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TMI Blog2008 (5) TMI 669X X X X Extracts X X X X X X X X Extracts X X X X ..... of the common issues relates to legality of the assessment framed under s. 153A of the IT Act. The assessment for the asst. yr. 2005-06 was framed under s. 143(3), so the question of legality of proceedings under s. 153A in that assessment year does not arise. As far as this ground is concerned, the learned CIT(A) in his order in the case of Metro Thermoformers has not adjudicated this issue on the ground that the same has not been pressed before him. The short claim of the assessee was that notices issued under s. 153A on 8th Dec., 2004 required the assessee to furnish the return of income in the prescribed form. No such form was prescribed by the Board at the relevant point of time and therefore, the notices issued under s. 153A were invalid and illegal. It is the claim of the assessee that when the assumption of jurisdiction itself was improper, the orders pursuant to these notices are not legally sustainable. Therefore, in the course of hearing, these contentions were not pressed into service. The order of the learned CIT(A) on this issue is therefore confirmed. The second ground in some of the assessee s appeals in the case of Mr. Rajesh Kapila, M/s Metro Thermoformers, Sun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee has produced the details of plant and machinery installed at Daman unit as also work stations which need to be manned for conducting manufacturing activities at the respective stations. The assessee has also furnished list of casual workers and the said records are certified by the labour inspector at Daman. The report of the auditor also makes an observation that the number of employees was more than 10 and the claim of wages under P L a/c in respect of such casual workers has been allowed by the Department. All these details were furnished before the AO. The only reliance by the AO was the attendance register which was found during the course of survey and also the initial statement of Mr. M. Misal. When the cross-examination was allowed before the CIT(A), Mr. Misal had made a statement that he did not take into consideration of the casual labourers. The assessee has now filed the details of the payments made to casual workers and also the names of the casual workers employed. Having regard to all these things, it cannot be said that the relief which the assessee is entitled under s. 80-IB has to be denied on the basis of number of employees recorded in the attendance register ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firm has no legal existence without the partners. The learned counsel for the assessee further pointed out that the rejection of SLP against the decision of the Karnataka High Court does not mean that the decision of the Karnataka High Court will become the decision of the Supreme Court. A reference was made to the decision of the Allahabad High Court in the case of CIT vs. Mustafa Khan (2005) 196 CTR (All) 411 : (2005) 276 ITR 601 (All) and the decision of the Madras High Court in the case of CIT vs. K.M. Jagannathan (1989) 76 CTR (Mad) 1 : (1989) 180 ITR 191 (Mad), wherein the effect of rejection of SLP was analysed. The learned CIT(A) has followed the decisions of the High Court which are in favour of the assessee and deleted the property income in the hands of the individual partners which was computed under s. 22 of the IT Act. On merits, the learned counsel for the assessee relied upon several decisions of Allahabad High Court, Gujarat High Court, Patna High Court, Orissa High Court and Delhi High Court in support of the submission that property is used in the business of the firm in which the assessee individual is a partner and no income from house property can be taxed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of the Supreme. The dismissal of the SLP in the exercise of discretionary jurisdiction cannot be construed as an affirmation by the Supreme Court of the decision against which the special leave to appeal was sought. In the light of these discussions, the order of the learned CIT(A) on this issue is confirmed. 7. The next issue arising out of the computation of income from house property in the case of Sri O.N. Kapila, wherein the assessees and the Department are in appeal for the asst. yrs. 2001-02 to 2005-06 relates to determination of income from house property based on the yield method. The AO has applied 12 or 13 per cent and the learned CIT(A) brought it down to 9 per cent. The case of the assessee is that the Departmental authorities ought to have computed the income from house property based on municipal rateable value. The properties under consideration were located at plot No. 54/1C at Ringanwada, Daman. Before the AO, the issue of determination of property income revolved around the percentage to be applied in the context of yield method. The assessee pleaded for adoption of municipal rateable value at the stage of first appeal. The assessee has already stated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness purpose. The assessee is not a partner in this firm. This is a family concern and the assessee was not receiving any rent from the said firm. No income from property was shown from these properties on the ground that they were used for the purpose of business. The AO did not accept and went on to apply @ ₹ 45 per sq. ft. to determine the ALV of the property in question. The short submission of the assessee in this regard is that properties of the assesses are part of an old dilapidated building and the rate of ₹ 45 per sq. ft. for determining the annual value is on higher side and will result in working of 22 per cent yield with reference to the cost of acquisition, which is certainly on higher side. The learned counsel for the assessee pleaded the same rate adopted in the case of Mr. O.N. Kapila by the learned CIT(A) may be directed to apply. The learned Departmental Representative, on the other hand, strongly questioned the contention of the assessee that the properties in question should be held exempt under s. 22 of the Act on the reasoning that the firm has used the asset for the purpose of assessee s business. The learned Departmental Representative