TMI Blog2010 (9) TMI 917X X X X Extracts X X X X X X X X Extracts X X X X ..... acturing or even the activity under-taken by the assessee is an industrial undertaking. The condition required under clause (iii) of sub-section (2) of section 80-I of the Act is not definitely made in this case as the assessee has claimed deduction for the assessment year 1996-97 whereas in terms of clause (iii) the benefit of the notification is available for initial period of ten years next following March 31, 1981 - in favour of the Revenue. - ITA NO 19/05 - - - Dated:- 13-9-2010 - D. V. Shylendra Kumar J. For Appeleants Indra Kumar for E.Sanmathi Indra Kumar, advocates. For Respondents K.m.Basavaraj , Advocate. Judgment: This appeal i is filed under section 260A of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), at the instance of the Revenue questioning the correctness and legality of the order dated August 27, 2004, passed by the Income-tax Appellate Tribunal, Bangalore Bench, in I. T. A. No. 313/Bang/2000 posing the following ques-tions of law for our answer in this appeal : "(i) Whether the activity of the assessee involving manufacture, sale and laying of mosaic tiles in construction of buildings, as well as manufacture and d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h profits and gains of an amount equal to twenty per cent. thereof : Provided that in the case of an assessee, being a company, the pro-visions of this sub-section shall have effect in relation to profits and gains derived from an industrial undertaking or a ship or the business of a hotel, as if for the words 'twenty per cent.', the words 'twenty-five per cent.' had been substituted. (1A) Notwithstanding anything contained in sub-section (1), in relation to any profits and gains derived by an assessee from- (i) an industrial undertaking which begins to manufacture or produce articles or things or to operate its cold storage plant or plants ; or (ii) a ship which is first brought into use ; or (iii) the business of a hotel which starts functioning,on or after the 1st day of April, 1990, but before the 1st day of April, 1991, there shall, in accordance with and subject to the provisions of this section, be allowed in computing the total income of the asses-see, a deduction from such profits and gains of an amount equal to twenty-five per cent. thereof : Provided that in the case of an assessee, being a company, the provisions of this sub-section shall have effect i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (b) such machinery or plant is imported into India from any country outside India ; and (c) no deduction on account of depreciation in respect of such machinery or plant has been allowed or is allowable under the pro-visions of this Act in computing the total income of any person for any period prior to the date of the installation of the machinery or plant by the assessee. Explanation 2.-Where in the case of an industrial undertaking, any machinery or plant or any part thereof previously used for any purpose is transferred to a new business and the total value of the machinery or plant or part so transferred does not exceed twenty per cent. of the total value of the machinery or plant used in the business, then, for the purposes of clause (ii) of this sub-section, the condition specified therein shall be deemed to have been complied with. Explanation 3.-For the purposes of this sub-section, 'small-scale industrial undertaking' shall have the same meaning as in clause (b) of the Explanation below sub-section (8) of section 80HHA. (3) This section applies to any ship, where all the following con-ditions are fulfilled, namely :- (i) it is owned by an Indian company an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reafter in this section referred to as the initial assessment year) and each of the seven assessment years immediately succeeding the initial assessment year : Provided that in the case of an assessee, being a co-operative society, the provisions of this sub-section shall have effect as if for the words 'seven assessment years', the words 'nine assessment years' had been substituted : Provided further that in the case of an assessee carrying on the business of repairs to ocean-going vessels or other powered craft, the provisions of this sub-section shall have effect as if for the words 'seven assessment years', the words 'four assessment years', had been substituted : Provided also that in the case of- (i) an industrial undertaking which begins to manufacture or produce articles or things or to operate its cold storage plant or plants ; or (ii) a ship which is first brought into use ; or (iii) the business of a hotel which starts functioning,on or after the 1st day of April, 1990, but before the 1st day of April, 1991, provisions of this sub-section shall have effect as if for the words 'seven assessment years', the words 'nine assessment years' had been substitut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsideration, if any, for such transfer as recorded in the accounts of the business of the industrial undertaking or the hotel or the operation of the ship or the business of repairs to ocean-going vessels or other powered craft does not correspond to the market value of such goods as on the date of the transfer, then, for the pur-poses of the deduction under this section, the profits and gains of the industrial undertaking or the business of the hotel or the operation of the ship or the business of repairs to ocean-going vessels or other powered craft shall be computed as if the transfer, in either case, had been made at the market value of such goods as on that date : Provided that where, in the opinion of the Assessing Officer, the computation of the profits and gains of the industrial undertaking or the business of the hotel or the operation of the ship or the business of repairs to ocean-going vessels or other powered craft in the manner hereinbefore specified presents exceptional difficulties, the Assessing Officer may compute such profits and gains on such reasonable basis as he may deem fit. Explanation.