ACIT, New Delhi v. Sh. Lovesh Jain, New Delhi

ITA 3175/DEL/2010 | 2007-2008
Pronouncement Date: 14-01-2011 | Result: Dismissed

Appeal Details

RSA Number 317520114 RSA 2010
Assessee PAN AADPJ6679D
Bench Delhi
Appeal Number ITA 3175/DEL/2010
Duration Of Justice 6 month(s) 19 day(s)
Appellant ACIT, New Delhi
Respondent Sh. Lovesh Jain, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 14-01-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 14-01-2011
Date Of Final Hearing 12-01-2011
Next Hearing Date 12-01-2011
Assessment Year 2007-2008
Appeal Filed On 25-06-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES E: NEW DELHI BEFORE SHRI I.P. BANSAL JUDICIAL MEMBER AND SHRI A.K. GARODIA ACCOUNTANT MEMBER ITA NO. 3175/DEL/2010 ASSESSMENT YEAR: 2007-08 ACIT VS. SHRI LOVESH JAIN CIRCLE 20(1) C-1/3 MODLE TOWN VIKAS BHAWAN NEW DELHI. NEW DELHI. AADPJ6679D (APPELLANT) (RESPONDENT) & ITA NO. 2837/DEL/2010 ASSESSMENT YEAR: 2007-08 SHRI LOVESH JAIN VS. ACIT C-1/3 MODLE TOWN CIRCLE 20(1) NEW DELHI. VIKAS BHAWAN AADPJ6679D NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI A.K. MONGA SR. DR RESPONDENT BY : SHRI AJ AY VOHRA SH. ROHIT JAIN FCA & MS. JANPRIYA ROOPRAI CA ITA NOS. 3175 & 2837/D/10 2 ORDER PER I.P. BANSAL J.M. THESE ARE CROSS APPEALS AND ARE DIRECTED AGAINST O RDER OF CIT(A) DATED 15 TH APRIL 2010 FOR A.Y. 2007-08. 2. GROUNDS OF APPEAL BY REVENUE : - 1. THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN HO LDING THAT THE ASSESSEES ACTIVITY IS ONE OF A MANUFACTURING OR PRODUCING SUC H ARTICLES OR THINGS SO AS TO QUALIFY FOR DEDUCTION U/S 10A AND THEREBY DELETI NG THE ADDITION OF RS. 89 75 234/- MADE BY THE AO. 2. THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN NOT GIVING ITS FINDINGS REGARDING CONDITIONS NEED TO BE SIMULTANEOUSLY SATI SFIED FOR CLAIM OF EXEMPTION I.E. THERE MUST BE MANUFACTURING THERE M UST BE EXPORT OUT OF THE COUNTRY DESPITE THE FACT THAT THE ASSESSEE IS CLAI MING EXPORT WITHOUT BECOMING OWNER OF SUCH ARTICLES OR THINGS. 3. THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THE FACT THAT THE ASSESSEE IS NOT MAKING ANYTHING OF HIS OWN AND THE TEMPORARY TRANSIT OF GOLD THROUGH INDIA CANNOT BE CLAIMED TO BE EXPORT A S CONTEMPLATED BY THE PROVISION OF SEC. 10A. 4. THE LD. CIT(A) ERRED IN LAW AND ON FACTS ON BOT H IN TERMS OF THE NATURE OF ACTIVITY CARRIED OUT BY THE ASSESSEE AS ALSO IN TE RMS OF THE QUESTION WHETHER THE RETURNING OF THE GOLD ORNAMENTS TO THE FOREIGN CLIENT WHO ALL ALONG RETAINED THE OWNERSHIP OF THE GOLD TANTAMOUN TS TO EXPORT WITHIN THE MEANING OF SEC. 10A OF THE ACT. 5. