ITO, Nahan v. Sh. Sanjeev Gupta Prop., Kala Amb

IN THE INCOME TAX APPELLATE TRIBUNAL: B BENCH: CH ANDIGARH BEFORE HONBLE SHRI D K SRIVASTAVA AM AND HONBLE MS. SUSHMA CHOWLA JM ITA NO. 8/CHANDI/2011 ASSESSMENT YEAR: 2006-07 I.T.O. NAHAN V SANJEEV GUPTA PROP M/S SURAJ INDUSTRIES RAMPUR JATTAN KALA AMB PAN: AAKPG 6217 H ITA NO. 9/CHANDI/2011 ASSESSMENT YEAR: 2007-08 I.T.O. NAHAN V SANJEEV GUPTA PROP M/S SURAJ INDUSTRIES RAMPUR JATTAN KALA AMB PAN: AAKPG 6217 H (APPELLANT) (RESPONDENT-ASSESSEE) APPELLANT BY: SMT. JAISHREE SHARMA RESPONDENT BY: S/SHRI K.S. GUPTA AND SANJEEV GUPTA ORDER D K SRIVASTAVA: BOTH THE APPEALS BY THE DEPARTMENT ARE DIRECTED AGAINST THE COMMON ORDER PASSED BY THE LD. CIT(A) ON 25.10. 2010 FOR BOTH THE ASSESSMENT YEARS UNDER APPEAL NAMELY ASSESSMENT Y EAR 2006-07 AND 2007- 08 ON IDENTICAL GROUNDS WHICH READ AS UNDER: 1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE ASSESSEE IS ENGAGED I N MANUFACTURE OF WIRE AND IS HENCE ELIGIBLE FOR DEDUCTION U/S 80IC ESPEC IALLY IN VIEW OF THE HON'BLE SUPREME COURT IN COLLECTION OF CENTRAL EXCI SE V. TECHNOWELD INDUSTRIES LTD (2003) 153 ELT 209 (S.C) WHERE SUCH ACTIVITY WAS HELD TO BEE NOT AMOUNTING TO MANUFACTURE. 2 IT IS PRAYED THAT THE ORDER OF THE LD. CIT(A) BE SET ASIDE AND THAT OF THE AO RESTORED. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT T HE ASSESSEE PROPRIETOR OF M/S SURAJ INDUSTRIES FILED HIS RETURN OF INCOME FO R ASSESSMENT YEAR 2006-07 AND 2007-08 RETURNING TOTAL INCOME AT RS. 74 275/- AND NIL AFTER CLAIMING SANJEEV GUPTA KALA AMB ITA NOS. 8 AND 9/CHANDI/2011 2 2 DEDUCTION U/S 80IC AND 80IB AMOUNTING TO RS. 21 90 899/- AND RS. 38 78 717/- RESPECTIVELY. THE ASSESSEE CLAIMS TO BE ENGAGED IN THE BUSINESS OF MANUFACTURE OF ENAMELED COPPER WIRE. BOTH THE RETUR NS WERE SELECTED FOR SCRUTINY. THE AO CALLED UPON THE ASSESSEE TO EXPLAI N THE VARIOUS PROCESSES INVOLVED IN THE MANUFACTURE OF ENAMELLED COPPER WIR E. THE ASSESSEE EXPLAINED THE VARIOUS MANUFACTURING PROCESSES INVOLVED IN THE PRODUCTION OF ENAMELLED COPPER WIRE AS UNDER: ASSESSEE PURCHASES COPPER WIRE BAR/ROD IN COIL FOR M FROM THE OPEN MARKET. THE ROD IS THEN PASSED THROUGH DRAWING MACH INES. AFTER DRAWING THE SAID ROD COPPER WIRE OF DESIRED GAUGE GENERALLY 31 TO 37 G. IS OBTAINED. COPPER WIRE I THEN FED INTO AUTOMATIC ENAMELLING PLANT. IN THIS PLANT FIRST COPPER WIRE SO DRAWN PASSES THROU GH HEATING CHAMBERS WHERE IT IS ANNEALED. THEN THIS ANNEALED WIRE PASSE S THROUGH VANISH TRAYS WHERE IT IS COATED WITH A LAYER OF VARNISH OF DESIRED THICKNESS. THEREFORE IT PASSES THROUGH BAKING OVEN AT A PREDE TERMINED TEMPERATURE WERE IT IS BAKED AND DRIED. AT THIS STA GE IT BECOMES ENAMELLED WIRE/WINDING WIRE. THIS ENAMELLED WIRE IS THEN WINDED ON REELS. THE PROCESS OF COATING OF VARNISH/ENAMELLING INDUCES THE PROPERTY OF INSULATION ON THE COPPER WIRE WHERE BY IT IS TEC HNICALLY CONVERTED INTO AND IS KNOWN IN THE TRADE AS INSULATED WIRE AS ALSO WINDING WIRE. THE PRODUCT IS THEN PUT TO VARIOUS TESTS LIKE PIN HOLE TESTING BREAK DOWN VOLTAGE TESTING RESISTANCE TESTING ELONGATION TES TING CUT THROUGH TESTING ETC. AND PACKED. 