The ITO,Ward 1, Vapi V. M/s Bhagat Textile engineers,

ITA 986/AHD/2009

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0296 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 10 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 03-01-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 02-04-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AGAINST TWO SEPARATE S PASSED
• Assessee Lawyers: LD CIT AVALSAD DATED; ASSES
• Section: 80IB

Judgement Text

ITA NO 294 & 986/AHD/2009. . ASSESSMENT Y EARS: 2005-06 & 2006- 07 . 1 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD (BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL C HATURVEDI, A.M.) I.T.A. NO. ASSESSMENT YEAR 294/AHD/2009 2005-06 986/AHD/2009 2006-07 INCOME TAX OFFICER, WARD-1, 2 ND FLOOR, SHIVAM COMMERCIAL COMPLEX, NATIONAL HIGHWAY NO.8, NEAR GALAXY HOTEL, VAPI. (APPELLANT) VS. M/S. BHAGAT TEXTILE ENGINEERS, 122/6, GROUND FLOOR, VAGDHARA, DADRA (UT OF D & N)-396191. (RESPONDENT) PAN: AAFFB 8401 R ON BEHALF OF REVENUE :MR.SHELLY JINDAL, CIT(DR) ON BEHALF OF ASSESSEE:MR.S.N. SOPARKAR,SR.ADV. ( )/ ORDER DATE OF HEARING : 3-1-2013 DATE OF PRONOUNCEMENT : 15-2-2013 PER: SHRI ANIL CHATURVEDI, A.M. BOTH THESE APPEALS ARE FILED BY THE REVENUE AGAINST TWO SEPARATE ORDERS PASSED BY LD. CIT (A)-VALSAD DATED 26-11-200 8 AND 30-1-2009 FOR THE ASSESSMENT YEARS 2005-06 AND 2006-07 RESPECTIVE LY. ITA NO 294 & 986/AHD/2009. . ASSESSMENT Y EARS: 2005-06 & 2006- 07 . 2 ITA NO.294/AHD/2009 ASSESSMENT YEAR 2005-06 . 2. THE ASSESSEE IS A PARTNERSHIP FIRM RUNNING AN IN DUSTRIAL UNDERTAKING IN THE NAME AND STYLE M/S. BHAGAT TEXTILE ENGINEER S IN THE BACKWARD AREA OF UNION TERRITORY OF DADRA & NAGAR HAVELI AND IS E NGAGED IN THE MANUFACTURING OF TEXTILE MACHINERIES, PARTS AND ASS EMBLIES LIKE DRAW TEXTURISING MACHINES, CONICAL PRECISION CHEESE WIND ING MACHINES AND AIR DRAW TEXTURISING MACHINE. ASSESSEE FILED ITS RETURN OF INCOME ON 25-10- 2005 DECLARING TOTAL INCOME AT RS. NIL. THE CASE WA S SELECTED FOR SCRUTINY AND THEREAFTER TOTAL INCOME WAS DETERMINED AT RS.3, 65,31,530/- VIDE ASSESSMENT ORDER PASSED U/S.143(3) VIDE ORDER DATED 24-12-2007. WHILE DETERMINING THE AFORESAID INCOME THE A.O. DISALLOWE D THE ASSESSEES CLAIM OF DEDUCTION U/S. 80IB. AGGRIEVED BY THE ORDER OF A .O., ASSESSEE CARRIED THE MATTER BEFORE THE CIT (A). 3. CIT (A) VIDE HIS ORDER DATED 26-11-2008 ALLOWED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF CIT (A) THE RE VENUE IS NOW IN APPEAL BEFORE US. 4. BEFORE US ONLY GROUND RAISED BY THE REVENUE IS W ITH RESPECT TO ALLOWANCE OF DEDUCTION U/S. 80IB OF THE ACT. 5. ON PERUSING THE DETAILS A.O. NOTICED THAT ASSES SEE HAS CLAIMED ITS ENTIRE PROFIT AS DEDUCTION U/S. 80IB. HE NOTED THAT THE ASSESSEE HAD SOLD GOODS WORTH RS. 14.63 CRORES WHICH WAS CLAIMED TO H AVE BEEN MANUFACTURED AT ITS PLANT AND AGAINST WHICH THE ASS ESSEE HAS INCURRED ITA NO 294 & 986/AHD/2009. . ASSESSMENT Y EARS: 2005-06 & 2006- 07 . 