TMI Blog2002 (11) TMI 248X X X X Extracts X X X X X X X X Extracts X X X X ..... le the appellant from claiming deduction under section 80-IA and hence, the disallowance of deduction of Rs. 1,29,86,160 under section 80-IA of the Act may be deleted." 3. The assessee carries on the business of manufacturing copper rods, segment section, wires, flat sheets, profiles, earthing plates, DPC, DCC and copper components section, profiles as per the customers drawings and specifications. For the assessment year under appeal the assessee had claimed deduction under section 80-IA amounting to Rs. 1,29,60,659. The Assessing Officer observed that though the assessee had claimed to have carried out its own manufacturing activities, yet, on verification of the manufacturing/profit loss account for the year of account it was seen that the assessee had paid labour charges of Rs. 27,34,771 to various parties outside Daman, The Assessing Officer further pointed out that the assessee had debited only Rs. 3,63,706 as factory wages and Rs. 3,61,454 as electricity charges to the manufacturing account as against labour charges of Rs. 27,34,771 paid to outside parties. The assessee has explained that it is having a cold rolling mill in which manufacturing of copper rods, segment sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bf Pollution Control Committee, Daman, Excise Registration Certificate, SSI Registration Certificate, Daman Sales Tax Central Sales Tax Registration Certificates, Factory license issued by Chief Inspector of Factories, Daman, Power Sanction Letter, Certificates of the Bombay Metal Exchange Ltd. etc. The assessee also relied upon the judgment of Bombay High Court in the case of CIT v. Penalty India Ltd. [1992] 196 ITR 813 wherein it was held that cutting machinery manufactured by somebody else under assessee's direct supervision and control entitles the assessee to the deduction under section 80-I as the assessee can be said to be engaged in the manufacture of sugar and tea machinery. The assessee had also relied upon the decision of Ahmedabad Bench in the case of Rashron Heavy Engg. (P.) Ltd. v. ITO [1992] 43 ITD 355 (SMC) wherein the Learned Members have discussed the Board's Circular No. 347 dated 7-2-1982 which expressly lays down that for claiming deduction under section 80-I it is not necessary that assessee should carryon the entire activities of manufacture and it is enough if such activities were carried on with the aid of other units under the supervision of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofit loss account at page 11 of the paper book and it was shown that purchases amounting to Rs. 4,98,75,113 debited therein represented raw material used in the assessee's cold rolling mill and amount of Rs. 27,34,771 debited therein under the head 'labour charges paid' was for hot rolling activity which the assessee got done on job work basis from the outside parties. The ld. counsel then adverted our attention to page 44 of the paper book which gives the details of capital investments in land and buildings, plant and machinery, dies, electrical fittings and vehicles upto 31-3-1998, the total capital investment comes to Rs 38,75,350. Thus the case of the assessee is that the assessee had its own business of manufacturing in its own industrial undertaking in Daman and hence the assessee is entitled to deduction under section 80-1A. The ld. counsel then adverted our attention to the manufacturing activity chart available at page 34 of the paper book and explained the activity carried on at each stage. The ld. counsel also adverted our attention to the note of Shri K.P. Patki, Chartered Engineer available at page 49 of the paper book, relating to the manufacturing of copper bus ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon the following decisions- (i) CWT v. K. Lakshmif1983] 142 ITR 6563 (Mad.) (ii) CIT v. V.O. Ramalingam [1995] 216 ITR 566 (Mad.), (iii) CIT v. A.N. Natarajan [1998] 234 ITR 363 (Mad.) (iv) Textile Machinery Corpn. Ltd. v. CIT [1977] 107 ITR 195 (SC) (v) CIT v. Orient Paper Mills Ltd. [1989] 176 ITR 110 (SC). With regard to the decisions relied upon by the ld. counsel of the assessee, the ld. DR submitted that the assessee could not have effectively supervised the hot rolling activity got done on job work basis as the job work was done by more than 10 concerns. The ld. DR again emphasized that deduction under section 80-IA is intended to be given in a specified area for generation of employment. Hence according to the ld. DR, the factories of the concerns doing hot rolling activities should have been located in the backward area (i.e., Daman) and this being not the case in the instant case, deduction under section 80-IA is not admissible to the assessee. 7. In his reply, the ld. counsel of the assessee contended that the judgments relied upon by the ld. DR are either distinguishable in facts or they in fact favour the case of the assessee. In this regard the ld. co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said to be engaged in the manufacturing activities if he is doing a part of the manufacturing activity by himself and, for the rest of it, engages the services of somebody else on a contract other than a contract of purchase. Similarly, it has been held by the Bombay High Court in the case of Neo Pharma (P.) Ltd. that where for the part of the manufacturing activity which is got done by the assessee by outside agencies, the accounts are kept by such agencies of all materials supplied by assessee and consumed in manufacture, risk for the entire manufacturing operation is undertaken by the assessee, products are manufactured at assessee's cost and were its properties, the operation amounts to manufacturing the products by the assessee and the assessee is an industrial company entitled to concessional rate of tax. It is also true that in Penalty India Ltd.'s case, which is relied upon by the ld. counsel of the assessee, reference has been made to K. Lakshmi's case which is relied upon by the ld. DR. After going through the relevant judgments, we are inclined to accept the argument of the ld. counsel of the assessee that even the judgments of Madras High Court assist the case of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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