ACIT, Jaipur v. M/S GALAXY IMPEX, Jaipur

ITA 756/JPR/2009 | 2006-2007
Pronouncement Date: 08-01-2010 | Result: Dismissed

Appeal Details

RSA Number 75623114 RSA 2009
Bench Jaipur
Appeal Number ITA 756/JPR/2009
Duration Of Justice 3 month(s) 8 day(s)
Appellant ACIT, Jaipur
Respondent M/S GALAXY IMPEX, Jaipur
Appeal Type Income Tax Appeal
Pronouncement Date 08-01-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 08-01-2010
Assessment Year 2006-2007
Appeal Filed On 30-09-2009
Judgment Text
1 ITA 756-09 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH A JAIPUR ( BEFORE SHRI I.C. SUDHIR AND SHRI B.P. JAIN ) ITA NO. 756/JP/2009 ASSTT. YEAR : 2006-07. THE ACIT CIRCLE-6 VS. M/S. GALAXY IMPEX JAIPUR. 45 GEM ENCLAVE MALVIYA NAGAR JAIPUR. (APPELLANT) (RESPONDENT) C.O. NO. 156/JP/2009 (ARISING OUT OF ITA NO. 756/JP/2009) ASSTT. YEAR : 2006-07. M/S. GALAXY IMPEX VS. THE ACIT CIRCLE-6 JAIPUR. JAIPUR. (CROSS OBJECTOR) (RESPONDENT) APPELLANT BY : SHRI RAJESH KUNDAN RESPONDENT BY : SHRI N.M. RANKA SR. ADVOCATE WITH SHRI N.K. JAIN ORDER PER SHRI I.C. SUDHIR J.M. ITA NO. 756/JP/2009 : THE REVENUE HAS QUESTIONED FIRST APPELLATE ORDER I N DIRECTING THE AO TO ALLOW THE EXEMPTION UNDER SECTION 10B OF THE IT ACT NOTWITHST ANDING THE FACT THAT THE ASSESSEE DID NOT FULFILL THE CONDITIONS FOR CLAIMING EXEMPTION U NDER SECTION 10B. 2. AT THE OUTSET OF HEARING THE LD. A/R POINTED OU T THAT THE ISSUE RAISED IN THE GROUND IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY TH E ORDER DATED 30.5.2008 IN ITA NO. 155 & 156/JP/2008 AND ORDER DATED 31.10.2008 IN ITA NOS . 1022 & 1178/JP/2008 OF THE 2 TRIBUNAL IN THE CASE OF ASSESSEE FOR THE ASSESSMENT YEARS 2003-04 04-05 AND 05-06. COPIES OF THE SAID ORDERS HAVE BEEN PLACED ON RECOR D FOR A READY REFERENCE. THE LD. A/R POINTED OUT FURTHER THAT THE DECISION OF HONBLE JU RISDICTIONAL HIGH COURT IN THE CASE OF ARIHANT TILES & MARBLES PVT. LTD. VS. ITO 211 CTR 169 (RAJ.) FOLLOWED BY THE TRIBUNAL WHILE DECIDING THE ISSUE IN THE ABOVE SAID APPEALS FOR EARLIER YEARS HAS BEEN UPHELD BY THE HONBLE SUPREME COURT IN ITS RECENT JUDGMENT DATED 2.12.2009 DISMISSING THE CIVIL APPEAL NO. 8036 OF 2009 ARISING OUT OF SLP PREFERRE D BY THE REVENUE. THE LD. A/R ALSO CITED THE RECENT DECISION OF HONBLE DELHI HIGH COU RT IN THE CASE OF CIT VS. SOPHISTICATED MARBLES AND GRANITE INDUSTRIES (2009) 225 CTR (DEL. ) 410 DATED 11.8.2009. 