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TMI Blog2008 (1) TMI 903X X X X Extracts X X X X X X X X Extracts X X X X ..... denial of deduction under section 80-IA of the Act for the assessment year 1998-99 because the Assessing Officer has already rectified the mistake and profits are subjected to computed under section 80-IA of the Act. Therefore, this deduction is not material and same is not pressed. Accordingly, we dismiss this ground for the assessment year 1998-99 as not pressed. 3. In respect of re-opening of assessment for the assessment year 1996-97 and 1997-98, the learned Counsel for the Assessee relied on the ground appeal. The ld. Departmental Representative, on the other hand, supported that orders of the authorities below. 4. After hearing both the parties we find that certain material hid come into the possession of the Assessing Officer and assessment have been reopened for the above assessment years within four years. Therefore, there is nothing wrong with the re-opening of the assessment and this ground for the assessment years 1996-97 and 1997-98 is dismissed. 5. The brief facts regarding the claim of deduction under section 80-IA of the Act for the assessment years 1996-97 and 1997-98 are that the Assessee was in the business of manufacture of Bandruff which was further used by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 80-IA mainly because there was no factory at the given address by the Assessee. The Assessee could not clearly establish whether the fumigation chamber existed, the grinding of leaves was not done in the premises of the Assessee, the Assessee consumed very little electricity and the whole of the produce was sold to only one party, viz., M/s. Mediherbs. On appeal, the CIT (Appeals) agreed with the Assessee that the entire process of converting raw material i.e., herbs into a finished product i.e., herbal power which has different use and name constitutes manufacturing activity. However, he agreed with the Assessing Officer on the other reasons mentioned above and confirmed denial of deduction under section 80-IA of the Act. Aggrieved, the Assessee is in appeal before us. 7. Before us, the learned Counsel for the Assessee submitted that the Assessee was basically selling Meera Herbal Shikakai Powder in the market which involved mainly two processes. First of all, it required manufacturing of Bandruff which was being manufactured in the Assessee's unit and some of the works like grinding, sieving etc., were being done on job work basis. Then such Bandruff was sold in the market and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls) which has been recorded at page 7 of the Appellate Order. All these certificates clearly show that the Assessee had an industrial unit and the deduction was mainly denied because the processes were not completed in-house. For this, he relied on the decision of the Tribunal in the case of Dy. CIT v. Elgi Ultra Industries Ltd. [IT Appeal No. 1631, 1789 & 1790 (Mds.) of 2003, dated 26-10-2005] (copy filed on record), wherein following the judgment of the Hon'ble Bombay High Court in the case of CIT v. Penwalt India Ltd. [1992] 196 ITR 813, it was held that even if the Assessee was in the manufacturing of goods, on job work basis, the Assessee was entitled to deduction under section 80-IA of the Act. Therefore, the learned Counsel for the Assessee pleaded that the case of the Assessee is squarely covered by that judgment. 10. On the other hand, the ld. Departmental Representative, strongly supported the orders of the lower authorities. He particularly relied on para 6 of the Appellate Order. 11. We have considered the rival submissions carefully in the light of the material on record. We find that the CIT(Appeals) has admitted that the Assessee was in the business of manufacturin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l and supervision was also ensured at all levels. We further find that assembling was done through labour contractors, but still supervision and quality control was being monitored by the Assessee company. Marketing and after sales services of (he product was also being provided by the Assessee company. According to us, the ld. CIT(Appeals) has correctly followed the decision of the Hon'ble Bombay High Court in the case of CIT v. M/s. Pentwalt India Ltd. (196 ITR 813) (Bom.), wherein it was observed as follows :- 'an Assessee would be said to be engaged in . manufacturing activity if he is doing a part of the manufacturing activity by himself and, for the rest of it, engages in the services of somebody else on a contract other than a contract of purchase. The Assessee canvassed orders for supplying, erecting and commissioning sugar and tea machinery. The Assessee's activity consisted of (i) canvassing of orders (ii) preparing of designs and drawings on the basis of orders (iii) placing orders for the manufacture of machinery with TH (iv) to see that the manufacturing process is carried on by TH under the direct supervision of the Assessee company (v) to have a check over the qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 6,22,438 on account of difference in purchase and sale price by M/s. India Industries Ltd. in the assessment years 1996-97 and 1997-98 respectively, According to the Assessing Officer, such inflation was done through Pondy Personal Care Ltd., and Fragra International and Madan Labs (P.) Ltd. and, therefore, sums of ₹ 42,67,940, ₹ 55,65,426 and Rs. ,4,67,825 were added on account of these three purchases in the assessment year 1998-99. The additions were confirmed on appeal by the CIT(Appeals). Hence, the Assessee is on appeal before us. 15. Before us, the learned Counsel for the Assessee submitted that none of these parties are related to the Assessee company and Bandruff was being sold to all these parties who in turn were, after adding perfume, converted the Bandruff into Meera Shikakai Powder which is a different product. In turn, RK Herbals (P.) Ltd., Madan Labs (P.) Ltd., Le-bain Herbs (P.) Ltd., for 1996-97 and RK Herbals (P.) Ltd., Madan Labs (P.) Ltd., Medi Herbs for 1998-99, after converting the Bandruff into Meera Shikakai Power after adding perfume, had sold the product to M/s. Kranes India Industries Ltd. in 1996-97 and Pondy Personal Care Ltd., and Fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ld. Departmental Representative submitted that when the Assessee was not the owner of Meera Trade Name, there was no need to sell the product to R.K. Herbals (P.) Ltd., etc., who in turn were selling the product to M/s. Kranes India Industries Ltd. who ultimately sold the goods to the Assessee company. There was no reason to believe that M/s. Kranes India Industries Ltd. would purchase the goods when it was known to that firm that ultimately the buyer is going to be the Assessee company only. He also strongly relied on the orders of the authorities below. 18. We have considered the rival submissions carefully in the light of the material on record. It is settled position of law that every transaction has to be viewed from the angle of business men and not from the angle of department. Every business man is free to conduct his business the way he ants. In fact, the Hon'ble Madras High Court has observed in the case of Global Motor Services (P.) Ltd. (supra) that "it is not for the Revenue to question the commercial expediency of the expenditure or income. The commercial expediency is a matter entirely left to the judgment of the Assessee". We also find that the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X
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