Assistant Commissioner of Income Tax Circle-6(3)(1), Bangalore V. M/s Dolphin International , Bangalore

ITA 860/BANG/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7726 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-07-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 20-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR P V PRADEEP KUMAR
• Assessee Lawyers: H GURUSWAMY ITP
• Keywords: Depreciation; Additional depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, B E NGAL U R U BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI LALI E T KUMAR, JUDICIAL MEMBER ITA NO. 860 / BANG/ 201 8 (ASSESSMENT YEAR : 201 2 - 13 ) ASST. COMMISSIONER OF INCOME - TAX, CIRCLE - 6(3)(1), BENGALURU. VS. APPELLANT M/S.DOLPHIN INTERNATIONAL , NO.TF - 1, #30, SAPTHAGIRI, 10 TH CROSS, 15 TH MAIN, RMV EXTENSION, SADASHIVNAGAR, BENGALURU - 560080. PAN:AABFD 471D RESPONDENT APPELLANT BY : DR. P.V.PRADEEP KUMAR, ADDL.CIT RESPOND ENT BY : SHRI H.GURUSWAMY, ITP. DATE OF HEARING : 02/07/2018 DATE OF PRONOUNCEMENT : 06 /0 7 /2018 O R D E R PER I NTURI RAMA RAO, AM : THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INC OME - TAX (APPEALS), [CIT(A] BENGALURU - 6, BENGALURU, DATED 23/10/2017 FOR THE ASSESSMENT YEAR 2012 - 13. 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APPEAL: ITA NO . 860 /BANG/201 8 PAGE 2 OF 4 3. BRIEFLY THE FACTS OF THE CASE ARE THAT THE RESPONDENT - ASSESSEE IS A PARTNERSHIP FIRM ENGAGE D IN THE BUSINESS OF MANUFACTURING AND SALE OF GRANITE BLOCKS. THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2012 - 13 WAS FILED ON 27/09/2012 DECLARING INCOME OF RS.1,44,65,520/ - . AGAINST THE SAID RETURN OF INCOME, THE ASSESSMENT WAS COMPLETED AT TOTAL INC OME OF RS.1,95,05,532/ - . THE DISPARITY BETWEEN THE RETURNED INCOME AND THE ASSESSED INCOME IS ON ACCOUNT OF DENYING DEPRECIATION AND ADDITIONAL DEPRECIATION ON THE GROUND THAT THE ACTIVITY OF THE RESPONDENT DOES NOT FALL WITHIN THE MEANING OF THE WORD MA NUFACTURING AS IT INVOLVES ONLY CUTTING AND POLISHING OF GRANITE BLOCKS. 4. BEING AGGRIEVED, AN APPEAL WAS PREFERRED BEFORE THE LD.CIT(A), WHO VIDE IMPUGNED ORDER, PLACING RELIANCE ON THE DECISION OF THE JURISDICTIONAL TRIBUNAL (BANGALORE) IN THE CASE OF P.MAYILVAGANAN IN ITA NO.1806/BANG/2013 FOR THE ASSESSMENT YEAR 2009 - 10 AND THE DECISION OF THE HON BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MYSORE MINERALS LTD. (250 ITR 73) HELD THAT THE ACTIVITY OF RESPONDENT - ASSESSEE FALLS WITHIN THE MEANING OF MANUFACTURING AND DIRECTED THE AO TO ALLOW DEPRECIATION AND ADDITIONAL DEPRECIATION. ITA NO . 860 /BANG/201 8 PAGE 3 OF 4 5. BEING AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 6. WE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ONLY ISSUE IN THE PRESENT APPEAL IS WHETH ER THE ACTIVITY OF CUTTING OF GRANITE SLAB AND POLISHING AMOUNTS TO MANUFACTURING THEREBY ENTITLING FOR ALLOWANCE OF DEPRECIATION AND ADDITIONAL DEPRECIATION. THE ISSUE IS COVERED BY THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF C IT VS SESA GOA LTD. (271 ITR 331) WHEREIN IT WAS HELD THAT EXTRACTION OF IRON ORE BY ITSELF AMOUNTS TO PRODUCTION AND