2012 (9) TMI 683 - AT - Income Tax

Maintainability of appeals filed before Tribunal u/s 253 Department file appeals for six A.Y in respect to claim of deduction u/s 80IA & 80IB - Held that - As per the instruction of CBDT 3/2011 dated 09-02-2011 read with instruction No. 5/2008 dated 15-05-2008, the tax effect has been less than Rs. 3 lacs in each of four A.Y. Therefore, appeals filed by the department for four A.Y are not maintainable, falling within the purview of the aforesaid instructions. And for another two A.Y, following the decision of Bombay HC in case of Patel Stationers Pvt. Ltd. decided in favour of assessee. Hence all the six common appeal decided in favour of assessee Deduction u/s 80IA Whether the assembly of sharpeners would qualify for the deduction u/s 80IA - Assembling of sharpener is a totally manual process and no machinery is required for the same Held that - Following the decision in case of Chiranjjeevi Wind Energy (2011 (1) TMI 421 - MADRAS HIGH COURT), there is no merit in the argument of AO that it is a simple manual process , which does not qualify for the deduction. It is so, because a manufacturing process shall always remain a manufacturing process even if that simple process brings into existence a distinct marketable product, and once a distinct product comes into being, by way of name, character and use, it would definitely qualify to come under the definition of manufacture. Appeal decided in favour of assessee

Summary

Issues involved:
- Appeal filed by the revenue covering assessment years 1998-99, 2000-01, 2001-02, 2003-04, 2006-07, and 2007-08.
- Appeal filed by the assessee for assessment years 1998-99, 2000-01, and 2001-02 regarding deduction u/s 80IA.
- Preliminary objection on the maintainability of departmental appeals.
- Dismissal of departmental appeals based on tax effect and High Court's decision.
- Eligibility of assembly of sharpeners for deduction u/s 80IA.

Analysis:

1. Departmental Appeals: The department filed six appeals covering various assessment years. The grounds of appeal were common, challenging the CIT(A)'s decision on deduction u/s 80IA & 80IB. The AR raised a preliminary objection on the maintainability of four appeals due to tax effect criteria. The AR pointed out that appeals for certain years did not meet the tax effect threshold as per instructions. The ITAT considered the maintainability issue and the High Court's decision against the department in a related case, leading to the dismissal of all six departmental appeals.

2. Assessee's Appeals - Deduction u/s 80IA: The assessee filed appeals for three years seeking deduction u/s 80IA for the assembly of sharpeners. The CIT(A) had disallowed the deduction based on the assembly process. The ITAT analyzed the assembly process and relevant case laws cited by the AR. Referring to judgments from different High Courts, the ITAT concluded that the assembly process qualifies as manufacturing under section 80IA. The ITAT set aside the CIT(A)'s order and directed the AO to allow the deduction for the assembly of sharpeners. Consequently, the appeals filed by the assessee for the relevant assessment years were allowed.

3. Final Decision: The ITAT dismissed the department's appeals and allowed the assessee's appeals concerning the deduction u/s 80IA for the assembly of sharpeners. The ITAT's decision was based on a detailed analysis of the assembly process, relevant case laws, and the legislative conditions for claiming the deduction. The judgment provided clarity on the eligibility of manual manufacturing processes for tax deductions under section 80IA.