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2017 (11) TMI 107 - AT - Income TaxClaim of deduction u/s 80IA - indulgence in manufacturing activity - converting the S.S. Sheets into S.S. casserole containers - Held that - The manufacturing process involved in converting the S.S. Sheets into S.S. casserole containers, clearly establishes bringing into existence a new product having a distinctive name, character, and use. We are persuaded to subscribe to the observations of the CIT(A) that the S.S. fabricated parts which are made by the assessee from the S.S. sheets, are the result of transformation from S.S. Sheets which is different in size, shape, contour and utility, is a entirely a commercially different product, distinct from the raw material, and as such falls within the four corners of the term manufacture . That still further on the basis of the material made available on record by the assessee, we find that the assessee during the year under consideration had employed more than 10 workers in the process of manufacturing carried on by him with the aid of power. We are thus of the considered view, that as the assessee had cumulatively satisfied both of the requisite conditions contemplated u/s. 80IB(4), therefore the CIT(A) had rightly observed that the assessee stood duly entitled towards claim of deduction under the aforesaid statutory provision. We thus further find ourselves to be in agreement with the ld. A.R. that in light of the settled position of law, now when the assessee had been held as eligible and therein entitled towards claim of deduction under the aforesaid statutory provision for the preceding years, viz. A.Y. 2005-06 and A.Y. 2006-07, therefore unless the said relief granted in the said preceding years in which such claim was made and accepted is withdrawn or set aside, the A.O cannot be allowed, to hold a different view and disentitle the assessee from claim of the deduction under the same statutory provision during the year under consideration. We thus in light of our aforesaid observations finding no reason to take a different view, therefore uphold the order of the CIT(A) that the assessee stood duly entitled for claim of deduction u/s. 80IB(4). - Decided in favour of assessee.
Issues Involved:
1. Deduction under Section 80IB(4) of the Income Tax Act, 1961. 2. Documentary evidence substantiating the number of workers employed. 3. Admission of additional evidence in violation of Rule 46A. 4. Deletion of addition based on additional evidence despite ample opportunities during assessment proceedings. Issue-wise Detailed Analysis: 1. Deduction under Section 80IB(4) of the Income Tax Act, 1961: The primary issue was whether the assessee was entitled to a deduction of ?31,28,017/- under Section 80IB(4) for A.Y. 2007-08. The Assessing Officer (A.O.) disallowed the deduction, questioning the genuineness of the manufacturing activity and the commencement of production before 31.03.2004. The A.O. argued that the process described by the assessee did not qualify as manufacturing since it did not result in a new product. However, the CIT(A) and ITAT concluded that the assessee's activities, which included cutting, marking, drilling, and bending stainless steel sheets to produce casserole containers, constituted manufacturing. The ITAT upheld the CIT(A)'s observation that the fabricated parts were commercially distinct products from the raw materials, thus fulfilling the criteria for deduction under Section 80IB(4). 2. Documentary Evidence Substantiating the Number of Workers Employed: The A.O. contended that the assessee failed to provide sufficient documentary evidence to substantiate the employment of the requisite number of workers. The CIT(A) accepted the wage register and monthly muster book as evidence, supported by a field report from the Income Tax Inspector, which confirmed the presence of workers at the premises. The ITAT agreed with the CIT(A) that the assessee employed more than 10 workers, meeting the condition for deduction under Section 80IB(4). 3. Admission of Additional Evidence in Violation of Rule 46A: The A.O. argued that the CIT(A) admitted additional evidence without providing an opportunity for examination in remand proceedings, violating Rule 46A. The CIT(A) admitted affidavits and invoices from machinery suppliers as additional evidence, which the A.O. did not seriously object to. The ITAT found no substantial issue with the admission of additional evidence, as it was crucial for verifying the genuineness of the manufacturing process. 4. Deletion of Addition Based on Additional Evidence Despite Ample Opportunities During Assessment Proceedings: The A.O. claimed that ample opportunities were provided to the assessee during the assessment proceedings to furnish documentary evidence, and the CIT(A) unjustifiably deleted the addition based on additional evidence. The CIT(A) and ITAT found that the additional evidence, including affidavits and field reports, substantiated the assessee's claims. The ITAT upheld the CIT(A)'s decision, noting that the assessee consistently claimed and was allowed deductions under Section 80IB(4) in previous years. Conclusion: The ITAT dismissed the revenue's appeal for A.Y. 2007-08, affirming the CIT(A)'s order that the assessee was entitled to the deduction under Section 80IB(4). The same rationale applied to the appeal for A.Y. 2008-09, leading to its dismissal as well. The ITAT emphasized the rule of consistency, noting that the assessee's eligibility for the deduction in previous years should not be questioned without significant changes in facts.
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