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TMI Blog2018 (4) TMI 982X X X X Extracts X X X X X X X X Extracts X X X X ..... d that this order of ld CITA has been accepted by the revenue by not preferring further appeal to this tribunal. Hence the very basis or foundation on which the ld AO denied the benefit of deduction u/s 10B of the Act stood nullified by his own orders or the order of his higher authority. These facts were not controverted by the revenue before us. The facts for the year under appeal are not different from the earlier years wherein relief was granted to the assessee. Assessee is indeed entitled for deduction u/s 10B of the Act for the Asst Year 2011-12 also and the same has been rightly granted by the ld CITA and accordingly we do not deem it fit to interfere with the order of the ld CITA. Accordingly, the grounds raised by the revenue are dismissed. X X X X Extracts X X X X X X X X Extracts X X X X ..... he sister concern N.M.Exports located at the same premises. During the course of survey proceedings, it was observed that the business activities of both the concerns i.e. Anmol Textiles and N.M.Exports are being carried on from the same premises with the following composition of partners :- M/s Anmol Textiles Shri Anil Kumar Saroagi 25% Mrs Ritu Saroagi 25% Shri Amit Saroagi 25% Shri Sandeep Saroagi 25% M/s N.M.Exports Shri Anil Kumar Saroagi 25% Shri Bijay Saroagi 25% Shri Amit Saroagi 25% Shri Sandeep Saroagi 25% Thus there are common partners in both the concerns except Shri Bijay Saroagi who is the father of other partners. He observed that M/s N.M.Exports which is engaged in the manufacturing of garments, the other unit of which (M/s Mahadev Fabrics) is engaged in dyeing of fabrics at JL-2, Sankrail Industrial Park, Dhulagori, Howrah. The assessee has made all the purchases of T-Shirts from M/s N.M.Exports in pieces and made exports thereof after putting tags etc on the T-Shirts which is being claimed as a manufacturing process for the claim of 100% deduction u/s 10B of the Act. Accordingly, the ld AO observed that the assessee is not the manufacturer of re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t even the assessment order acknowledges the fact of existence of machines. Now if the machines were identified with the declared and approved production process, I find no reason to accept the point that there was no machine or to disbelieve that the machines were insufficient to carry out the production. With regards to Whether the assessee was only buying raw material from NME or buying the finished goods manufactured by NME, it is submitted that in several places of the assessment order, it was narrated that the main manufacturing of the product was done at the assessee's parent unit. On the other hand, the Ld. AR stressed on the point that assessee has carried out the due manufacturing process at its bonded warehouse. The bonded warehouse was a declared station under the Customs Law functioning under the physical supervision of the Cost Recovery Officer (CRO) appointed under the said law. Further, the place was registered with the Central Excise Department for carrying out manufacturing(Stock registers were maintained showing date wise receipts and issues of raw material, daily production and sales of finished goods and stock balance at the end of the day. Monthly retur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an intermediate stage. It was a manufacturing process in itself and who! is done at ANMOL is the final stage and it has to be. seen whether appellant's activity also falls under the legal definition of manufacturing. I have observed tr-ot while appellant had cited a number of authorities in respect of his arguments as to what should be manufacture and how this is complied with by him, AO has declined to accept the logic. Before applying the principles laid down in those authorities, an analysis is required to understand the exact nature of processing done by the appellant. 5.2.10 Now, I consider how the Courts have dealt with the subject 'manufacturing'. (i)ITAT (Chennai) in Vinbros and Co. vs. ITO (2008) 297 ITR(AT) 280 held that where after carrying on process, a different commodity emerges it would be a manufacture. In that case the issue was whether undertaking was carrying out any manufacture or production of any article or things for the purpose of deduction u/s 80IB.The raw material used was rectified spirit and what were manufactured were bear, wine and other alcoholic spirits. It was held that the end product was quite different than the rectified spirit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court considered the case of an assessee who converted jumborolls of photography films into small flats and rolls in desired sizes. It was held that it amounted to manufacture or production for the purpose of allowances u/s 32AB, 80 HH and 80 I of the Act. (vi) In CIT vs. Prabhudas Kishordas tobacco Products P. Ltd. (2006) 2821TR 568 (Guj) Hon'ble Gujarat High Court considered the case of a tobacco declerwho was buying tendu leaves and tobacco. Assessee had hired contract workers who rolled the leaves into bidis which was sold under its brand name. It was held that tendu leaves and tobacco which were used as inputs do not retain their independent identity after the bidis are produced after undergoing various processes. Commercially the final product is known as different commodity and has a separate market. It was held that the assessee was engaged in manufacturing of bidis entitled to deduction u/s80 HH & 801. (vii)The concept of manufacture was further explained by Hon'ble Supreme Court in CIT vs. Oracle Software India Ltd. (2010) 320 ITR 546(SC) where it was held that after operation/process rendered a commodity fit for use for which it would otherwise not be fit, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one unit can be the raw material of another. Since it was not a case and books of accounts the appellant are accepted then the observation by the AO that the assessee is buying a semi finished goods from its parent. cannot alter the situation and the process undertaken being satisfying the basic test of manufacture i.e. production of commercially new goods, there is no material in record to negate exemption u/s 10B. The process that the appellant had undertaken. clearly points out the irreversible nature of the final end product from a raw material purchased and given the above said fact. I agree with the contention of the appellant that there was, in fact, 'manufacture'. Hence, I agree with the contention of the appellant in this regard drawing support from the decision of the Apex Court reported in Aspinwall & Co. Ltd. [2001] 251 ITR 323/118 Taxman 771 (SC) that the word 'manufacture' has to be understood in common parlance. In the decision reported in Aspinwall & Co. Ltd. (supra), the Apex Court observed "It is to be understood as meaning the production of articles for use from raw or prepared materials by giving such materials new forms, qualities or co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oduction under Section 80IA will have disastrous consequences, particularly in view of the fact that the assessees in all the cases would plead that they were not liable to pay excise duty, sales tax etc. because the activity did not constitute manufacture. Keeping in mind the above factors, we are of the view that in the present cases, the activity undertaken by each of the respondents constitutes manufacture or production and, therefore, they would be entitled to the benefit of Section 80/A of the Income Tax Act, 1961." 