The ACIT,(OSD)Circle-10,, Ahmedabad v. Subhalachal Print & Pack,, Ahmedabad

ITA 1905/AHD/2010 | 2007-2008
Pronouncement Date: 20-08-2010 | Result: Dismissed

Appeal Details

RSA Number 190520514 RSA 2010
Bench Ahmedabad
Appeal Number ITA 1905/AHD/2010
Duration Of Justice 2 month(s) 17 day(s)
Appellant The ACIT,(OSD)Circle-10,, Ahmedabad
Respondent Subhalachal Print & Pack,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 20-08-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 20-08-2010
Date Of Final Hearing 20-08-2010
Next Hearing Date 20-08-2010
Assessment Year 2007-2008
Appeal Filed On 02-06-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A AHMEDABAD BEFORE SHRI N.S.SAINI ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH JUDICIAL MEMBER ITA NO.1905/AHD/2010 ASSESSMENT YEAR:2007-08 DATE OF HEARING:20.8.10 DRAFTED:20.8.10 ASST. COMMISSIONER OF INCOME-TAX(OSD) CIRCLE-10 AHMEDABAD V/S . M/S. SUBSHLACHAL PRINT & PACK 1 ST FLOOR UPNISHAD COMPLEX NR. SHREYAS RLY CROSSING AHMEDABAD PAN NO.AAKFS8123L (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI R.K.DHANESTA DR RESPONDENT BY:- SHRI BANDISH SOPARKAR AR O R D E R PER BENCH:- THIS APPEAL BY THE REVENUE IS ARISING OUT OF THE O RDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-XVI AHMEDABAD IN APPEAL NO. C IT(A)- XVI/ACIT.CIR.10/165/2009-10 DATED 25-03-2010. THE A SSESSMENT WAS FRAMED BY ACIT (OSD) CIRCLE-10 AHMEDABAD U/S143(3) OF THE IN COME TAX ACT 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORD ER DATED 15-12-2009 FOR ASSESSMENT YEAR 2007-08. 2. THE ONLY ISSUE IN THIS APPEAL OF REVENUE IS AGAI NST THE ORDER OF CIT(A) IN ALLOWING THE DEDUCTION U/S.80IB OF THE ACT. 3. AT THE OUTSET LD. COUNSEL FOR THE ASSESSEE SHRI BANDISH SOPARKAR STATED THAT ASSESSING OFFICER AS WELL AS CIT(A) HAS FOLLOWED TH E FINDINGS OF EARLIER YEAR AND THE CIT(A) HAS CONSIDERED THE ISSUE AS UNDER:- 3. SHRI N.C.AMIN ADVOCATE APPEARED ON 25-3-2010 A ND FILED A COPY OF THE ORDER OF THE TRIBUNAL DATED 16-12-2009 IN THE CASE OF THE APPELLANT FOR AY ITA NO.1905/AHD/2010 A.Y2007-08 ACIT(OSD) CIR-10 ABD V. M/S. SUBHLACHALPRINT P ACK PAGE 2 2000-01 TO 2005-06. IT WAS STATED BY SHRI AMIN THA T THE APPEAL OF THE ASSESSEE HAS BEEN ALLOWED BY THE ITAT WHEREIN THE B ENEFIT OF DEDUCTION U/S.80IB HAS BEEN ALLOWED TO THE APPELLANT IN ALL T HESE YEARS BY HOLDING THAT THE ALLEGED UNIT OF THE ASSESSEE IS MANUFACTURING U NIT AND THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S.80IB(4) OF THE ACT. 4. SINCE THE DISALLOWANCE OF DEDUCTION U/S.809IB WA S MADE BY FOLLOWING EARLIER YEARS ORDER WHICH HAS BEEN NOW ALLOWED BY THE ITAT RESPECTFULLY FOLLOWING THE ORDER OF ITAT DATED 26-12-2009 IN THE CASE OF THE APPELLANT THE APPEAL IS ALLOWED. WE FIND THAT CIT(A) HAS RELIED ON EARLIER YEARS AS NOTED ABOVE AND THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.2128/AHD/2007 425-428 & 1104/AHD/2009 DATED 16-12-2009 ASSESSMENT YEARS 2001-02 TO 2005-06 ON T HE SAME FACTS HAS CONSIDERED THE ISSUE IN PARA-3 TO 8 AS UNDER:- 3. THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN T HE BUSINESS OF MANUFACTURE AND SALE OF SILTING OF PRINTED/LAMINATE D PAPER AND BOARDS. THE AWE HAS SET UP ITS MANUFACTURING UNIT AT SILVASSA WHICH IS A