TMI Blog2018 (4) TMI 982X X X X Extracts X X X X X X X X Extracts X X X X ..... this tribunal. Hence the very basis or foundation on which the ld AO denied the benefit of deduction u/s 10B of the Act stood nullified by his own orders or the order of his higher authority. These facts were not controverted by the revenue before us. The facts for the year under appeal are not different from the earlier years wherein relief was granted to the assessee. Assessee is indeed entitled for deduction u/s 10B of the Act for the Asst Year 2011-12 also and the same has been rightly granted by the ld CITA and accordingly we do not deem it fit to interfere with the order of the ld CITA. Accordingly, the grounds raised by the revenue are dismissed. - I.T.A No. 2031/Kol/2014 - - - Dated:- 17-4-2018 - Shri Aby. T. Varkey, JM And Shri M.Balaganesh, AM For The Appellant : Shri P.K. Srihari, CIT For The Respondent : Shri S.M. Surana, Advocate ORDER Per M.Balaganesh, AM 1. This appeal by the revenue arises out of the order passed by the Learned Commissioner of Income Tax (Appeals) XII, Kolkata (in short the ld CITA) in Appeal No. 311/XII/Cir-41/14-15 dated 08.08.2014 against the order passed by the ACIT, Circle-41, Kolkata [ in short the ld A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncern N.M.Exports located at the same premises. During the course of survey proceedings, it was observed that the business activities of both the concerns i.e. Anmol Textiles and N.M.Exports are being carried on from the same premises with the following composition of partners :- M/s Anmol Textiles Shri Anil Kumar Saroagi 25% Mrs Ritu Saroagi 25% Shri Amit Saroagi 25% Shri Sandeep Saroagi 25% M/s N.M.Exports Shri Anil Kumar Saroagi 25% Shri Bijay Saroagi 25% Shri Amit Saroagi 25% Shri Sandeep Saroagi 25% Thus there are common partners in both the concerns except Shri Bijay Saroagi who is the father of other partners. He observed that M/s N.M.Exports which is engaged in the manufacturing of garments, the other unit of which (M/s Mahadev Fabrics) is engaged in dyeing of fabrics at JL-2, Sankrail Industrial Park, Dhulag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... F.E.P.Z. Authorities to set up an undertaking for manufacture of goods. The same authority had renewed the approval in terms of clause 6.9 of the Foreign Trade Policy Oh satisfying the basic compliances regarding manufacturing and exporting. He also elaborated the production process as was stated in the Project Report submitted to the FEPZ Authorities and their relation with the machineries installed in the factory. He further mentioned that the requirement of machines were related to the nature of the product and since the appellant was in the business of fashioned garments requiring high degree of soft skill, the unit was not machine intensive. I have gone through the submissions of the Ld. AR. It is observed that even the assessment order acknowledges the fact of existence of machines. Now if the machines were identified with the declared and approved production process, I find no reason to accept the point that there was no machine or to disbelieve that the machines were insufficient to carry out the production. With regards to Whether the assessee was only buying raw material from NME or buying the finished goods manufactured by NME, it is submitted that in several ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led manufacturing process, It is seen that this is the most crucial and relevant aspect of entire discussion. While explaining the production process, the Ld.,AR had stated that the appellant had at the first stage needs to develop the design of the ladies T-shirt, approved the same from the overseas customers, selected the fabrics, developed the prototype and ordered its parent unit to supply the stitched and cut fabrics as per the sample. Such inputs would undergo hand embroidery, stone fixing, embossing, neck printing and various stages of finishing process viz. steaming, ironing and folding, buttoning, poly bag filling, labelling, tagging and final packing in the cartons for export. As held above, what was done at NME was an intermediate stage. It was a manufacturing process in itself and who! is done at ANMOL is the final stage and it has to be. seen whether appellant's activity also falls under the legal definition of manufacturing. I have observed tr-ot while appellant had cited a number of authorities in respect of his arguments as to what should be manufacture and how this is complied with by him, AO has declined to accept the logic. Before applying the principles laid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iv) In CIT vs. Sterling Foods (Goa) (1995) 213 ITR 851 (Bom) Hon'ble Bombay High Court held that the three expressions namely processing, 'manufacture and production used in various taxing statutes which are not interchangeable expressions. They are often used in juxtaposition. But they convey different concepts and refer to different . activities. Processing is much wider concept. Every process does not amount to manufacture. It is only when process results into the emergence of a new and different article having distinctive name, character and use that manufacturing can be said to have taken place. Similarly production is wider than manufacture. ( v) In Indian Cine Agencies vs. CIT (2009) 308 ITR 98 (SC) Hon'ble Supreme Court considered the case of an assessee who converted jumborolls of photography films into small flats and rolls in desired sizes. It was held that it amounted to manufacture or production for the purpose of allowances u/s 32AB, 80 HH and 80 I of the Act. ( vi) In CIT vs. Prabhudas Kishordas tobacco Products P. Ltd. (2006) 2821TR 568 (Guj) Hon'ble Gujarat High Court considered the case of a tobacco declerwho was buying tendu leav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey could be manufacturing process by themselves. These intermediate products can have their independent identity and marketability. Accordingly, the cut and stitched items will fall under finished product for the parent on whose basis it can claim deduction u/s 80IB. However, so far as the appellant is concerned the cut stitched fabrics are definitely the desired raw material to manufacture fashioned T-shirt having acceptability in the export market. Therefore, the claim of the appellant that it purchased raw material and manufactured finished product by the relevant process cannot be rejected unless it is established by the AO by cogent evidences that aI/ the activities by appellant were only a smoke screen. Further, it is well known that finished product of