PRINTING LABELS AS REQUIRE -ED BY THEM,THAT ASSESSEE WAS NOT ENGAGED IN MANUFA CTURING OR PRODUCTION ACTIVITY, THAT THE ASSESSEE WAS A CONTRACTOR UNDERTAKING JOB WORK. HE DISALLOWED ADDITIONAL DEPRECIATION CLAIMED BY THE ASSESSEE U/S.32(1)(IIA) OF THE ACT. 2.1. ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPEL LATE AUTHORITY(FAA).AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE ASSESSMENT ORDER HE HELD THAT ACTIVITIES CARRIED OUT BY THE ASSESSEE WAS THAT OF A CONTRACTOR OF JOB WORK,THAT THE REAL MANUFACTURER IN A PRINTING PRESS WAS THE PUBLISHER.RELYING UPON THE ORDER DELIVERED BY T HE HONBLE CALCUTTA HIGH COURT,IN THE CASE OF A MUKHERJEE & CO. PVT. LTD.[1977 (ITZ) GJX-0433-CAL ],HE HELD THAT PUBLISHER MIGHT GET THE BOOKS PRINTED FROM THE PRINTER,THAT PRINTER WAS NOT THE MANUFACTURER.HE FURTHER HELD THAT ASSESSEE WAS ONLY PRINTING TO ORDER,THAT MANUFACTURING ACTIV ITY WAS ONLY UNDERTAKEN BY THE PRINCIPLE, THAT APPELLANT WAS UNDERTAKING JOB WORK ONLY, THAT IT HA D NO RIGHT TO ALTER THE SHAPE AND IDENTITY OF THE MATTER TO BE PRINTED.FINALLY,HE HELD THAT THE ASSE SSEE WAS NOT IN A BUSINESS OF MANUFACTURING. 2.2. BEFORE US,AR SUBMITTED THAT ASSESSEE WAS MANUFACTUR ING LABELS,IT HAD FULFILLED ALL THE CONDITI -ONS LAID DOWN U/S 32(1)(IIA)OF THE ACT,FOR CLAIMIN G ADDITIONAL DEPRECIATION AT THE RATE OF 15% OF THE COST,THAT ASSESSEE WAS PRINTING THE LABELS USIN G PAPER AND CHEMICALS, THAT ACTIVITIES CARRIED OUT BY THE ASSESSEE WERE MANUFACTURING.HE RELIED UPON T HE CASE OF BALAJI HOTELS & ENTERTAINMENT LTD.(311ITR89-MADRAS HC).DR RELIED UPON THE ORDER O F THE AO AND FAA. 2.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT HONBLE MADRAS HIGH COURT, WHILE DECIDING THE CASE OF M/S B ALAJEE HOTELS AND ENTERPRISES LTD. (SUPRA) HAS HELD THAT THE PROCESS OF PRINTING ACTIVITY WOUL D AMOUNT TO MANUFACTURER IN ORDER TO QUANTIFY THE BENEFIT U/S 80IA OF THE ACT.WE FIND THAT SIMILA R ISSUE HAD ARISEN BEFORE THE HONBLE GUJARAT HIGH COURT IN THE CASE OF AJAY PRINTERY PVT. LTD. ( 58ITR811). IN THAT CASE PRINTING WAS HELD TO BE MANUFACTURING ACTIVITY.VARIOUS COURTS HAVE DISCUSSE D AND ANALYSED THE CONCEPT OF MANUFACTURING /PRODUCTION.WE FIND THAT THEY ARE OF THE UNANIMOUS VIEW THAT THE TEST TO DETERMINE WHETHER A PARTICULAR ACTIVITY AMOUNTS TO MANUFACTURER OR NOT IS: DOES NEW AND DIFFERENT GOOD EMERGE HAVING DISTINCT NAME USE AND CHARACTER. THE MOMENT THERE IS TRANSFORMATION INTO A NEW COMMODITY COMMERCIALLY KNOWN AS DISTINCT AND SEPARA TE COMMODITY HAVING ITS OWN CHARACTER, USE AND NAME;WHETHER IT BE THE RESULT OF ONE PROCES S/SEVERAL PROCESSES; MANUFACTURER TAKES PLACE. IN THE CASE UNDER CONSIDERATION, THE AO/FAA HAS NOT DISCUSSED THAT HOW PRINTING OF LABEL IS NOT MANUFACTURING ACTIVITY.IN OUR OPINION,PRINTED LABEL S INVOLVE VARIOUS PROCESSES BEFORE THEY ARE CALLED LABELS AND THEY REQUIRE DIFFERENT INGREDIENT S LIKE PAPERS,INK AND CHEMICALS.THEY HAVE A SEPARATE IDENTITY IN THE COMMERCIAL WORLD.IN THESE CIRCUMSTANCES,IN OUR OPINION , FAA WAS NOT JUSTIFIED IN UPHOLDING THE ORDER OF THE AO.REVERSIN G HIS ORDER , WE DECIDE GROUND NO.1 AND 2 IN FAVOUR OF THE ASSESSEE AND DIRECT THE AO TO ALLOW A DDITIONAL DEPRECIATION AS PER PROVISIONS OF SECTION 32(1)(IIA) OF THE ACT. AS A RESULT, APPEAL FILED BY THE ASSESSEE IS STANDS ALLOWED. 2 ,3$2, + 45 + !, 67. ORDER PRONOUNCED IN THE OP EN COURT ON 19 TH JUNE,2013 '1 + ./% ' 8 9$ 19 !5$ , 2013 / + 0 : 3 ITA NO.796/MUM/2011,(AY-2005-06) KAUSHAL ARTS SD/- SD/- ( .. / B.R. MITTAL ) ( !'# !'# !'# !'# / RAJENDRA ) / JUDICIAL MEMBER ' ' ' ' /ACCOUNTANT MEMBER / MUMBAI, 9$ /DATE: 19 TH JUNE, . 2013 '1 '1 '1 '1 + ++ + (,; (,; (,; (,; <';%, <';%, <';%, <';%, / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / &' 2. RESPONDENT / ()&' 3. THE CONCERNED CIT (A) / = > 4. THE CONCERNED CIT / = > 5. DR I BENCH, ITAT, MUMBAI / ;?0 (,$ , . . . 6. GUARD FILE/ 0 @ );, (, //TRUE COPY// '1$ / BY ORDER, A / 6 ! DY./ASST. REGISTRAR , /ITAT, MUMBAI