TMI Blog2005 (7) TMI 543X X X X Extracts X X X X X X X X Extracts X X X X ..... rcumstances of the case, the ld. CIT(A) erred in holding the new machinery has been purchased, installed and commissioned during the accounting period without appreciating the observation made by the Assessing Officer. 4. On the facts and circumstances of the case, the ld. CIT(A) erred in law holding the receipts of Rs. 6,05,000 treating as agricultural income without appreciation of the finding of Assessing Officer treating the same as income from other sources." 2. Though the revenue has taken four grounds appeal but in fact the dispute revolve around two issues namely, grant of deduction under section 80-IA and treating Rs. 6,05,000 as agricultural income. 3. Both these issues have come up for the consideration of the Tribunal in ITA No. 287/Mum./2002 for assessment year 1997-98. While dealing with this issue, the Tribunal has recorded the following finding : "2. The brief facts of the case are that assessee is proprietor of M/s. Reliable Paper Mart, M/s. Kidnap and M/s. Time Industries. M/s. Reliable Paper Mart is doing business of trading in paper, whereas M/s. Kidnap is involved in the business of ready made garments. M/s. Time Industries is situated at Silvasa in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icles or things, the undertaking employs ten or more workers in a manufacturing process carried with the aid of power or employs 20 or more workers in the manufacturing process carried on without the aid of power. Ld. Assessing Officer further found mainly two defects in the claim of the assessee. He doubted the process of the assessee as of manufacture and violation of section 80-IA(2)( v ). According to which the industrial undertaking which manufacture or produce article or thing should employ 10 or more workers in manufacturing process carried with the aid of power or employs 20 or more workers in the manufacturing process carried on without the aid of power. Thus, ld. Assessing Officer invited explanation of the assessee vide following show-cause notice dated 18-8-2000. 1. With regard to the claim of section 80-IA deduction amounting to Rs. 43,99,493.92 in the newly stated M/s. Time Industries, the following discrepancies have been found during the course of assessment proceedings : ( a )Infrastructural profile of M/s. Time Industries is not commensurate to the profitability of the concern. The concern has earned gross profit of 21 per cent approximately and net profi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dertaking has been dismantled or the production work has been stopped. In view of paras ( a ) to ( c ) you are required to show cause why you claim of deduction under section 80-IA should not be disallowed and added back to the total income. In order to explain the manufacturing process the assessee contended that the main raw material was paper board which comes in the rolls, sheets or reams. Papers were cut into desirable sizes as per orders with the help of automatic cutting machine which cut sheets then arranged in stacks. These were known as finished papers. In the process of cutting and stacking the impurity of paper on grain, uneven size and defective papers were removed. These finished papers were then redied to do the graining, embossing, printing and designing. Thereafter with the help of rotogravure embossing, graining machine the necessary design was done in different colours. Embossing was done as per the order or requirement. It was further submitted that in some cases the border printing was also done. After all these processes, the paper so designed, printed and embossed was cut to the different sizes as per customers requirement. According to the assessee, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er in detail as well as the submission of the assessee. After considering the arguments of the assessee ld. First appellate authority found that assessee was involved in the manufacturing activity. He further found that assessee used electric power in the manufacturing activity and also employed 10 workers throughout the year in the manufacturing business of the appellant. 4. Ld. D.R. took us through the order of the Assessing Officer and submitted that assessee do not fulfilled the requirement of sections 80-IA(2)( iii ) and 80-IA(2)( v ). He emphasized on the point that cutting of papers for making of Xerox paper could not be termed as manufacturing activity. Similarly making a designing or embossing can be termed as processing but certainly not as a manufacturing activity. He emphasized on the point that assessee was required to employ 10 or more workers in the manufacturing process. The Sweeper has no contribution in the manufacturing process hence assessee failed to fulfil the requirement of section 80-IA(2)( v ). With regard to the electricity consumption of the assessee ld. D.R. took us through the electricity expenses and submitted that the total electricity expenses are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re. As observed by the Supreme Court in CIT v. N.C. Budharaja Co. [1993] 204 ITR 412, the word production or produce 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. It also takes in all the by-products, intermediate products and residual products which emerge in the course of manufacture of goods. The position that emerges from the above discussion can be summed up thus : The three expressions processing , manufacture and production used in various taxing statutes, are not interchangeable expressions. Though often used in juxtaposition, they convey different concepts and refer to different activities. Processing is a much wider concept. The nature and extent of processing may vary from case to case. Every process does not tantamount to manufacture . It is only when the process results in the emergence of a new and different article having a distinctive name, character or use, that manufacture can be said to have taken place. Similarly, production is wider than manufacture . As a result, every production need not amount to manufacture though every m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertain big size papers into smaller one though used for different purposes but their identity as paper do not lost. Therefore, the assessee cannot draw any benefit from the judgment of Hon ble Supreme Court. 7. The next condition required to be fulfilled by the assessee relates to giving employment to 10 or more workers in the manufacturing process. Admittedly assessee was having only 9 employees. Though he has pleaded that one Sweeper was also employed whose attendance was not marked but a salary of Rs. 250 was debited in the P L Account and claimed as business expenses. For substantiating his claim assessee has relied upon the judgment of Hon ble Allahabad High Court. In that case assessee had claimed deduction under sections 80-IA and 80J. The assessee was running a rice mill and had employed labourers. To qualify the condition assessee had claimed that it had employed workers for carrying the paddy from the trucks, etc., and kept them in the factory. The revenue did not count such workers as employed in the process of manufacturing. However Tribunal upheld the claim of assessee and found that workers engaged in carrying paddy bags from outside to the factory premises are work ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rops, etc. which the assessee failed to submit, therefore, he made an addition of Rs. 3 lakhs and did not accept the claim of assessee. 9. On appeal, ld. CIT(A) without assigning any reason accepted the claim of the assessee. 10. Before us ld. counsel for the assessee submitted that assessee has been showing agricultural income in the past and the revenue has accepted the same. On our asking he has produced the revenue record prepared by the Revenue Authorities of Gujarat Government in the shape of Proforma No. 7/12. These proformas are in Gujarathi and the ld. counsel for the assessee did not file the English translation of this proforma. With little difficulty we have gone through this proforma and found that assessee was having 7 acres 23 gunta of land in survey No. 354 wherein Moong, Moth, Til and Castroll have been sown. Similarly details of certain other land have also been placed on record wherein similar crops have been sown. From this limited evidence it is not ascertainable whether the assessee could have earned a net income of Rs. 3 lakhs because the assessee was not directly involved in agricultural activity. He had undertaken the agricultural operation with the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 80-IA is being disallowed." Ld. CIT(A) has recorded a contradictory finding without pointing out whether any notice was given to Assessing Officer before considering the copies of bill etc. Since in the earlier order Tribunal has held that assessee is not engaged in manufacturing activity and not entitled for deduction under section 80-IA, therefore, it is not necessary to adjudicate to this issue, whether machinery was installed or not. Similarly we have recorded a finding that assessee has violated section 80-IA(2)( v ) in the earlier year. Similar position is available in this assessment year. Keeping in view both these factors assessee is not entitled to deduction under section 80-I. As far as the decision relied upon the assessee is concerned, this was not pointed out to the Tribunal while deciding ITA No. 287/Mum./2002. No doubt this decision is having persuasive value but could not be given weightage over and above the decision rendered by the Tribunal in assessee s own case. Because facts of each case always play important role in applying ratio of law on them. The facts of the assessee and judgment relied upon are not exactly similar. Taking into considerat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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