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2016 (10) TMI 99 - GUJARAT HIGH COURT

2016 (10) TMI 99 - GUJARAT HIGH COURT - TM - Revision u/s 263 - whether industrial undertakings of the assessee were eligible for deduction under Sections 80HH and 80I ? - Held that:- For multiple reasons the notice for revision cannot be sustained. As noted, the issue in the past had traveled through various stages and ultimately, before the High Court also the question in case of this assessee came to be settled. Such issue was examined by the High Court concerning earlier assessment year. The .....

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unal's decision on this point. - Tribunal discarded assessee's contention that having been registered as small scale industrial unit, the assessee fulfilled the requirement of being an industrial undertaking. Having done that, we find it somewhat incongruent whether the Tribunal directed the Assessing Officer to examine whether the unit was an industrial undertaking and also to examine whether it was registered. In plain terms, therefore, the second requirement imposed by the Tribunal was no .....

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tself is carrying on manufacturing activity. In this context, the Assessing Officer referred to the materials on record including the decision of the High Court in case of Prabhudas Kishordas Tobacco Products P. Ltd. (2006 (1) TMI 68 - GUJARAT High Court ) in which, under similar circumstances, the Revenue's contention that the assessee did not carry on itself the activity came-up for consideration.It can thus be seen that the decision of the Assessing Officer upon remand by the Tribunal was bas .....

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ustrial unit was equally erroneous. We have already noted that the Tribunal's insistence on such verification itself was contrary to the documents on record and, in any case, it is not even the case of the Revenue that the units were not registered. - Before concluding, we may deal with the Revenue's preliminary objection to the High Court entertaining a writ petition at show cause notice stage. Firstly, the petition was admitted long back. We would not therefore, summarily dismiss the same .....

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:- 26-9-2016 - MR. AKIL KURESHI AND MR. A.J. SHASTRI, JJ. FOR THE PETITONER : MR S N SOPARKAR, SR ADV WITH MR BANDISH SOPARKAR WITH MRS SWATI SOPARKAR, ADVOCATE FOR THE RESPONDENT : MR MANISH BHATT, SR ADV WITH MRS MAUNA M BHATT, ADVOCATE ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. These petitions arise in common background. We may, therefore, record facts from Special Civil Application No. 2987 of 2010. The petitioner is a private trust engaged in manufacture and sale of Bidis. .....

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hort]. For the assessment year 1994-95, the assessee had claimed deduction under section 80HH and 80I of the Act. Such deduction the assessee has been claiming right from the assessment year 1989-90. Year after year the Assessing Officer would disallow such deduction upon which, the assessee would carry the matter in appeal. In some cases, the issue also reached the High Court. All along, the final decisions were in favour of the assessee. When once again therefore, the issue came up for conside .....

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t engaged in the manufacturing activity. The assessee was thus providing tendu leaves and tobacco to the contractors. Sometimes, the contractors would even purchase the tendu leaves from outside and prepare bidis and provide to the assessee. Since no new article came into existence with the help of the assessee's activity, according to the Assessing Officer, assessee's activity would not qualify for deductions. 3. On appeal, the Commissioner allowed the assessee's claim as was being .....

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opinion that this basic conditions were not verified in any of the years earlier either by the Tribunal or by the High Court. The basic objection of the Assessing Officer that the assessee did not satisfy these conditions was required to be verified. The Tribunal noted that the assessee had produced a certificate of being a small scale industry issued by the Department of Industries. The Tribunal referred to Note No.7 of such a certificate which clarified that the certificate would not confer o .....

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llowing observations: 16. In the totality of the facts and circumstances of the case and the fact that the issue relating to the Revenue's objection that the assessee was not an Industrial Undertaking and/or a Small Scale Industrial Unit, we are of the opinion that the issue having not been dealt with by any of the Appellate Authority, we, in the interest of justice, restore the issue back to the file of Assessing Officer for both the assessment years with the directions that the assessee .....

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l undertaking; (ii) Whether it was registered; and, (iii) Whether it satisfied other requirements of the deduction provision. 5. The Assessing Officer undertook the exercise as directed by the Tribunal and issued a notice to the assessee to satisfy him about such requirements. In response to such a notice, the assessee replied under a letter dated 29.12.2008 and raised three contentions: (I) That by virtue of the earlier judgements of the Tribunal and the High Courts, such an inquiry was not per .....

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cer, thereupon, passed an order dated 30.12.2008. In such order, he referred to the directions of the Tribunal for conducting fresh inquiry as also the representation of the assessee in response to his notices dated 07.09.2007 and 24.12.2008 and concluded as under: 4. The Ld. AR has explained and in support of the explanation and has filed above referred High Court orders as well as the order of the Assessing Officer for A.Y. 1999-2000. I have gone through the entire submission and order submitt .....

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assessee itself the order of the Hon. Gujarat Court in the cause of Prabhudas Kishordas Tobacco Products Pvt. Ltd. and I accept the units as industrial undertakings which are small scale industrial undertakings and permanently registered with Dept of Industries, Government of Andhra Pradesh are eligible for deduction u/s. 80 HH and 80I. 6. With regards to the 3rd point raised by the Hon'ble ITAT, it is verified and noted that assessee have fulfilled the other conditions as required under th .....

