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TMI Blog2015 (5) TMI 653X X X X Extracts X X X X X X X X Extracts X X X X ..... Income Tax Act. - Decided in favour of assesse. - Decided in favour of the assessee Eligibility for deduction under Section 80IB (4) - whether necessarily to be computed after allowing depreciation under Section 32? - Held that:- Profits eligible for deduction under Section 80IB (4) of the Act though are necessarily to be computed after allowing depreciation under Section 32 of the Act, but the same would apply only from April 1, 2002, when the amendment came into force and will not apply to earlier years. See CIT v. Mahendra Mills [2000 (3) TMI 3 - SUPREME Court] - Decided in favour of the assessee Condition of ten or more workers to be employed in the manufacturing process as specified in section 80IB(2)(iv) - whether could be said to be complied with, especially when ten or more workers were actually engaged on only 73 days during the entire year? - Held that:- Once, it is established that the assessee had not employed 10 or more workers during the substantial part of the year, we are left with no other option but to answer the question in favour of the revenue - Decided against the assessee. - ITA No. 43 of 2009, ITAs No. 44, 45, 46, 49 , 51 of 2009 - - - Dated:- 23 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion under Section 80IB. While regular assessment proceedings for assessment year 2001-02 were started, assessment proceedings under Section 147 were initiated for assessment year 2000-01 and 2002-03. Regular assessment was also made for assessment year 2003-04 and 2004-05. Assessment for the assessment year 2003-04 in this case was completed under Section 143(3) on 30.03.2006. In all these five assessments the claim of deduction under Section 80IB was disallowed on various grounds including the ground that the process of making daliya and besan did not amount to manufacture. 4. The Assessing Officer also held in the assessment that though the assessee had not claimed depreciation in assessment year 2000-01 and 2001-02, the same should be allowed while computing the eligible profits and the depreciation allowable alongwith WDV to be carried forward in each of the years was recomputed in the assessments made. 5. Appeal filed by the assessee before the CIT (A) was dismissed vide order dated 17.10.2007 passed in Appeal No.IT/81/2006- 07/SML. The CIT (A) held that in all the years the making of daliya and besan did not amount to manufacture and it also held that the assessee shoul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the assessee carries on is stated in the order of the Appellate Assistant Commissioner of Income Tax thus: But if an analysis of the activity of making powder from the chicory roots is made, it will be found out that there are only two processes in making the powder from chicory roots: (i) roots are roasted, and (ii) after that they are powdered. We have asked learned counsel for the assessee whether there is anything else that describes the process. There is apparently nothing else. If that is the only process, it does not satisfy the test laid down by this Court in Aspinwall and Co. Ltd. v. CIT [2001] 251 ITR 323. 10. In so far as Poonam Arora case (supra) is concerned, this Court had categorically come to the conclusion that mere process of roasting of raw groundnut seeds into groundnut did not amount to manufacture as no new and distinct product came into existence. 11. Now, in case the facts of the present case are seen, the ITAT after considering its own observations in the case of M/s Indus Cosmeceuticals held the activity of converting Besan from gram Dal amounted to manufacture by according the following reasons:- If the facts of the aforesaid case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the judgment of the Hon'ble Supreme Court in Idandas versus Anant Ram Chandra Phadke (dead) by L.Rs., AIR 1982 SC 127 which is far more closer to the issue involved in this lis. Therein the question before the Hon'ble Supreme Court related to a lease under Section 106 of the Transfer of Property Act and the precise question was as to whether the lease was for a manufacturing process. The following tests for determining whether a lease for running flour mill had been granted for the purpose of manufacturing process were culled out:- 1. That it must be proved that a certain commodity was produced; 2. That the process of production must involve either labour or machinery; 3. That the end product which comes into existence after the manufacturing process is complete, should have a different name and should be put to different use. In other words, the commodity should be so transformed so as to lose its original character. 14. It was thereafter held that wheat was transformed into flour by the manufacturing process which involved both labour and machinery. The commodity before manufacture was wheat which could not be consumed by any human being but would be used o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to such percentage and for such number of assessment years as specified in this section. (2) This section applies to any industrial undertaking which fulfils all the following conditions, namely:- (i) .. (ii) .. (iii) . (iv) . (3) (i) . (ii) (4) The amount of deduction in the case of an industrial undertaking in an industrially backward State specified in the Eighth Schedule shall be hundred per cent of the profits and gains derived from such industrial undertaking for five assessment years beginning with the initial assessment year and thereafter twenty-five per cent (or thirty percent where the assessee is a company) of the profits and gains derived from such industrial undertaking: Provided that the total period of deduction does not exceed ten consecutive assessment years (or twelve consecutive assessment years where the assessee is a co-operative society) subject to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has not established its business for the other assessment years. The contention on behalf of the assessee is that the assessee had not claimed any deprecation on fixed assets in the books of accounts so as to claim higher deduction under Section 80IB. The revenue never disputed this claim of the assessee and failed to establish that the interest of the revenue has been adversely affected. 20. As per the admitted case of the revenue itself, the assessee was entitled to depreciation allowance only from April 1, 2002 and, therefore, amendment did not apply to the earlier years. For coming to such conclusion, we may conveniently rely upon the Division Bench judgment of the Madras High Court in Commissioner of Income Tax versus Sree Senha Valli Textiles P. Ltd., [2003] 259 I.T.R. 77 wherein it was held as under:- The question referred to us at the instance of the revenue is, Whether, on the facts and in the circumstances of the case, the Tribunal is correct in law in upholding the order of the Commissioner (Appeals) holding that the depreciation should not be allowed to the assessee since he has specifically withdrawn the claim for depreciation by filing revised return? ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to such percentage and for such number of assessment years as specified in this section. (2) This section applies to any industrial undertaking which fulfils all the following conditions, namely:- (i) . (ii) .. (iii) . (iv) in a case where the industrial undertaking manufactures or produces articles or things, the undertaking employs ten or more workers in a manufacturing process carried on with the aid of power, or employs twenty or more workers in a manufacturing process carried on without the aid of power. 23. A bare perusal of Section 80IB (2) (iv) would show that for claiming deduction under this sub-section an industrial undertaking is required to employ 10 or more workers in a manufacturing process carried on with the aid of power. The Assessing Officer came to the conclusion that the assessee had not employed 10 or more workers in the manufacturing process though at a given time the assessee was having more than 10 workers out of whom four employees had been eng ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertaking manufactures or produces articles or things, the undertaking employs ten or more workers in a manufacturing process carried on with the aid of power, or employs twenty or more workers in a manufacturing process carried on without the aid of power. Therein, in one of the appeals, the assessee had employed ten or more workers only for two months, while in the other case only for six months and this court held that this could not be deemed to fulfill the requirements of section as the employment had to be for a substantial part of a year. It was held as follows:- 3. It is not disputed before us that in one of the appeal, ten or more workers were employed only for two months and in the other, only for six months. This cannot be deemed to fulfill the requirements of the aforesaid clause of Section 80-IA. The employment has to be for a substantial part of a year and employment for two months and six months cannot be termed to be employment for a substantial part of the year. 4. In this regard, we may make reference to the judgment of Delhi High Court in Commissioner of Income Tax versus Taluja Enterprises (P.) Ltd., (2001) 250 ITR 675 , wherein the Division Bench held ..... X X X X Extracts X X X X X X X X Extracts X X X X
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