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TMI Blog2013 (11) TMI 1273X X X X Extracts X X X X X X X X Extracts X X X X ..... corroborate and support the fact that the assessee manufactured the products exclusively by use of manual skill or art. The Assessing Officer concluded that the product manufactured and produced by the assessee was not a handicraft but machine craft. The Assessing Officer disallowed the claim of the assessee with the following observations:- " 7.3 Since the word '"handicraft" has not been defined in the IT Act, 1961. The meaning of the word is being taken from the 'ADVANCED LAW LEXICON' compiled and edited by Shri P.Ramnath Aiyar under the general editorship of Hon'ble Mr. Justice Y.B. Chandrachur, former Chief Justice of Supreme Court of India reads as under: Handicraft : manual skill, manual art or trade. Goods produced by hand, e.g. certain pottery, woven goods, embroidery, basket work etc. 7.4 Handicraft means any manual labour exercised by way of trade or for purposes of gain in or incidental to the making any article or part of an article, or in or incidental to the altering, repairing, ornamenting finishing, or otherwise adapting for sale of any article." Making straw plait, by a child under the age of 8 years and who is being taught such plaiting was a "handicraft" with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... examination of the facts of the case and the provisions of law, it is held that the assessee was eligible for the said deduction under the said clause. That being so, there is no occasion to go into the alternative plea. In view of that, the AO's finding that it was not eligible for the same deduction u/s 80IC(2)(b)(ii) of the Act is being expunged as irrelevant. It is noted, however, that the AO, vide his report dt. 22.12.2009, submitted to the CIT(A) in course of the appellate proceeding for A.Y. 2005-06 concurred with the assessee's alternative plea and, based on his report, the CIT(A) also did the same. If an occasion arises for the AO to revisit the issue whether the assessee manufactures/produces 'handicrafts' or not, she would do well to keep this aspect of the matter in mind. With these remarks, the addition is deleted. For statistical purposes, the appeal is treated as allowed." 4. Ld. counsel for the assessee submitted copies of the judgments in assessee's own appeal filed by the Revenue in ITA No.2768/D/2007 dated 24.12.2008 for AY 2004-05 and order dated 23.12.2011 in ITA Nos. 3245 & 3246/Del/2010 for AY 2005-06 & 2006-07 respectively. In above appeals of the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 80-IC(2)(b)(ii) of the I.T. Act and necessary criteria for an existing manufacturing unit are as under :- (i) The business of manufacturing or producing any article of thing should be in the state of Himachal Pradesh or state of Uttaranchal. (ii) The undertaking or enterprise manufactures or produces any article or things specified in fourteenth schedule. (iii) An existing manufacturing unit "should undertake substantial expansion beginning from 7.1.2003 and ending before 1.4.2012." 5.5 In the assessment for A.Y. 2004-05, the AO was satisfied about the first two conditions but not on the third condition that the appellant has undertaken substantial expansion during the period beginning 7.1.2003 and ending before 1.4.2012. The main reason for not accepting the appellant's plea that substantial expansion has actually taken place during A.Y. 2004-05, is that the appellant firm could not provide the book value of plant and machinery existing as on the first day of the financial year relevant to assessment year 2004-05. In fact the appellant firm provided the WDV of plant and machinery as on 31.3.1991 and addition made in plant and machinery thereafter. The appellant has taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Mysore Petrochemical Ltd. 145 ITR 416. The AO was, therefore, not right in not allowing exemption u/s 80-IC of the I.T. Act on the ground that major investment in plant and machinery was made in February, 2004. Coming to the substantial expansion, I find that the firm is a very old firm constituted in 1964 with only two partners, Shri Ved Prakash Windlass and Shri Vinay Kumar Windlass. Therefore, the firm has been reconstituted from time to time and it was in the year 1989 that land was purchased in Balawala and additions to the plant and machinery were made in the year 1990. The appellant furnished before the AO report of Malik & CO. dated 16.6.2003 wherein the gross block of plant and machinery as on 1.4.1993 has been taken at Rs. 13,13,243/- (WDV Rs.. 4,11,450/-). The appellant vide its letter dated 17.3.2004 informed the CIT, Dehradun and the DCIT, Circle-1, Dehradun about the certificate of the Chartered Accountant dated 16.6.2003 about the gross block of plant and machinery. The gross value of this machinery as on 1.4.1990 cannot be more than about Rs. 25.50 lakhs taking depreciation @ 20% in the year 1990 to 1993. Before 1989, the appellant's factory was situated at 11-A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ideally, the assessee should have furnished the value of gross block on the first day of the previous year. But looking to insurmountable difficulties in furnishing the value, especially when it was not expected to maintain the past books of more than 6 years, the approach of the ld. CIT(A) was reasonable in determining this issue. Therefore, we do not find any such error in his order which requires any correction from our side. Thus, this ground is dismissed. 5.8 Having regard to the above finding of the ld. CIT(A) for A.Y. 2004-05 and upholding the same by Hon'ble ITAT, the issue regarding the fact that appellant has undertaken substantial expansion within the meaning of section 80- IC(8) (ix) stands settled in the first year of such claim of deduction u/s 80-IC of the I.T. Act i.e. for A.Y. 2004-05. It appears that the department has not agitated against this issue for further appeal before the Hon'ble High Court of Uttaranchal and thus Hon'ble ITAT being the last fact finding authority, the criteria of substantial expansion has been accepted to be fulfilled in the first year of such claim of deduction u/s 80IC in A.Y. 2004-05. The instant assessment year is the second year of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the use of machine and to that extent the end product can be definitely termed as 'handicraft'". 5. On due consideration of the above findings, we are of the view that learned Assessing Officer in the remand report himself accepted that the product manufactured by the assessee i.e. handicraft items comes within the ambit of sec. 80IC of the Act. Learned First Appellate Authority has referred the conclusion drawn by the Assessing Officer in the remand proceedings. In this way, it is not justifiable at the end of the revenue to challenge the order of the Learned CIT(Appeals) in further appeal before the ITAT on this issue. In view of the above discussion, ground No.2 is rejected in both the years." 5. After careful and thoughtful due consideration of above observations and findings, we are of the view that the product manufactured by the assessee i.e. "Handicraft Items" comes within the ambit of section 80IC of the Act. The ld. Commissioner of Income Tax(A) has referred and considered the conclusion drawn by the Assessing Officer in the remand proceedings. Accordingly, we observe that it is not justifiable at the end of the Revenue to challenge the order of ld. Commissioner of I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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