TMI Blog2006 (11) TMI 267X X X X Extracts X X X X X X X X Extracts X X X X ..... cation in support of deduction, the assessee submitted a note on business/manufacturing activities of both of its units, which has been incorporated on pp. 2 and 3 of the assessment order. The AO confronted the assessee with the decision of the Hon'ble Supreme Court in the case of Divisional Dy. CST Anr. vs. Bherhaghat Mineral Industries (2000) 246 ITR 230 (SC) in which it was held that the crushing of dolomite lumps into chips is not a process of manufacture that brings about a new commercial commodity. The assessee distinguished the said decision by making elaborate submissions, which have been incorporated on pp. 3 to 6 of the assessment order. The AO opined that s. 80-I was not relevant in respect of the assessment year in question and on the contrary the case of the assessee could be considered under s. 80-IA. He went on to consider the details furnished by the assessee in support of claim for deduction and finally came to the conclusion that deduction under s. 80-I/80-IA in respect of both the units was not available because in both the units only the form of Wollastonite and Calcite is changed from pieces or granules of 1/4th inch to 3 inches size to powder of different me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing. In the Wolkron Unit after extraction of Calcite from ROM, activities consist of sorting, washing and conveyor belt dressing, grading, beneficiation, blending and micronizing. The learned CIT(A), during the course of first appellate proceedings, called upon the assessee to submit the details of plant and machinery installed in both the units. Such detail was given with the names of machines and the relevance of the working of these machines in the manufacturing process, which is contained in pp. 33 to 35 of the impugned order. The sum and substance of the above is that in the Madri Unit, the assessee manufactured a number of different types of products of Wollastonite group. Before reaching the final product, the Wollastonite extracted from ROM passes through several processes of beneficiation, blending and micronizing, etc. Blending is the process where high grade material is mixed with low grade material such that the overall mix of the material as per the standard specification required for production of final product of the company. Blending is done on the basis of colour, whiteness and brightness of the material. Micronizing is a process required for production of fine pow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y processing and grinding minerals, but was also doing mining as well. The observations contained in paras 13 to 16 of the order in the case of Arihant Tiles Marbles (P) Ltd. are fully applicable to the instant case entitling the assessee to deduction under s. 80-IA/80-IB. Insofar as the decision of the Hon'ble Supreme Court in the case of Divisional Dy. CST Anr. vs. Bherhaghat Mineral Industries relied upon by the Revenue is concerned, we find the same to be distinguishable on facts inasmuch as this judgment was rendered in the context of Sales-tax Act and the term 'manufacture' the subject-matter of consideration in that case, was with reference to s. 2(j) of Madhya Pradesh General Sales-tax Act, 1958 and notification dt. 11th Oct., 1977. On the contrary we find that the Hon'ble Supreme Court in the case of Lucky Minmat (P) Ltd. vs. CIT (2000) 162 CTR (SC) 404 : (2000) 245 ITR 830 (SC) considered the judgments of Hon'ble Rajasthan High Court in the cases of CIT vs. Lucky Mineral (P) Ltd. (1996) 134 CTR (Raj) 541 : (1997) 226 ITR 245 (Raj) and CIT vs. Best Chem Limestone Industries (P) Ltd. (1993) 113 CTR (Raj) 298 and finally drew a line of distinction between the two cases ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... off. The AO did not accept the assessee's claim on the ground that s. 145A of the IT Act did not permit such type of valuation. He further noted that the assessee had valued thousands of items at 5 per cent of the cost irrespective of the year of purchase or condition of the item. He still further observed that the assessee had even valued the items purchased in January and February, 2000 @5 per cent of the cost. An addition of Rs. 68,59,108 was, therefore, made. In the first appeal the learned CIT(A) enhanced the valuation of obsolete stores at 10 per cent by considering the judgment of the Hon'ble Bombay High Court in the case of Alia Laval India Ltd. vs. Dy. CIT (2004) 186 CTR (Bom) 390. Both the sides are in appeal against their respective stands. 7. We have heard both the sides and perused the relevant material on record. The point, which falls for our consideration is to decide the deductibility of obsolete stores along with its valuation. Sec. 145A provides that the inventory shall be valued in accordance with the method of accounting employed by the assessee. The assessee has valued the inventories, such as, nut, bolt, glass fuse, bearing, bushes, lock pin, pipe, screw, c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the stores which were valued by the assessee at Rs. 3.59 lakhs @ 5 per cent, were partly consumed in the subsequent years at Rs. 2.08 lakhs and remaining portion was sold at Rs. 3.46 lakhs. Thus the total value of the stores consumed/sold in the subsequent period comes to Rs. 6.54 lakhs against the value estimated by the assessee at Rs. 3.59 lakhs. The Hon'ble Bombay High Court in the case of Alfa Laval India Ltd. considered a similar issue, viz., valuation of obsolete items made by the assessee at 10 per cent of the cost. The Hon'ble High Court held 10 per cent valuation to be reasonable by considering the sales realization in the subsequent year. Adverting to the facts of the case, we find the valuation at 5 per cent of the total cost is on lower side when the amount of stores consumed/sold in the subsequent years is taken into consideration. In our considered opinion, the learned CIT(A) was fully justified in valuing the stores at 10 per cent of the cost. We, therefore, uphold the impugned order on this aspect. 8. The other effective ground of the assessee's cross-objection with regard to the deduction under s. 80-IB has become academic because of our finding given against gro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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