2014 (7) TMI 1000 - HC - Income Tax

Deduction u/s 80IA Manufacturing unit set up at Daman - Whether cutting and polishing of Diamond is not a manufacturing activity or not Held that - The assessee gave the details as to how the silver was acquired by him - assessee had carried on activity of manufacturing of Diamond Studded Silver Jewellery, he filed all the details by addressing various letters - That proved purchases, sales, consumption of silver in manufacturing of Diamond Studded Silver Jewellery, list of workers and that there were 10 workers in Diamond Division and 23 in Jewellery division - clarifications from the consultant, certificate from the Sales Tax Department, Daman, all this material remained uncontroverted - Diamond Studded Silver Jewellery, sold to M/s. Shukra Jewellery Ltd. was termed as manufacture - the claim u/s 80IA was granted - Tribunal has referred to all the materials, thus, the order of the Tribunal is upheld Decided against Revenue.

Summary

Issues: Challenge to order passed by Income Tax Appellate Tribunal regarding deduction claimed under section 80IA for the assessment year 1998-99 based on manufacturing activity of Diamond Studded Silver Jewellery.

Analysis:
1. Substantial Question of Law: The appeal contested the inference drawn by the Tribunal and the Commissioner of Income Tax (Appeals) from the remand report, claiming it to be erroneous and perverse. The Revenue argued that the cutting and polishing of Diamond did not qualify as a manufacturing activity for the claimed deduction under section 80IA.

2. Background and Tribunal's Directions: The Tribunal directed a remand to the Assessing Officer to determine if the activities could be classified as "manufacture." Despite two rounds of assessment, the Assessing Officer's findings were not in favor of the assessee, leading to appeals and subsequent remands by the Commissioner of Income Tax (Appeals).

3. Contention of the Revenue: The Revenue challenged the contents of the remand report, arguing that it did not support the assessee's case. However, the Commissioner of Income Tax granted the relief after considering the report, leading to the matter being brought before the Tribunal by the Revenue.

4. Findings of the Tribunal: The Tribunal examined the materials presented by the assessee, including details of purchases, sales, and the manufacturing process of Diamond Studded Silver Jewellery. The Tribunal noted uncontroverted evidence such as the acquisition of silver, the workforce involved, and certifications from relevant departments, supporting the manufacturing activity.

5. Decision and Reasoning: The Tribunal concluded that the activities undertaken by the assessee, including the manufacturing of Diamond Studded Silver Jewellery, qualified as "manufacture" under section 80IA. The Tribunal found no errors in the assessment or misinterpretation of the remand report. The findings were supported by substantial evidence, and the appeal was dismissed without any costs awarded.

In summary, the High Court upheld the Tribunal's decision, ruling in favor of the assessee regarding the eligibility for deduction under section 80IA for the manufacturing activity of Diamond Studded Silver Jewellery. The Court found no substantial questions of law raised in the appeal, affirming the legitimacy of the manufacturing process and the correctness of the Tribunal's findings based on the presented evidence.