TMI Blog2019 (11) TMI 603X X X X Extracts X X X X X X X X Extracts X X X X ..... is more than sufficient to sustain the findings of fact recorded by the Assessing Officer and ITAT. It is not possible for us to say that the finding of fact recorded by the two authorities is vitiated by perversity or that the inferences drawn by the two authorities are not legal inferences that could have been drawn in the matter of this nature. In fact, the material on record suggests that prior to the amendment by Finance Act, 2002 in Section 80IB(4), the Appellant had declared the date that the Appellant's industrial undertakings began manufacture was 26th March, 2002. After the amendment of extended date for beginning of manufacture upto 31st March, 2004, the Appellant sought to contend that the manufacture began for the first time at its industrial undertakings only on 1st February, 2003. The ITAT has rightly observed that the Appellant has been shifting the stances. Such shifting of stances clearly amounts to approbation and reprobation. Even if the returns filed by the Appellant or declarations made by the Appellant are to be excluded from consideration, rest of the material on record also does not support the Appellant's contention that the processes unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come Tax Act, contrary to the view taken by our High Court in CIT Vs. Hindustan Antibiotics Ltd , reported in (93 ITR 548) (Bom)? (ii) Whether the Appellate Tribunal is justified in law by holding that Assessment Year 2002-03 is the initial Assessment Year, as contemplated under clause (c) of subsection 14 of Section 80IB of the Income Tax Act ? (iii) Whether the Appellate Tribunal is justified in law by holding that the testing of optical fiber cable purchased from open market and then selling it after testing, in market amount to production of optical fiber cable? 3. The Assessee is a Public Limited Company engaged in the business of manufacturing and trading of optical fiber cable and accessories, insulated wires and power cable and other telecommunication equipment. On 14th November, 2007, the Appellant filed return of income for the Assessment Year (AY) 2007-08 declaring the income of Rs. Nil, after claiming deduction of ₹ 15,98,63,200/- under Section 80IB of the Income Tax Act, 1961 (IT Act). 4. This return was selected for scrutiny and notice under Sections 142(1) and 143(2) of the IT Act came to be issued to the Appellant. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant purchased some material from outside sources solely for the purposes of testing or trial. He submits that merely because such material may have ultimately been sold for some paltry amount after some value additions, there was no scope to conclude that the Appellant's industrial undertakings began manufacturing in the Assessment Year 2002-03. He relies on Commissioner of Income Tax, Poona Vs Hindustan Antibiotics Ltd. 93 ITR 548 (BOM) to submit that the trial production or production for the purpose of testing does not amount to manufacture for the purpose of Section 80IB of the IT Act. He submits that inasmuch as this aspect has not been considered by both the Assessing Officer and the ITAT in its proper legal perspective, the substantial questions of law as framed, are required to be answered in favour of the Appellant and against the Revenue. 9. Mr. Rivankar submits that both the Assessing Officer as well as the ITAT have failed to appreciate that the object of the provisions in Section 80IB was to encourage the establishment of new industrial undertakings in backward areas and in that sense the provisions in Section 80IB are the provisions of beneficial to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aking it clear that the manufacture had commenced in Assessment Year 2002-03. The findings of fact recorded by the Assessing Officer as well as the ITAT is therefore borne out by the ample material referred to by the two authorities and there is absolutely no case is made out to warrant inference in the impugned orders. 12. Ms. Razaq points out that the substantial questions of law urged by the Appellant proceed on the basis that the manufacturing activities and the production of finished goods in Assessment Year 2002-03 was admitted to be on trial basis or for the purpose of testing by the Revenue. She submits that such position was never admitted but on the contrary it was consistent case of the Revenue that the manufacturing began in the Assessment Year 2002-03. Accordingly, she submits that the decisions in Hindustan Antibiotics Ltd., (supra), Himalayan Magnesite Ltd.,(supra) and Emptee Poly-Yarn P. Ltd., (supra) are clearly distinguishable and inapplicable. 13. Ms. Razaq relies on Income Tax Officer, Udaipur Vs Arihant Tiles and Marbles (P) Ltd., 320 ITR 79 (SC) to submit that even the conversion of marble blocks by sawing into slabs and tiles and pol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the evidence on record or that inferences drawn by the two authorities from the evidence on record are so absurd that the same can be stigmatized as perverse. 16. The material on record indicates that the Appellant themselves filed returns and made declarations before the various authorities including the Directorate of Industries, Sales Tax Authority and even the Central Excise Authority, in which they categorically stated that they had commenced manufacture in the Assessment Year 2002-03. Mr. Rivankar himself pointed out that in the Assessment Year 2007-08, there was no definition manufacture in the IT Act. Since the Appellant itself declared that it had commenced the manufacture during the Assessment Year 2002- 03, it was for the Appellant to explain as to how such manufacture was not required to be treated as manufacture for the purpose of provisions in Section 80IB of the IT Act. Merely stating that the position under the various enactments is different and is too vague and the explanation to trickle out from the admissions made by the Appellant themselves before various statutory authorities. It is pertinent to note that on the basis of such declarations and retu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n if the returns filed by the Appellant or declarations made by the Appellant are to be excluded from consideration, rest of the material on record also does not support the Appellant's contention that the processes undertaken during the Assessment Year 2002- 03 were in the nature of testing or trial run is only involvement, there is no element of manufacture. Accordingly, the first substantial question of law is required to be answered against the Appellant and in favour of the Revenue. 22. In Hindustan Antibiotics Ltd., (supra), the factual position was very clear inasmuch as crude penicillin which was produced as a precursor to sterile penicillin which was final saleable product, was not even ultimately sold by the Assessee. In the said case, there was no material that the products were actually sold to any purchasers and it is in this context, it was held that mere trial production or production for the purpose of testing does not amount to any manufacture. Taking into consideration the established factual position in the present case, the decision in the case of Hindustan Antibiotics Ltd. (supra) can be of no assistance to the Appellant. 23. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ablishes that there was manufacture involved and the process undertaken by the Appellant during the Assessment Year 2002-03 was not restricted to mere testing or trial run. The findings of fact in this regard are amply borne out from the material on record and consequently are not vitiated by any perversity or absurdity. This substantial question of law is also therefore required to be answered against the Appellant and in favour of the Revenue. 27. The appeals under Section 260A of the IT Act are entertained and are required to be decided on the basis of substantial questions of law that may be involved in such matters. In the present case, we find that the Appellant basically wished us to reappreciate the evidence on record as if we were exercising some First Appellate jurisdiction. No doubt, even the findings of fact can, be assailed in an appeal under Section 260A of the IT Act but for that the Appellant has to establish that such findings of fact are vitiated by perversity. In the present case, the Appellant has failed to establish that the findings of fact recorded by the Assessing Officer and the ITAT are vitiated by perversity or that they are not backed by any m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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