SUBSEQUENTLY TH E HON BLE SUPREME COURT IN THE CASE OF ITO VS. ARIHANT TILES & MARBLES (P) LTD., IN C IVIL APPEAL N O .8036 OF 2009 HELD THAT CUTTING AND POL ISH ING OF GRANIT E AMOUNTS TO PRODUCTION. THE RELEVANT PARA . IS EXTRACTED HEREUNDER: IN OUR VIEW, APPLYING THE TESTS LAID DOWN BY THIS COURT IN SESA GOA'S CASE (SUPRA) AND APPLYING IT TO THE ACTIVITIES UNDERTAKEN BY THE RESPONDENTS HEREIN, REPRODUCE D HEREIN - ABOVE), IT IS CLEAR THAT THE SAID ACTIVITIES WOULD COME WITHIN THE MEANING OF THE WORD 'PRODUCTION . ONE MORE ASPECT NEEDS TO BE HIGHLIGHTED. BY THE SAID JUDGMENT, THIS COURT AFFIRMED THE DECISION OF THE KARNATAKA HIGH COURT IN THE CASE O F COMMISSIONER OF INCOME TAX VS. MYSORE MINERALS LTD, (2001) 250 ITR 725 (KAR). IN THE CASE OF COMMISSIONER OF INCOME TAX VS. N.C. BUDHARAJA & CO., REPORTED IN 204 ITR 412 (SC), THE QUESTION WHICH AROSE FOR DETERMINATION BEFORE THIS COURT WAS WHE THER CONSTRUCTION OF A DAM TO STORE WATER (RESERVOIR) CAN BE CHARACTERISED AS AMOUNTING TO MANUFACTURING OR PRODUCING AN ARTICLE. IT WAS HELD THAT THE WORD 'MANUFACTURE AND THE WORD 'PRODUCTION HAVE RECEIVED EXTENSIVE JUDICIAL ATTENTION BOTH UNDER THE IN COME TAX AS WELL AS UNDER THE CENTRAL EXCISE AND THE SALES TAX LAWS. THE TEST FOR DETERMINING WHETHER MANUFACTURE CAN BE SAID TO HAVE TAKEN PLACE IS WHETHER THE COMMODITY, WHICH IS SUBJECTED TO A PROCESS CAN NO LONGER BE REGARDED AS THE ORIGINAL COMMODIT Y BUT IS RECOGNISED IN TRADE AS A NEW AND DISTINCT COMMODITY. THE WORD 'PRODUCTION , WHEN USED IN JUXTAPOSITION WITH THE WORD 'MANUFACTURE , TAKES IN BRINGING INTO EXISTENCE NEW GOODS BY A PROCESS WHICH MAY OR MAY NOT AMOUNT TO MANUFACTURE. THE WORD 'PRODU CTION TAKES IN ALL THE BYPRODUCTS, INTERMEDIATE PRODUCTS AND RESIDUAL PRODUCTS WHICH EMERGE IN THE COURSE OF MANUFACTURE OF GOODS. APPLYING THE ABOVE TESTS LAID DOWN BY THIS COURT IN BUDHARAJA'S CASE (SUPRA) TO THE FACTS OF THE PRESENT CASES, WE AR E OF THE VIEW THAT BLOCKS CONVERTED INTO POLISHED SLABS AND TILES AFTER UNDERGOING THE PROCESS INDICATED ABOVE CERTAINLY ITA NO . 860 /BANG/201 8 PAGE 4 OF 4 RESULTS IN EMERGENCE OF A NEW AND DISTINCT COMMODITY. THE ORIGINAL BLOCK DOES NOT REMAIN THE MARBLE BLOCK, IT BECOMES A SLAB OR TILE. I N THE CIRCUMSTANCES, NOT ONLY THERE IS MANUFACTURE BUT ALSO AN ACTIVITY WHICH IS SOMETHING BEYOND MANUFACTURE AND WHICH BRINGS A NEW PRODUCT INTO EXISTENCE AND, THEREFORE, ON THE FACTS OF THESE CASES, WE ARE OF THE VIEW THAT THE HIGH COURT WAS RIGHT IN COM ING TO THE CONCLUSION THAT THE ACTIVITY UNDERTAKEN BY THE RESPONDENTS - ASSESSEES DID CONSTITUTE MANUFACTURE OR PRODUCTION IN TERMS OF SECTION 80IA OF THE INCOME TAX ACT, 1961. THE ORDER OF THE LD/CIT(A) IS IN CONSONANCE WITH THE SETTLED PROPOSITION OF LAW MADE BY THE HON BLE APEX COURT. ACCORDINGLY, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 0 6 TH JULY 2018. S D/ - S D/ - ( LALI E T KUMAR ) (INTURI RAMA RAO) JUDICIAL MEMB ER ACCOUNTANT MEMBER PLACE : B EN GAL URU D A T E : 06 /0 7 2018 SRINIVASULU, SPS COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A) 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY INCOME - TAX APPELLATE TRIBUNAL BANGALORE