TMI Blog2012 (5) TMI 341X X X X Extracts X X X X X X X X Extracts X X X X ..... 28 OF 2004 & 56 OF 2005 - - - Dated:- 22-2-2012 - M.M. KUMAR AND ALOK SINGH, JJ. Rajesh Katoch for the Appellant. Sandeep Goyal and Rishab Singla for the Respondent. JUDGMENT M.M. Kumar, J. This order shall dispose of ITA Nos. 28 of 2004 and 56 of 2005, filed by the revenue under Section 260A of the Income-tax Act, 1961 (for brevity, 'the Act') against the orders dated 4.3.2003 and 2.4.2004, passed by the Chandigarh Bench 'A' of the Income Tax Appellate Tribunal (for brevity, 'the Tribunal') in respect of Assessment Years 1994-95 and 1995-96 respectively, in the case of the assessee-respondent. It is pertinent to notice that against the order passed by the CIT(A) in respect of Assessment Year 1994-95, the assessee-respondent and revenue-appellant filed ITA No. 980/Chandi/97 and ITA No. 1079/Chandi/97 respectively, which were dismissed by the Tribunal vide common order dated 4.3.2003. Similarly, against the order passed by the CIT(A) in respect of Assessment Year 1995-96, ITA No. 936/Chandi/1998 and ITA No. 897/Chandi/1998 were filed by the assessee-respondent and revenue-appellant respectively. Both the appeals were decided by the Tribunal vide common orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es which are undertaken before bringing in existence a final product known as 'pullover' after purchase of Flat ( pallas ). It was pointed out that the assessee-respondent purchased Flat (Pallas) and thereafter such Flat (Pallas) are subjected to various processes involving Mending, Chainlock, Kachhi lock, Up-down, Milling, Up-down, Pallas steam press, Flatmaster check, Cutting, Kachi Removing, Tailoring, O'clock pakki, Linking, Neck Saphai, Cup sewing, Tarpai, Kaj button, Kachi checking, pakka press, pakki checking, Label Tailoring, Paking and in-store . 4. It was also shown before the CIT(A) that the cost incurred by the supplier on the process of one piece for pullover was about Rs. 20/- approximately which did not include the cost of the raw material and the cost incurred by the assessee-respondent to make the Flat (Palla) a pullover was amounting to Rs. 45/- per pullover. The aforesaid aspect was highlighted to show that substantial processing is done by the assessee-respondent before a Flat (Palla) is converted into finished pullover. It was on the basis of the aforesaid arguments that the CIT(A) in paragraphs 5.2 and 5.3 held as under: "5.2 I have carefully ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the other by the assessee-respondent. The Tribunal, vide order dated 4.3.2003 (A-3), dismissed both the appeals by observing as under: "7. From the facts discussed above, it is obvious that the AO is satisfied about assessee fulfilling all the conditions except mentioned at Sl. No. (iii) above, i.e. an industrial undertaking must manufacture or produce articles or things. From the facts discussed above, it is also obvious that the assessee does not manufacture/produce the woolen pallas used in manufacturing pullovers and blankets. The assessee purchased the same from the market. It is also not a case of the assessee that it got the cloth manufactured under its direct control and supervision. Now, the material question that requires to be considered by this Bench is whether the various activities carried on by the assessee in making pullovers amount to manufacture and producing goods and articles. The expression 'manufacture' used in section has not been defined in the Act. Therefore, the question arises as to what is the meaning of 'manufacture'? This issue was considered by the Hon'ble Supreme Court in the case of Union of India v. Delhi Cloth Genl. Mills Co. Ltd. , AIR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the grey cloth was not being manufactured by the assessee itself. In the case of CIT v. Sovrin Knit Works, supra , the Hon'ble Punjab Haryana High Court has also held that bleaching, dyeing and embroidering of grey cloth constitutes manufacture and hence entitled to development rebate. Thus, the detailed operations carried on by the assessee in the form of mending, chain lock, kachhi lock, up-down, milling, up-down, pallas steam press, flatmaster check, cutting, kachi removing, tailoring, O' lock pakki, linking, neck saphai, cup sewing, tarpai, kaj button, kachhi checking, pakka press, pakki checking, label tailoring, packing and in-store etc. in making the pullovers would amount to 'manufacture' or articles. The assessee has also given working of the case incurred by the assessee on the raw-material and labour cost of Rs. 45/- per piece of pullover. The item being manufactured by the assessee is distinct in character and quality than the item being purchased by the assessee in the form of woolen cloth. Therefore, we are in agreement with the Ld. CIT(A) that the assessee is entitled to deduction u/s 80-I in respect of income derived from manufacture of pullovers. We confirm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re us. In the present case, we are not concerned only with cutting of marble blocks into slabs. In the present case we are also concerned with the activity of polishing and ultimate conversion of blocks into polished slabs and tiles. What we find from the process indicated herein-above is that there are various stages through which the blocks have to go through before they become polished slabs and tiles. In the circumstances, we are of the view that on the facts of the cases in hand, there is certainly an activity which will come in the category of "manufacture" or "production" under Section 80IA of the Income Tax Act. As stated herein- above, the judgment of this Court in Aman Marble Industries Pvt. Ltd. was not required to construe the word "production" in addition to the word "manufacture". One has to examine the scheme of the Act also while deciding the question as to whether the activity constitutes manufacture or production. Therefore, looking to the nature of the activity stepwise, we are of the view that the subject activity certainly constitutes "manufacture or production" in terms of Section 80IA. In this connection, our view is also fortified by the following judgments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l like Mending, Chainlock, Kachhi lock, Up-down, Milling, Up-down, Pallas steam press, Flatmaster check, Cutting, Kachi Removing, Tailoring, O'clock pakki, Linking, Neck Saphai, Cup sewing, Tarpai, Kaj button, Kachi checking, pakka press, pakki checking, Label Tailoring, Paking and in-store. Moreover, the CIT(A) as well as the Tribunal even found that the cost of processing the Flats (pallas) to make it pullover by the assessee- respondent is Rs. 45/- per piece which shows that substantial processing is done by the assessee- respondent before the Flat (palla) is converted into a finished pullover. It was also held by both the appellate authorities that a different marketable product would come into being after the Flats (pallas) are subjected to aforesaid various processes which was not in the case of blankets and mufflers. The processes which are undertaken to make blankets and mufflers were wholly insignificant so as to conclude that a different and distinguished marketable product comes into being. Therefore, we are of the view that the opinion expressed by both the appellate authorities merit acceptance and is hereby approved. 11. It is worthwhile to notice that in para ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
