ITO, CHENNAI V. Cauvery Stone Impex Pvt. Ltd., CHENNAI

ITA 811/CHNY/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4389 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-06-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 03-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PAVUNA SUNDARI
• Section: 10B

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI ... , , # BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ I.T.A. NO. 811/MDS/2017 / ASSESSMENT YEAR : 2011-12 INCOME TAX OFFICER, CORPORATE CIRCLE -1(3), CHENNAI 600 034. VS. M/S. CAUVERY STONE IMPEX PVT. LTD., NO. 8, 2 ND STREET, GANAPATHY COLONY, CHENNAI 600 086. [PAN: AACCC 3310J] ( / APPELLANT) ( / RESPONDENT) % & / APPELLANT BY : SHRI PAVUNA SUNDARI, JCIT )*% & / RESPONDENT BY : NONE & /DATE OF HEARING : 01.06.2017 & /DATE OF PRONOUNCEMENT : 07.06.2017 /O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-1, CHENNAI IN ITA NO. 138/14-15 (NEW NO. ITA 224/CIT(A)-1/2014-15), DATED 19.01.201 7. :-2-: I.T.A. N0. 811/MDS/2017 2. THE SOLE SUBSTANTIVE GROUND RAISED BY THE REVENU E IS THAT THE CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW D EDUCTION U/S. 10B WITHOUT APPRECIATING THE EXPLANATIONS AND ALSO DEFINITION O F MANUFACTURE DEFINED UNDER SECTION 2(29BA) OF THE ACT AND THE FINANCIAL ACT, 2009. 3. THE BRIEF FACTS ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF EXPORTING GRANITE ART PIECES AND MONUME NTS ETC. WHILE COMPLETING THE ASSESSMENT FOR ASSESSMENT YEAR 2011- 12, THE AO DISALLOWED THE DEDUCTION CLAIMED U/S. 10B FOR THE REASON THAT THE AO OBSERVED FROM FORM 56G THAT THE NATURE OF BUSINESS OF UNDERTAKING IS MANUFACTURERS OF PROCESSED DIMENSIONAL GRANITE DRESSED, CUT AND POLI SHED GRANITE SLABS/GRANITE MONUMENTS MOULDED BRONZE AND ORNAMENTAL PIECES FOR FIXING IN GRANITE, SYNTHETIC DIAMOND TOOLS USED IN PRODUCTION OF GRANI TE PRODUCTS. SINCE THE NATURE OF BUSINESS SEEM TO BE ONLY CUTTING AND POLI SHING GRANITES INTO REQUIRED SHAPES, THE ASSESSEE WAS ASKED BY THE AO T O SUBSTANTIATE ITS CLAIM OF DEDUCTION U/S. 10B IN THE LIGHT OF INTRODUCTION OF THE DEFINITION OF MANUFACTURE INTRODUCED IN S. 2(29AB) BY FINANCE ACT , 2009 W.E.F 01.04.2009. THE AO FURTHER STATED THAT THOUGH THE ASSESSEE DESC RIBED THE STEPS INVOLVED IN CONVERSION OF CRUDE GRANITE BLOCK INTO A USABLE GRANITE MONUMENT, IT DOES NOT REVEAL THAT THE PROCESS IS MANUFACTURING., THE PROCESS INVOLVED IN CONVERSION IS A MERE SCULPTURING OR ENGRAVING O R CARVING OF THE GRANITE BLOCK INTO A MEMORIAL STONE, THE BLOCK DOES NOT LOS E ITS CHARACTER OR ITS USE. :-3-: I.T.A. N0. 