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

ITA 3212/AHD/2009 | 2006-2007
Pronouncement Date: 09-07-2010 | Result: Allowed

Appeal Details

RSA Number 321220514 RSA 2009
Bench Ahmedabad
Appeal Number ITA 3212/AHD/2009
Duration Of Justice 7 month(s) 9 day(s)
Appellant Subhalachal Print & Pack,, Ahmedabad
Respondent The ACIT.,(OSD)Circle-10,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 09-07-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 09-07-2010
Date Of Final Hearing 01-07-2010
Next Hearing Date 01-07-2010
Assessment Year 2006-2007
Appeal Filed On 30-11-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD A BENCH (BEFORE S/SHRI G.D. AGARWAL VICE-PRESIDENT AND MUKUL SHRAWAT JUDICIAL MEMBER) ITA.NO.3212/AHD/2009 ASSTT.YEAR : 2006-2007 M/S.SUBHALACHAL PRINT & PACK 1 ST FLOOR UPNISHAD COMPLEX NR.SHREYAS RAILWAY CROSSING AMBAWADI AHMEDABAD. VS. ACIT (OSD) CIR.10 AHMEDABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S.N. SOPARKAR REVENUE BY : SHRI SAMIR TEKRIWAL O R D E R PER G.D. AGARWAL VICE-PRESIDENT: THIS IS ASSESSEES APPEAL AGAINST THE ORDER OF THE CIT(A)-XVI AHMEDABAD DATE D 09.10.2009 FOR A.Y.2006-2007 ARISING OUT OF THE ORDER OF THE ASSES SING OFFICER PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT 1961. 2. THE GROUND NO.1 OF THE ASSESSEE READS AS UNDER: 1. THAT THE LD.CIT(A) HAS ERRED IN LAW AND ON FACT S OF THE CASE IN NOT ALLOWING THE CLAIM U/S.80IB OF THE I.T.ACT 1961 AN D DENYING THE DEDUCTION OF RS.7 67 999/- GROUND NOS.2 TO 5 ARE ONLY ARGUMENTS IN SUPPORT OF THE ABOVE GROUND NO.1. 3. WE HAVE HEARD BOTH THE PARTIES AND WE FIND THAT ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE ITAT AHMEDABAD BENCH-A IN ITA NO.2128/AHD/2007 FOR ASSTT.YEAR: 2003-2004 AND ITA NO.425 426 427 428 AND 1104/AHD/2009 FOR ASSTT.YEARS 2000-2001 20 01-2002 2002-2003 2004-2005 AND 2005-2006 ORDER DATED 16-12-2009. WE FIND THAT THE ITAT HAS ITA.NO.3212/AHD/2009 -2- CONSIDERED THE ISSUE OF ALLOWABILITY OF DEDUCTION U NDER SECTION 80IB AT LENGTH AND DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AS UNDER: 4. WE CONSIDERED THIS ISSUE. THE ASSESSEE IS MANU FACTURING SMALL REELS OF MAPLITHO PAPER (STIFFNER) LDPE GRAN ULES POLYESTER/BOPP FILM WHICH ARE PRINTED AND LAMINATE D OF DIFFERENT SIZES AND DIMENSIONS. IN THE MANUFACTURING PROCESS EMPLOYED BY THE ASSESSEE THE POLYCOATED/POLYESTER MAPLITHO PO LYESTER FILM ETC. GOT CONVERTED INTO WRAPPERS USED FOR PACKING O F TOILET SOAPS AND ARE USED AS INNER PACKING. THE ASSESSEE PURCHA SES MAPLITHO PAPER POLY GRANULES POLYESTER FILM ETC AND DELIVE R THESE MATERIALS TO JOB WORKERS WHO CARRY OUT THE PROCESS OF LAMINATION WORK. THE LAMINATION WORK IS CARRIED OUT BY THE JO B WORKERS UNDER THE SUPERVISION OF THE QUALITY CONTROL STAFF OF THE ASSESSEE. AFTER COMPLETING THE PROCESS THE JOB WORKERS DISPATCH TH E POLY-COATED LAMINATED PAPERS AND SIMILAR ITEMS FOR PRINTING AT SILVASSA FACTORY. AFTER PRINTING THE ASSESSEE CONVERTS THESE ROLLS I NTO SMALL REELS WITH THE HELP OF SLITTING MACHINE. THE SLITTING IS DONE MECHANICALLY AND THE DOCTORING ACTIVITIES DONE MANUALLY FOR FINE FINISH. IN THE PROCESS CERTAIN REELS NOT PROPERLY SLITTED ARE REJ ECTED AND THE MATERIALS ARE SENT TO PACKING SECTION FOR PACKING A ND LABELING AFTER REWINDING. AFTER PACKING AND LABELING THE REELS A RE DISPATCHED TO THE END CUSTOMERS. 