3 POWER AND FUEL EXPENSES OF RS.61,064/- AND ELECTRIC ITY EXPENSES OF RS.2,189/- ONLY. HE FURTHER OBSERVED THAT THE MAIN PLANT AND MACHINERIES UTILIZED BY THE ASSESSEE WERE CENTRE LATHE MACHINE HAVING VALUE OF RS.1,54,419/-, GRINDING MACHINE RS.2,04,750/- AND P OLISHING MACHINE RS.3,01,948/-. FURTHER HE ALSO OBSERVED THAT THE MA JOR EXPENSES INCURRED BY THE ASSESSEE WAS ON ACCOUNT OF LABOUR CHARGES PA YMENT WHICH AMOUNTED TO RS. 1,63,48,399/- WHICH ACCORDING TO A. O. PROVED THAT THE WORK WAS DONE OUTSIDE THE ASSESSEES OWN FACTORY. A .O. FURTHER OBSERVED THAT THE VARIOUS MACHINERIES SOLD BY THE ASSESSEE W ERE ASSEMBLED AT THE PROCESSING UNIT OF THE CUSTOMERS AND NOT MANUFACTUR ED BY THE ASSESSEE. A.O. ASKED THE ASSESSEE TO JUSTIFY ITS CLAIM OF DED UCTION. IN RESPONSE TO THE SHOW CAUSE NOTICE ISSUED BY THE A.O., ASSESSEE INTERALIA SUBMITTED COMPLETE MANUFACTURING PROCESS. IT WAS FURTHER SUBM ITTED THAT THE ASSESSEE WAS PAYING EXCISE DUTY ON THE GOODS MANUFA CTURED BY IT. WITH RESPECT TO THE LOWER ELECTRICITY EXPENSES THE ASSES SEE SUBMITTED THAT IT WAS DUE TO THE DEFECTIVE ELECTRICAL METERS INSTALLED BY THE ELECTRICITY DEPARTMENT. AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSES SEE A.O. CONCLUDED THAT WHATEVER PROCESSING IS CLAIMED TO HAVE BEEN DO NE BY THE ASSESSEE WAS IN THE NATURE OF ASSEMBLING AND THE ASSESSEE WA S NOT ENGAGED IN MANUFACTURING ACTIVITY. A.O. FURTHER CONCLUDED THAT ASSEMBLING IS NEITHER MANUFACTURING NOR PRODUCTION. A.O. THUS CONCLUDED T HAT THE MACHINES WHICH THE ASSESSEE HAS SOLD BECOME FINAL AT THE TIM E OF ERECTION AT SITE/FACTORY OF THE CUSTOMERS. HE FURTHER CONCLUDE D THAT UNDER THE BANNER OF TEXTILE MACHINERY THE ASSESSEE WAS DISPATCHING V ARIOUS PARTS MANUFACTURED THROUGH ITS 150 OR MORE VENDORS AND AL L THESE MACHINERY PARTS WERE ASSEMBLED AT THE SITES/FACTORY PREMISES OF THE CUSTOMERS AND ITA NO 294 & 986/AHD/2009. . ASSESSMENT Y EARS: 2005-06 & 2006- 07 . 4 THE INSTALLATION WAS DONE BY THE PERSONS OF CONTRAC TORS. HE THUS CONCLUDED THAT ASSESSEE WAS NOT HAVING THE CAPACITY TO MANUFA CTURE THE ITEMS SOLD BY IT BUT WAS GETTING IT MANUFACTURED FROM VARIOUS VENDORS AND AFTER GETTING ASSEMBLED THROUGH CONTRACTORS AT THE PREMISES OF CU STOMERS AND FURTHER THE ASSEMBLING ACTIVITY WAS ALSO NOT CARRIED OUT BY THE ASSESSEE. HE THUS CONCLUDED THAT THE ASSESSEE IS NOT ELIGIBLE TO CLAI M DEDUCTION U/S. 80IB FOR THE REASON THAT THE ASSESSEE HAS NOT MANUFACTURED A NY PRODUCT SOLD BY IT AS IT WAS NOTHING BUT ASSEMBLING AND FURTHER THE AS SEMBLING HAS ALSO BEEN DONE THROUGH LABOUR JOB GIVEN TO OUTSIDERS. HE ACCO RDINGLY DISALLOWED THE CLAIM OF DEDUCTION U/S. 80IB OF RS.3,65,31,533/- AN D ADDED TO THE TOTAL INCOME. 6. AGGRIEVED BY THE ACTION OF THE A.O. THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT (A) . 7. CIT (A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND REMAND REPORT AND THE REJOINDER THERETO ALLOWED THE CLAIM OF THE ASSESSEE BY HOLDING AS UNDER:- I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE APP ELLANT AND HAVE GONE THROUGH THE REMAND REPORT AND THE REJOIND ER THEREOF. THE A.OS OBJECTIONS ARE IN RESPECT OF THE APPELLANT NO T HAVING A CENTRAL EXCISE REGISTRATION BEFORE THE END OF THE YEAR. THE ASSESSING OFFICERS CONTENTION AND THE COMMENTS OF THE ADDL. CIT IN THEIR REMAND REPORT DATED 13-6-2008 IS THAT THE APPELLANT APPLIED TO CENTRAL EXCISE ON 26-4-2004 AND RECEIVED PERMISSION ONLY ON THAT VERY DATE. THEREFORE, THE APPELLANTS CLAIM OF STAR TING MANUFACTURING ACTIVITIES ON 27-3-2004 COULD NOT BE ACCEPTED. HOWE VER, I FIND THAT THE EXCISE DUTY IS APPLICABLE ON THE SMALL SCALE IN DUSTRY ONLY AFTER ACHIEVING A TURNOVER OF RS.1 CRORE. THE MANUFACTURE R HAS TO OBTAIN ITA NO 294 & 986/AHD/2009. . ASSESSMENT Y EARS: 2005-06 & 2006- 07 . 