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER AL L OR ANY OF THE AFORESAID GROUNDS OF APPEAL AND ADD OTHER GROUND OF APPEAL. ITA NOS. 3175 & 2837/D/10 3 GROUNDS OF APPEAL BY ASSESSEE : - 1. THE ORDER OF THE CIT(A) IS BAD IN LAW AND ON F ACTS ON THE ISSUES COVERED IN THESE GROUNDS OF APPEAL. 2. THAT THE CIT(A) ERRED IN SUSTAINING THE VIEW TA KEN BY THE AO IN DISALLOWING RS. 54 29 453/- BEING INTEREST RECEIVED ON FDR(S) FOR EXEMPTION U/S 10A. 3. THAT THE CIT(A) ERRED IN HOLDING THAT THERE WAS NO DIRECT NEXUS BETWEEN EARNING OF THE INTEREST ON FDR(S) AND EXPORT TURNOV ER. 4. THAT THE CIT(A) ERRED IN HOLDING THAT INTEREST ON FDR(S) DOES NOT QUALIFY FOR EXEMPTION U/S 10A. 5. THE APPELLANT CRAVES LEAVE TO ADD ALTER OR DEL ETE ANY GROUND OF APPEAL AT THE TIME OF HEARING. 3. AT THE OUTSET IT WAS POINTED OUT BY LD. AR THAT THE ISSUE RAISED BY REVENUE IN ITS APPEAL IS COVERED IN FAVOUR OF ASSES SEE BY THE ORDER OF COORDINATE BENCH IN THE CASE OF DCIT VS. SHASHIKANT MITTAL 122 TTJ 828. HE POINTED OUT THAT ASSESSEE IN THAT CASE WAS MANUF ACTURING GOLD JEWELLERY BY CONVERTING THE GOLD BARS SUPPLIED TO IT BY ITS F OREIGN CUSTOMERS AND WAS RETURNING THE SAME TO THE FOREIGN CUSTOMERS WAS HEL D TO BE IN THE CATEGORY OF MANUFACTURING AND THUS WAS HELD ENTITLED FOR DE DUCTION U/S 10B. HE POINTED OUT THAT COPY OF SUCH ORDER IS FILED AT PAG ES 120 TO 122 OF THE PAPER BOOK. HE SUBMITTED THAT THE SOLE GROUND UPON WHICH DEDUCTION U/S 10A HAS BEEN DISALLOWED TO THE ASSESSEE IS THAT THE ASSESSE E IS MANUFACTURING GOLD JEWELLERY FROM THE GOLD BARS SUPPLIED BY THE FOREIG N CUSTOMERS AND AO HELD THAT THE ASSESSEE IS NOT INVOLVED IN MANUFACTURING ACTIVITY HENCE NOT ELIGIBLE FOR DEDUCTION US/ 10A. HE THUS SUBMITTED THAT THE FACTS OF THE ITA NOS. 3175 & 2837/D/10 4 ASSESSEES CASE ARE IDENTICAL WITH THE FACTS OF THE CASE OF DCIT VS. SHASHIKANT MITTAL (SUPRA). SIMILARLY HE POINTED OU T THAT THE ISSUE RAISED BY ASSESSEE IN ITS APPEAL IS COVERED AGAINST ASSESSEE BY THE EARLIER ORDER OF THE TRIBUNAL DATED 30 TH APRIL 2010 PASSED IN ITA NO. 4725/DEL/09 REPORTED AS 39 SOT 73. HE SUBMITTED THAT COPY OF THIS ORDER IS ALSO PLACED AT PAGES 123 TO 134 OF THE PAPER BOOK. 4. TO ASCERTAIN THAT WHETHER SUCH CONTENTION OF LD. AR IS CORRECT THE MATTER WAS KEPT BACK AND LD. DR WAS REQUESTED TO GO THROUGH