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2015 (12) TMI 1186 - DELHI HIGH COURT

2015 (12) TMI 1186 - DELHI HIGH COURT - TMI - Deduction under Section 80IC - fabrication of steel Held that:- the fabrication of steel as undertaken by the Assessee, which involves several of the processes does fall within the definition of ‘manufacture’ for the purposes of Section 80 IC of the Act

Assessee furnished the requisite documents to demonstrate that it carried on the manufacturing activity at its Agartala unit. The Assessee produced during the assessment proceedings as well .....

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thorities were furnished. The Assessee also produced details of the rent paid to the Tripura Industrial Development Corporation Ltd., the bills of construction of the factory sheds and the details of payment of electricity charged to Tripura State Electricity Corporation Ltd. The appellant has produced the bills purchase of the machinery installed at the premises, comprising drilling machines, welding machines, motors, gas cutting machines.: air compressor, etc. It produced details and bills of .....

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Muralidhar And Rajiv Shakdher, JJ. For the Appellant : Mr. Kamal Sawhney, Senior Standing counsel with Mr. Raghvendra K. Singh, Mr. Shikhar Garg and Mr. Sharad Agarwal, Advocates For the Respondent : Dr. Rakesh Gupta with Ms. Poonam Ahuja and Mr. Rohit Kumar Gupta, Advocates ORDER CM No. 31181/2015 (for exemption) in ITA No. 972/2015 1. Exemption allowed subject to all just exceptions. 2. The application is disposed of. CM No. 31182/2015 (for condonation of delay in re-filing the appeal) in ITA .....

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-07 and 2008-09 respectively. ITA Nos. 490 of 2015 is directed against the impugned order dated 13th February 2015 passed by the ITAT in ITA No. 227/Del/2013 for the AY 2010-11. 6. The common question that is sought to be urged in three appeals concerns the correctness of the order of the ITAT, upholding the order of the Commissioner of Income Tax (Appeals) [ CIT (A) ] holding that the Assessee was eligible to the deduction under Section 80IC of the Act and deleting the disallowance ordered by t .....

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ount for the Agartala Branch for the period 1st April 2005 to 31st March 2006, the balance sheet as on 31st March 2006 and the auditor s report in form Nos. 3CD and 10CCB. The auditor s report certified that the Assessee s units did not manufacture any article or thing specified in the 13th Schedule. The date of commencement of operation of the unit was 12th July 2005. In the Tax Audit report in form No. 3CD the business of the Assessee was described as manufacturing and fabrication of steel str .....

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mpal Prem Chand Limited ('DPCL). The subject of the purchase order was fabrication, supply, shot blasting, painting and erection of steel structures for picking line and HR coil storage building (G-H & H-1 Boys) of our steel project at Agartala. It was further stated in the purchase order as under: With reference to your offer and subsequent discussions with you on the above subject, we are pleased to place the order on you for fabrication, supply, shot blasting, painting and erection of .....

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shall be executed strictly in conformity with the Technical details as given at enclosed detail fabrication drawings to be made available with you. The total fixed price for the scope of work mentioned above shall be ₹ 6.50 crores (Rupees Six Crores and Fifty lakhs only). The above mentioned price are on FOR site basis excluding Excise duty, Education Cess and Sales Tax (Inclusive of Freight and Transit insurance). " 9. Before the AO, the Assessee contended that it had paid the requi .....

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the premises of the Assessee at Agartala. 10. The AO observed that that the tax auditor had not given any description of finished goods as no such article or thing manufactured or produced by the Assessee could be ascertained. The AO referred to the decision of the Supreme Court in Commissioner of Income Tax v. N.C. Budhraja & Co. (1993) 204 ITR 412 (SC) and held that the fabrication work done by the Assessee and erected at the factory site of the contractee cannot be called manufacture. A r .....

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under Section 80IC of the Act. 12. The Assessee then appealed before the CIT (A). By an order dated 27th November 2009 while allowing the appeal of the Assessee, the CIT (A) disagreed with the AO and held that the Assessee was engaged in manufacture of articles and was, therefore, eligible for deduction under Section 80IC of the Act. 13. The Assessee s return for AY 2008-09 was picked up for scrutiny and notice under Section 143 (2) was issued on 6th August 2009. A reference was made in the AO s .....

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survey operation, additional evidences have been gathered which prove that the Assessee was not a manufacturer of certain goods or articles which saleable independently in the open market, but it was mere a contractor for M/s. Dharampal Prem Chand Limited who was establishing a Tobacco factory unit in Agartala. The AO accordingly reached the same conclusion regarding ineligibility of the Assessee to claim deduction under Section 80IC of the Act. 15. Aggrieved by the above order of the AO, the A .....

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wed the order passed for the earlier AY. The CIT (A) noted that the Assessee after procuring the raw material had subjected it to various mechanical processes and transformed into a something else . Accordingly, it was held that the Assessee was entitled to deduction under Section 80IC of the Act. 16. Against the above orders of the CIT (A) for the AYs 2006-07 and 2008-09, the Revenue filed appeals before the ITAT. By the impugned order dated 14th June 2013, the ITAT confirmed the order of the C .....

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n question. As noticed hereinbefore, the Assessee undertook the work of fabrication of steel for use by DPCL. Apart from fabrication, the work involved shot/sand blasting, painting and erection of the steel structures. The detailed fabrication drawings were provided by DPCL. 19. In Commissioner of Income Tax v. Beehive Engineering Co. & Allied Industries (P) Ltd. (1996) 221 ITR 561 (AP), the Assessee was engaged in purchasing MS angles, joints, channels, etc., cutting them into required size .....

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nufacturing of goods, and (ii) that the application of the Explanation would arise only in a case where the company is not mainly an industrial company; in such a case, if the income of that company from manufacture of goods exceeds 51 per cent, it would be treated as industrial company. The decision in N.C. Budharaja (supra) was distinguished since in that case the question was whether the construction of a dam in Orissa would be taken to be manufacturing of an article or thing. The view taken .....

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inition of manufacture for the purposes of Section 80 IC of the Act. The decision in CIT v. Beehieve Engineering Co. (supra) fully supports the case of the Assessee in this regard. 21. The question that next arises is whether during the AYs in question, it could be said that the Assessee was in fact carrying out any manufacturing activity in its units at Agartala? The case of the Revenue is that the CIT (A) and the ITAT failed to take note of the fact that a survey was undertaken on 9th March 20 .....

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corner of the compound. The question raised was whether it was possible to produce/manufacture goods worth ₹ 8 crore in an FY with only three regular employees and few machines. 22. The CIT (A) has, in his order for AY 2008-09, taken note of the explanation offered by the Assessee that in one unit no work was being carried out for several years. As far as the second unit was concerned, the last order was completed sometime in July 2009 and thereafter no work was done. It was pointed out by .....

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in the order dated 30th January 2012 that the Assessee had furnished adequate evidence of fabrication and assembly of the steel structure for the steel project of DPCL at Agartala. 23. The ITAT has agreed with the factual findings of the CIT (A) for AY 2008-09 in which there is an extensive discussion of the survey report. This was followed for AY 2010-11. Therefore, it cannot be said that the ITAT and the CIT (A) failed to take note of the survey report. 24. The Court finds that the Assessee fu .....

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