5.2.12 Whether the appellant,ANMOL TEXTILES was formed by splitting NM Exports The Ld. AR has explained about formation of the 100% EOU and placed all documents like the LOP of the unit issued by Development Commissioner, renewal of the same, approval of the change of name and address. constitution of the firm and details of partners, PAN card of the firm for the undertaking etc. The Ld. AR reiterated that the undertaking was formed with the name of N M Exports-EOU and granted approval. The name was subsequently changed to Anmol Textiles having the same partners with continuance of assessment with the same PAN. In fact I find that in the. assessment ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conclusion for dis-entitlement of the substantive exemption provided u/s l10B of the Act. 5.2.14 Whether principle of consistency has any significance From the documents submitted by the Ld. AR, it is found that the appellant was under scrutiny assessment from AY 2004-05 to 2009-10 and no questions regarding its eligibility to get exemption u/s 10B of the Act were enquired into. He also placed the assessment order made u/s 143(3) for the AY 2010-11 where the specific issue of compliance of the provisions u/s 10B was examined as to whether any value addition was being done by the assessee in manufacturing Tshirts after purchase of the same from the sister concern M/s NM Exports keeping in view the fact that M/s NM Exports has also claiming deduction u/s 80IB(3) as a manufacturing concern and the AO, after allowing exemption u/s 10B, accepted the returned income as such. The Ld. AR mentioned a settled proposition as held in the case of Sharda Export Vs. JClT [2014] 147 ITD/ 183/ [2013] 36 taxmann.com 357 (Delhi Tri.) that the eligibility for deduction under section 10B is to be examined in the first year of allowabilty and not thereafter. In this context. reliance was also plac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mentioned in the assessment order that no undertaking was set up, there was no ownership of goods with the assessee, all the raw materials having being purchased by M/s. N.M. Exports and sister concern was carrying on the business of manufacturing/exporting of T-shirts for more than 20 years, 5. Ld. CIT(A) erred in law and in facts in holding that principles of consistency applies in this case whereas facts of the case are distinguishable and specific action u/s 133A of the Income Tax Act was taken which established the dubious ways of claiming deduction. 6. That the appellant craves the leave to add, alter, modify, include or delete any ground of appeal. 6. We have heard the rival submissions. We find that the ld AO had disputed the existence of manufacturing activity per se carried out by the assessee. Accordingly, the benefit of deduction u/s 10B of the Act had been denied by the ld AO. It is not in dispute that the assessee had set up a 100% Export Oriented Unit (EOU) in terms of the EXIM policy and obtained approval (letter of permission) from the Development Commissioner, Special Economic Zone, Falta, to establish a new undertaking at 5, Khagendra Chatterjee Road, Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duction u/s 10B of the Act. c) The re-assessment for the Asst Year 2010-11 was completed by the ld AO wherein the fact of carrying on of manufacturing activity was accepted by the ld AO and benefit of deduction u/s 10B of the Act was duly granted to the assessee vide orders u/s 147 /143(3) of the Act dated 28.8.2015. 6.1. From the aforesaid facts, it could be seen that the assessee was given deduction u/s 10B of the Act by the revenue commencing from Asst Years 2003-04 to 2010-11. In fact based on the assessment framed for the Asst Year 2011-12, the assessments for the earlier years were reopened wherever possible, based on the same reasoning given in Asst Year 2011-12, and in the re-assessments completed, the ld AO had granted deduction u/s 10B of the Act to the assessee. Hence we hold that the very basis on which the ld AO had held that assessee is not a manufacturer and consequentially not eligible for deduction u/s 10B of the Act stands nullified by his own re-assessment orders passed for the Asst Years 2007-08, 2008-09 and 2010-11. For the Asst Year 2009-10, though the ld AO again took a different stand and denied the benefit of deduction u/s 10B of the Act to the assessee, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he effect that the aforesaid judgment was rendered when Section 35D was not on the statute book and this provision had altered the legal position, the High Court still chose to follow the said judgment. It is here where the High Court went wrong as the instant case is to be decided keeping in view the provisions of Section 35D of the Act. In any case, it warrants repetition that in the instant case under the very same provisions benefit is allowed for the first two Assessment Years and, therefore, it could not have been denied in the subsequent block period. We, thus, answer question No. 1 in favour of the assessee holding that the assessee was entitled to the benefit of Section 35D for the Assessments Years in question. 6.2. In view of the aforesaid findings in the facts and circumstances of the case and respectfully following the judicial precedent relied upon hereinabove, we hold that the assessee is indeed entitled for deduction u/s 10B of the Act for the Asst Year 2011-12 also and the same has been rightly granted by the ld CITA and accordingly we do not deem it fit to interfere with the order of the ld CITA. Accordingly, the grounds raised by the revenue are dismissed. 7. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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