THE ORDERS REFERRED TO BY LD. AR AND THEN TO SUBMIT HIS COMMEN TS. 5. THEREAFTER THESE APPEALS WERE PROCEEDED TO BE HE ARD. LD. DR THOUGH DID NOT OBJECT TO THE SUBMISSION OF THE ASSE SSEE THAT THE FACTS IN THE CASE OF DCIT VS. SHASHIKANT MITTAL (SUPRA) ARE IDEN TICAL TO THE FACTS OF ASSESSEES CASE BUT HE RELIED UPON THE ORDER OF AO AND SUBMITTED THAT AO HAD RIGHTLY HELD THAT ASSESSEE IS NOT ENGAGED IN TH E ACTIVITY OF MANUFACTURING HENCE NOT ELIGIBLE FOR DEDUCTION U/S 10A. THEREFORE HE SUBMITTED THAT THE ORDER OF LD. CIT(A) SHOULD BE SE T ASIDE AND THAT OF AO BE RESTORED AND IN RESPECT OF ASSESSES APPEAL HE SUBMI TTED THAT THE ISSUE IS COVERED AGAINST THE ASSESSEE BY THE EARLIER ORDER O F THE TRIBUNAL. 6. WE HAVE CAREFULLY HEARD BOTH THE PARTIES AND CAR EFULLY GONE THROUGH THE ASSESSMENT ORDER AS WELL AS ORDER OF CIT(A) AND THE ORDERS REFERRED TO ITA NOS. 3175 & 2837/D/10 5 BY LD. AR. EXEMPTION U/S 10A HAS BEEN DENIED TO TH E ASSESSEE ON THE GROUND THAT ASSESSEE IS NOT INVOLVED IN THE MANUFAC TURING ACTIVITY AS IT IS MAKING GOLD ORNAMENTS OUT OF GOLD BARS RECEIVED BY IT FROM FOREIGN CUSTOMERS AND THUS INVOLVED IN A JOB WORK ACTIVITY . SIMILAR ACTIVITY HAS BEEN HELD TO BE MANUFACTURING ACTIVITY BY THE COORD INATE BENCH IN THE CASE OF DCIT VS. SHASHIKANT MITTAL (SUPRA). THE OBSERVAT IONS OF THE TRIBUNAL WHILE HOLDING THAT THE ACTIVITY CARRIED ON BY THE A SSESSEE IN THE CASE OF DCIT VS. SHASHIKANT MITTAL (SUPRA) WAS A MANUFACTU RING ACTIVITY ENTITLED FOR EXEMPTION U/S 10B ARE REPRODUCED BELOW FOR THE SAKE OF CONVENIENCE: - 4. WE HAVE HEARD THE RIVAL SUBMISSIONS. UNDISPUTEDLY WHAT IS NOTICED HERE IS THAT THE ASSESSEE IS BEING SUPPLIED PRIMARY GOLD WHICH IS THE RAW MATERIAL BY ITS FOREIGN CUSTOMERS. THIS PRIMARY GOLD IS CONVERTED INTO GOLD JEWELLERY. PRIMARY GOLD CANN OT BE USED AS JEWELLERY. PRIMARY GOLD CANNOT BE USED AS GARLAND O R AS A NECKLACE OR AS EARRING. AFTER ITS CONVERSION INTO JEWELLERY THE SAME IS USED FOR WEARING AS JEWELLERY. PRIMARY GOLD IS NORMALLY USED AS RAW MATERIAL FOR MAKING GOLD JEWELLERY. PRIMARY GOLD IS A RAW MA TERIAL AND GOLD JEWELLERY IS THE FINISHED PRODUCT. THE USES ARE DIF FERENT. PRIMARY GOLD IS NOT KNOWN UNDER THE COMMON PARLANCE AS GOLD JEWELLERY. IT IS EITHER KNOWN AS GOLD BARS OR GOLD INGOTS. GOLD JEWE LLERY ARE NEVER KNOWN AS GOLD BARS OR GOLD INGOTS BUT ARE KNOWN AS GOLD JEWELLERY ITSELF HAVING DIFFERENT NAMES ACCORDING TO USES. TH US THE TWO PRODUCTS ARE DISTINCT