one unit can be the raw material of another. Since it was not a case and books of accounts the appellant are accepted then the observation by the AO that the assessee is buying a semi finished goods from its parent. cannot alter the situation and the process undertaken being satisfying the basic test of manufacture i.e. production of commercially new goods, there is no material in record to negate exemption u/s 10B. The proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t would be declined deduction under the Income Tax Act on the ground that the same did not. In this context, in the case of ITO vs. Arihant Tiles and Marbles P. Ltd. [2010] 320 ITR 79 (Se)' the Supreme Court had observed as under:- 23. Before concluding, we would like to make one observation. If the contention of the Department is to be accepted, namely that the activity undertaken by the respondents herein is not a manufacture, then, it would have serious revenue consequences. As stated above, each of the respondents is paying excise duty, some of the respondents are job workers and the activity undertaken. by them has been recognized by various Government Authorities as manufacture. To say that the activity will not amount to manufacture or production under Section 80IA will have disastrous consequences, particularly in view of the fact that the assessees in all the cases would plead that they were not liable to pay excise duty, sales tax etc. because the activity did not constitute manufacture. Keeping in mind the above factors, we are of the view that in the present cases, the activity undertaken by each of the respondents constitutes manufacture or production and, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to produce the desired result. Further no cogent evidence, as a fall-out of survey operation, has been brought on record by the AO about both the vital aspects to determine eligibility of exemption u/s 80B. The references made by the AO in respect of survey about usage of same business premises, change of address: knowledge of workers etc. are little relevance. The documents placed by the AR revealed that aspects like presence of its parent concern in the same line of business or 100% procurement from parent or change of name from NM Exports-EOU to Anmol Textiles were all disclosed in the past assessments. Accordingly, considering all these factors, I am unable to accept AO's contention that through survey only. new facts were gathered which could lead to a conclusion for dis-entitlement of the substantive exemption provided u/s l10B of the Act. 5.2.14 Whether principle of consistency has any significance From the documents submitted by the Ld. AR, it is found that the appellant was under scrutiny assessment from AY 2004-05 to 2009-10 and no questions regarding its eligibility to get exemption u/s 10B of the Act were enquired into. He also placed the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w and in facts in holding that assessee was having sufficient plant machinery at its disposal for carrying out manufacturing activity when as per balance sheet on record, there are sewing machines worth ₹ 1.43 lacs and all the manufacturing activity has been executed by the sister concern M/s. N.M. Exports, as discussed in the order. 3. Ld. CIT(A) erred in law and in facts in holding alleged inspections verifications were made by the Central Excise and Customs Department as regards manufacturing of T-shirts without considering the facts of the case and voluminous evidences on record as discussed in the assessment order. 4. Ld. CIT(A) erred in law and in facts in holding that it is not a case of splitting up of existing business ignoring the detailed facts and evidences mentioned in the assessment order that no undertaking was set up, there was no ownership of goods with the assessee, all the raw materials having being purchased by M/s. N.M. Exports and sister concern was carrying on the business of manufacturing/exporting of T-shirts for more than 20 years, 5. Ld. CIT(A) erred in law and in facts in holding that principles of consistency applies in this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benefit of deduction u/s 10B of the Act was duly granted to the assessee vide orders u/s 143(3) / 147 of the Act dated 10.9.2015 and 28.8.2015 respectively. b) The re-assessment for the Asst Year 2009-10 was completed by the ld AO u/s 144/147 of the Act on 31.7.2014 denying the benefit of deduction u/s 10B of the Act. The ld CITA vide his order in Appeal No. 10/CIT(A)-13/Kol/Cir-44/2014-15 dated 24.6.2016 granted relief to the assessee by accepting the contentions of the assessee and granted deduction u/s 10B of the Act. Against this order of ld CITA, the ld AR stated that no appeal has been preferred by the revenue before this tribunal. Accordingly it was argued that the revenue had accepted the contentions of the assessee that it is engaged in manufacturing activities and thereby eligible for deduction u/s 10B of the Act. c) The re-assessment for the Asst Year 2010-11 was completed by the ld AO wherein the fact of carrying on of manufacturing activity was accepted by the ld AO and benefit of deduction u/s 10B of the Act was duly granted to the assessee vide orders u/s 147 /143(3) of the Act dated 28.8.2015. 6.1. From the aforesaid facts, it could be seen that the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansion of the facilities to the industrial undertaking of the assesseee. It is on this satisfaction that for the Assessment Year 1996-97 also the expenses were allowed. Once, this position is accepted and the clock had started running in favour of the assessee, it had to complete the entire period of 10 years and benefit granted in first two years could not have been denied in the subsequent years as the block period was 10 years starting from the Assessment Year 1995-96 to Assessment Year 2004-05. The High Court, however, disallowed the same following the judgment of this Court in the case of Brook Bond India Ltd (supra). In the said case it was held that the expenditure incurred on public issue for the purpose of expansion of the company is a capital expenditure. However, in spite of the argument raised to the effect that the aforesaid judgment was rendered when Section 35D was not on the statute book and this provision had altered the legal position, the High Court still chose to follow the said judgment. It is here where the High Court went wrong as the instant case is to be decided keeping in view the provisions of Section 35D of the Act. In any case, it warrants repetition th ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