NOTIFIED BACKWARD AREA FOR THE PURPOSE OF DEDUCTION UNDER SE CTION 80IB(4). THE DEDUCTION CLAIMED BY THE ASSESSEE-FIRM UNDER SECTIO N 80IB(4) WAS REJECTED BY THE AO ON THE GROUND THAT THE NEW UNIT HAS BEEN SET UP BY RECONSTITUTING/SPLITTING UP OF EXISTING UNIT; THAT A PORTION OF THE PROCESS IS CARRIED ON BY THE JOB WORKERS; THAT NO MANUFACTURIN G ACTIVITIES HAVE BEEN CARRIED OUT AS SUCH AND THAT THE NUMBER EMPLOYEES A RE LESS THAN TEN. IN FIRST APPEAL EVEN THOUGH THE CIT(A) HAS DISPROVED THE F INDING OF THE ASSESSING AUTHORITY THAT THE NUMBER OF EMPLOYEES ARE LESS THA N TEN HE HAS UPHELD THE DENIAL OF DEDUCTION UNDER SECTION 80IB(4) ON THE RE MAINING GROUNDS. 4. WE CONSIDERED THIS ISSUE. THE ASSESSEE IS MANUFA CTURING SMALL REELS OF MAPLITHO PAPER (STIFFNER) LDPE GRANULES POLYESTER /BOPP FILM WHICH ARE PRINTED AND LAMINATED OF DIFFERENT SIZES AND DIAMEN SIONS. IN THE MANUFACTURING PROCESS EMPLOYED BY THE ASSESSEE THE POLYCOATED/POLYESTER MAPLITHO POLYESTER FILM ETC. GOT CONVERTED INTO WR APPERS USED FOR PACKING OF TOILET SOAPS AND ARE USED AS SINNER PACKING. THE AS SESSEE PURCHASES MAPLITHO PAPER POLY GRANULES POLYESTER FILM ETC A ND DELIVER THESE MATERIALS TO JOB WORKERS WHO CARRY OUT THE PROCESS OF LAMINAT ION WORK. THE LAMINATION WORK IS CARRIED OUT BY THE JOB WORKERS UNDER THE SU PERVISION OF THE QUALITY CONTROL STAFF OF THE ASSESSEE. AFTER COMPLETING THE PROCESS THE JOB WORKERS DISPATCH THE POLY-COATED LAMINATED PAPERS AND SIMIL AR ITEMS FOR PRINTING AT SILVASSA FACTORY. AFTER PRINTING THE ASSESSEE CONV ERTS THESE ROLLS INTO SMALL REELS WITH THE HELP OF SLITTING MACHINE. THE SLITTI NG IS DONE MECHANICALLY AND THE DOCTORING ACTIVITIES DONE MECHANICALLY AND THE DOCTORING ACTIVITIES DONE MANUALLY FOR FIND FINISH. IN THE PROCESS CERTAIN R EELS NOT PROPERLY SLITTED ARE REJECTED AND THE MATERIALS ARE SENT TO PACKING SECT ION FOR PACKING AND LABELING AFTER REWINDING. AFTER PACKING AND LABELING THE RE ELS ARE DISPATCHED TO THE END CUSTOMERS. ITA NO.1905/AHD/2010 A.Y2007-08 ACIT(OSD) CIR-10 ABD V. M/S. SUBHLACHALPRINT P ACK PAGE 3 5. IN FACT THE ASSESSEE HAS COMMENCED ITS COMMERCIA L PRODUCTION W.E.F. 30 TH JUNE 1999. THEREFORE THE ASSESSEE CLAIMED THE DED UCTION UNDER SECTION 80IB(4) FORT THE FIST TIME FOR THE ASSESSMENT YEAR 2000-2001. 6. THE ASSESSEE FIRM HAS BEEN RECOGNIZED AS A MANUF ACTURING UNIT BY THE SALES TAX DEPARTMENT AS WELL AS BY THE CENTRAL EXCI SE DEPARTMENT. THE INDUSTRIES DEPARTMENT ALSO HAS RECOGNIZED THE ASSES SEE AS A SMALL SCALE INDUSTRIAL UNIT ENGAGED IN THE MANUFACTURING ACTIVI TY. IN A RECENT JUDGMENT THE HONBLE SUPREME COURT IN THE CASE OF ITO UDAIPUR VS. M/S. ARIHANT TILES & MARBLES P. LTD. IN CIVIL APPEAL NOS.8037 TO 8044 OF 2009 DELIVERED ON DECEMBER 2 2009 HAS HELD IN SIMILAR CIRCUMSTANCES AS FOLLOWS: .. BEFORE CONCLUDING WE WOULD LIKE TO MAKE ON OBSERVATION. IF THE CONTENTION OF THE DEPARTMENT IS TO BE ACCEPTED NAM ELY THAT THE ACTIVITY UNDERTAKEN BY THE RESPONDENTS HEREIN IS NOT A MANUF ACTURE 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 BEE N RECOGNIZED BY VARIOUS GOVERNMENT AUTHORITIES AS MANUFACTURE. TO S AY THAT THE ACTIVITY WILL NOT AMOUNT TO MANUFACTURE OR PRODUCTI ON UNDER SECTION 80IA WILL HAVE DISASTROUS CONSEQUENCES PARTICULARL Y IN VIEW OF THE FACT THAT THE ASSESSEES IN ALL THE CASES WOULD PLEAD THA T THEY WERE NOT LIABLE TO PAY EXCISE DUTY SALES TAX ETC. BECAUSE T HE ACTIVITY DID NOT CONSTITUTE MANUFACTURE. KEEPING IN MIND THE ABOVE F ACTORS WE ARE OF THE VIEW THAT IN THE PRESENT CASES THE ACTIVITY UN DERTAKEN BY EACH OF THE RESPONDENTS CONSTITUTES MANUFACTURE OR PRODUCTI ON AND THEREFORE THEY WOULD BE ENTITLED TO THE BENEFIT OF SECTION 80 IA OF THE INCOME TAX ACT 1961. 