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The Deputy Commissioner of Income-tax, Circle-1, Udupi Versus Shri Ashok Shetty

Eligibility for deduction u/s 10B - manufacturing activity or not - exporting granite blocks which were extracted from quarries and cut into dimensional blocks using wire-cutting machine - denial of exemption u/s 10B was resorted to by the AO on the premise that the process involved in the business of the assessee was removal of rock from parent rock by using wire cutting machine and thus, according to the AO, this did not amount to manufacture as defined u/s 2 (29BA) -CIT (A) allowed the assess .....

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or article or thing into a new and a distinct object or thing having a different name, character and use. Thus, the dimensional block was a different name with distinct use and character. Thus, the provisions of s. 2 (29BA) (a) of the Act [the ruling of the jurisdictional High court in the case of Puttur Petro Products P Ltd [2013 (12) TMI 251 - KARNATAKA HIGH COURT] and also the Board’s circular No.729 dated 1.11.1995] clearly show that the process involved in the case of the assessee was ‘manu .....

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ON P BOAZ, JJ. For The Revenue : Dr. P.K.Srihari, Addl.CIT For The Assessee : Shri V. Srinivasan, CA ORDER PER SHRI GEORGE GEORGE, K JM: These two appeals instituted, at the instance of the Revenue, are directed against the consolidated order of the CIT (A), Mysore, dated 21.8.2014. The relevant assessment years are 2010-11 and 2011-12. 2. The only grievance of the Revenue, for both the assessment years under dispute, is that the CIT (A) was erred in allowing the assessee s claim of deduction u/ .....

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, initially, claiming reduction u/s 10 A (5) of the Act and, subsequently, claimed deduction for the identical sums u/s 10B of the Act. In the meanwhile, the assessee s premise was subjected to a survey u/s 133A of the Act on 26.06.2012. During the course of survey and also at the time of the assessment proceedings, the AO was of the view that the assessee was not engaged in the activities of manufacture or production of an article or thing as envisaged either in s. 10A or 10B of the Act. It was .....

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e AO had resorted to disallow the assessee s claim of deduction u/s 10B of the Act amounting to ₹ 5,43,27,505/-, primarily on the ground that the assessee was neither engaged in manufacturing nor production of any article or thing and, thus, the assessee had formed by splitting up or reconstruction of a business already in existence and it was formed by the transfer to a new business or machinery or plant previously used for any purpose. Likewise, for the AY 2011-12, the AO had disallowed, .....

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under: 4.14. Though these cases are prior to amendment to insertion of section 2(29BA) w. e. f. 1.4.2009 I am of the view that the process of extraction of rock and converting it into dimensional block is resulting block is resulting in transformation of the object or article or thing (here it is rock) into a new and distinct use and character. Hence, the provisions of s. 2(29BA) (a) read with the decision of the jurisdictional High Court and the Board s Circular No.729 dated 1.11.1995 cited abo .....

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ith Central Excise, the definition of manufacture in foreign trade policy, the fact that the place of manufacturing is bonded by the customs authorities as per the agreement, though or not conclusive, do add strength to the argument of the appellant. Prima facie, I am of the view that the activity of the appellant fits into the definition of s. 2 (29BA) as discussed above. 4.15. The second criteria pointed out by the AO is that the business of the appellant was established by splitting up or the .....

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ion of a business already in existence. As explained by the appellant discussed in this order, the business of M/s. Ashok Exports is on a different model and the business of the appellant is as an EOU. 4.16. The third criteria for disallowance of deduction u/s 10B is that the appellant has not satisfied the third condition that it is not formed by transfer to a new business or machinery or plant previously used for any purpose. From the copies of the ledger accounts, balance sheets and fixed acc .....

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ng the observation that the appellant has not paid Central Excise, it is explained by the appellant that since it is 100% EOU, registered as such, they are not liable for the same. 4.17. For the detailed discussions in this order, I am of the considered view that the appellant has satisfied the condition precedent for deduction u/s 10B and, hence, I direct the AO to allow the same for both the years. 5. Aggrieved, the Revenue has come up before us with the present appeals. During the course of h .....

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not be categorized as manufacture . The learned DR also submitted that the CIT (A) erred in relying upon the decisions of the (i) Hon ble Karnataka High Court in the case of M/s. Puttur Petro Products Pvt. Ltd [40 Taxman 430] and (ii) Hon ble Apex Court in the case of CIT v. Sesa Goa [271 ITR 331 (SC)] as they were not applicable to the facts and the circumstances of the assessee s case. In conclusion, the Ld. DR prayed that the order of the CIT (A) deserves to be set aside on the above points a .....

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(A) and also the case law on which the ld. AR placed reliance. The denial of exemption u/s 10B was resorted to by the AO on the premise that the process involved in the business of the assessee was removal of rock from parent rock by using wire cutting machine and thus, according to the AO, this did not amount to manufacture as defined u/s 2 (29BA) of the Act. Thus, the prime issue now for consideration before us is: Whether the process involved in preparing the dimensional blocks amounts to tr .....

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ruling in the case of Sesa Goa (supra). However, the AO took a contradictory view to that of the assessee on the ground that the facts in the assessee s case were different. After duly analyzing the views of rival parties, the CIT (A) took a stand that in the case of Sesa Goa (supra), the process involved was that of extraction of iron ore, removal of mud etc., which was exported and that in the case of the assessee also there was extraction of blocks which were dressed into dimensional blocks. .....

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onsequently, the assessee is entitled to the benefit of section 32A(1) of the Act…. 7. At this point of time, we refer to the findings of the earlier Bench of this Tribunal in the case of M/s Someshwara Stone Crushing Company v. ITO, W-1, Raichur [ in ITA Nos. 848 to 851/Bang/2010 dated 20.9.2013 had an occasion to consider - Whether the assessee is eligible for claim of deduction u/s 80IA of the Act?. While analyzing the provisions of s. 80IA of the Act, the earlier Bench had averred tha .....

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rs (1980) 46 STC 63, the earlier Bench has recorded its findings as under: 15. (on page 14)……………. According to us, more appropriate and relevant decision is the decision of the Hon ble Supreme Court in the case of Lucky Minmat reported in 245 ITR 830 (SC), wherein the Hon ble Supreme Court was considering the case of mining of lime stone and marble blocks and thereafter cutting the same to the size before being sold in the market and it was held that it is not .....

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