5 THE LICENSE AFTER ACHIEVING THIS TURNOVER AND THAT IS WHY THE APPELLANT DID NOT OBTAIN THE LICENSE BEFORE 31-3-2004.THE EXC ISE RECORDS PRODUCED BY THE APPELLANT CLEARLY INDICATE THE LEVY OF EXCISE DUTY. IT IS ALSO SEEN THAT AS PER REGISTRATION CERTIFICATE UNDE R THE SALES-TAX ACT AND THE CENTRAL SALES TAX ACT, THE BUSINESS OF THE APPELLANT IS SHOWN AS A MANUFACTURING ACTIVITY. FURTHER, THE A.OS OBJ ECTION THAT THE APPELLANT GOT SSI REGISTRATION ON 21-7-2005 ONLY AN D THEREFORE NO MANUFACTURING ACTIVITY COULD HAVE BEEN UNDERTAKEN B Y THE APPELLANT BEFORE THAT DATE IS ALSO NOT IN ORDER. IT IS SEEN T HAT THE APPELLANT WAS GRANTED A PROVISIONAL SSI REGISTRATION DATED 9-12-2 003 WHICH WAS SUBSEQUENTLY CONVERTED TO A PERMANENT CERTIFICATE A ND SO THE BUSINESS ACTIVITY OF APPELLANT COULD VERY WELL HAVE STARTED PRIOR TO 31- 3-2004. A PERUSAL OF THE REMAND REPORT INDICATES TH AT THE A.O. HAS NOT COMMENTED ON THE SUBMISSIONS OF THE APPELLANT B UT HAS ONLY GIVEN DETAILS OF QUESTIONNAIRE ISSUED FOR A.Y. 2006 -07 AND HAS STATED THAT DETAILS CALLED FOR BY THE ASSESSING OFFICER WE RE NOT FURNISHED. THIS HAS NO RELEVANCE TO THE YEAR UNDER APPEAL. THE REFORE, IT IS SEEN THAT THE A.O. HAS NOT DELIBERATED UPON THE SUBMISSI ONS MADE BY THE APPELLANT. THE APPELLANT HAS ALSO BEEN GRANTED AN E LECTRICAL CONNECTION VIDE LETTER DATED 30-12-2003 WITH A LOAD OF 50 HP. THE APPELLANT IS IN THE BUSINESS OF MANUFACTURE AND SAL E OF TEXTILE MACHINERIES AND TEXTURISING AND WINDING MACHINES WH ICH ARE THE END PRODUCTS OF CONVERSION OF CERTAIN PARTS INTO A NEW MACHINERY. THE PROCESS OF MANUFACTURE HAS NOT BEEN DEFINED IN THE INCOME-TAX ACT BUT VARIOUS JUDICIAL PRONOUNCEMENTS CAN BE RELI ED UPON IN INTERPRETING THE TERM MANUFACTURE. IT HAS BEEN HE LD THAT WHEN THE RAW MATERIAL IS SUBJECTED TO A PROCESS OR PROCESSES OF SUCH A NATURE THAT IT COULD NOT BE TERMED TO BE THE SAME AS END P RODUCT AND THE ARTICLE PRODUCED IS HAVING AN INDEPENDENT AND DIFFE RENT IDENTITY THEN THE RAW MATERIAL HAVING A SEPARATE MARKET FOR SALE, IT WOULD BE A MANUFACTURING ACTIVITY IN RESPECT OF THE FACT WHETH ER AN ASSESSEE CARRIED OUT ITS MANUFACTURING ACTIVITIES ITSELF OR GOT CERTAIN PROCESS DONE FROM OUTSIDE. THIS HAS BEEN HELD IN THE CASE O F PRABHUDAS KISHORDAS BY THE HONBLE GUJARAT HIGH COURT 282 ITR 568. IN THE INSTANT CASE THE ASSESSING OFFICERS OBJECTION IS T HAT MOST OF THE JOB WORK HAS BEEN GOT DONE BY THE APPELLANT FROM THE OU TSIDE PARTIES AND THROUGH 150 VENDORS. HOWEVER, THE FINAL PROCESS HAS BEEN UNDERTAKEN IN THE APPELLANTS FACTORY ITSELF WHICH IS ALSO EVIDENT FROM THE EXCISE DUTY PAYMENT MADE BY THE APPELLANT. AS R EGARDS THE ITA NO 294 & 986/AHD/2009. . ASSESSMENT Y EARS: 2005-06 & 2006- 07 . 6 ASSESSING OFFICERS OBJECTION THAT THE APPELLANT WA S NOT HAVING A FACTORY LICENSE, IT IS NOT MATERIAL TO PROCEEDINGS UNDER THE INCOME-TAX ACT AND THE ONLY CRITERIA FOR AVAILING OF DEDUCTION U/S. 80IB OF THE ACT IS WHETHER A MANUFACTURING ACTIVITY HAS BEEN DONE B Y THE APPELLANT OR NOT. FURTHER, THE LIST OF PLANT AND MACHINERY FILED BY THE APPELLANT AS ALSO THE RAW MATERIAL USED AND THE SALE BILLS IS IN DICATIVE OF THE FACT THAT THE PRODUCT FINALLY SOLD BY THE APPELLANT IS D ISTINCT AND DIFFERENT FROM THE ORIGINAL RAW MATERIAL. THE ASSESSING OFFI CERS OBSERVATION THAT ELECTRICITY CONSUMED DURING THE YEAR WAS ONLY WORTH RS.61,064/- AND THEREFORE MANUFACTURING ACTIVITY COULD NOT HAVE TAKEN PLACE IS ALSO NOT CORRECT SINCE A PART OF THE WORK IS GOT DO NE THROUGH OUTSIDE VENDORS AS PER THE REQUIRED SPECIFICATION OF THE BU YER OF THE MACHINERIES. IT