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2013 (2) TMI 150 - HC - Income TaxReopening of assessment - deduction under Section 80HHC allowed by ITAT - Held that - The contention of the Revenue is governed by the decision of Gem Granites vs. Commissioner of Income Tax 2004 (11) TMI 13 - SUPREME COURT wherein held that the cut and polished granite would also be a mineral and export thereof would not qualify for the special deduction under the un-amended Section 80HHC (2)(b). And that every statute is prima facie prospective unless it is expressly or by necessary implication made to have retrospective operation - against assessee. Invalid deduction u/s 80I granted by ITAT - Held that - Considering the ratio of decision of n Aspinwall and Co. Ltd. v. CIT 2001 (9) TMI 3 - SUPREME COURT and considering the order passed by the ITAT there is no evidence to come to a definite conclusion as to whether the assessee is doing manufacturing activity or not thus it is appropriate to remand the matter to the AO for the purpose of eliciting and proving the same.
Issues Involved:
1. Interpretation of deduction under Section 80HHC of the Income Tax Act. 2. Validity of deduction under Section 80I of the Income Tax Act for industrial activity. Issue 1: Interpretation of deduction under Section 80HHC of the Income Tax Act: The High Court of Madras dealt with an appeal by the Revenue against the orders of the Income Tax Appellate Tribunal regarding the deduction under Section 80HHC of the Income Tax Act for the assessment years 1986-1987 to 1989-1990. The Tribunal upheld the deduction granted by the Commissioner of Income Tax, holding that the assessee was eligible for investment allowance under Section 80I and deduction under Section 80HHC. The Tribunal relied on a circular clarifying that once a mechanical process is carried out on granite, deduction under Section 80HHC can be allowed. The Revenue contended that the amendment introducing Schedule XII was effective only from the assessment year 1991-1992, and the deduction should not be granted retrospectively. The High Court, referring to a Supreme Court decision, held in favor of the Revenue, stating that the deduction under Section 80HHC was not valid in law due to the nature of the granite export activity. Issue 2: Validity of deduction under Section 80I of the Income Tax Act for industrial activity: The second contention raised by the Revenue was regarding the eligibility of the assessee for deduction under Section 80I of the Income Tax Act due to engaging in industrial activity. The Revenue argued that the assessee was not involved in any industrial activity manufacturing or producing any article or thing, thus not entitled to the deduction. The High Court referred to previous decisions and observed that the act of cutting and polishing granite slabs did not involve a manufacturing process to qualify for the benefit under Section 32A or 80I of the Act. The Court emphasized the need for evidence regarding the type of activity carried out by the assessee to determine if it amounted to manufacturing activity. Citing a Supreme Court decision on the definition of 'manufacture,' the Court concluded that there was insufficient evidence to decide definitively on the industrial activity aspect. Consequently, the Court remanded the matter back to the Assessing Officer for further examination. In conclusion, the High Court of Madras ruled against the assessee on the interpretation of deductions under Sections 80HHC and 80I of the Income Tax Act. The Court upheld the Revenue's contentions regarding the retrospective nature of the amendment and the lack of evidence to support the industrial activity claim. The Court remanded the industrial activity issue to the Assessing Officer for further investigation and directed the Officer to dispose of the matter within three months.
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