2012 (8) TMI 1019 - HC - Income Tax

Disallowing the benefit available to assessee u/s 10B - Held that - Tribunal was not justified in disallowing the benefit available to the assessee under Section 10-B of the Income Tax Act; and the view as taken by the Tribunal does not stand in conformity with the law declared in the case of Income Tax Officer Vs. M/s Arihant Tiles & Marbles P. Ltd. (2009 (12) TMI 1 - SUPREME COURT )

Summary

Issues:
1. Disallowance of benefit under Section 10B of the Income Tax Act.
2. Denial of benefit under Section 80HHC.

Issue 1: Disallowance of benefit under Section 10B of the Income Tax Act:
The appellant, engaged in the manufacture and export of finished marble slabs and tiles, claimed exemption under Section 10-B of the Act for its Unit-2 as a 100% Export Oriented Undertaking. The Assessing Officer denied the claim, stating that processing marble slabs did not amount to manufacturing. The Commissioner of Income-Tax (Appeals) accepted the claim, but the ITAT ruled in favor of the revenue, stating that the activities did not constitute manufacturing. The ITAT relied on the decision in the case of Lucky Minmat P. Ltd, concluding that the appellant's activities did not amount to manufacture as per Section 10B. However, the appellant argued that the ITAT's decision contradicted the Supreme Court's ruling in the case of Income-Tax Officer Vs. Arihant Tiles and Marbles P. Ltd., which held that processing marble blocks into polished slabs and tiles constituted manufacturing under Section 80-IA. The High Court agreed with the appellant, stating that the ITAT's decision was not sustainable, and dismissed the revenue's appeal.

Issue 2: Denial of benefit under Section 80HHC:
Another issue involved the claim of benefit under Section 80-HHC, which the CIT(A) allowed in favor of the assessee. However, the ITAT ruled in favor of the revenue. The appellant did not press on this ground due to minimal financial implications and the lack of an appeal from the revenue. The High Court did not disturb the ITAT's order on this issue. The judgment partly allowed the appeal of the assessee based on the findings related to Section 10-B, as discussed above.

In conclusion, the High Court held that the ITAT was not justified in disallowing the benefit under Section 10-B of the Income Tax Act, as the activities of the appellant constituted manufacturing as per the Supreme Court's decision. The judgment also addressed the denial of benefit under Section 80-HHC, which was not pressed further due to financial implications and lack of appeal from the revenue.