2013 (10) TMI 8 - HC - Income Tax

Deduction u/s 10B of the Income Tax Act whether printing of textbooks is eligible activity for claiming exemption u/s 10B - Reassessment u/s 147/148 - Held that - Section 10B applies to 100% export oriented undertaking engaged in export of articles, things or computer software - The words articles and things are wide and by no stretch it can be said that the petitioner does not produce an article or a thing. After receipt of manuscripts from abroad, the petitioner has to do type setting, make/process/print on paper and then bind printed pages into books. Thus, a new product, distinct and separate from the bare manuscripts takes shape and gets a physical shape in form of books. Books are an article or a thing and the process involved is certainly production, if not manufacture Decided in favor of Assessee. Reliance has been placed in the case of A. Mukherjee and Company Private Limited 1977 (9) TMI 26 - CALCUTTA High Court , wherein it was held that a publisher of books should be a manufacturer of books it is wholly unnecessary for him either to be an owner of a printing press or to be a book-binder himself. A paper is not a book, though it is printed on papers. A publisher may get the books printed from any printer but the printer is not the manufacturer but a mere contractor. The findings of the Tribunal in our opinion conclusively show that the assessee was carrying on the activity of manufacturing and also of processing of books which are also goods This judgment does not support the Revenue - reassessment notice quashed - Decided in favor of assessee.

Summary

Issues:
Challenge to reassessment proceedings for assessment year 2006-07 under Section 148 of the Income Tax Act, 1961.

Analysis:
The petitioner contested the reassessment proceedings initiated for the assessment year 2006-07 under Section 148 of the Income Tax Act. The reassessment was based on the belief that the petitioner was not eligible for claiming deduction under Section 10B due to engaging in the printing of textbooks, which was deemed ineligible for the deduction. The Assessing Officer referred to an earlier decision of the Calcutta High Court to support this stance. However, the original assessment order clearly acknowledged the petitioner's activities of printing and exporting books, indicating that the Assessing Officer was aware of these operations during the initial assessment. The petitioner argued that the reassessment was a case of "change of opinion" and that no new factual information had come to light post the first assessment order. The Assessing Officer's reliance on audit objections was deemed insufficient to justify reassessment, as it did not constitute new information but rather a disagreement on legal interpretation.

The petitioner further contended that the Assessing Officer's initial legal opinion was erroneous, as the nature of the petitioner's activities was well-known and documented in the first assessment order. The court highlighted the distinction between cases of incorrect application of law and instances where new factual information emerges post-assessment. It was emphasized that reassessment based on a mere change of opinion is invalid, and the Assessing Officer should resort to Section 263 of the Act in cases of erroneous application of law. The judgment referenced relevant legal precedents to support the distinction between cases warranting reassessment and those falling under the realm of change of opinion. The court ultimately ruled in favor of the petitioner, quashing the reassessment notice and order dated 28th September, 2010, based on the established facts regarding the petitioner's activities and the inapplicability of Section 10B deduction to their operations.