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TMI Blog2016 (4) TMI 562X X X X Extracts X X X X X X X X Extracts X X X X ..... d manufacturing of air purifier by using sample tools and testing equipments. It was held that assessee would be entitled to deduction u/s 80IC.This decision clearly counters the claim of revenue that the value of fixed asset is one of the deciding criteria for arriving at a finding whether assessee was carrying out manufacturing or not. The assessee has filed copies of invoices in the paper book from which it is evident that the raw material was purchased at Sitarganj unit during the relevant year under consideration and the fabricated items were transported from the Sitarganj to the site of contratees. We do not find any reason to doubt the credentials of these invoices particularly when ld. CIT(A) has not referred to the specific invoices to which she has referred in her order in para no. 5.4.2 reproduced earlier. The next objection is regarding employees, the details of which have been referred to by ld. counsel for the assessee, noted in his arguments. From those details it is evident that keeping in view the nature of activity carried out by assessee, the number of employees and their qualifications could not be disputed. As far as the objection regarding ESI and PF is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eing filed u/s 139(1). Thus, keeping in view the various decisions noted earlier, we do not find any reason to deny the claim of assessee on the ground of filing the return belatedly. - Decided in favour of assessee - ITA no. 1853/Del/2015 - - - Dated:- 25-2-2016 - SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER AND SHRI A.T. VARKEY: JUDICIAL MEMBER For The Appellant : Shri Gautam Jain Adv. P. Kamal Adv. For The Respondent : Smt. Rehka Vimal DR ORDER PER S.V. MEHROTRA, A.M: This is assessee s appeal against the order dated 14.01.2015 passed by the ld. CIT(A)-XX, New Delhi in appeal no. 166/2013-14, relating to A.Y. 2010-11. 2. Brief facts of the case are that the assessee firm, comprising of three partners viz. Rishabh Kishore, Mrs. Reshma Kishore Mr. A.P. Dwivedi, having 1/3rd profit sharing ratio each, in the relevant assessment year was engaged in the business of assembling and undertaking civil contracts for and on behalf of government and public sector undertaking etc. It had filed its return of income declaring total income at ₹ 1,73,00,489/-, inter alia, after claiming deduction u/s 80-IC of ₹ 1,06,47,239/-. The AO required the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the time contemplated under sub-sec. (1) of section 139. b. CIT Vs. Rajesh Kumar Jalan 286 ITR 274, wherein it was, inter alia, held that the assessee could fulfill the requirement u/s 54 of the I.T. Act for exemption of the capital gain from being charged to income-tax on the sale of property used for residence by filing return before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, which ever was earlier under sub-section (4) of section 139. c. High Court of Bombay vs. Trustees of Tulsidas Gopalji Charitable Chaleshwar Temple Trust Commissioner of Income Tax. 207 ITR 368. d. CIT Vs. Kulu Valley Transport Co. Ltd. 77 ITR 518 (SC), , wherein it was, inter alia, held that section 22(3), equivalent to section 139(4) is merely a proviso to section 22(1) equivalent to section 139(1). e. The assessee further referred to various decisions of the Tribunal on this count, noted in AO s order. (ii) The second reason given by assessee regarding late filing of return was that it was prevented by sufficient cause from filing its income-tax return before 15.10.2010 as the assessee was engaged in executing certain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elf use required for execution of contracts being executed by it. He further observed that the auditors commented in the tax audit report that the assessee had not maintained the stock records and in absence of such records it was not practically possible for the auditors to give the quantitative details. 6. The AO further pointed out that the closing stock in hand valued in total at ₹ 40214495/- related to the various sites and the head office at New Delhi and other branches and there was no closing stock of factory at Sitargunj. 7. Further, the AO referred to sale invoice/ stock transfer wherein description of item claimed to be manufactured was as under: (1) Signage Type-1 Top Board fully assembled with RF Board size from 1284.479mm (2) Verticle post with mounting clamps. Top cap and Base plate assembled size 4350.76 mm . 8. Considering all the above aspects the AO concluded that assessee was merely assembling various materials like aluminum, steel sheets, fiberglass etc. to form panels, signboards, and signages and related products. The AO did not accept the assessee s claim that it was manufacturing articles as contemplated u/s 80IC, as it did not bring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been reproduced by ld. CIT(A) in his order. From the details furnished by the assessee, ld. CIT(A) in para 5.4.2 observed as under: 5.4.2 The process under taken by the appellant was explained as under:- i) Procurement of material, both imported and indigenous ii) Fabrication of structural as per drawings given in the tender for each item. iii. Galvanizing, powder coating of painting of the structural members in the workshop of vendor. iv) Cutting, bending to shape and fabrication ACM as per given drawings, v) Pre dispatch inspection by third party inspection at the vendor premises vi) Transportation vii) Erection at site viii) Post installation inspection by third party inspecting (TPI) at site installation ix) Inspection by the oil company engineer at site of installation Thus as per above the process under taken by the appellant is galvanizing, painting, cutting and bending. Even as per the CD and photographs provided by the appellant the work apparent from them is cutting of pipes to size, transfer of these pipes to the site, where the work of preparing the framework is undertaken and on this