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TMI Blog2013 (9) TMI 160X X X X Extracts X X X X X X X X Extracts X X X X ..... hat it is engaged only in an assembling job, with the use of some tools and equipments, also evidenced from the opening WDV of plant & machinery being at a mere Rs. 19,175, with no additions during the year, even as the turnover of the said unit is at Rs. 404.94 lacs. The assessee's workers were mounting bought out components on the panel and wiring them. The same was clearly only an assembly job, which could not be said to be manufacturing, for which he drew support from the definition of the said term as provided u/s. 2(29BA) of the Act, as inserted on the statute by Finance (No.2) Act, 2009 w.e.f. 01.04.2009. Reference was also made by him to the decisions clarifying the scope of the term, as in the case of Aman Marble Industries 157 ELT 393 (SC); V. M. Salgaonkar Brs. Pvt. Ltd. vs. CIT [1996] 217 ITR 849 (Kar). The electricity expenditure for the year (Rs.47,932), would also show that no power connection was required/used, as electricity expenditure to this extent would even otherwise arise from an electrical connection. The assessee's processes being, thus, carried out without the aid of the power, would required at least twenty or more workers for it to qualify as an eligible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y labour contractors, which were three in number during the relevant year, but that would not in any manner imply that the labour contractors were manufacturing the panels at their own premises using their own machinery. They had only supplied the labour, issuing bills in its respect, and which had been discharged, also deducting the tax at source thereon. The goods purchased as well as those produced is clearly evidenced from the purchase bills (i.e., the bills of the bought out) as well as the invoices raised, respectively. The same would also clarify that the assessee had employed more than 10 workers during the relevant year, and which is the threshold limit which needs to be observed to qualify the undertaking in view of the manufacturing process being carried out with the aid of power. The A.O.'s objection with regard to the quantum of plant and machinery was also misconceived inasmuch as the law does not stipulate any minimum investment in plant and machinery to avail of the deduction under reference. The manufacturing process is, in fact, quite simple, though labour intensive, but would not stand disqualified for that reason, or be considered as being carried out without th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich reference has been abundantly made - in their favour of course - by both the authorities below. Besides, it is only this that would determine if the same leads to a manufacture of a new and distinct product. The same is a function of the degree of the change wrought on the original (raw) material, as explained by the apex court in the case of Dy. CST vs. Pio Food Packers, 46 STC 63 (SC) (refer para 2.3.7 of the impugned order): "Commonly, manufacture is the end result of one or more process through which the original commodity is made to pass. The nature and extent of processing may vary from one case to another, and indeed there may be several stages of processing and perhaps different kinds of processing at each stage. With each process suffered, the original commodity experiences a change. But it is only when the change, or a series of changes, take the commodity to the point where commercially it can no longer be regarded as the original commodity but indeed is recognized as a new distinct article that a manufacture can be said to take place." Clearly, a number of processes have been undertaken, as explained by the assessee, also enclosing the process flow c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or a statue. Yet, undeniably, the earthen pots or statute cannot be equated with clay - which remains the same, so that a new product has emerged. As such, though not 'manufacture', the processes undertaken by the assessee would amount to 'production', which equally qualifies for deduction u/s.80-IB(1). Reference in this context may be made to the decision in the case of CIT vs. Tata Locomotive and Engineering Co. Ltd. [1968] 68 ITR 325 (Bom), which stands relied upon by the ld.CIT(A). Its stand explained therein that production or manufacture means bringing into existence something different from its components. In the facts of the case, the assessee was engage in assembly of bus/truck chasis from imported parts on a knock down condition. The original components retaining their identity, as in the instant case, the question as to whether the same led to manufacture or production arose. The hon'ble court advocated a broader construction of the term, using the words 'manufacture' and 'production' interchangeably. In fact, the Act has used both these words together, so that the two, wherever the condition for the same is prescribed, have to be read in conjunction. It becomes immater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellate authority, though to no material effect. We have perused the relevant details, placed at pgs. 126 to 134 of the assessee's paper-book. The same clearly states of the charges as being towards assembled units. If the contractors were only labour contractors, the bills raised by them would only state the number of persons supplied on a per month or per day (i.e., per unit of time) basis. On the other hand, the bills make it clear that the charges raised are in respect of the specific work performed, and it is only on the basis of the completed work that the terms of the contract get fulfilled and the contractor entitled to his charges. The same is only, therefore, a work contract. This finding by us would however, be of little consequence. This is as without doubt the work is carried out at the assessee's works at Daman under the supervision of his staff as well as the partners, two of three of them being qualified engineers. Apart therefrom, work in also carried out at the customer's site, which may be of commissioning, and charges in respect of which are on time basis. The details in respect of labour charges stand provided by the assessee vide its letter dated 20.10.2009 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ong with the copy of the relevant invoices to the A.O. during the course of the assessment proceedings (refer Para V of the assessee's written submissions before the A.O., which appear at page 12 of the impugned order). Mere low investment in machinery, which is only on account of the various processes carried out being elementary, requiring low power, besides being labour intensive, would be to no effect. In fact, the assessee in this regard has also clarified that per mistake one air compressor machine purchased during the year from M/s. Bimpex Machines Pvt. Ltd. for Rs.56,060/- had been inadvertently debited to the purchase account, so that the necessary adjustment may be made, i.e., increasing its profit to that extent, while allowing depreciation @ 25% on the said machinery. No such adjustment has been directed by the ld. CIT(A), which he ought to have in view to the assessee conceding to the said error in its accounts for the year. We direct accordingly, so that the AO shall carry out the required verification and allow depreciation as exigible. The same would have no tax effect though inasmuch as the assessee's increased income would qualify for deduction. The objection by t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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