IS ALSO SEEN THAT THE APPELLANTS C LAIM THAT ONCE THE MACHINE BECOMES COMPLETE, IT IS PACKED IN VARIOUS P ARTS AND DISPATCHED TO THE CUSTOMERS AND FINALLY ASSEMBLED T HERE HAS ALSO BEEN MISCONSTRUED BY THE A.O. WHO HAS CONCLUDED THA T THE PERSONS TO WHOM ERECTION AND INSTALLING WORK WAS ENTRUSTED WERE THE CONTRACTORS OF THE APPELLANT WHICH WOULD MEAN THAT THE APPELLANT WAS NOT HAVING THE INSTALLED CAPACITY TO MANUFACTURE TH E ITEMS SOLD BY IT. IT WOULD BE PACKED INTO MANAGEABLE PIECES TO BE INSTAL LED AT THE PREMISES OF THE BUYERS AND FOR THIS INSTALLATION; T HE APPELLANTS CONTRACTOR WOULD BE THE MOST APPROPRIATE PERSONS. T HEREFORE, THIS ACTIVITY LEADS TO THE CONCLUSION THAT NO MANUFACTUR ING ACTIVITY WAS CARRIED OUT BY THE APPELLANT AT ITS OWN PREMISES. T HEREFORE, I AM OF THE CONSIDERED VIEW THAT THE APPELLANTS ACTIVITY I S A MANUFACTURING ACTIVITY AND DEDUCTION U/S. 80IB OF THE ACT HAS TO BE ALLOWED AS PER THE PROVISIONS OF THE ACT. IN THE RESULT, THE APPE AL IS ALLOWED. 8. AGGRIEVED BY THE AFORESAID ORDER OF CIT (A), THE REVENUE IS NOW IN APPEAL BEFORE US. 9. BEFORE US THE LD. D.R. SUBMITTED THAT THOU GH THE ASSESSEE HAS CLAIMED TO HAVE SOLD GOODS WORTH MORE THAN RS.14.63 CRORES, ITS INVESTMENT IN THE PLANT AND MACHINERIES WAS ONLY TO THE EXTENT OF RS.7 ITA NO 294 & 986/AHD/2009. . ASSESSMENT Y EARS: 2005-06 & 2006- 07 . 7 LAKHS. HE FURTHER POINTED OUT THAT THE TOTAL EXPEND ITURE INCURRED ON POWER AND FUEL WAS TO THE EXTENT OF RS. 61,000/-. HE THUS SUBMITTED THAT ON THE BASIS OF THE MACHINERIES WHICH THE ASSESSEE OWNS AN D THE EXPENDITURE INCURRED ON POWER AND FUEL IT CANNOT BE SAID THAT T HE ASSESSEE WAS HAVING CAPACITY TO ASSEMBLE THE MACHINERIES AT ITS PREMISE S. HE FURTHER SUBMITTED OUT OF THE LABOUR CHARGES OF RS.1,63,00,000/- THE P AYMENT OF LABOUR CHARGES TO SISTER CONCERNS WAS TO THE EXTENT OF RS. 86 LAKHS. THE LD. A.R. FURTHER SUBMITTED THAT EVEN THE ASSEMBLING OF MACHI NES AT THE CLIENTS PREMISES IS DONE BY THE CONTRACTOR. HE THUS SUBMITT ED THAT THE ACTIVITY UNDERTAKEN BY THE ASSESSEE CANNOT BE CONSIDERED TO BE AN ACTIVITY ELIGIBLE FOR DEDUCTION U/S. 80IB OF THE ACT AND THEREFORE TH E ASSESSEE WAS NOT ELIGIBLE FOR DEDUCTION FOR THE REASON THAT EVEN THE ASSEMBLING WAS CARRIED OUT THROUGH LABOUR CONTRACTORS. HE FURTHER SUBMITTE D THAT CIT (A) HAS PASSED THE ORDERS WITHOUT CONSIDERING THE DETAILED SUBMISSIONS/FINDINGS OF THE A.O. HE THUS SUPPORTED THE ORDER OF A.O. 10. ON THE OTHER HAND, THE LD. A.R. SUBMITTED THAT AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE THE A.O. HAS HELD THAT ASSESSEE IS ENGAGED IN THE ASSEMBLING ONLY AND NOT MANUFACTURING ACTIVI TY. HE POINTED OUT TO VARIOUS PARAGRAPHS OF THE A.OS ORDER WHEREIN THE A .O. HAS CONCLUDED THAT THE ASSESSEE IS NOT ENGAGED IN THE MANUFACTURING BU T IN ASSEMBLING OF THE GOODS. FOR EXAMPLE HE POINTED OUT TO PARAGRAPH 5.3, PARAGRAPH 7 AND PARAGRAPH 9. THE LD. A. R. FURTHER SUBMITTED THAT A SSESSEE WAS GRANTED PROVISIONAL SMALL SCALE INDUSTRIES REGISTRATION CER TIFICATE ON 9-12-2003 ISSUED BY THE DIRECTORATE OF INDUSTRIES, ADMINISTRA TION OF DADRA & NAGAR ITA NO 294 & 986/AHD/2009. . ASSESSMENT Y EARS: 2005-06 & 2006- 07 . 8 HAVELI. HE FURTHER SUBMITTED THAT THE GOODS MANUFAC TURING BY THE ASSESSEE WAS SUBJECT TO EXCISE DUTY UNDER CHAPTER 84 AND SUB -HEAD 45.. 