5. IN FACT THE ASSESSEE HAS COMMENCED ITS COMMERCIA L PRODUCTION W.E.F. 30 TH JUNE 1999. THEREFORE THE ASSESSEE CLAIMED THE DEDUCTION UNDER SECTION 80IB(4) FOR THE FIRST T IME 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 EXCISE DEPARTMENT. THE INDUSTRIES DEPARTMENT ALSO HAS REC OGNIZED THE ASSESSEE AS A SMALL SCALE INDUSTRIAL UNIT ENGAGED I N THE MANUFACTURING ACTIVITY. IN A RECENT JUDGMENT THE HONBLE SUPREME COURT IN THE CASE OF ITO UDAIPUR VS. M/S.A RIHANT TILES & MARBLES P.LTD. IN CIVIL APPEAL NOS.8037 TO 8044 O F 2009 DELIVERED ON DECEMBER 2 2009 HAS HELD IN SIMILAR CIRCUMSTANCES AS FOLLOWS: . ITA.NO.3212/AHD/2009 -3- BEFORE CONCLUDING WE WOULD LIKE TO MAKE ON OBSER VATION. IF THE CONTENTION OF THE DEPARTMENT IS TO BE ACCEPTED NAMELY THAT THE ACTIVITY UNDERTAKEN BY THE RESPONDENTS HEREIN IS NO T 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 MAN UFACTURE. TO SAY THAT THE ACTIVITY WILL NOT AMOUNT TO MANUFACTURE OR PRODUCTION UNDER SECTION 80IA WILL HAVE DISASTROUS CONSEQUENCES PAR TICULARLY 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. BECAU SE THE ACTIVITY DID NOT CONSTITUTE MANUFACTURE. KEEPING IN MIND THE ABOVE FACTORS 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 VE RY NECESSARY TO BEAR IN MIND THE ABOVE MENTIONED CONCERN EXPRESSED BY THEIR LORDSHIPS OF THE SUPREME COURT. THE ASSESSEE FIRM HAS ESTABLISHED A NEW UNIT TO MANUFACTURE SLITTED PACKING REELS NEC ESSARY FOR THE SAID UNIT. THE ASSESSEE HAS ERECTED PLANT AND MAC HINERY. THE ASSESSEE IS CARRYING ON A NUMBER OF MANUFACTURING O R CONVERSION PROCESSES EITHER DIRECTLY OR THROUGH JOB WORKERS. IT IS NOT NECESSARY THAT THE ASSESSEE ITSELF SHOULD CARRY OUT ALL THE STAGES OF MANUFACTURING PROCESS. OUTSOURCING OF CERTAIN PROC ESSES 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 ASSESS EE IS GETTING THE SHEETS PRINTED/LAMINATED UPTO THE REQUIRED MARK AND THEREAFTER GETS INTO SMALL REELS AND RE-PACK IT FOR FINAL DISP ATCH. THE ACTIVITY OF SLITTING ITSELF INVOLVES DIFFERENT PROCESSES BY WHICH THE CHARACTER OF THE MATERIAL IS TRANSFORMED INTO A DIFFERENT NAT URE. THE FACT THAT THE ASSESSEE IS OUTSOURCING CERTAIN PROCESSING ACTI VITIES DOES NOT DISQUALIFY THE ASSESSEE TO BE PLACED 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 HIMS ELF CARRY OUT ALL THE PROCESSES RESULTING IN THE END PRODUCT AND HE M AY GET SOME OF THEM DONE BY A THIRD PARTY. WHEN WE CONSIDERED ALL THESE ITA.NO.3212/AHD/2009 -4- ACTIVITIES CARRIED OUT BY THE ASSESSEE IN THE LIGH T OF THE ABOVE OBSERVATIONS OF THE HONBLE SUPREME COURT IN THE C ASE OF M/S. ARIHANT TEXTILES PVT. LTD. WE ARE OF THE VIEW THAT THE ACTIVITY CARRIED ON BY THE ELIGIBLE UNIT OF THE ASSESSEE IS A MANUFACTURING ACTIVITY AND THE ASSESSEE IS ELIGIBLE FOR THE DEDUC TION CONTEMPLATED UNDER SECTION 80IB(4) AS FAR AS THAT RELEVANT INCOM E IS CONCERNED. 8. THEREFORE WE DECIDE THE ISSUE OF EXEMPTION UNDE R SECTION 80IB IN FAVOUR OF THE ASSESSEE AND DIRECT THE AO TO GRANT THE DEDUCTION IN ACCORDANCE WITH THE LAW. 4. SINCE FACTS ARE IDENTICAL THE ABOVE FINDING OF THE ITAT WOULD BE SQUARELY APPLICABLE. RESPECTFULLY FOLLOWING THE SA ME WE DIRECT THE AO TO ALLOW DEDUCTION UNDER SECTION 80IB TO THE ASSESSEE. ACCORDINGLY GROUND NO.1 TO 5 OF THE ASSESSEES APPEAL IS ALLOWED. 5. GROUND NO.6 READS AS UNDER: 6. THAT THE INTEREST CHARGED BY LEARNED AO UNDER S ECTION 234B 234C AND 234D IS NOT CHARGEABLE AS THE APPELLANT HA S NOT COMMITTED DEFAULT U/S.207-217 AND THEREFORE UNWANTED INTEREST CHARGED BE CANCELLED. 6. AT THE TIME OF HEARING BEFORE US IT IS FAIRLY S TATED BY THE LEARNED COUNSEL THAT CHARGING OF INTEREST IS CONSEQUENTIAL. WE THE REFORE DIRECT THE AO TO RE- COMPUTE INTEREST IF ANY AFTER FINAL DETERMINATION OF INCOME AS PER OUR ABOVE ORDER. 7. IN THE RESULT THE ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 9 TH JULY 2010. SD/- SD/- (MUKUL SHRAWAT) JUDICIAL MEMBER (G.D. AGARWAL) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 09-07-2010 ITA.NO.3212/AHD/2009 -5- VK* COPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR ITAT. BY ORDER AR ITAT AHMEDABAD