3. THE LD. D/R ON THE OTHER HAND TRIED TO JUSTIFY T HE ASSESSMENT ORDER ON THE ISSUE WITH THE SUBMISSION THAT THE ASSESSEE IS NOT FULFIL LING THE PRIMARY CONDITION OF MANUFACTURING AND PRODUCTION OF ANY ARTICLE OR THIN G THEREFORE THE CLAIM OF EXEMPTION UNDER SECTION 10B IS NOT AVAILABLE TO THE ASSESSEE IN THE PRESENT CASE. 4. CONSIDERING THE ABOVE SUBMISSIONS WE FULLY CONC UR WITH THE ABOVE SUBMISSIONS OF THE LD. A/R THAT THE ISSUE RAISED IN THE GROUND IS FULLY COVERED BY THE ORDERS DATED 30.5.2008 AND 31.10.2008 OF JAIPUR BENCH OF THE TRI BUNAL IN THE CASE OF ASSESSEE IN ITA NOS. 155 & 156/JP/2008 AND ITA NOS. 1022 & 1178/JP /2008 FOR THE ASSESSMENT YEARS 2003-04 04-05 AND 05-06. NOW WE ALSO FIND SUPPORT FROM THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF ITO VS. ARIHANT TILES & MARBLES PVT. LTD (SUPRA) UPHOLDING THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT I N THE SAID CASE (SUPRA) RESPECTFULLY FOLLOWED BY THE JAIPUR BENCH OF THE TRIBUNAL IN THE CASE OF THE ASSESSEE ITSELF FOR EARLIER ASSESSMENT YEARS (SUPRA). THE AO DENIED THE BENEF IT OF PROVISIONS OF SECTION 10B OF THE ACT TO JAIPUR UNIT OF THE ASSESSEE ON THE BASIS THA T THE ASSESSEE IS SIMPLY PERFORMING IN ITS 3 UNIT THE ACTIVITY OF SIZING/CUTTING/DRESSING/POLISH ING AND WASHING OF STONES WHICH AT THE BEST BE CALLED AS PROCESSING OF ROUGH STONE AND THE REBY THERE WAS NO SUBSTANTIAL CHANGES IN THE NATURE OF ROUGH STONE DUE TO ABOVE ACTIVITIE S HENCE THERE IS NO INVOLVEMENT OF MANUFACTURING. THE LD. CIT (A) HOWEVER FOLLOWING THE DECISION OF THE TRIBUNAL IN THE ABOVE ORDERS FOR A.Y. 2003-04 TO 05-06 HAS HELD THA T THE ASSESSEE IS ENTITLED FOR THE EXEMPTION CLAIMED UNDER SECTION 10B OF THE ACT IN R ESPECT OF JAIPUR UNIT. THE TRIBUNAL IN THE ASSESSMENT YEARS 2003-04 AND 04-05 (SUPRA) V IDE ORDER DATED 30.5.2008 HAS GIVEN FOLLOWING FINDING ON THE ISSUE VIDE PARAS 7 & 8 OF THE SAID ORDER WHICH IS BEING REPRODUCED HEREUNDER :- 7. AFTER CONSIDERING THE ABOVE SUBMISSIONS WE FIN D THAT THE ISSUE RAISED IN THE GROUND IS FULLY COVERED WITH THE DECI SION OF JAIPUR BENCH OF THE TRIBUNAL IN THE CASES OF SURAJ MARBLES PVT. LTD . ITA NOS. 512 TO 514/JP/03 ORDER DATED 18.8.2006 AND M/S. AGARWAL MA RBLE & INDUSTRIES LTD. ITA NO. 676/JP/04 DATED 22.12.06 WHEREIN AFTER HAVING GONE THROUGH THE DECISION OF HONBLE SUPREME COURT IN THE CASE O F LUCKY MINMAT PVT. LTD. AND SESA GOA LTD. THE TRIBUNAL HAS COME TO TH E CONCLUSION THAT THE ACTIVITIES OF CUTTING OF MARBLE BLOCKS INTO USABLE SLABS/TILES IS A MANUFACTURING ACTIVITY. IN THIS REGARD WE ALSO FIN D SUPPORT FROM THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN A RECENT JUDGMENT DATED 30.5.2007 IN THE CASE ARIHANT TILES AND MARBLES LTD . VS. ITO (SUPRA) HOLDING THAT CUTTING OF GRANITE/MARBLE BLOCKS INTO USABLE SLABS IS A MANUFACTURING ACTIVITY BECAUSE THE MARBLE BLOCKS AS A MINERAL PRODUCE FROM EARTH BY ITSELF IS NOT USABLE FOR ANY PURPOSES AND THEREFORE TO MAKE IT USABLE VARIOUS PROCESSES WHICH COULD BE APPLIED TO BRING IT TO THAT STAGE WOULD AMOUNT TO MANUFACTURING. 8. THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF AKASH STONE INDUSTRIES LTD. VS. ACIT 13 SOT 15 (MUMBAI) HAS HE LD THAT WHERE ASSESSEE USED TO TRANSFORM ROUGH RAW MARBLE BLOCKS INTO FINISHED POLISHED 4 SLABS BY SUBJECTING TO RAW BLOCKS TO SEVERAL PROCES SES LIKE PEELING DRESSING CORRECTING NATURAL FLAWS PADDING SORTIN G GRADING SHAPING SIZING POLISHING ETC. TO PRODUCE FINISHED PRODUCTS LIKE POLISHED MARBLE SLABS/TILES/TABLE TOP WHICH WAS A COMMERCIAL DISTIN CT COMMODITY HAVING DISTINCTIVE NAME AND USE IT COULD BE SAID THAT THE ASSESSEE IS ENGAGED IN MANUFACTURING/PRODUCTION OF POLISHED MARBLES SLABS TILES TABLE TOPS ETC. AND IN SUCH CASE THE ASSESSEE WOULD BE ENTITLED TO DEDUCTION UNDER SECTION 80IB OF THE ACT. SECTION 10B IS A SPECIAL PROVISIO N IN RESPECT OF NEWLY ESTABLISHED 100% EXPORT ORIENTED UNDERTAKING. THIS SECTION APPLIES TO ANY UNDERTAKING WHICH FULFILLS THE CONDITIONS BESID ES OTHERS THAT IT MANUFACTURES OR PRODUCE ANY ARTICLE OR THING. UNDI SPUTEDLY THE ASSESSEE IS A 100% EOU. THE EARLIER SECTION 10B HAS BEEN SU BSTITUTED BY FINANCE ACT 2000 WITH EFFECT FROM 1.4.2001 I.E. IN RESPECT OF SUCH EOU WHICH COMMENCES PRODUCTION ON 1.4.2000 IN THE MANNER PROV IDED THEREIN. THE EXPLANATION BELOW SECTION 10B OF THE ACT DEFINES M ANUFACTURING WHICH IS WIDER IN ITS APPLICATION AND LEGISLATURE IN HIS WISDOM LOOKING TO SCHEME AND THE REGISTRATION GRANTED TO THE EOU HAS INCLUDE D THE WORD PROCESS. IT ALSO EXPLAINS THE EXPRESSION PRODUCE ANY ARTICL E OR THING IN EXPANDED AND WIDER SENSE AND FURTHER EXTEND IT TO INCLUDE PR ODUCTION ON COMPUTER PROGRAMME. UNDER THESE CIRCUMSTANCES WE ARE OF T HE VIEW THAT THERE IS NO INFIRMITY IN THE FIRST APPELLATE ORDER IN THIS R EGARD WHICH IS ALSO SUPPORTED BY THE DECISIONS OF HONBLE SUPREME COURT AND HONBLE JURISDICTIONAL HIGH COURT. THE SAME IS UPHELD. THE GROUND IS THUS REJECTED. THE SAME DECISION HAS BEEN FOLLOWED BY THE TRIBUNAL IN THE CASE OF ASSESSEE FOR THE ASSESSMENT YEAR 2005-06 (SUPRA). THE TRIBUNAL HAS ALSO RESPECTFULLY FOLLOWED THE DECISION OF HONBLE RAJASTHAN HIGH COURT IN THE CAS E OF ARIHANT TILES & MARBLES PVT. LTD. VS. ITO (SUPRA) IN THIS REGARD WHICH HAS NOW B EEN AFFIRMED BY THE HONBLE SUPREME 5 COURT WHILE DISMISSING THE APPEAL PREFERRED BY THE REVENUE THEREIN ARISING OUT OF THE SLP FILED BY THEM (SUPRA). THE HONBLE SUPREME COURT H AS BEEN PLEASED TO CONCLUDE ITS DECISION VIDE ITS LAST PARA AS UNDER :- APPLYING THE ABOVE TESTS LAID DOWN BY THIS COURT IN BUDHARAJAS CASE (SUPRA) TO THE FACTS OF THE PRESENT CASES WE ARE O F THE VIEW THAT BLOCKS CONVERTED INTO POLISHED SLABS AND TILES AFTER UNDER GOING THE PROCESS INDICATED ABOVE CERTAINLY RESULTS IN EMERGENCE OF A NEW AND DISTINCT COMMODITY. THE ORIGINAL BLOCK DOES NOT REMAIN THE M ARBLE BLOCK IT BECOMES A SLAB OR TILE. IN THE CIRCUMSTANCES NOT ONLY THERE IS IS MANUFACTURE BUT ALSO AN ACTIVITY WHICH IS SOMETHING BEYOND MANUFACTURE AND WHICH BRINGS A NEW PRODUCT INTO EXISTENCE AND THEREFORE ON THE FACTS OF THESE CASES WE ARE OF THE VIEW THAT THE HIGH CO URT WAS RIGHT IN COMING TO THE CONCLUSION THAT THE ACTIVITY UNDERTAKEN BY T HE RESPONDENTS-ASSESSEES DID CONSTITUTE MANUFACTURE OR PRODUCTION IN TERMS O F SECTION 80IA OF THE INCOME TAX ACT 1961. BEFORE CONCLUDING WE WOULD LIKE TO MAKE ONE OBSERV ATION. 