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TMI Blog2008 (8) TMI 1025X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 80-IB of the Income Tax Act, 1961 (in short 'the Act). The assessee is a partnership firm registered as a small scale industrial undertaking with the Industries department of Himachal Pradesh. It is engaged in the manufacture of exercise books and registers. The assessee filed its return of income for the assessment year 2003-04 declaring nil taxable income, which inter alia included gross total income of Rs. 7,97,103. In the return of income the assessee had claimed deduction under Section 80-IB of the Act of Rs. 7,97,103 and hence the final income was determined at nil. In the assessment finalized under Section 143(3) of the Act on 21-3-2006 the assessing officer has denied the claim of the assessee for deduction under Section 80-IB of the Act and hence the income has been determined at Rs. 7,97,103. The appeal of the assessee against such denial of Section 80-IB benefits before the Commissioner (Appeals) was unsuccessful and hence the present appeal of the assessee before us. 3. We have heard arguments from both the sides. The appellant has also furnished a paper book which inter alia contains copies of submissions made before the lower authorities, copies of wage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of copies/registers. 6. On the basis of the above, the plea of the appellant is that the exercise note books/registers manufactured by the assessee is a commercially different commodity from the raw materials. The final product of the assessee has a distinct character, use and name. It is pointed out that the raw material used by the assessee undergoes various processes and what emerges is a new and different product as understood in the commercial sense. It is further submitted that the end-product is not capable of being brought back to its original shape. It was therefore argued that the process of making exercise notebooks and registers amounts to manufacture. In support it is pointed out that the Mumbai Bench of the Tribunal in the case of ITO v. Punchline Forms (2005) 96 ITD 393 (Mum) has held that the process of making continuous computer stationery amounts to manufacture. In this regard, reliance has been placed on the following decisions: (i) Aspinwall Co. Ltd. vs. CIT (2001) 170 CTR (SC) 68 : (2001) 251 ITR 323 (SC); (ii) CIT vs. Ajay Printery (P) Ltd. (1965) 58 ITR 811 (Guj); (iii) Addl. CIT vs. A. Mukherjee Co. (P) Ltd. (1978) 113 ITR 718 (Cal); (iv) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n eligible industrial undertakings. Sub-section (2) of Section 80-IB enumerates the conditions that are to be fulfilled by an industrial undertaking so as to be eligible for Section 80-IB benefits. Shorn of other details, for the present, we are concerned with the condition prescribed in clause (iii) of Sub-section (2) of Section 80-IB which reads as under: (iii) it manufactures or produces any article or thing, not being any article or thing specified in the list in the Eleventh Schedule, or operates one or more cold storage plant or plants, in any part of India: Provided that the condition in this clause shall, in relation to a small scale industrial undertaking or an industrial undertaking referred to in Sub-section (4) shall apply as if the words 'not being any article or thing specified in the list in the Eleventh Schedule' had been omitted. 10. From the aforesaid it is clear that in order to claim Section 80-IB benefit the industrial undertaking should manufacture or produce an article or thing. The restriction on production of article or thing specified in the list in the Eleventh Schedule is not relevant in the instant case as the industrial undertaking of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exercise books/registers are cut to give the desired shape. In our considered opinion, the final product made by the assessee is a commercially different commodity from the raw materials, i.e., plain paper sheet, cardboard, gum, stitching pins, binding cloth, craft paper etc. used in its preparation. The exercise notebook and registers produced have a distinct character, usage name distinct from the raw materials and ostensibly the change brought out by the process in question is not capable of reversal. Clearly, the registers and the exercise notebooks cannot be brought back to the original shape inasmuch as the raw materials undergo a process from which emerges a new and different product as understood in the commercial parlance and in usage too. The end-products are specifically made for use as stationery. Apart from the aforesaid, we also notice that the assessee is registered as 'manufacturing' small scale industrial unit with District Industries Center, Nahan (Himachal Pradesh). The assessee also employs machines amounting to Rs. 82,160 for carrying out the process of manufacturing exercise notebooks/registers. The counsel for the assessee has also referred to the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing officer is non-submission of the prescribed audit report. In this regard, we find that along with return of income, the assessee had submitted the report of the auditor as required by Section 80-IA(7) as applicable to Section 80-IB in the old format. So however, in the course of the assessment proceedings, the report in the required format was submitted. The assessing officer noticed various discrepancies in the said report and held that since it was not filed initially in the prescribed format, the benefit of Section 80-IB could not be allowed to the assessee. For similar reasoning the Commissioner (Appeals) has also sustained the stand of the assessing officer. In our view, the parity of reasoning laid down by the Hon'ble Punjab Haryana High Court in the case of Punjab Financial Corporation (supra) clearly helps the case of the assessee. The Hon'ble High Court was interpreting a similar provision in Section 32AB(5) requiring the assessee to file an audit report to claim benefit of deduction under Section 32AB(1) of the Act. It was held by the Hon'ble Court that the provision relating to the submission of audit report along with return of income was not manda ..... X X X X Extracts X X X X X X X X Extracts X X X X
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