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TMI Blog2013 (5) TMI 225X X X X Extracts X X X X X X X X Extracts X X X X ..... ase, the only basis with the AO for initiating reassessment proceedings was the judgment of Hon'ble Supreme Court in the case of Lucky Minmat Pvt. Ltd. vs CIT (supra) wchich was considered by in the case of Arihant Tiles & Marbles Pvt. Ltd. vs ITO (supra), thereafter it was held that process of cutting and sizing or polishing of Marble Blocks into slabs and tiles which results into making raw marble usable amounts to manufacturing. Therefore, the reopening by the Assessing Officer was not sustainable. Rectification made u/s 154 for the disallowance u/s 40(a)(ia) - Held that:- Credit balance written off were the balances not payable by the company due to various reasons. On the similar issue, the decision of in the case of Wipro Ltd. vs DCIT, (2002 (7) TMI 752 - ITAT BANGALORE) was held in favour of the assessee therefore, it can be said that the issue was highly debatable. Similarly, the applicability on reimbursement of the expense in the case of exporters i.e. Ocean Freight paid and other expenses was highly debatable, therefore, it cannot be said that there was a mistake apparent on record particularly when the AO examined the issue in detail during original assessment procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore hearing of appeal. 2.2 The grounds raised by the Department in its appeal in ITA No.201/Jodh/2011 read as under:- ''On the facts and in present circumstances of the case, the ld. CIT(A) has erred in:- 1. Relying upon the decision of Hon'ble Supreme Court in the case of M/s Arihant Tiles Marbles Pvt. Ltd. where the facts are entirely different from the facts of the case under consideration 2. In allowing exemption u/s 10B of Income Tax Act of Rs. 21,28,976/- without considering the fact that the deduction u/s 10B of the Income Tax Act is allowable only on export of slabs and tiles and not on export of marble blocks. 3.1 First we will deal with assesee's appeal wherein vide Ground No. 1, the reopening u/s 147 read with Section 148 of the Income Tax Act. 1961 (hereinafter referred to as ' the Act' in short) is challenged. 3.2 The facts related to this issue in brief are that the assessee filed its return of income on 31-10-2002 declaring total income of Rs. Nil which was processed u/s 143(1) of the Act on 11-02-2003. The Assessing Officer noticed that the assessee claimed exemption of Rs. 37,65,799/- u/s 10B of the Act allowable to 100% Export Oriented Unit (E.O.U.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here were no materials or reasons to believe that income had escaped assessment. It was stated that the case had been reopened beyond the period of four years which was liable to be quashed and that the decision of Hon'ble Supreme Court in the case of Lucky Minmat Pvt. Ltd. vs CIT, 254 ITR 830 had no application in the present case as that was a case of mine owner who was doing cutting of marble blocks for making them marketable which cannot be equated to a factory owner who had involved in comprehensive production process i.e. marble slabs and tiles. The copy of the judgement of Hon'ble Rajasthan High Court in the case of M/s Arihant Tiles Marbles Pvt. Ltd. vs ITO (2007), 211 CTR 109 which was confirmed by the Hon'ble Supreme Court by distinguishing the said decision of Lucky Minmat Pvt. Ltd. vs CIT and it was held that conversion of marble blocks into slabs and tiles amounts to manufacturing. 3.4 The ld. CIT(A) after considering the submissions of the assessee observed that the assessment for the assessment year 2002-03 was reopened after four years of the end of the relevant assessment year. He further observed that the return was initially accepted u/s 143(1) of the Act. So ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 320 ITR 79 (SC) 7. Lucky Minmat Pvt. Learned vs CIT, 245 ITR 830 (SC) 8. Rajasthan Financial Corporation vs DCIT, 66 ITD 193 (JP) 9. Wipro Ltd. vs DCIT (2010) 34 DTR (Bang.) Trib. 497 10. S.B. Builders Developers vs ITO (2011) 136 TTJ 420 (Mum) 11. CIT vs Gem Plus Jewellery India Ltd. 233 CTR 248/ 330 ITR 175 (Bom.) 12. ACIT vs Nirmala Overseas (2010) 37 DTR 321 (Del.) 13. Suraj Auto Service Centre vs ITO 111 TTJ 418 (Jd.) 14. Agarwal Roadlines Pvt. Ltd. vs DCIT, 129 TTJ 49 (Ahd) 3.8 In his rival submissions, the ld. DR strongly supported the orders of the authorities below. 3.9 We have considered the submissions of both the parties and perused the materials available on record. In the present case, it is noticed that reopening was initiated by the Assessing Officer only on the basis of judgement of Hon'ble Supreme Court in the case of Lucky Minmat Pvt. Ltd. vs CIT (supra) which is evident from the reasons recorded placed at page no. 49 of the assesee's paper book and the same is reproduced as under:- ''The assessee company furnished its return of income on 31.10.2002 with the I.T.O. Ward-10(2)(1), Mumbai, declaring total income at NIL. Later on this case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. Since the assessee was involved in the conversion of Marble Blocks into slabs and tiles, therefore, it was engaged in the manufacturing activity. In the present case, the only basis with the Assessing Officer for initiating reassessment proceedings u/s 147 of the Act was the judgment of Hon'ble Supreme Court in the case of Lucky Minmat Pvt. Ltd. vs CIT (supra). The said decision was considered by the Hon'ble Jurisdictional High Court in the case of Arihant Tiles Marbles Pvt. Ltd. vs ITO (supra), thereafter it was held that process of cutting and sizing or polishing of Marble Blocks into slabs and tiles which results into making raw marble usable amounts to manufacturing. The said judgemnt was affirmed by the Hon'ble Supreme Court vide judgemnt dated 2nd Dec. 2009 reported in (2010) 320 ITR 79. The earlier judgemnt in the case of Lucky Minmat Pvt. Ltd. vs CIT (supra) was distinguished by the Hon'ble Supreme Court. In the instant case, the reopening of the assessment was initiated by the Assessing Officer only on the basis that decision of Hon'ble Supreme Court applies to the assessee's business disentitling it to exemption u/s 10B of the Act whereas the said decision has been h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on'ble Supreme Court in the case of ITO vs Arihant Tiles Marbles Pvt. Ltd. (supra) and also order dated 20-04-2012 in assessee's own case for the assessment years 2003-04 and 2006- 07, copy of the said order was furnished by the ld. counsel for the assessee. 