7. WHEN WE CONSIDER THE NARROW APPROACH ADOPTED BY THE LOWER AUTHORITIES IN DECIDING THE ISSUE WHETHER THE ASSESSEE IS CARRYING ON MANUFACTURING ACTIVITY OR NOT IT IS VERY NECESSARY TO BEAR IN MIND THE AB OVE MENTIONED CONCERN EXPRESSED BY THEIR LORDSHIPS OF THE SUPREME COURT. THE ASSESSEE FIRM HAS ESTABLISHED A NEW UNIT TO MANUFACTURE SLITTED PACKI NG REELS NECESSARY FOR THE SAID UNIT. THE ASSESSEE HAS ERECTED PLANT AND MACHI NERY. THE ASSESSEE IS CARRYING ON A NUMBER OF MANUFACTURING OR CONVERSION PROCESSES EITHER DIRECTLY OR THROUGH JOB WORKERS. IT IS NOT NECESSARY THAT TH E ASSESSEE ITSELF SHOULD CARRY OUT ALL THE STAGES OF MANUFACTURING PROCESS. OUTSOURCING OF CERTAIN PROCESSES IS PERMISSIBLE IN LAW AS HELD BY VARIOUS COURTS. THE ARGUMENTS OF THE REVENUE THAT THE ACTIVITIES OF THE ASSESSEE DO NOT AMOUNT TO MANUFACTURING ACTIVITIES AS ASSESSEE IS ONLY SLITTI NG OR CUTTING OF PAPER ROLLS INTO SMALLER REELS. IN FACT THE ASSESSEE IS GETTING THE SHEETS PRINTED/.LAMAINATED UPTO THE REQUIRED MARK AND THER EAFTER GETS INTO SMALL REELS AND RE-PACK IT FOR FINAL DISPATCH. THE ACTIVITY OF SLITTING ITSELF. INVOLVES DIFFERENT PROCESSES BY WHICH THE CHARACTER OF THE MATERIAL IS TRANSFORMED INTO A DIFFERENT NATURE. THE FACT THAT THE ASSESSEE IS OUT SOURCING CERTAIN PROCESSING ACTIVITIES DOES NOT DISQUALIFY THE ASSESSEE TO BE P LACED IN THE STATUS OF A MANUFACTURER. IN CIT VS. ORICON 151 ITR 296 AND CIT VS. PENWALT 196 ITR 813 IT WAS HELD THAT A PROCESSOR OF GOODS NEED NOT HIMSELF CARRY OUT ALL THE ITA NO.1905/AHD/2010 A.Y2007-08 ACIT(OSD) CIR-10 ABD V. M/S. SUBHLACHALPRINT P ACK PAGE 4 PROCESSES RESULTING IN THE END PRODUCT AND HE MAY G ET SOME OF HEM DONE BY A THIRD PARTY. WHEN WE CONSIDERED ALL THESE ACTIVIT IES CARRIED OUT BY THE ASSESSEE IN THE LIGHT OF THE ABOVE OBSERVATIONS OF THE HONBLE SUPREME COURT IN THE CASE OF M/S. ARIHANT TEXTILES PVT. LTD. WE ARE OF THE VIEW THAT THE ACTIVITY CARRIED ON BY THE ELIGIBLE UNIT OF THE ASS ESSEE IS A MANUFACTURING ACTIVITY AND THE ASSESSEE IS ELIGIBLE FOR THE DEDUC TION CONTEMPLATED UNDER SECTION 80IB(4) AS FAR AS THAT RELEVANT INCOME IS C ONCERNED. 8. THEREFORE WE DECIDE THE ISSUE OF EXEMPTION UNDE R SECTION 80IB IN FAVOUR OF THE ASSESSEE AND DIRECT THE AO TO GRANT THE DEDU CTION IN ACCORDANCE WITH THE LAW. AS THE ISSUE IS SQUARELY COVERED IN FAVOUR OF ASSES SEE AND AGAINST THE REVENUE AND IN THE PRESENT CASE FACTS BEING EXACTLY IDENTICAL WE DISMISS THIS ISSUE OF REVENUES APPEAL. 4. IN THE RESULT REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 20/08/2010 SD/- SD/- (N.S.SAINI) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD DATED : 20/08/2010 *DKP COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)-XVI AHMEDABAD 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD