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TMI Blog2007 (8) TMI 480X X X X Extracts X X X X X X X X Extracts X X X X ..... ated the facts are that the assessee carried out the work relating to manufacture of photo identity cards of voters according to the specifications of Chief Electoral Officer, Haryana. Apart from this, the assessee also undertook the manufacture of photo identity cards for other companies also. The assessee submitted that in order to manufacture the photo identity cards it had to process the data, print the same on the cards, put hologram containing the State emblem, take photograph of the voter, match the photo with voter s data, affix the same on the card and laminate the cards and take out the master copy duly laminated, consisting 40 miniatures per page of the above cards for the Election Department. The assessee claimed that in order to carry out the aforesaid exercise it had installed various computers and other plant and machinery and therefore it had to be considered as an industrial undertaking for the purposes of section 80-IA of the Act and that the profits therefrom are eligible for the benefit of section 80-IA. 4. The claim of the assessee was that it satisfies all the conditions for claim of deduction under section 80-IA of the Act. The Assessing Officer has den ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed while taking a photograph by the photographer is manufacture. Hence, the assessee was entitled to investment allowance and the Departmental appeal being without merits was liable to be dismissed . 27. The Hon ble Calcutta High Court in the case of CIT v. Air Survey Co. of India (P.) Ltd. ( supra ) has held that the ultimate photographs which came to be produced as a result of the business activity of the assessee came within the expression manufacture or production of article or thing and as such, the assessee was entitled to investment allowance under section 32A of the Act. In that case, the assessee, an air survey company, which derived its income from surveying, mapping aerial photography and aero-magnetic photography done for the Surveyor General of India and the Atomic Mineral Division of the Government of India, claimed investment allowance, under section 32A of the Act in respect of the aircraft radio purchased in the relevant year. This activity of the assessee was regarded as, falling within the purview of the expression manufacture or production . 28. In the case of CIT v. Emirates Commercial Bank Ltd. ( supra ), the Hon ble jurisdictional Bombay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. ( supra ) and further the decision of this Tribunal in the case of Footofast Colour Processors ( supra ). In the light of the above discussion, we, therefore, hold that the assessee s activity of producing identity card amounted to production or manufacture of article or thing for the purpose of section 80-IA of the Act. The Assessing Officer shall treat the same accordingly and consider the assessee s claim under section 80-IA in the light of the various other conditions and provisions contained in section 80-IA of the Act. The Assessing Officer shall provide reasonable opportunity of being heard to the assessee for the purposes of computing deduction under section 80-IA in the light of our order made above. We order accordingly." 6. Further it is submitted that the other objections raised by the Assessing Officer have been duly explained and that the lower authorities have erred in denying the deduction. The learned counsel explained that the assessee has established a separate industrial undertaking with the object of manufacturing of photo identity cards; that the machinery and equipments in the said industrial undertaking is new and that such a unit has not been s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rprises (P.) Ltd. v. Dy. CIT [1996] 55 TTJ (Ahd.) 167. ( vii ) CIT v. Steel Tubes of India Ltd. (No. 1) [1997] 228 ITR 38 (MP). ( viii ) CIT v. Shaw Wallace Co. Ltd. [1993] 201 ITR 17 (Cal.). ( ix ) CIT v. Oswal Data Processors [1997] 223 ITR 735 (MP). ( x ) Medical Genetic Clinic Laboratory v. ITO [2001] 79 ITD 14 (Mum.). ( xi ) CIT v. Professional Information Systems Management [2005] 274 ITR 242 (Guj.). ( xii ) Datamatics Financial Services Ltd. v. Jt. CIT [2005] 95 ITD 23 (Mum.). ( xiii ) CIT v. Peerless Consultancy Services (P.) Ltd. [2001] 248 ITR 178 (SC). ( xiv ) CIT v. Emirates Commercial Bank Ltd. [2003] 262 ITR 55 (Bom.). ( xv ) CIT v. Air Survey Company of India (P.) Ltd. [1998] 232 ITR 707 (Cal.). ( xvi ) Asstt. CIT v. Soni Photo Films (P.) Ltd. [1998] 67 ITD 81 (Delhi) (SB). ( xvii ) CIT v. Laxmi Art Studio [2002] 120 Taxman 23 (Raj.). ( xviii ) CIT v. Ajay Printery (P.) Ltd. [1965] 58 ITR 811 (Guj.). ( xix ) CWT v. Smt. Pratima Bhargava [2001] 249 ITR 123 (Delhi) ( xx ) CIT v. A.R.J. Security Printers [2003] 264 ITR 276 (Delhi). ( xxi ) CIT v. Penwalt India Ltd. [1992 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out by the assessee in this regard. In this context we have perused the written submissions made by the assessee before the lower authorities wherein the work has been divided into following areas : ( a )Data from the voter list is entered into the computer. Such data includes name, age, sex and address of the voters constituency-wise in bilingual language. ( b )Photography of the individual voter-wise is carried out with the help of cameras, attendant equipment viz., TV, VCR generator, monitor, video tapes etc. ( c )Feeding the data from video tapes to the computer machine for