AND SEPARATE. PRIMARY GOLD IS TO BE PUT THROUGH MECHANICAL AND PHYSICAL PROCESS AS ALSO CHEMICAL PR OCESS TO CONVERT THE SAME INTO GOLD JEWELLERY. PRIMARY GOLD IS MELTED BY APPLYING HEAT MIXED WITH COPPER THROUGH CHEMICAL P ROCESS POURED INTO DYES DRAWN INTO WIRES ETC. THROUGH PHYSICAL AND MECHANICAL PROCESS AND THESE DYES AND WIRES ARE SOLDERED/FLATT ENED THROUGH HUMAN LABOUR TO MAKE GOLD ORNAMENTS/ JEWELLERY. THU S CONVERSION OF THE GOLD BARS INTO GOLD JEWELLERY IS NOTHING BUT A MANUFACTURING PROCESS. 5. NOW THE QUESTION IS WHETHER THE RAW MATERIAL SHOUL D BE OWNED BY THE ASSESSEE FOR THE PURPOSE OF CLAIMING THE EXE MPTION UNDER S. ITA NOS. 3175 & 2837/D/10 6 10B. A READING OF THE PROVISIONS OF S. 10B SPECIFIE S THAT THE ASSESSEE SHOULD BE EXPORTING ARTICLES OR THINGS SH OULD BE AN UNDERTAKING AND SHOULD BE MANUFACTURING ARTICLES OR THINGS WHICH ARE EXPORTED. UNDISPUTEDLY THE ASSESSEE IS RECEIVI NG RAW MATERIALS FROM ITS FOREIGN CUSTOMERS AND IS EXPORTING THE MAN UFACTURED GOLD JEWELLERY. A COPY OF THE BILL WHICH HAS BEEN EXTRAC TED IN THE ASSESSMENT ORDER ALSO CLEARLY SHOWS THAT IN THE BIL L THE ASSESSEE HAS TAKEN VALUE OF THE JEWELLERY WHICH IS EXPORTED AND FROM THE SAME HE HAS REDUCED THE COST OF THE RAW MATERIAL WH ICH HAS BEEN PROVIDED BY THE CUSTOMERS WHICH IS THE PRIMARY RAW MATERIAL. FURTHER A PERUSAL OF THE DECISION OF THE HON'BLE M ADRAS HIGH COURT IN THE CASE OF TAJ FIRE WORKS INDUSTRIES REFERRED TO SUPRA CLEARLY SHOWS THAT THE OWNERSHIP OF THE RAW MATERIAL IS NOT AN ISSUE FOR THE PURPOSE OF SATISFYING THE TEST OF MANUFACTURE OR TH AT OF AN INDUSTRIAL UNDERTAKING. A PERUSAL OF THE PROVISIONS OF S. 10B ALSO SPECIFIES ONLY THAT THE ASSESSEE SHOULD MANUFACTURE. THE DEFINITIO N OF MANUFACTURE AS DEFINED BY THE HON'BLE SUPREME COURT IN THE CASE OF ASPINWALL & CO. LTD. (SUPRA) REFERRED TO ABOVE ALSO DOES NOT GIVE ANY INDICATION THAT OWNERSHIP OF THE RAW MATERIALS IS A PRIMARY CONDITION FOR MANUFACTURING. THIS BEING SO WE ARE OF THE VIEW THAT THE CIT(A) WAS RIGHT IN LAW IN HOLDING THAT THE ASS ESSEE WAS ENTITLED TO THE BENEFIT OF EXEMPTION UNDER S. 10B OF THE ACT . 6. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISS ED. 7. AS THE ACTIVITY OF THE ASSESSEE IS SIMILAR THER EFORE RESPECTFULLY FOLLOWING THE AFOREMENTIONED DECISION OF COORDINATE BENCH WE HOLD THAT LD. CIT(A) HAS RIGHTLY HELD THAT ASSESSEE IS INVOLVED I N THE ACTIVITY OF MANUFACTURING GOLD ORNAMENTS HENCE ELIGIBLE FOR DE DUCTION U/S 10A. IT MAY ALSO BE MENTIONED HERE THAT LD. CIT(A) HAS FOUND TH AT ASSESSEE IN EARLIER FOUR YEARS IS ASSESSED U/S 143(3) AND THE CLAIM OF THE ASSESSEE REGARDING EXEMPTION U/S 10A HAS NEVER BEEN DENIED TO THE ASSE SSEE. FOR THIS REASON ALSO WE FOUND NO MERIT IN THE DEPARTMENTAL APPEAL VIDE WHICH THE ITA NOS. 3175 & 2837/D/10 7 DEPARTMENT IS ASSAILING THE FINDINGS OF LD. CIT(A) ON THE ISSUE OF GRANT OF EXEMPTION U/S 10A. 8. ACCORDINGLY THE APPEAL FILED BY THE REVENUE IS D ISMISSED AND IT IS HELD THAT LD. CIT(A) HAS RIGHTLY HELD THAT ASSESSEE IS ENTITLED FOR EXEMPTION U/S 10A. 9. NOW COMING TO ASSESSES APPEAL IT IS COVERED AGA INST ASSESSEE AS PER AFOREMENTIONED DECISION OF TRIBUNAL IN ASSESSEE S OWN CASE FOR A.Y. 2006-07. THE RELEVANT OBSERVATIONS OF TRIBUNAL WHI LE HOLDING THAT INTEREST RECEIVED ON FDRS IS NOT ELIGIBLE FOR DEDUCTION U/S 10A ARE REPRODUCED BELOW: - THE FIXED DEPOSITS SO MADE BY THE ASSESSEE INITIAL LY WITH ABN AMRO BANK AND THEN TRANSFERRED TO VYASYA BANK H AVE NO RELATION OR NEXUS WITH THE ASSESSEES BUSINESS O F UNDERTAKING FROM THE EXPORT OF GOLD JEWELLERY THE PROFIT OF WHICH IS CLAIMED AS DEDUCTION U/S 10A OF THE ACT. EVEN IN A BROAD SENSE OF THE MATTER THE FIXED DEPOSITS SO MA DE CANNOT BE SAID TO HAVE ANY RELATION OR NEXUS WITH A NY BUSINESS ACTIVITY OF THE ASSESSEE. THEREFORE THE INTEREST INCOME EARNED ON SUCH FIXED DEPOSITS HAS BEEN RIGHT LY TAXED UNDER THE HEAD INCOME FROM OTHER SOURCES BY THE AUTHORITIES BELOW. 10. IT WAS ALSO HELD BY THE BENCH IN ASSESSES OWN C ASE THAT EVEN IF THE INTEREST EARNED BY THE ASSESSEE ON FIXED DEPOSIT IS ASSESSABLE UNDER THE ITA NOS. 3175 & 2837/D/10 8 HEAD BUSINESS BUT THEN ALSO THE INTEREST WILL NOT BE ELIGIBLE FOR EXEMPTION U/S 10A AND THE RELEVANT OBSERVATIONS ARE AS FOLLOW S: - 28. IN THE LIGHT OF THE DISCUSSIONS MADE ABOVE THE GR OUND REGARDING THE ASSESSEES CLAIM OF DEDUCTION ON INTE REST INCOME EARNED ON FDR U/S 10A(1) IS REJECTED AND TH E ISSUE IS DECIDED IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE. THE ORDER OF THE CIT(A) ON THIS ISSUE IS THUS UPHELD ACCORDINGLY. 11. ACCORDINGLY THE APPEAL FILED BY THE ASSESSEE I S DECIDED AGAINST THE ASSESSEE AND IS DISMISSED. 12. IN THE RESULT BOTH THE APPEALS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14.1.11 (A.K. GARODIA) (I.P. BANSAL) ACCOUNTANT MEMBER JUDICIAL MEMBER * KAVITA DATED: COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT ITA NOS. 3175 & 2837/D/10 9