11. BEFORE US LD. A.R. ALSO POINTED OUT TO THE COMP LETE MANUFACTURING PROCESS UNDERTAKEN BY THE ASSESSEE AND WHICH WAS SU BMITTED BEFORE A.O. HE THUS SUBMITTED THAT EVEN IF THE ASSESSEE IS ASSU MED TO BE ASSEMBLING THE GOODS IT IS STILL ENTITLED TO DEDUCTION U/S. 80 IB AND FOR WHICH HE RELIED ON THE FOLLOWING DECISIONS:- (1) CIT VS. SUNILBHAI S.KAKAD (TAX APPEAL NO.1287 O F 2010) (2) ITO VS. ARIHANT TILES & MARBLES (P) LTD. (2010) 186 TAXMAN 439(SC). (3) CIT VS. CHIRANJEEVI WIND ENERGY LTD. (2011) 243 CTR (MAD.)195. (4) CIT VS. PRABHUDAS KISHORDAS TOBACCO PRODUCTS (P )LTD., 154T AXMAN 404 (GUJ.) HE THUS SUBMITTED THAT IN VIEW OF THE AFORESAID FAC TS CIT (A) HAD UPHELD THE DEDUCTION U/S. 80IB OF THE ACT AND HE THUS SUPPORTE D THE ORDER OF CIT (A) 12. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. ON PERUSAL OF THE ASSESSMENT ORDER PASSED BY THE A.O. WE FIND THAT HE HAS HELD THE ASSESSEE TO BE ENGAGED IN THE ASSEMBLING AND NOT MANUFACTURING. CIT (A) WHILE GRANTING THE DEDUCTION HAS HELD THAT THE GOODS MANUFACTURED BY THE ASSESSEE ARE SUBJECT TO P AYMENT OF EXCISE DUTY. HE HAS FURTHER GIVEN A FINDING THAT AS PER TH E REGISTRATION CERTIFICATE ITA NO 294 & 986/AHD/2009. . ASSESSMENT Y EARS: 2005-06 & 2006- 07 . 9 FOR THE SALES TAX AND CENTRAL SALES TAX ACT THE BUS INESS OF THE IS SHOWN TO BE MANUFACTURING ACTIVITY, THE ASSESSEE HAS BEEN GRANTED PROVISIONAL SSI REGISTRATION PRIOR TO 31 ST MARCH, 2004 THE ASSESSEE HAS BEEN GRANTED ELECTRICAL CONNECTION VIDE LETTER DATED 30-12-2003 WITH LOAD OF 50 HP. HE HAS FURTHER GIVEN A FINDING THAT THOUGH MOST OF THE JOB HAS BEEN GOT DONE BY THE ASSESSEE FROM OUTSIDE PARTIES FINAL PROCESS HAS BEEN UNDERTAKEN AT THE ASSESSEES FACTORY PREMISES AND WHICH IS EVIDE NT FROM THE EXCISE DUTY PAYMENT MADE BY THE ASSESSEE. HE HAS ALSO GIVEN A F INDING AFTER CONSIDERING THE BILLS OF RAW MATERIAL USED AND THE SALES BILLS THAT THE PRODUCT SOLD BY THE ASSESSEE IS DISTINCT AND DIFFER ENT FROM THE ORIGINAL RAW MATERIAL. AFTER CONVERSION OF RAW MATERIAL ASSEMBL ING OF PARTS AND AFTER TESTING THE MACHINERIES THE SAME ARE PACKED IN VARI OUS PARTS AND DISPATCHED TO THE CUSTOMERS WHERE THE ERECTION IS D ONE. THE AFORESAID FACTS COULD NOT BE CONTROVERTED BY REVENUE BY BRING ING ANY CONTRARY MATERIAL ON RECORD. 13. IN THE CASE OF CIT VS. SUNILBHAI KAKAD IN INCOM E TAX APPEAL NO.1287 OF 2010 THE ISSUE BEFORE THE HONBLE GUJARA T HIGH COURT WAS WHETHER THE ASSESSEE WHO WAS IN THE BUSINESS OF ASS EMBLING OF COMPUTERS AND SERVERS AND PARTS PROVIDING SERVICES ETC. WAS E LIGIBLE FOR DEDUCTION U/S. 80IB. THE HONBLE HIGH COURT AFTER CONSIDERING THE DECISION OF APEX COURT IN THE CASE OF ITO VS. ARIHANT TILES AND MARBLES PV T. LTD., REPORTED IN 320 ITR 79 (SC) HELD AS UNDER : - 13. IN THE CASE OF AMAN MARBLE INDUSTRIES (P) LTD. , VS. COLLECTOR OF CENTRAL EXCISE [2003] 157 ELT 393 (SC), THE QUESTIO N THAT AROSE FOR CONSIDERATION WAS WHETHER CUTTING OF MARBLE BLOCKS INTO MARBLE SLABS ITA NO 294 & 986/AHD/2009. . ASSESSMENT Y EARS: 2005-06 & 2006- 07 . 10 AMOUNTED TO MANUFACTURE FOR THE PURPOSES OF CENTRAL EXCISE ACT. AT THE OUTSET, WE MAY POINT OUT THAT I THE PRESENT CAS E, WE ARE NOT ONLY CONCERNED WITH THE WORD MANUFACTURE, BUT WE ARE A LSO CONCERNED WITH THE CONNOTATION OF THE WORD PRODUCTION IN SE CTION 80IA OF THE INCOME TAX ACT, 1961, WHICH AS STATED HEREINABOVE, HAS A WIDER MEANING AS COMPARED TO THE WORD MANUFACTURE. FUR THER, WHEN ONE REFERS TO THE WORD PRODUCTION, IT MEANS MANUFACTU RE PLUS SOMETHING IN ADDITION THERETO. THE WORD PRODUCTION WAS NOT UNDER