onward processing of identity cards. ( d )Application of hologram of the State on each such card and appending the signatures of the issuing authority etc. ( e )Printing and lamination of the identity cards. ( f )Miniature printing for onward transmission to the Election Department." Now the assessee contends that the photo identity card which it so manufactures as a final product is a completely new product in comparison with data from which it started the entire process of its manufacture. On this aspect, we have considered the decision of the Pune Bench of the Tribunal in the case of V.M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Bank Ltd. [2003] 262 ITR 55. In this judgment, the Hon ble Bombay High Court was dealing with the claim of deduction under section 32A in respect of computers installed in the office premises of the bank. In denying the claim, the revenue contended before the Hon ble High Court that in order to attract section 32A(2)( b )( iii ), there should be existence of plant and machinery in an "industrial undertaking" for the purposes of business of manufacture or production of any article or thing. It was argued that the assessee was a banking business and could not be construed as an "industrial undertaking". In this context, the Hon ble High Court noted that the computers were used to process the customer s data and the output which resulted from the computers consisted of management reports. That even a bank would constitute an "industrial undertaking" in the sense that although it was rendering services, still in the course of its business, it produces articles and things. It was, therefore concluded that the conditions of section 32A(2)( b )( iii ) are satisfied. The Hon ble High Court specifically noted that the nature of service rendered by the bank to its customers involve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benefit under section 80-IA with respect to its income derived from the business of the industrial undertaking of manufacturing of photo identity cards. 17. Before parting, we may refer to the judgment of the Supreme Court in the case of N.C. Budharaja Co. ( supra ) relied upon by the learned DR. We have perused the said decision. The issue before the Apex Court involved the interpretation of words manufacture or produce appearing in section 80HH and another section 32A of the Act. In this context, the Hon ble Supreme Court has laid down certain principles to adjudicate whether or not a particular activity is one of manufacturing or producing articles. The activity before the Hon ble Apex Court was construction of a dam and it was held that the same could not be characterized as manufacture or production of an article within the meaning of section 80HH(2)( i ) of the Act. In our view none of the decisions and the basis discussed by us in the earlier paragraphs are in dispute with the judgment of the Apex Court in the case of N.C. Budharaja Co. ( supra ). The said judgment, in our view cannot be applied in the instant case to support the case of the revenue. We, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der section 80-IA. However, in this ground, challenge is to the validity of assuming jurisdiction to make the impugned assessment by issuance of notice under section 148 dated 14-5-2002. 20. The CIT (Appeals) has upheld the assumption of jurisdiction for the reason that the Assessing Officer had sufficient grounds to issue notice under section 148 of the Act. 21. Before us the stand of the assessee is that the notice under section 148 has been issued merely to cover up the non-issuance of a notice under section 143(2) within specified period. According to the learned counsel, the return of income of the assessee contained its claim for benefit under section 80-IA and the same was processed under section 143(1)( a ) on 25-1-2001. According to him : the Assessing Officer was to disallow the claim of deduction under section 80-IA, it was permissible for him to issue notice under section 143(2) within the period specified and make scrutiny assessment in terms of section 143(3) of the Act. Having failed to do so, no fresh facts came to light and therefore according to him the mere claim of section 80-IA made in the return cannot be construed as an escapement of income so as to j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessing Officer could have issued notice under section 143(2) and make an assessment under section 143(3) in order to deny the relief under section 80-IA not having done so, according to the assessee, subsequent invoking of section 147/148 on the same issue is illegal. In our view, on this aspect the judgment of the Hon ble jurisdictional High Court in the case of Punjab Tractors Ltd. ( supra ) clearly covers the issue against the assessee. The following portion of the head note of the judgment is worthy of notice: "A perusal of section 147 of the Income-tax Act, 1961, shows that if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he can proceed to assess or reassess such income. This power has to be exercised subject to the provisions of sections 148 to 153. Thus, the condition precedent for proceeding under section 147/148 is that the Assessing Officer should have reason to believe that income has escaped assessment. Nothing more. It is not necessary that assessment should have been finalized under section 143(3) before it can be re-opened. The intimation under section 143(1) operates as an order ..... X X X X Extracts X X X X X X X X Extracts X X X X
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