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2016 (6) TMI 594 - ITAT DELHI

2016 (6) TMI 594 - ITAT DELHI - TMI - Revision u/s 263 - Exemption u/s 80-IC - manufacturing activity or not - buying jumbo rolls and slitting into smaller rolls - Held that:- These rolls are converted into round strips and thereafter printing is done on such round strips. The assessee is duly registered with the Director of Industries. It is registered with the Excise Department and it has been filing its returns in respect of the manufacturing process carried on by it. In these circumstances, .....

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result, assessment order dated 30.12.2010 passed by the AO is restored and grounds of the appeal of the assessee are allowed. - ITA No. 2519/Del/2013 - Dated:- 14-6-2016 - Shri I. C. Sudhir And Shri O. P. Kant For the Assessee : Shri Ved Jain & Ashish Chadha, Adv For the Department : Shri BK Singh, CIT ( DR ) ORDER Per I. C. Sudhir: Judicial Member The revisional order under section 263 of the Income-tax Act, 1961 passed on 25.3.2013 has been impugned by the assessee. 2. The original assessm .....

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se notice. In response thereto the assessee submitted its reply and contended that it is eligible for claiming exemption under Section 80-IC of the Act. The learned CIT, however, was of the view that assessee is engaged only in printing and it cannot be called as manufacturing and processing. Accordingly, he held that the order passed by the Assessing Officer is erroneous in so far as it was prejudicial to the interest of the Revenue. The assessment order passed by the Assessing Officer, accordi .....

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ble in the absence of order of the A.O. being erroneous as well as prejudicial to the interest of the Revenue. 3. On the facts and circumstances of the case, the learned CIT has erred both on facts and in law in ignoring the fact that the issue raised by him in notice under Section 263 was before the A.O. and as such the jurisdiction on this issue under Section 263 cannot be assumed. 4. On the facts and circumstances of the case, the learned CIT has erred both on facts and in law in rejecting th .....

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n of the A.O. by that of the CIT. 6. On the facts and circumstances of the case, the learned CIT has erred both on facts and in law in invoking revisionary power under Section 263 of the Act despite the fact that even after thorough examination, no specific findings have been given on the issue of how the order is erroneous and prejudicial to the interest of Revenue. 7. On the facts and circumstances of the case, the learned CIT has erred both on facts and in law in setting aside the matter to t .....

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r. Attention was invited to the questionnaire dated 5thAugust, 2010 at PB Pg. 38 whereby the Assessing Officer has asked the assessee to explain the nature of the business activities carried on by it. 6. It was further submitted that vide letter dated 3rd December, 2010 at PB Pg. 51 the assessee has explained before the Assessing Officer the eligibility of its claim under Section 80-IC of the Income Tax Act. All the necessary details in support thereof were filed including the details of the pla .....

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ing satisfied about the eligibility of the assessee. It was further contended that the learned CIT was not justified in setting aside the order passed by the Assessing Officer and sitting over the judgment of the Assessing Officer. It was further submitted that in a proceeding under Section 263 the learned CIT has to give a categorical finding and he cannot set aside the order passed by the Assessing Officer where the Assessing Officer has passed the order after carrying out necessary enquiry. 9 .....

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g. 108 which explains the manufacturing process. 10. It was further submitted that case of the appellant is squarely covered by the judgment of the Hon ble Supreme Court in the case of India Cine Agencies v. CIT [2009] 308 ITR 98 (SC). It was further contended that the above judgment has been relied upon by the Hon ble jurisdictional High Court of Delhi in the case of CIT v. Delhi Press PatraPrakashan Ltd. [2013] 355 ITR 14 (Del) where on similar facts it has been held that printing also include .....

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with effect from 6th February, 2007. Attention was also invited to the subsidy granted to the assessee as a manufacturing unit by the Government of Himachal Pradesh. Attention was also invited to the excise returns being filed by the assessee in respect of the manufacturing activities being carried on by it. 11. Further reliance was placed on the judgment of Chennai Bench of CEGAT in the case of Sri Kumar Agencies & Others V. CCE 2000 taxmann.com 849 (CEGAT - Chennai) whereby it has been hel .....

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at various judgments relied upon by the learned CIT are not on the issue and hence not relevant for the present case and learned CIT has wrongly applied these judgments in this case. 14. The learned CIT(DR) supported the order passed by the learned CIT. It was submitted that the learned CIT has examined the details and has passed a reasoned order. The assessee cannot be said to be engaged in the manufacture and hence not eligible for deduction claimed by it. 15. We have considered the above subm .....