811/MDS/2017 SINCE, EITHER THE BLOCK OR THE MONUMENTS CAN BE PLA CED AS MEMORIAL STONES, THE VALUE ADDITION MADE BY THE ASSESSEE BY POLISHIN G AND CUTTING INTO OR CHIPPING INTO A DIFFERENT SHAPE DOES NOT ALL TOGETH ER TRANSFORM THE BLOCK INTO A NEW AND DISTINCT OBJECT. THE FACT THAT THE LABOUR AND SKILL WAS REQUIRED TO REMOVE THE BLOCK FROM THE LARGER MASS AND WASHING A ND POLISHING THE BLOCK AND CUTTING ROUGH EDGES CANNOT BE REGARDED AS AMOUN TING TO PRODUCTION AND ACCORDINGLY HE REJECTED THE EXEMPTION CLAIMED BY TH E ASSESSEE U/S. 10B ON THE GROUND THAT THE PROCESS OF CONVERSION OF GRANIT E BLOCK INTO MONUMENT DOES NOT AMOUNT TO MANUFACTURE. ON AN APPEAL TO TH E CIT(A)-1, CHENNAI, THE CIT(A), INTER ALIA, FOUND THAT THE HONBLE ITAT CHE NNAI IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2010-11, ON THE ISSUE OF MANUFA CTURE OF PRODUCTION, VIDE ORDER IN ITA NO. 2098/MDS/2015 DATED 31.03.2016 UPH ELD THE ORDER OF THE CIT(A) AND DECIDED THE ISSUE IN FAVOUR OF THE ASSES SEE AND HENCE ALLOWED THE APPEAL. AGGRIEVED, THE REVENUE FILED THIS APPEAL. 4. THE DR ARGUED THE CASE ON THE LINES OF THE AO AN D GROUNDS OF APPEAL. NONE APPEARED ON BEHALF OF THE ASSESSEE. WE HEARD THE DR AND GONE THROUGH RELEVANT MATERIAL. 5. THE RELEVANT PORTION OF THIS TRIBUNAL ORDER IN T HE ASSESSEES CASE FOR ASSESSMENT YEAR 2010-11 IN ITA NO. 2098/MDS/2015 DA TED 31.03.2016 IS EXTRACTED AS UNDER: :-4-: I.T.A. N0. 811/MDS/2017 7. WE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MAT ERIAL ON RECORD AND JUDICIAL DECISION CITED. THE LD. DEPARTMENTAL R EPRESENTATIVE ARGUED THAT THE COMMISSIONER OF INCOME TAX (APPEALS ) HAS MISINTERPRETED THE DEFINITION OF MANUFACTURE WITHOU T GOING INTO ACTUAL PROCESS SYSTEM AS THERE IS ONLY VALUE ADDITION TO T HE PRODUCT AND NO NEW DISTINCT ITEM IS PRODUCED. WE FIND THE SUBMISSI ON OF THE LD. DEPARTMENTAL REPRESENTATIVE ARE RESTRICTED TO THE E XCLUSIVE DEFINITION OF MANUFACTURE WITHOUT CONSIDERING THE PROCESS OF C HIPPING, CUTTING, POLISHING AND MILLING WHICH ARE NECESSARILY CARRIED OUT FOR MONUMENTS AND FIXED IN THE MEMORY OF DEPORTED SOUL SUCH DISTI NCT PRODUCT HAS EMERGED FROM RAW MATERIAL HAVING SEPARATE IDENTITY AND SOLD INDEPENDENTLY. THE DEDUCTION U/S.10B OF THE ACT APP LIES TO ANY UNDERTAKING AS UNDER:- (I) IT MANUFACTURES OR PRODUCES ANY ARTICLE OR TH ING OR COMPUTER SOFTWARE; (II) IT IS NOT FORMED BY THE SPLITTING UP, OR THE RECONSTRUCTION, OF A BUSINESS ALREADY IN EXISTENCE: PROVIDED THAT THIS CONDITION SHALL NOT APPLY IN RES PECT OF ANY UNDERTAKING WHICH IS FORMED AS A RESULT OF THE RE- ESTABLISHMENT, RECONSTRUCTION OR REVIVAL BY THE ASS ESSEE OF THE BUSINESS OF ANY SUCH INDUSTRIAL UNDERTAKING AS IS REFERRED TO IN SECTION 33B, IN THE CIRCUMSTANCES AN D WITHIN THE PERIOD SPECIFIED IN THAT SECTION; (III) IT IS NOT FORMED BY THE TRANSFER TO A NEW BUS INESS OF MACHINERY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE . THE ASSESSEE COMPANY HAS COMPLIED THE CONDITIONS FO R CLAIMING 10B DEDUCTION AS THERE IS NO DISPUTE EXCEPT THE ALLEGAT ION THAT PROCESS IS NOT MANUFACTURE. ON PERUSAL OF DEFINITION U/SEC . 