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assessee fulfilled other conditions required under the law for such deduction. 8. It is this order the Commissioner desires to take in revision for which, he issued the impugned notice. To prima facie believe that the order of assessment was erroneous and prejudicial to the interest of the Revenue, he recorded his following tentative reasons: The Hon'ble ITAT vide Order No. ITA 500/Ahd/1998 at Para 15.1 has questioned the cognizance of this certificate and its admissibility as an evidence/p .....

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Hence deduction u/s. 80HH & 80I are wrongly allowed by the AO. 5. In view of the above facts, it is proposed to set aside the assessment made by the A.O. u/s. 263 of the I.T. Act with the direction to the A.O to adjudicate afresh on the allowability of deduction u/s. 80HHC & 80IA as per the directions of the Hon'ble ITAT on the basis of the above facts and evidence available and after taking into consideration all relevant aspects and examining all other issues as well and to make a .....

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h the Registrar as demanded by the Tribunal. Therefore, deductions under Section 80HH and 80I of the Act, in the opinion of the Commissioner, were wrongly granted. 10. Having heard learned counsel for the parties at considerable length and having perused the materials on record, we find that the following relevant aspects of the matter emerge: (i) In earlier several years concerning the assessee, the deductions were claimed and allowed. In all such cases, the Assessing Officer having disallowed .....

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with the specific directions to the Assessing Officer to verify specific three aspects: (a) Whether the unit was an industrial undertaking; (b) Whether the industrial undertaking is registered with the Registrar; (c) Whether other requirements of law were satisfied. (iii) The assessee did not challenge this order of the Tribunal but complied by participating in the remand proceedings and presented before the Assessing Officer, materials in support of its contention that all three requirements se .....

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registration certificate itself would prove satisfaction of the requirements under the Income Tax law and whether the unit was registered with the Registrar as required by the Tribunal 11.For multiple reasons the notice for revision cannot be sustained. As noted, the issue in the past had travelled through various stages and ultimately, before the High Court also the question in case of this assessee came to be settled. Such issue was examined by the High Court in Tax Appeal No. 597 of 2005 conc .....

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- 90, the Revenue has accepted the Tribunal's decision on this point. 12.The question of industrial undertakings of the assessee being eligible for deduction under Section 80HH and 80I of the Act was thus examined by the Revenue authorities, Tribunal and High Court on more occasions than one. It is true that in the income tax law each assessment year is considered separate. Nevertheless, the concept of consistency is also well recognized. If year after year a certain view has been consistent .....

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an opinion that the question of the assessee being an industrial undertaking not having been decided by any other forum also needs to be decided afresh by the Assessing Officer. Though we are not clear what the Tribunal meant by the assessee being an industrial undertaking or not, we may accept the explanation of Shri Bhatt that the Tribunal referred to the requirement of manufacturing of bidis being carried out by the assessee itself. We may recall, in this context, the Tribunal raised three p .....

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ial condition for deduction in either of the two deduction provisions. If the Tribunal was referring to the registration of the industry as an SSI, whether required or not, the Tribunal in the remand order itself had noted that the same was duly registered but commented that one of the clauses of the registration provided that such certificate would not confer any right on the applicant to be treated as proof of fulfillment of any statutory requirement of condition which may exist in any law for .....

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nt imposed by the Tribunal was not germane. The third condition of the unit satisfying other requirements has been duly recorded by the Assessing Officer in the order of assessment. Even the Commissioner in the impugned notice has not objected to non-fulfillment of this requirement. This leaves us with the first requirement cast by the Tribunal viz. of the unit being an industrial undertaking. We have proceeded on the basis that in the process, the Tribunal desired that the Assessing Officer sho .....

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s and got the same thing done through contract labourers. The stand of the Revenue was presented by the Counsel in following manner: 5. Assailing the aforesaid order of Tribunal, Mr. B.B.Naik the learned standing counsel for the applicant revenue, submitted that both the Commissioner (Appeals) and th Tribunal had failed to take into consideration that the activity carried on by the assessee was of such a nature that it could not be termed to be a manufacturing activity. According to him, the ass .....

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ous decisions of the Apex Court and this High Court. Broadly, the requirement is that the raw material must be in the first instance, subjected to a process of such a nature that it cannot be termed to be the same as the end product after the raw material undergoes the process of manufacture. In other words, the goods purchased as raw material should go in as inputs in the process of manufacture and the result must be manufacture of other goods. The article produced must be regarded by the trade .....

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change, or a series of changes, bring about a result so as to produce a new and distinct article, can it be said that the commodity used as raw material has been consumed in the manufacture or the end product. To put it differently, the final product does not reta in the identity of the raw material after it has undergone the process or processes of manufacture. 15. It can thus be seen that the decision of the Assessing Officer upon remand by the Tribunal was based on materials on record and th .....

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istinction can be discerned. In fact, the counsel for the Revenue in the said case had contended that the assessee did nothing on its own. All that the assessee did was to purchase raw materials, handover the same to the outside parties, who, in fact, rolled the bidis which the assessee marketed. Further, earlier also, this comparison between the case of the assessee and in case of Prabhudas Kishordas Tobacco Products P. Ltd. (supra) had come up for consideration. For the assessment year 1989-90 .....

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