4.3 In his submissions, the ld. DR although supported the order of the Assessing Officer but could not controvert the aforesaid contentions of the ld. counsel for the assessee. 4.4 After considering the submissions of both the parties and the materials available on record, in the present case it appears that the Assessing Officer disallowed the claim of the assessee for exemption u/s 10B of the Act by observing that the decision in the case of ITO vs Arihant Tiles Marbles Pvt. Ltd. (supra) was applicable for export of slabs and tiles but not for Marble Blocks. It is also noticed that this issue was also a subject matter of the Departmental appeal in ITA Nos. 302 303/Jodh/2010 for the assessment years2003-04 and 2006-07 in assessee's own case wherein vide order dated 20-04-2012 (copy is placed on record) , this bench of the tribunal has held as under:- ''9. After considering the-submissions and perusing the material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bs and tiles constitute manufacture or production as it results in emergence of a new and distinct commodity, and therefore, the assessee undertaking is entitled to benefit under section 80-IA of the Act, While holding so, the Hon'ble Supreme Court has considered various other decisions of the same court and only then it was found that the Rajasthan High Court was right in holding that conversion of marble block into polished slabs and tiles constitute manufacture or production. Facts are identical in the present case, therefore, now the issue has been settled by the Hon'ble Apex Court and there is no reason to interfere with the finding of Id. CIT (A) for both the years. Accordingly, we confirm the findings of Id. CIT (A) in granting exemption under section 10B of the Act.'' 4.5 So respectfully following the aforesaid order dated 20-04-2012 of ITAT Jodhpur bench, we do not see any merit in this appeal of the Department. 6.1 Now we will deal with the assesee's appeal in ITA No.193/Jodh/2011 where following grounds have been raised. ''1. The Learned Commissioner of Income-tax (Appeals) erred in law as well as on the facts and circumstances of the case in confirming the disallo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, without going into the details of the disallowance and by following the aforesaid order of the ITAT Jodhpur bench, are of the view that even if this disallowance of Rs. 96,000/- is sustained, the assessee is eligible for exemption u/s 10B of the Act. 8.1 The last issue vie Ground No. 3 relates to confirmation of addition of Rs. 1,18,960/- made by the Assessing Officer u/s 41(1) of the Act. 8.2 During the course of hearing, the ld. counsel for the assessee submitted that in the subsequent year this liability was paid. Therefore, the addition made by the Assessing Officer and sustained by the ld. CIT(A) was not justified. It was further stated that this fact can be verified by the Assessing Officer in the subsequent year and the matter may be sent back to the Assessing Officer for verification. 8.3 The DR did not object if this issue is sent back to the Assessing Officer for verification. 8.4 After considering the submissions of both the parties, we remand this issue back to the file of the Assessing Officer to be adjudicated afresh after verifying from the record and by giving due and reasonable opportunity of being heard to the assessee. 9.1 Now we will deal wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax of Rs. 1,21,869/- was paid to Central Govt. account and the same did not attract TDS and no TDS liability arose on reimbursement of the expenses The Assessing Officer accepted the contention of the assessee in respect of payment of service tax but as regards the other payment amounting to Rs. 72,76,680/-, it has been held that TDS liability was applicable and therefore, the same was disallowed u/s 154 of the Act. 9.4 The assessee carried the matter to the ld. CIT(A) who deleted the disallowance of Rs. 5,89,976/- by observing in para 3.3 of his order as under:- ''3.3. I have considered the submissions of the appellant as well as the order under section 154 passed by the A.O. The only disallowance involved is regarding credit balance written off and sales tax refund. It is seen the A.O. had considered the issue regarding disallowance under section 10B in the original proceedings and no disallowance of income from credit balance written off and C.S.T refunds was made. In the rectification order the A.O. has only mentioned that amount of Rs.5,80,976/- does not qualify for deduction under section 10B of the Act and has not given any specific reasons for holding such a view. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der for purpose 40(a)(ia) and has specifically excluded the above amounts for determining the disallowance under section 40(a)(ia) From this it is apparent that this exclusion has been made after considering the issue. Further, applicability of TDS on the reimbursement of expenses in the case of exporters i.e. Ocean freight paid and other expenses is highly debatable. There are decisions holding that reimbursement of actual expenses is not liable to TDS viz ITO Vs. dr.Willimar Schwabe India (P) Ltd -95 ITD 53 (Del), ACIT Vs.Grandprix Fab-128 TTJ 60 (Del) 'D' Bench) etc. This has to be decided after examining the nature of contract between the parties, residential status of the payee, applicability of processions of section 172 etc. In such a situation, it has been held by the Honourable Supreme court in the case of T.S. Balaram, ITO Vs. Vokart Brothers - 82ITR 50 (SC) that a mistake apparent on the record must be an obvious and patent mistake and not something which can be established by along drawn process of reasoning on points on which there may conceivably be two opinions. In view of above discussions, above rectification made u/s 154 for the disallowance u/s 40(a)(ia) is n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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