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ee in carrying out its manufacturing activities. On going through the process we note that assessee is buying raw material in the form of aluminum foils which are in jumbo rolls. These rolls are being cut into strips of different seizes. Further these strips are converted into round shape. After such conversion these round strips are printed after loading on to the printing machine. The printed aluminium foils are thereafter run through air drying unit and after drying the same, the finished goo .....

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Thus the issue is whether such activity which the assessee is carrying on can be called within the meaning of manufacture of an article or thing. 16. This issue has come up before the Hon ble jurisdictional Delhi High Court in the case of CIT vs. Delhi Press PatraPrakashan Ltd. (Supra). In this case an issue has arisen whether the assessee is eligible to claim exemption under section 80-I of the Income Tax Act. The assessee s two units were engaged in printing. The raw materials used were paper, .....

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etween the raw paper and the resultant product. The purpose and usage of a blank paper is completely different from the use and purpose of a printed magazine or periodical. Once the blank paper undergoes a process of printing, the character of blank paper changes completely and the content of the printed material now becomes the identity of a printed paper. No one can say that blank paper and printed article are one and the same and in our opinion it can hardly be said that printing carried out .....

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uce' is similar to the word "production" and it has been held by the Supreme Court in the case of CIT v. N.C. Budharaja& Co.: (1993) 204 ITR 412 (SC) that while every manufacture can be characterized as production, every production need not amount to manufacture. The quoted passage from the said decision of the Supreme Court is as under: "The word 'production' has a wider connotation than the word 'manufacture'. While every manufacture can be characterized .....

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d, thus, would take in its sweep any article that may be manufactured or produced. The house of lords in the case of Long Hurst v. Gild Ford Godalming& District, Wider Board: [1961] 3 AIIER 545 had held that water in filter beds is an article. The Court in that case was considering the definition of factory which was defined to mean "any premises in which, or within the close or curtilage or precincts of which, persons are employed in manual labour in any process for or incidental to an .....

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or control". 55. The Shorter Oxford English Dictionary defines 'article' to mean "A particular material thing (of a specified class); a commodity; a piece of goods or property". The meaning of the word "thing" is wider and the meanings ascribed to the word "thing" by the shorter Oxford English Dictionary includes "an inanimate material object", "a material substance", "That which one possesses: property, wealth". 56. It is .....

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dicates that Unit Nos.2 & 3 do "manufacture or produce an article or thing". 57. The Supreme Court in the case of Commissioner of Income Tax v. SESA Goa Limited: (2004) 271 ITR 331 (SC) considered the question whether extraction and processing of iron ore amounted to manufacture or not in the context of availability of investment allowance under section 32(A) of the Act in respect of machinery used in the mining activity. In that case, revenue contended that processing of iron ore .....

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urt noted that the meaning of the word production was defined only in the Oxford English Dictionary as "amongst other things that which is produced; a thing that results from any action, process or effort, a product; a product of human activity or effort" and this definition has been accepted by the Supreme Court in an earlier decision in the case of Chrestian Mica Industries Ltd. v. State of Bihar: [1961] 12 STC 150. The Court further held that the definition of the word 'producti .....

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nown to market comes into existence. It is not necessary that an industrial undertaking must manufacture a commercially new product in order to fulfill the condition as specified in Section 80-I(2)(iii) of the Act. Since, in any event production of any article or thing by an industrial undertaking would be sufficient to entitle the industrial undertaking to claim that the condition under Section 80-I(2)(iii) of the Act was fulfilled. Indisputably, printed paper falls within the meaning of the ex .....

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r bound for making it marketable, the word produce occurring in Section 80-I(2)(iii) of the Act would include it within its ambit. 58. The decision of the Supreme Court in the case of N. C. Budharaja& Co. (supra) and Sesa Goa Limited (supra) have been followed by the Supreme Court in the later decision of India Cine Agencies v. Commissioner of Income Tax: (2009) 308 ITR 98. In this case the Supreme Court accepted that the meaning of the word "production" or "produce" was .....

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The condition for claiming exemption under Section 80-IC so far manufacturing or produce any article or thing is concerned is paramateria the same as under Section 80-I which was being examined by the Hon ble Delhi High Court. The Hon ble High Court has categorically held that the word produce has wider meaning than the word manufacture . Similarly the Hon ble High Court has held that the expression article or thing is also extremely wider. It has held that the printed paper which is produced a .....

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