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 RESP ONDENTS ARE JOB WORKERS AND THE ACTIVITY UNDERTAKEN BY THEM HAS BEE N RECOGNIZED BY VARIOUS GOVERNMENT AUTHORITIES AS MANUFACTURE. TO SAY THAT THE ACTIVITY WILL NOT AMOUNT TO MANUFACTURE OR PRODUCTION UNDER SECTION 80IA WILL HAVE DISASTROUS CONSEQUENCES PARTICULARLY IN VIEW OF THE FACT THAT THE ASSESSES IN ALL THE CASES WOULD PLEAD THAT THEY WER E NOT LIABLE TO PAY EXCISE DUTY SALES TAX ETC. BECAUSE THE ACTIVITY DID NOT C ONSTITUTE MANUFACTURE. KEEPING IN MIND THE ABOVE FACTORS WE ARE OF THE VI EW THAT IN THE PRESENT CASES THE ACTIVITY UNDERTAKEN BY EACH OF THE RESPO NDENTS CONSTITUTES MANUFACTURE OR PRODUCTION AND THEREFORE THEY WOUL D BE ENTITLED TO THE BENEFIT OF SECTION 80IA OF THE INCOME TAX ACT 1961 . 6 FOR THE AFORE-STATED REASONS CIVIL APPEALS FILED B Y THE DEPARTMENT STAND DISMISSED WITH NO ORDER AS TO COSTS. 5. IN VIEW OF THE ABOVE DECISIONS ESPECIALLY THE DE CISION OF HONBLE SUPREME COURT IN THE CASE OF ITO VS. ARIHANT TILES & MARBLES PVT. LTD. WHEREBY THE ISSUE IS NO MORE DEBATABLE WE DO NOT FIND INFIRMITY IN THE FIRST AP PELLATE ORDER HOLDING THE ASSESSEE (JAIPUR UNIT) ENTITLED FOR CLAIMING EXEMPTION UNDER SECTION 10B OF THE ACT. THE GROUND IS ACCORDINGLY REJECTED. 6. IN THE RESULT APPEAL PREFERRED BY THE REVENUE I S DISMISSED. C.O. NO. 156/JP/2009 : 7. THE OBJECTION NOS. 1 AND 1.1 ARE IN SUPPORT OF T HE FIRST APPELLATE ORDER HOLDING THAT THE ASSESSEE IS ENTITLED FOR THE EXEMPTION CLAIMED UNDER SECTION 10B OF THE ACT IN RESPECT OF JAIPUR UNIT SUPPORTED BY THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF ARIHANT TILES & MARBLES PVT. LTD. VS. ITO ( 2007) 295 ITR 148 (RAJ.) AND OTHERS. SINCE WE HAVE UPHELD THE FIRST APPELLATE ORDER IN T HIS REGARD QUESTIONED BY THE REVENUE IN THE ABOVE APPEAL THESE OBJECTIONS ARE REJECTED AS HAVING BECOME INFRUCTUOUS. 8. VIDE OBJECTION NO. 2 THE FIRST APPELLATE ORDER HAS BEEN QUESTIONED IN NOT ALLOWING DEDUCTION FOR THE YEAR UNDER APPEAL OR IN THE ALTERNATIVE FOR THE ASSESSMENT YEAR 2005-06 ON TAX DEDUCTED AT SOURCE ON ACCOUNT OF EXP ENDITURE OF RS. 10 73 750/- HAVING BEEN DEPOSITED ON 29.4.2005 AND 10.5.2005. OBJECTION NO. 2 : 9. ON CONSIDERING THE SUBMISSIONS OF THE PARTIES IN VIEW OF THE ORDERS OF THE LOWER AUTHORITIES WE FIND MERIT IN THE CONTENTION OF THE LD. A/R THAT IN VIEW OF THE LAW AMENDED BY THE FINANCE ACT 