CONSIDERATION BEFORE THIS COURT IN THE CASE OF AMAN MARBLE INDUST RIES (P) LTD. (SUPRA). BE THAT AS IT MAY, IN THAT CASE, IT WAS HE LD THAT CUTTING OF MARBLE BLOCKS INTO SLABS PER SE DID NOT AMOUNT TO MANUFACTURE. THIS CONCLUSION WAS BASED ON THE OBSERVATION S MADE BY T HE COURT IN THE CASE OF RAJASTHAN ELECTRICITY BOARD (SUPRA).IN OUR VIEW, THE JUDGMENT OF THIS COURT IN AMAN MARBLE INDUSTRIES (P) LTD.S CASE (SUPRA) ALSO HAS NO APPLICATION TO THE FACTS OF THE PRESET CASE. ONE OF THE MOST IMPORTANT REASONS FOR SAYING SO IS THAT IN ALL SUCH CASES, PARTICULARLY UDER THE EXCISE LAW, THE COURT HAS TO GO BY THE FAC TS OF EACH CASE. IN EACH CASE ON E HAS TO EXAMINE THE NATURE OF THE ACT IVITY UNDERTAKEN BY AN ASSESSEE. MERE EXTRACTION OF STORES MAY NOT C ONSTITUTE MANUFACTURE. SIMILARLY, AFTER EXTRACTION, IF MARBLE BLOCKS ARE CUT INTO SLABS PER SE WILL NOT AMOUNT TO THE ACTIVITY OF MAN UFACTURE. 14. IN THE PRESENT CASE, WE HAVE EXTRACTED IN DETAI L THE PROCESS UNDERTAKE BY EACH OF THE RESPONDENTS BEFORE US. IN THE PRESENT CASE, WE ARE NOT CONCERNED ONLY WITH CUTTING OF MARBLE BL OCKS INTO SLABS. IN THE PRESENT CASE, WE ARE ALSO CONCERNED WITH THE AC TIVITY OF POLISHING AND ULTIMATE CONVERSION OF BLOCKS INTO POLISHED SLA BS ADDITION TILES. WHAT WE FIND FROM THE PROCESS INDICATED HEREINABOVE IS THAT THERE ARE VARIOUS STAGES THROUGH WHICH THE BLOCKS HAVE TO GO THROUGH BEFORE THEY BECOME POLISHED SLABS ADDITION TILES. IN THE C IRCUMSTANCES, WE ARE OF THE VIEW THAT O THE FACTS OF THE CASES IN HA ND, THERE IS CERTAINLY AN ACTIVITY WHICH WILL COME IN THE CATEGORY OF MAN UFACTURE OR PRODUCTION UNDER SECTION 80-IA OF THE INCOME TAX ACT. AS STATED HEREINABOVE, THE JUDGMENT OF THIS COURT IN AMAN MAR BLE INDUSTRIES (P) LTD.S CASE (SUPRA) WAS NOT REQUIRED TO CONSTRU E THE WORD PRODUCTION IN ADDITION TO THE WORD MANUFACTURE. ONE HAS TO EXAMINE THE SCHEME OF THE ACT ALSO WHILE DECIDING T HE QUESTION AS TO WHETHER THE ACTIVITY CONSTITUTES MANUFACTURE OR PRO DUCTION. THEREFORE, ITA NO 294 & 986/AHD/2009. . ASSESSMENT Y EARS: 2005-06 & 2006- 07 . 11 LOOKING TO THE NATURE OF THE ACTIVITY STEPWISE, WE ARE OF THE VIEW THAT THE SUBJECT ACTIVITY CERTAINLY CONSTITUTES MANUFAC TURE OR PRODUCTION IN TERMS OF SECTION 80-IA. IN THIS CONNECTION, OUR VIE W IS ALSO FORTIFIED BY THE FOLLOWING JUDGMENTS OF THIS COURT WHICH HAVE BE EN FAIRLY POINTED OUT TO US BY LD. COUNSEL APPEARING FOR THE DEPARTME NT. 14. IN THE CASE CIT VS. CHIRANJEEVI WIND ENERGY LT D., (SUPRA), THE HONBLE HIGH COURT OF MADRAS HAS HELD AS UNDER:- CONCLUSION : DIFFERENT PARTS OF WINDMILL WHEN ASS EMBLED GET TRANSFORMED INTO AN ULTIMATE PRODUCT WHICH IS COMME RCIALLY KNOW AS A WINDMILL WHICH AMOUNTS TO MANUFACTURE OR PRODUCT ION WITHIN THE MEANING OF SEC. 80 IB(2)(III). 15. IN THE CASE OF CIT VS. PRABHUDAS KISHORDAS TOB ACCO PRODUCTS (P) LTD., (2006) 154 TAXMAN 404 (GUJ.) THE HONBLE HIGH COURT HAS HELD AS UNDER:- THE TESTS TO ASCERTAIN WHETHER AN ACTIVITY AMOUNT S TO MANUFACTURE OF PRODUCTION OF AN ARTICLE OR THING HA VE BEEN LAID DOWN AND REITERATED BY VARIOUS DECISIONS OF THE APEX CO URT AND THE HIGH COURTS .BROADLY, THE REQUIREMENT IS THAT THE RAW MA TERIAL MUST BE, IN THE FIRST INSTANCE, SUBJECTED TO A PROCESS OF SUCH A NATURE THAT IT CANNOT BE TERMED TO BE THE SAME AS THE END-PRODUCT AFTER THE RAW MATERIAL UNDERGOES THE PROCESS OF MANUFACTURE. IN O THER WORDS, THE GOODS PURCHASED AS RAW MATERIAL SHOULD GO IN AS INP