strongl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounts were offered at the time of search. The amounts were shown as income in the case of the assessee firm. The AO however, made a protective assessment and observed that since the expenses related to the flat owned by Sri O.N. Kapila, the amounts were to be assessed in his hands. The AO further observed that the seized papers did not indicate that there was any link between the expenses and the income of the assessee firm and the partners of the firm were partners in other firms also and therefore, there was no basis for offering the income in the hands of the assessee. The learned counsel for the assessee submitted that in the course of search of the residential premises of Sri O.N. Kapila at flat Nos. 1A/1B, Girnar Apartment, certain papers and documents were found indicating expenditure of ₹ 17,98,854 in the asst. yr. 2003-04 and ₹ 3,77,540 in the asst. yr. 2004-05. The learned counsel for the assessee pointed out that the expenditure was defrayed by utilising the income of the assessee firm. The partners of the firm were Mr. Rajesh Kapila and Mrs. Sudesh Kapila, who happen to be son and wife of Sri O.N. Kapila. The firm had earned this income from sale of scrap an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of the assessee, no interest was charged at the time of original assessment, therefore, its levy at the stage of s. 153A was not justified. This issue for the asst. yr. 2005-06 is only with reference to the consequential relief. Reliance was placed on the decision of the Tribunal in the case of Datamatics Ltd. vs. Asstt. CIT in ITA No.6616/Mum/2003 [reported at (2007) 111 TTJ (Mumbai) 55-Ed.] vide order dt. 14th Feb., 2007. The learned Departmental Representative, on the other hand, strongly supported the imposition of interest under s. 234B of the Act. We have carefully considered the rival contentions and gone through the records. In all these cases, where assessments have been framed under s. 153A, levy of interest under s. 234B get attracted only if it is required to be enhanced in view of the increase in the income determined. In the case of the assessee, where there is no assessment under s. 143(1), there is no case for enhancement of interest under s. 234B. Identical plea has been accepted by the Co-ordinate Bench of the Tribunal vide order dt. 14th Feb., 2007 (supra) and therefore, the interest charged has to be deleted. As far as the appeals for the asst. yr. 2005- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e buys plain metal sheets from the market on which the printing is done. The printing work is done on job work basis by M/s Metal Printer Company (MPC) a sister concern of the assessee at Kandivali and the rest of the job, the details of which has been mentioned in the assessment order, is carried out at the assessee s factory at Daman with the aid of machinery and electric power. As the Daman unit is eligible for deduction under s. 80-IB, the assessee claimed deduction in respect of profit for all these years under appeal. The AO disallowed the claim on the reasoning extracted earlier. The AO also observed that the assessee firm had close connection with MPC which carries out the printing job. He also observed that the profit of the eligible unit had been artificially inflated. According to him, the profit of the assessee should be 15 per cent of the turnover. The claim is therefore to be restricted to 15 per cent of the turnover. The relevant para in the assessment order for the asst. yr. 2002-03 reads as under : In view of the facts as discussed above, it is held that due to the close connection between the assessee firm and M/s MPC, Kandivli, the business was arranged in such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. In fact, as a result of dealings with M/s MPC, the profit of the assessee got reduced instead of being inflated as alleged by the AO. The details of rate paid to M/s MPC and rate paid to other parties were produced before the AO which were not properly appreciated, especially these evidences have been rejected. The learned CIT(A) went in detail of the various activities undertaken by the assessee from pp. 5 to 14 of the order and accepted the contention of the assessee that activities in the units in question amount to manufacturing. After extracting various authorities of the Bombay High Court, Madras High Court and Supreme Court, the learned CIT(A) has come to the conclusion that in order to qualify as a manufacturer or processor, it is not essential that the entire manufacturing /processing activities to be carried out by the assessee himself at his own premises. It would suffice if the assessee carried out some activities at its unit and get it some other activities through outside agency on contract. The only requirement held by the Bombay High Court in the case of CIT vs. Penwalt India Ltd. (1991) 96 CTR (Bom) 20 : (1992) 196 ITR 813 (Bom) is that the activity carried out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ape of the individual poster. The printing work is done on job work basis with the assessee s sister concern M/s Metal Printer Company and rest of the job are done at the Daman unit of the assessee. According to him, there is no manufacturing activity at Daman unit. The manufacturing activity if at all is done, it is only at Mumbai by M/s Metal Printer Company. The claim of the supervision has been done by the assessee on M/s Metal Printer Company is ill-founded. The Circular No. 347, dt. 7th July, 1982 according to the learned Departmental Representative is in the context of book publishers and not relevant to the industrial undertaking as undertaken by the assessee. The other evidences of SSI certificate, registration of excise records, etc. are not evidences which are material enough to conclude that the assessee is engaged in the manufacturing activity. The learned counsel for the assessee, on the other hand, strongly supported the order of the learned CIT(A). We have carefully considered the rival contentions and gone through the records. In our view, the order of the learned CIT(A) does not require any sort of interference. The learned CIT(A) has gone into all the case law ..... X X X X Extracts X X X X X X X X Extracts X X X X
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