2008 WITH RETROSPECTIVE EFFECT FROM 1.4.2005 THE ASSESSEE HAS BECOME 7 ENTITLED TO DEDUCTION IN THE YEAR IN WHICH TDS WAS DEPOSITED. THE RELEVANT FACTS ARE THAT THE ASSESSEE FAILED TO DEDUCT AND DEPOSIT TAX IN RE SPECT OF EXPENDITURE IN JAIPUR UNIT AT RS. 4 05 049/- AND IN CHENNAI UNIT AT RS. 11 17 776 /- FOR THE ASSESSMENT YEAR 2005-06. THE ASSESSEE WHILE COMPUTING TOTAL INCOME FOR THE A SSESSMENT YEAR 2005-06 DISALLOWED THE SAID AMOUNT ON ACCOUNT OF SUCH NON DEPOSIT AND OVER RIDING PROVISIONS CONTAINED IN SECTION 40(A)(AI). THE AO HOWEVER DID NOT ALLOW T HE SAID EXPENDITURE FOR THE ASSESSMENT YEAR 2005-06. THE ASSESSEE DEPOSITED SUCH TAX DURIN G THE ACCOUNTING PERIOD 1.4.2005 AND 31.3.2006 RELEVANT FOR THE ASSESSMENT YEAR 2006-07. THE ASSESSEE CLAIMED THAT IT HAS BECOME ENTITLED TO SUCH DEDUCTION EARLIER DISALLOW ED DURING THE YEAR UNDER CONSIDERATION AND FILED COMPUTATION OF TOTAL INCOME WITH MATERIAL IN SUPPORT. THE AO ALLOWED A SUM OF RS. 4 49 315/- AS A DEDUCTION FOR THE ASSESSMENT YEAR 2006-07 AS THE TDS WAS DEPOSITED ON 14.11.2005 I.E. AFTER THE DATE OF FILING THE RETURN FOR THE ASSESSMENT YEAR 2005-06. HE HOWEVER DID NOT ALLOW THE REMAI NING AMOUNT OF RS. 10 73 750/- AS PAID BEFORE THE DUE DATE FOR FILING OF THE RETURN F OR THE ASSESSMENT YEAR 2005-06. THE LD. CIT (A) HAS UPHELD THE SAME. HE HAS HOWEVER ACCEP TED ON BEHALF OF THE ASSESSEE TO THIS EXTENT THAT IN CASE OF RETROSPECTIVE AMENDMENT IF A SSESSEE IS ENTITLED FOR ANY RELIEF HE IS FREE TO CLAIM SAID RELIEF BEFORE ASSESSING OFFICER IN ACCORDANCE WITH PROVISIONS OF THE LAW WHICH WILL BE DECIDED BY THE ASSESSING OFFICER AS P ER PREVAILING LEGAL PROVISIONS. BEFORE US THE LD. A/R HAS REITERATED THE SAID ALTERNATIVE ARGUMENT ADVANCED BEFORE THE LD. CIT (A) IN WHICH WE PRIMA FACIE FIND MERIT. SINCE THE LD. CIT (A) HAS SET ASIDE THE MTTER TO THE FILE OF THE AO TO CONSIDER THE ALTERNATIVE ARGU MENTS OF THE ASSESSEE TO DECIDE THE ISSUE WE DO NOT FIND REASON TO INTERFERE THEREWITH . AS DIRECTED BY THE LD. CIT (A) THE ASSESSEE IS AT LIBERTY TO ADVANCE ITS ARGUMENT IN S UPPORT OF THE ALTERNATIVE PLEA BEFORE THE 8 AO WHO HAS TO COMPLY THE DIRECTIONS OF THE LD. CIT (A) IN THIS REGARD. IF THE ASSESSEE IS AGGRIEVED WITH THE FINDINGS OF THE AO ON THE ISSUE THE REMEDY IS OPEN TO IT TO PREFER APPEAL. THE OBJECTION IS ACCORDINGLY REJECTED AS PR EMATURE. 10. IN THE RESULT APPEAL PREFERRED BY THE REVENUE AND CROSS OBJECTION PREFERRED BY THE ASSESSEE ARE DISMISSED 11. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON ( B.P. JAIN ) ( I.C. SUDHIR ) ACCOUNTANT MEMBER JUDICIAL MEMBER JAIPUR DATED _____/01/2010. D/- COPY FORWARDED TO :- THE ACIT CIRCLE-6 JAIPUR. M/S.GALAXY IMPEX JAIPUR. THE CIT (A) THE CIT THE D/R GUARD FILE (ITA NO. 756/JP/2009) BY ORDER SR. PS ITAT JAIPUR.