UTS IN THE PROCESS OF MANUFACTURE AND THE RESULT MUST BE MANUF ACTURE OF OTHER GOODS. THE ARTICLE PRODUCED MUST BE REGARDED BY THE TRADE AS A NEW AND DISTINCT ARTICLE HAVING AN IDENTITY OF ITS OWN, AN INDEPENDENT MARKET AFTER THE COMMODITY IS SUBJECTED TO THE PROC ESS OF MANUFACTURE. THE NATURE AND EXTENT OF THE PROCESS W OULD VARY FROM CASE TO CASE AND IN A GIVEN CASE, THERE MAY BE ONLY ONE STAGE OF PROCESSING, WHILE IN ANOTHER CASE, THERE MAY BE SEV ERAL STAGES OF PROCESSING AND PERHAPS, A DIFFERENT KIND OF PROCESS AT EVERY STAGE. ITA NO 294 & 986/AHD/2009. . ASSESSMENT Y EARS: 2005-06 & 2006- 07 . 12 THAT WITH EVERY PROCESS THE COMMODITY WOULD EXPERIE NCE A CHANGE, BUT ULTIMATELY, IT IS ONLY WHEN THE CHANGE, OR A SE RIES OF CHANGES, BRING ABOUT A RESULT SO AS TO PRODUCE A NEW AND DIS TINCT ARTICLE, CAN IT BE SAID THAT THE COMMODITY USED AS RAW MATERIAL HAS BEEN CONSUMED IN THE MANUFACTURE OF THE END-PRODUCE. TO PUT IT D IFFERENTLY, THE FINAL PRODUCT DOES NOT RETAIN IDENTITY OF RAW MATERIAL AF TER IT HAS UNDERGONE THE PROCESSES OF MANUFACTURE. 16. IN THE CASE OF CIT VS. MAHESHCHANDRA SHARMA (20 09) 178 TAXMAN 22 (P & H) HAS HELD AS UNDER:- HEAD NOTE SECTION 80-IB OF THE INCOME TAX, 1961 DEDUCTIONS PROFITS AND GAINS FROM INDUSTRIAL UNDERTAKINGS OTHER THAN INFRA STRUCTURE DEVELOPMENT UNDERTAKINGS ASSESSMENT YEAR 2001-02 ASSESSEE WAS ENGAGED IN MANUFACTURING OF MOTORCYCLE WHEELS B Y ASSEMBLING RAW MATERIALS/COMPONENTS, VIZ., RIM, TYRE, TUBE, BE ARING, DRUM, SPOKE, NIPPLE AND COLLAR, BY CARRYING OUT INTERMITTENT PRO CESSES WHETHER PROCESS OF ASSEMBLING CARRIED OUT BY ASSESSEE AMOUN TED TO MANUFACTURE OR PRODUCTION OF AN ARTICLE AND, ACCORD INGLY, HE WOULD BE ENTITLED TO DEDUCTION UNDER SECTION 80-IB HELD, Y ES. 17. IN THE CASE OF CIT VS. SOPHISTICATED MARBLES & GRANITE INDUSTRIES (2010) 187 TAXMAN 251 (DELHI) HAS HELD AS UNDER:- HEAD NOTE:- SECTION 80-IB OF THE INCOME TAX ACT, 1961 DEDUCT IONS PROFITS AND GAINS FROM INDUSTRIAL UNDERTAKINGS OTHER THAN I NFRASTRUCTURE DEVELOPMENT UNDERTAKINGS ASSESSEE WAS ENGAGED IN MANUFACTURE AND SALE OF MARBLE STONES FOR THAT PURPOSE, IT AF TER PURCHASING OF BLOCKS OF MARBLE SLABS AND GETTING THEM CUT BY CUTT ING MACHINES FROM OUTSIDE, PUT FULL SIZED FIBRE ON ONE SALE OF SLABS WHICH WAS TECHNICALLY REQUIRED TO GIVE SUPPORT TO SLABS; FILLED HOLES AN D CRACKS IN THOSE SLABS TO MAKE THEM MARKETABLE BY APPLYING CHEMICALS ON HOLES AND ITA NO 294 & 986/AHD/2009. . ASSESSMENT Y EARS: 2005-06 & 2006- 07 . 13 CRACKS; POLISHED SLABS BY DIFFERENT MACHINES FOR BR INGING SHINE O SLABS AND THEREAFTER CUT FINISHED SLABS TO PROPER S IZES AND SHAPES FROM WHICH MARKETABLE SIZE OF SLABS, MOLDED PIECES , EDGED PIECES AND TILES WERE MADE WHETHER ACTIVITIES UNDERTAKEN BY ASSESSEE WOULD FALL WITHIN EXPRESSION MANUFACTURING PROCESS FOR PURPOSE OF DEDUCTION UNDER SECTION 80-IB HELD, YES. 18. IN VIEW OF THE FACTUAL POSITION STATED ABOVE AN D RELYING ON THE VARIOUS DECISIONS OF HONBLE HIGH COURTS CITED ABOVE WE FIN D NO INFIRMITY IN THE ORDER OF CIT (A) AND THUS UPHOLD THE ORDER. THUS T HIS GROUND OF THE REVENUE IS DISMISSED. THUS THE APPEAL OF THE REVENU E IS DISMISSED. ITA NO.986/AHD/2009 A.Y. 2006-07 19. THE LD. D.R. SUBMITTED THAT THE DISPUTE UNDER A PPEAL IS SIMILAR TO THAT OF A.Y. 2005-06 HOWEVER CERTAIN NEW FACTS WERE PLAC ED BY THE A.O. WHILE DENYING DEDUCTION. HE POINTED OUT TO THE NEW FACTS VIZ THAT THE ASSESSEE DID NOT FURNISH THE COPIES