-In this sub-section, 'market value', in relation to any goods, me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee had a comprehensive contract with its customers by paying lump sum amount for the entire activity of laying and polishing of tiles manufactured by it. 8. The Assessing Officer, though appears to be an officer well versed in such matters having good language and wisdom ability to examine such aspects has summed up his view very aptly in paragraphs 3.1, 3.2 and 3.3 and relying upon the judgment of the Supreme Court in the case of CIT v. N. C. Budharaja and Co. reported in [1993] 204 ITR 412 (SC) concluded in paragraph 3.4 holding that the activity of laying and polishing does not qualify for deduction under section 80-I of the Act, particularly, the profits attributable to the manufacturer or producer of such article. The very opinion of the Assessing Officer as contained in paragraphs 3.1 and 3.2, 3.3 and 3.4 reads as under : "3.1 Simultaneously, the assessee was asked to show cause why the profits derived from the contract receipts of Rs. 1,65,51,346 (Rs. 2,14,33,318 - Rs. 48,81,972) should not be excluded for the reason that profits derived from contract receipts on flooring works cannot be characterised as 'production or manufacture of an article or a thing' sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Budharaja's case allowed the appeal by reversing the view of well considered reasoned finding of the Assessing Officer and held that the assessee was entitled for the benefit of deduction under section 80-I of the Act in respect of the profit attributable to the entire contract value, etc. 11. It was the turn of the Revenue to take up the matter, by way of an appeal to the Appellate Tribunal but without success as the appellate authority without applying its mind, without going into the questions raised by the Revenue and without spelling out any reasons, agreeing with the Appellate Commissioner simply opined that the Appellate Commissioner's order has to be affirmed. In our view, the order passed by the Appellate Tribunal is nothing but a non-speaking order not showing any awareness to the argu-ments advanced on behalf of the Revenue to produce an order without rhyme or reason but by just extracting some portions of the order passed in other cases not relating to the fact and circumstances of this case. It is in such circumstances, the Revenue is yet again before this court under section 260A of the Act. 12.We have heard Sri Sanmathi Indrakumar, learned senior counsel app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee had also undertaken independent contracts for flooring work. It is nothing but laying and polishing the tiles as per the specification of the customers, i.e., better appearance or appealing presentation and charge for the particular service. 15.The Income-tax Officer, in our view, has very rightly and aptly come to the conclusion, that such an activity does not produce either a product or an article or a thing and he is fully justified in placing reliance on the judg-ment of the Supreme Court in Budharaja's case wherein the Supreme Court, while examining a similar question in the context of the provisions of section 80HH of the Act, has opined that any activity in the nature of utilising necessary raw materials for constructing a dam does not result in producing an article or thing for the purpose of claiming deduction, which had been given to the assessee under the provisions of section 80HH of the Act. 16. While it is no doubt true section 80-I of the Act is a different section and the Supreme Court has not either interpreted or examined the statutory provisions of section 80-I of the Act in Budharaja's case. In so far as the understanding of the meaning of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Central Government may, by a notification in the Official Gazette, specify with reference to any particular industrial undertaking. In fact, learned senior counsel appearing for the appellant specifically submits that no such notification has been issued, authorities having not gone into this aspect, there is no need for examining this ques- tion though otherwise, it might have arisen. We also realise the absence of such a notification for the simple reason that the Revenue would agree the activity of flooring would amount to an activity in the nature of producing an article or a thing is the very question with reference to which they are before this court seeking for an answer, though the assessee has never taken out any notification. If such is the factual position, the assessee even otherwise is disentitled to the benefit of section 80-I of the Act. Therefore, this appeal is allowed. The orders of the Tribunal and the Appellate Com- missioner are set aside. The view taken by the Assessing Officer is affirmed and question regarding profits attributable for the service provided by the assessee in laying and polishing mosaic tiles is answered in favour of the Revenue and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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