2(29BA) OF THE ACT AS UNDER:- MANUFACTURE WITH ITS GRAMMATICAL VARIATION, MEANS A CHANGE IN A NON-LIVING PHYSICAL OBJECT OR ARTICLE O R THING :-5-: I.T.A. N0. 811/MDS/2017 (A) RESULTING IN TRANSFORMATION OF THE OBJECT OR A RTICLE OR THING INTO A NEW AND DISTINCT OBJECT OR ARTICLE OR THING HAVING A DIFFERENT NAME, CHARACTER AND USE OR , (B) BRINGING INTO EXISTENCE OF A NEW AND DISTINCT O BJECT OR ARTICLE OR THING WITH A DIFFERENT CHEMICAL COMPOSIT ION OR INTEGRAL STRUCTURE. MANUFACTURE DEFINITION HAS COME INTO EFFECT FROM 01 .04.2009, FURTHER ON COMBINED READING OF BOTH THE CONDITIONS OF SEC. 10B OF INCOME TAX ACT AND DEFINITION OF MANUFACTURE. THE MAIN REQ UIREMENT OF PRODUCT IS ACTIVITY SHOULD BE IN MANUFACTURING ITEM S AND SHOULD RESULT IN TRANSFORMATION OF THE OBJECT OR ARTICLE OR THING INTO A NEW AND DISTINCT OBJECT WITH DIFFERENT CHARACTER. THE GRANI TE RAW BLOCK IS MOUNTED AND WITH THE PROCESS OF CUTTING, CLIPPING A ND POLISHING INTO A MONUMENT HAS DISTINCT CHARACTER AND USAGE. THE LD. AUTHORISED REPRESENTATIVE SUPPORTED AND RELIED ON DECISION OF ITO VS. ARIHANT TILES & MARBLES (P) LTD 320 ITR 0079 (SC) WERE THE CONVERSION OF MARBLE BLOCK INTO POLISHED SLABS AND TILES CONSTITU TES MANUFACTURE OR PRODUCTION AS IT RESULTS IN EMERGENCE OF A NEW A ND DISTINCT COMMODITY, THEREFORE, ASSESSEE UNDERTAKING SUCH ACT IVITY IS ENTITLED TO THE BENEFIT OF SEC.80IA. SO, CONSIDERING THE APPARE NT FACTS, DEFINITIONS, USAGE AND THE PROCESS OF MANUFACTURING , AND ASSESSEES OWN CASE ON THE NATURE OF BUSINESS OF MANUFACTURING OF MONUMENTS AND THE PROCESS OF CONVERSION OF RAW MATERIAL INTO FINISHED PRODUCT IS IDENTIFIED AND SALEABLE AND WE RELY ON APEX COURT D ECISION OF ARIHANT TILES & MARBLES (P) LTD (SUPRA) WERE THE LORDSHIP H AS CONSIDERED CONVERSION OF MARBLE BLOCK INTO POLISHED SLABS AND TILES CONSTITUTES MANUFACTURE AND SAME ANALOGY APPLY FOR PROCESS OF G RANITE BLOCK. THEREFORE, WE ARE NOT INCLINED TO INTERFERE WITH TH E ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) WHO HAS DEALT THE ISSUE IN DETAIL VIZ-A-VIZ THE EXPLANATIONS OF THE ASSESSEE A ND WE UPHOLD THE :-6-: I.T.A. N0. 811/MDS/2017 ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) A ND DISMISS THE REVENUE APPEAL. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO.2098/MDS/2015 IS DISMISSED. 6. SINCE, THERE IS NO CHANGE IN THE FACT OR IN LAW, FOLLOWING THE ABOVE DECISION, THE REVENUES APPEAL IS DISMISSED. 7. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . ORDER PRONOUNCED ON WEDNESDAY, THE 07 TH DAY OF JUNE, 2017 AT CHENNAI. SD/- ( . . . ) (N.R.S. GANESAN) ! ' /JUDICIAL MEMBER SD/- ( ) (S. JAYARAMAN) ' /ACCOUNTANT MEMBER /CHENNAI, 0 /DATED: 07 TH JUNE, 2017 JPV & )12 32 /COPY TO: 1. %/ APPELLANT 2. )*% /RESPONDENT 3. 4 ( )/CIT(A) 4. 4 /CIT 5. 2 ) /DR 6. 7 /GF