frame work the sheets which have been painted and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of the appellant whether a new article or thing has been manufactured to enable it to merit the requisite deduction under section 80IC(2) of the act. The Assessing Officer has claimed that the process adopted by the applicant cannot be termed as manufacturing process as no new product has come into being. Reliance is placed on the decision of Rajasthan High Court in the case of CIT Vs. Lucky Minerals Pvt. Ltd. 226 ITR 245. Applying the above tests, if the present case is analyzed, it emerges that in case of the appellant, the original article i.e. Pipes/Posts, as the photographs furnished indicate, do not undergo a substantial change and a commercially different product with distinctive name, cha se does not come into existence. Some of the metal attachments are being manufactured at the Gurgaon unit. Even the machinery installed at the Sitarganj factory reflects the activity or the lack of it being undertaken at the unit. The total machinery installed is a mere eye wash to claim manufacturing activities at the Sitarganj factory. The nature of the employees, their qualification, the wages being paid to them, and work assigned to each also show that the manufacturing act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ory is erroneous and against judicial pronouncements of various benches of the tribunal, courts including the apex court. 6. That the appellant prays for leave, to add, alter, amend or vary any of the grounds either before or at the time of hearing of the appeal. 15. Ld. counsel for the assessee submitted that the first issue to be considered is whether activity carried out by the assessee is a manufacturing activity or not so as to entitle it for deduction u/s 80IC. He referred to pages 96 to 98 of PB wherein process carried out by assessee is contained, which is reproduced below: The process of procurement, fabrication and installation of all the Retail Visual Identity (RVI) features can be sub-divided as follows: i) Procurement of material, both imported and indigenous ii) Fabrication of structural as per drawings given in the tender for each item. iii) Galvanising, powder coating of painting of the structural members in the workshop of vendor. iv) Cutting, bending to shape and fabrication ACM as per given drawings . v) Pre dispatch inspection by third party inspection at the vendor premises vi) Transportation vii) Erection at site viii) Post i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or building through bolts. Monoliths: Monolith is a complete sign which is manufactured at the manufacturing unit using steel, ACM, ploy carbonate sheets aluminum tubes. Exact cut to steel pipes were received, and fabricated as per design of the oil company. The steel, was then directly dispatched from our manufacturing unit to the site. Other items like ACM and poly carbonate were prepared as per the design of the Oil Company. These panels were then cladded on the cut to size as per format. POC Foam boards were also packed and dispatched to the' site, where they are all assembled .and installed on the specially constructed foundation built by Oil Company for the same. Building Fascia: Building Fascia is the ACM cladding done on top of sales Building of a Petrol Pump. Aluminum Composite Panels (ACM) sheets and Aluminum ACt-1 sheets and Aluminum Angle/Extrusion length were also made and dispatched as per the requirement. They were cut to size as per requirements of that particular site/petrol pump. They were installed on the existing sites Building Top of the petrol pumps. The entire building fascia after taking the exact measurements of the site, were manufactured at th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use and, therefore, assessee was carrying out manufacturing activity as contemplated u/s 80IC. In this regard he relied on the decision of Hon ble Supreme Court in the case of CIT Vs. Oracle Software India Ltd. 320 ITR 546 (SC), wherein in para 16 it has been observed: 16. If one reads the judgment in Tata Consultancy Services', it becomes clear that the intelligence/logic (contents) of a programme do not change. They remain the same, be it in the original or in the copy. The Department- needs to take into account the ground realities of the business and sometimes oversimplified tests create confusion, particularly, in modem times when technology grows each day. To say, that contents of the original and the copy are the same and, therefore, there is (sic no) manufacture would not be a correct proposition. What one needs to examine in each case is the process undertaken by the assessee. Our judgment is confined strictly to the process. impugned in the present case. It is for this reason that the American courts in such cases have evolved a new test to determine as to what constitute manufacture. They have laid down the test which states that if a process renders a commodity o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Letter from the Fire Department dated 7.9.2009 v) Registration under Central capital Investment Subsidy Scheme, 2003 dated 20.8.2009. vi) Letters from Uttarakhand Power Corporation Ltd. vii) Letter to the Central Excise Division dated 17.8.2009 regarding start of the production in August 2009. viii) Documents from the Pollution Control Board dated 23.4.2009. 22. Ld. counsel further referred to page 163 of PB, wherein conditions of tender documents are contained, in which para 5 reads as under: You are required to procure, install and commission the machinery as per details available in annexure XXII of the tender within 45 days from the date of the letter of Intent and confirm to us, so that IOC Engineers/ TPI agency may inspect your factory for verification of machinery. In case of failure to procure, install and commission the machinery within 45 days, the LOI and this work order shall be cancelled forthwith and the earnest money deposit/ initial security deposit shall be forfeited. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at no proper reason has been given for not filing return in time. Ld. DR referred to Explanation 2 to section 139(1) which defines the term due date . She submitted that section 139(4) nowhere mentions that the due date as contemplated u/s 139(1) will get altered if the return is filed belatedly u/s 139(4). 29. Ld. DR submitted that the second issue which is to be considered is whether assessee is carrying out any manufacturing activity or not as contemplated u/s 80IC. She referred to page 266 of the PB, wherein a note on the process being undertaken by assessee is contained and pointed out that assessee itself mentioned that it is only process of cutting , welding, bolting and jointing which is only a fabrication work done by assessee. 30. Ld. DR referred to page 215 onwards wherein copy of invoices of the machinery purchased for setting up industrial undertaking at Sitarganj unit is contained to submit that the investment is not subst4antial as claimed by assessee. She further submitted that no stock records have been maintained by assessee, as has been pointed out by the auditors. Ld. DR further relied on the order of CIT(A) page 9 para 5.4.2 wherein ld. CIT(A) disputed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had undertaken contract for sale and not contract for job and, therefore, it cannot be said to be a job work being carried out by assessee. He further referred to the decision in the case of CIT Vs. Faith Biotech Pvt. Ltd. to submit that value of machinery is not a relevant factor for deciding whether the assessee was carrying out manufacturing activity and the acid test is user of the article. He pointed out that, in any case, the assessee s investment is not of small amount as submitted by ld. DR. As regards non-maintenance of records, ld. counsel pointed out that its books have not been rejected and quantitative details are there in invoices. On late filing of return ld. counsel submitted that no contrary judgment has been cited by ld. counsel which shows that 139(4) is not to be treated as proviso to section 139(1). 37. We have considered the rival submissions and have perused the record of the case. Primarily we have to consider following three issues- (a) Whether any activity actually carried out by assessee at Sitarganj or not. (b) Whether such activity could be termed as manufacturing or producing of any article or thing as contemplated u/s 80IC. (c) Whether ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out by assessee on the said premises. Therefore, it is evident that the approval might have been intimated vide letter no. 467F/Rekha dated 16.2.2010, but the activities must have been carried out prior to that date also. 42. Further from the bills on record it is evident that machinery had been installed at the said premises. 43. Ld. DR in course of her arguments submitted that there was no substantial investment in fixed assets at the premises so as to enable one to conclude that assessee was carrying out manufacturing activity. We do not find any substance in this plea of ld. DR because the requirement of investment depends on the nature of activity being carried out by assessee. It is not the case of revenue that with the investment at site the activities could not be carried out by assessee. 44. The assessee has also referred to the tender documents and the third party inspection carried out at the vender s premises. From these documents it is evident that the third party inspection was carried out at Sitarganj Unit and, therefore, it cannot be said that no activity was carried out at the said premises. The submissions of ld. DR to the contrary are not correct when t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or production of any article or thing as contemplated u/s 80IC or not. We have extensively produced the assessee s contention in regard to the activity being undertaken by it. From those submissions it is evident that assessee was primarily carrying out the process of procurement, fabrication and installation of the retail visual identity (RVI), which can be subdivided into following activities: i) Procurement of material, both imported and indigenous ii) Fabrication of structural as per drawings given in the tender for each item. iii) Galvanising, powder coating of painting of the structural members in the workshop of vendor. iv) Cutting, bending to shape and fabrication ACM as per given drawings . 51. All these activities definitely culminate into producing of an article, which has different utility in commercial sense. The fabricated item cannot be said to be the same as was the raw material for producing the same. The raw material may not be undergoing any chemical changes but nonetheless the same is fabricated in a manner so as to create an article which is of use to assessee s customer as per their specifications. 52. Ld. counsel has referred to the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be interpreted in a manner so as to advance the objects of economic activities in the country and not to deny the claim merely on technical grounds. 56. Section 139(4) reads as under: 139(4) Any person who has not furnished a return within the time allowed to him under sub-section (1), or within the time allowed under a notice issued under sub-section (1) of section 142, may furnish the return for any previous year at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier. Provided that where the return relates to a previous year relevant to the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year, the reference to one year aforesaid shall be construed as a reference to two years from the end of the relevant assessment year. 57. A bare perusal of this section makes it clear that the legislature itself has allowed the assessee to file return belatedly subject to fulfillment of conditions written in the said section. Therefore, once those conditions are met, then return filed by the assessee would for all technical purposes be consider ..... X X X X Extracts X X X X X X X X Extracts X X X X
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