3. THE AO PROCEEDED TO EXAMINE THE AFORESAID PROCES SES IN DETAIL. AFTER EXAMINATION OF VARIOUS PROCESSES UNDERTAKEN BY THE ASSESSEE TO PRODUCE THE ENAMELED COPPER WIRE THE AO HELD THAT VARIOUS PROC ESSES INVOLVED DO NOT LEAD TO MANUFACTURE OF PRODUCTION OF ANY ARTICLE OR THIN G. ACCORDINGLY HE DENIED THE RELIEF CLAIMED BY THE ASSESSEE U/S 80IB & 80IC. IN SUPPORT OF HIS CONCLUSION THE AO HAS RELIED ON THE JUDGMENT IN COLLECTOR OF C ENTRAL EXCISE V. TECHNOWELD INDUSTRIES LTD (2003) 153 ELT 209 (S.C) AND DY. C.S .T. V. PIO FOODS PACKERS (1980 46 STC 63. 4. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) UPON WHICH T HE LD. CIT(A) HELD SANJEEV GUPTA KALA AMB ITA NOS. 8 AND 9/CHANDI/2011 3 3 FOLLOWING THE ORDER OF THIS TRIBUNAL IN JB CONDUCTO RS AND CABLES V. ITO BADDI (ITA NO.215/CHANDIGARH/2009) THAT THE ISSUE IS COV ERED IN FAVOUR OF THE ASSESSEE AND CONSEQUENTLY DIRECTED THE AO TO ALLOW RELIEF U/S 80IC AND 80IB. 4. AGGRIEVED BY THE ORDER PASSED BY THE LD. CIT(A) THE DEPARTMENT IS NOW IN APPEAL BEFORE THIS TRIBUNAL. IN SUPPORT OF THE A PPEAL THE LD. DR RELIED UPON THE ORDER PASSED BY THE AO. 5. IN REPLY THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE RELIED UPON THE ORDER PASSED BY THE LD. CIT(A). HE SUBMITTED TH AT THE ISSUE UNDER APPEAL WAS SQUARELY COVERED BY THE ORDER OF THIS TRIBUNAL IN JB CONDUCTORS AND CABLES V. ITO BADDI (SUPRA). 6. WE HAVE HEARD BOTH THE PARTIES. THE GRIEVANCE OF THE DEPARTMENT AS REFLECTED IN THE GROUNDS OF APPEAL IS THAT THE ASSE SSEE CANNOT BE SAID TO BE ENGAGED IN THE MANUFACTURE OF WIRE AND HENCE IS NOT ELIGIBLE FOR DEDUCTION U/S 80IC/80IB IN VIEW OF THE JUDGMENT OF THE HON'BLE SU PREME COURT IN THE CASE OF COLLECTOR OF CENTRAL EXCISE V. TECHNOWELD INDUSTRIE S (2003) 155 ELT 2909 (S.C). THE APPLICABILITY OF THE AFORESAID JUDGMENT HAS BEEN SPECIFICALLY CONSIDERED BY THIS TRIBUNAL IN ITS ORDER DATED 13.1 1.2009 IN JB CONDUCTORS AND CABLES (SUPRA). THE RULE OF CONSISTENCY REQUIRES US TO FOLLOW THE DECISIONS OF CO-ORDINATE BENCHES. WE CANNOT SIT IN JUDGMENT TO R EVIEW THE DECISIONS OF OTHER CO-ORDINATE BENCHES OF THIS TRIBUNAL. IT IS N OT THE CASE OF THE DEPARTMENT THAT THE DECISION RENDERED BY THIS TRIBUNAL IN JB C ONDUCTORS AND CABLE (SUPRA) DOES NOT COVER THE ISSUE. IT IS ALSO NOT THE CASE O F THE DEPARTMENT THAT THE LD. CIT(A) HAS COMMITTED ANY ERROR IN FOLLOWING THE AFO RESAID DECISION OF THIS TRIBUNAL. IN THIS VIEW OF THE MATTER THE ORDERS PA SSED BY THE CIT(A) IS CONFIRMED AND CONSEQUENTLY BOTH THE APPEALS FILED B Y THE REVENUE ARE DISMISSED. ORDER PRONOUNCED ON 18 FEBRUARY 2011 SD/- SD/- (SUSHMA CHOWLA) (D K SRIVASTAVA) JUDICIAL MEMBER ACCOUNTANT MEMBER CHANDIGARH: THE 18 FEBRUARY 2011 SURESH SANJEEV GUPTA KALA AMB ITA NOS. 8 AND 9/CHANDI/2011 4 4 COPY TO: 1. THE APPELLANT THE ITO NAHAN 2. THE RESPONDENT SHRI SANJEEV GUPTA KALA AMB 3. THE CIT(A) SHIMLA 4. THE LD. CIT SHIMLA 4. THE D.R INCOME-TAX DEPARTMENT CHANDIGARH TRUE COPY BY ORDER ASSISTANT REGISTRAR ITAT CHANDIGARH