9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2008 (6) TMI 248 - AT - Income TaxDisallowance of Exemption U/s 10BA - survey u/s 133A - three units did not fulfil the conditions laid down u/s. 10BA - Disallowance u/s. 80HHC - SFT sales (counter sales) against convertible foreign exchange. Disallowance of Exemption U/s 10BA - survey u/s 133A - three units did not fulfil the conditions laid down u/s. 10BA - partnership firm dealing in the manufacture and export of wooden handicraft items, Diaris, textile and other metal items - items of artistic value - AO has observed that the items exported by the assessee are furniture and other items of general utility and these items cannot be said to be the items having artistic value as per Expln. (b) to s. 10BA - HELD THAT - Assessee has submitted that the workers live in the premises of the assessee, took their food, use the modem toiletries and washing facilities etc. Their work is all alone checked by the assessee quality inspectors and are indeed under the ultimate control of the assessee. The termination of the contract of the contractor would result in their immediate eviction and loss of job. As per agreement those employees cannot work in any other units of any other person. As per definition of the workman as provided in s. 2(s) of the Industrial Disputes Act, 1947 includes any person employed in any industry or by a contractor in relation to execution of his contract with such employer included within the ambit of employees these workmen also - Therefore, we are of the view that the assessee has employed more than 20 workers during the year and therefore, satisfies the conditions contained in s. 10BA(2)(e) of the Act. Assessee further submitted that the assessee in all the preceding years has been accepted as exporter of wooden handicrafts and has been allowed (benefit) u/s. 80HHC of the Act. The assessee has also been recognized by other departments of Government of India, Handicraft Export Council of India, the Sales-tax Department of Government of Rajasthan and all other concerned authorities, all along. The assessee caters to the requirement of diverse buyers of Europe, USA, Japan, Australia, South Africa, etc. for wood based handicrafts amidst fierce competition in the global market. The assessee is engaged in promoting those types of manufacturing and with those steps within the manufacturing value chain that require more people inputs (labour intensive) that cannot be easily performed by the machinery and requires less capital. The creative talent visualization and originality of its carpenters in production department the dexterity of its workmen directly employed or through contractors or the job workers, the expertise of the large number of labour in polishing artistic, mirror and bone china fixing in wooden articles, special packing as per requirement of MNCs is the main strength of our artistic wooden handicrafts manufactured for export. The use of 'Aara machine' fumigation, power driven screw drivers; grinders, gauge machine are only aid to the workmen and playa secondary role and help. The real role is that of the expert creative workmen with their dexterity. The assessee has further submitted the explanation that the goods manufactured or produced by the assessee are eligible articles or things having the artistic value and in this regard the explanation was that Webster Dictionary defines artistic . During the course of survey u/s. 133A, the authorized officers themselves had occasion to visit and see Manglam Arts woodbased more than 850 items of artistic nature developed by Manglam Arts from time to time at one place for review by visitors. Besides they had also visited the product development section where the skilled and trusted craftsmen were busy in crafting new models and the videography was also done by the department. Survey authorities had visited and saw the picture painting artists doing art work on wooden boxes, wooden containers etc. Manglam Arts has successfully developed its leading position in designing colour shading artistry in hand in printing on wooden articles/things, but its wooden products are presently a brandname by itself and this is duly reflected in the continuous surge in its sales of wooden handicrafts since 2001. From the perusal of the facts and circumstances of the case and the explanation given by the assessee, we are of the view that the AO has ignored the explanation given by the assessee and has not taken the facts of the case in the right perspective. Therefore, in our view the assessee is manufacturing the items of artistic value even after getting some process on piece of job basis from outside but under its control. The items so produced or manufactured will be treated as manufacture or production by the assessee employing more than 20 persons. Therefore, we are of the view that the assessee has fulfilled all the conditions u/s 10BA(2) of the Act and therefore. he is entitled to deduction u/s 10BA(1) and we find no infirmity in the order of the learned CIT(A) who has rightly reversed the decision of the AO. Thus ground No. 1 of the Revenue is dismissed. Disallowance u/s. 80HHC - SFT sales (counter sales) against convertible foreign exchange - HELD THAT - We concur with the views of the learned CIT(A) in view of the consistent decisions taken by this Bench and also the case referred by the learned CIT(A) and also the decision of Hon'ble Supreme Court of India in the case of CIT vs. Silver Arts Palace 2002 (12) TMI 12 - SUPREME COURT . Therefore, we find no infirmity in the order of the ld CIT(A) who has rightly reversed the order of the AO on the issue. Thus ground No. 2 of the Revenue is dismissed. In the result the appeal of the Revenue is dismissed.
Issues Involved:
1. Disallowance of deduction under Section 10BA. 2. Disallowance of deduction under Section 80HHC on counter sales. Issue-wise Detailed Analysis: 1. Disallowance of Deduction under Section 10BA: The Revenue was aggrieved by the CIT(A)'s decision to grant relief on the disallowance of deduction under Section 10BA amounting to Rs. 8,99,43,092. The assessee, a partnership firm involved in manufacturing and exporting wooden handicrafts, claimed this deduction across three units. A survey under Section 133A revealed that these units did not meet the conditions set forth in Section 10BA. The AO highlighted various irregularities: - Kusum Sarovar Unit, Maharani Farm, Jaipur: The unit used old machinery, violating Section 10BA(2)(c), which states that the industrial undertaking should not be formed by the transfer of previously used machinery. The partner admitted to using old machinery and agreed to withdraw the claim. - Kusum Sarovar Unit-II, FCI Godown, Jaipur: The unit did not manufacture items of artistic value as required by Section 10BA and employed fewer than the required 20 workers. - Lali Unit, Ramgarh Road, Jaipur: The unit employed only seven workers, not meeting the condition of employing 20 or more workers as per Section 10BA(2)(e). The CIT(A) allowed the deduction after considering the assessee's explanations. The Tribunal noted that Section 10BA does not specify a commencement date for manufacturing to claim the deduction, thus existing businesses are not excluded. The Tribunal found no infirmity in the CIT(A)'s order, stating that the AO misinterpreted the law. The Tribunal also noted that the partner's withdrawal of the claim during the survey was not valid as it was made under duress and without credible evidence. The Tribunal cited several court decisions to support the view that workers employed through contractors should be considered as employees for the purpose of claiming the deduction. The Tribunal concluded that the assessee fulfilled all the conditions under Section 10BA(2) and upheld the CIT(A)'s decision to grant the deduction. 2. Disallowance of Deduction under Section 80HHC on Counter Sales: The Revenue contested the CIT(A)'s decision to grant relief on the disallowance of deduction under Section 80HHC for counter sales amounting to Rs. 66,96,039. The AO disallowed the deduction, but the CIT(A) reversed this decision based on the Tribunal's ruling in a similar case (S. Kasliwal & Co. vs. Asstt. CIT). The Tribunal concurred with the CIT(A), referencing the consistent decisions of the Jaipur Bench and the Supreme Court's ruling in CIT vs. Silver & Arts Palace. The Tribunal found no infirmity in the CIT(A)'s order and dismissed the Revenue's appeal on this issue. Conclusion: The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decisions on both issues. The assessee was found to have met the conditions for deductions under Sections 10BA and 80HHC.
|
