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TMI Blog2010 (1) TMI 880X X X X Extracts X X X X X X X X Extracts X X X X ..... carefully. The brief facts of the case with regard to issue No. 1 are that assessee has filed a return of income on 1-11 -2004 declaring total income of Rs. 29,28,760. The case was selected for scrutiny assessment and statutory notices under section 143(2) was issued on 31-1-2005 fixing the case for hearing on 25-2-2005. Thereafter notice under section 142(1) along with questionnaire was served. During the course of assessment proceeding, assessee has revised computation or income vide letter dated 19-2-2006 contending therein that assessee had claimed depreciation under section 32(l)(iia) at Rs. 36,10,546 whereas the same should have been Rs. 18,05,273. The assessee had claimed additional depreciation under section 32(l)(iia) of the Act on the ground that it is engaged in the manufacturing of ready mixed concrete which involved mixture of three ingredients, namely, cement, sand and aggregate. The product manufactured is mixed with another chemical called add-mixture. The final product after mixing has to be used within four hours of its mixing. The product manufactured by assessee-company is altogether a different product from the material out of which it was produced. The product ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to the raw material. If anything is to be considered has changed, i.e., cement which is a normal course to mixing with water will become solid and, thus, by any stretch of imagination the assessee could be said to be an industrial undertaking involving manufacturing of any product. For buttressing his point, Learned First Appellate Authority has placed reliance upon the judgment of Hon'ble Allahabad High Court in the case of Singh Engg. Works (P.) Ltd. (supra). The main emphasis of the learned CIT (Appeals) is that there should be some chemical change of raw material only then a new product would be construed as manufacture. If there is no change in the inherent quality or chemical composition of the raw material then there is no manufacturing activity. 4. The learned counsel for the assessee while impugning the order of the learned CIT (Appeals), took us through the written submissions filed before the learned CIT (Appeals) and contended that assessee was preparing RMC of different categories and under different grade. These are M-5, M-10, M-15 and M-7.5 and so on. These grades are manufactured according to the requirements of the buyers. There is different ratios of sand, ceme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e which are computerized one. Assessing Officer has denied the status of assessee as an industrial undertaking on the ground that it is in the construction activity. In fact, assessee is not doing any construction activity. Referring to the judgment of Hon'ble Supreme Court in the case of Bangalore Water Supply and Sewerage v. R. Rajappa AIR 1978 SC 548 and judgment of Hon'ble Gujarat High Court in the case of CIT v. J.B. Kharwar and Sons[l987] 163 ITR 394', he pointed out that expression "activity" has a wide import. According to the judgment of Hon'ble Gujarat High Court, where there is a systematic activity, organized by co-operation between employer and employees for the production and/or distribution of goods and services calculated to satisfy human wants and wishes, prima facie there is an industry in that enterprises. The true focus is functional and the decisive test is the nature of activity with special emphasis on the employer employees relationship. He pointed out that the assessee fulfilled the criteria as prescribed by the Hon'ble Supreme Court in the case of Bangalore Water Supply and Sewerage (supra). The assessee has also placed on record copy of BIS standard for c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of processing may vary from one case to another. There may be several stages of processing, a different kind of processing at each stage. With each process suffered, the original commodity experiences a change. Whenever a commodity undergoes a change as a result of some operation performed to it or in regard to it, such operation would amount to processing of the commodity. But it is only when the change or a series of changes takes the commodity to the point where commercially it can no longer be regarded as the original commodity but instead is recognized as a new and distinct article that a manufacture can be said to take place. Process in manufacture or in relation to manufacture implies not only the production but also various stages through which the raw material is subjected to change by different operations. It is the cumulative effect of the various processes to which the raw material is subjected that the manufactured product emerges. Therefore, each step towards such production would be a process in relation to the manufacture. Where any particular process is so integrally connected with the ultimate production of goods that but for that process processing of goods w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-Empire Industries Ltd. v. Union of India [1985] 3 SCC 314." 7. In the light of above judgment, if we examine the activity of the assessee then it would reveal that preparation of RMC is not as simple as construed by the learned CIT (Appeals). The assessee has been carrying out this activity in an organized manner with the help of heavy machinery and computer. Its activity is not as simply as mixing of sand, cement, etc., by a labourer on the right side. Though in the common parlance, sometime it does not sound logic to say that mixing of R.M.C. is a manufacturing activity but if we look into this activity carried out by the assessee from the point of an expert who has laid down BIS standard placed on the paper book then it would indicate that it is a complicated affair. The mixing of four products in prescribed ratio would result a different identifiable product which cannot be reconverted to its original shape. Hon'ble Supreme Court in the case of India Cine Agencies (supra) has considered cutting of a jumbo films rolls into small piece of films a manufacturing activity. If we analysis the facts of assessee's case, as per the ratios of Hon'ble Supreme Court's decision then its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee should have filed confirmation. 10. We have considered the rival contentions and gone through the records carefully. The assessee has achieved a turnover of Rs. 884.81 lakhs. It has shown net profit of Rs. 79.11 lakhs. Its net profit in terms of percentage is almost double than the previous year. Assessing Officer was unable to point out a single defect in its books of account. Merely non-filing of confirmation from two suppliers, it cannot be held that assessee has not received the goods from these persons and the credit balance in the shape of sundry credit appearing in the books of account is unaccounted money of the assessee. The assessee has filed certificate from the bank indicating the facts that cheque issued by it were cleared. Assessing Officer is harping upon only one aspect that notice issued to Shri Subhash Chand returned back with a remark "not known", thereafter he did not take any steps to procure the presence of this person. According to the assessee, notice did not contain the father's name of Shri Subhash Chand, that may be the reason for return of the notice otherwise on the bills raised by Shri Subhash Chand, his Mobile Number is available. He could have be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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