OF LORRY RECEIPTS OF TRA NSPORTATION OF THE PARTS SO GOT MANUFACTURED THROUGH LABOUR CONTRACTS OF THE AS SESSEES PREMISES. HE FURTHER, POINTED OUT THAT AT PAGE 11 OF THE ASSESSM ENT ORDER WHEREIN THE A.O. HAD FURNISHED THE DETAILED CHART OF JOB WORK D ONE BY THE ASSESSEE FROM OUTSIDE VENDORS. THE TOTAL AMOUNT PAID WAS TO THE EXTENT OF RS. 2,20,73,985/-. FROM THE CHART HE POINTED OUT THAT E VEN NOMINAL WORK LIKE, GRINDING, PAINTING ETC., OF THE MACHINERY PARTS WAS DONE THROUGH JOB WORK. HE FURTHER POINTED OUT THAT OUT OF THE TOTAL LABOUR CHARGES THE PAYMENT TO SISTER CONCERNS WAS TO THE TUNE OF RS.1,31,97,911/- WHICH COMES TO AROUND 60%. ON THE BASIS OF TEST CHECK DONE BY THE A.O. IT WAS OBSERVED BY HIM THAT THE DELIVERY OF STEEL AND MACHINERY PARTS WAS DONE AT THE PREMISES OF ITA NO 294 & 986/AHD/2009. . ASSESSMENT Y EARS: 2005-06 & 2006- 07 . 14 ITS SISTER CONCERNS. IT WAS THUS SUBMITTED BY LD. D .R. THAT CIT (A) HAS SIMPLY FOLLOWED THE ORDER OF A.Y. 2005-06 WHILE DEC IDING THE APPEAL OF A.Y. 2006-07 AND HAS NOT CONSIDERED THE NEW FACTS BROUGH T BY THE A.O. IN VIEW OF THESE FACTS IT WAS SUBMITTED THAT THE MATTER BE REMANDED BACK TO THE FILE OF CIT (A) FOR PASSING THE SPEAKING ORDER AFTER CON SIDERING THE AFORESAID NEW FACTS BROUGHT BY THE A.O. 20. ON THE OTHER HAND LD. A.R. SUBMITTED THAT THE A DDITIONAL FACTS BROUGHT BY THE A.O. WOULD NOT CHANGE THE CONCLUSION ARRIVED BY THE CIT (A) FOR THE REASON THAT WHILE PASSING THE ORDER FOR A.Y. 2005-0 6 CIT (A) HAD PLACED RELIANCE ON THE DECISION OF GUJARAT HIGH COURT AND VARIOUS OTHER DECISIONS. THESE FACTS WOULD NOT CHANGE THE CONCLUSION ARRIVED BY THE CIT (A). HE THUS SUPPORTED THE ORDER OF CIT (A). 21. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE FACTS OF THE CASE IN THE YEAR UNDER APPEAL ARE IDENTICAL TO THAT OF A.Y. 2005-06 WE ALSO FIND THAT CERTAIN NEW FACTS WERE BROUGHT ON RECORD BY THE ASSESSING OFFICER LIKE ON PRODUCTION OF LORRY RECEIPTS BY ASSESSEE BEFORE A.O. TO PROVE THAT THE GOODS HAVE NOT BEEN MANUFACTURED BY THE ASSESSEE. WE ALSO FIND THAT CIT (A) HAS FOLLOWED THE ORDER OF A.Y. 2005-06 WHILE DECIDING THE APPEAL OF A.Y. 2006-07. WE ARE OF THE VIEW THAT ADDITIONAL FACTS BROUGHT ON RECORD BY A.O. SHOULD HAVE BEEN CONSIDERED BY CIT (A) WHILE PASSING THE ORDER. WE T HEREFORE ARE OF THE VIEW THAT IN THE INTEREST OF JUSTICE, THE MATTER BE REMA NDED BACK TO THE FILE OF CIT (A) FOR CONSIDERING THE ADDITIONAL FACTS BROUGHT BY A.O. AND PASS A SPEAKING ORDER THEREAFTER. THUS THIS GROUND OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSE. ITA NO 294 & 986/AHD/2009. . ASSESSMENT Y EARS: 2005-06 & 2006- 07 . 15 21. IN THE RESULT, APPEAL OF THE REVENUE FOR A.Y. 2 005-06 IS DISMISSED AND APPEAL OF REVENUE FOR A.Y. 2006-07 IS ALLOWED F OR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 15-2 - 2013. SD/- SD/- (G.C.GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD. S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) VALSAD. 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD. 1.DATE OF DICTATION 4 - 1 -2013 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 4 / 2 / 2013 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S 11 -2 -2013. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT - -2013 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S - -2013 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK - -2013. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER