2020 (10) TMI 248 - AT - Income Tax

Tribunal Upholds Manufacturing Exemption, Disallows Transport Payments

DCIT, Circle-1 (1), Bhubaneswar Versus M/s Anand Exports And (Vice-Versa)

The Tribunal directed the Assessing Officer to reconsider the case for eligibility of deduction under section 10B, emphasizing the intention to export ... Exemption u/s. 10B - assessee is engaged in manufacturing activity - beneficiation of chrome ore is not a manufacturing activity ignoring the fact that on the basis of such manufacturing activity the assessee has been issued 100% ECU certificate from the Ministry of Commerce and Industries, Government of India - HELD THAT:- Tribunal has restored the issue to the file of AO for reconsideration of the intention of the assessee to export mineral which is abundantly available in the particular area insofar as an effort in manufacturing the same whether could entitle it to claim deduction u/s.10B of the Act or not. Similar is the position in the assessment year under consideration. Respectfully, following the decision of the Tribunal in own case we set aside the order of the CIT(A) and restore the issue to the file of AO to decide the issue afresh in the light of the observations made by the Tribunal in the preceding assessment year i.e.A.Y.2008-2009. Thus, the grounds No.1 to 3, consisting of one issue, are allowed for statistical purposes. Disallowance u/s.40A(3) - HELD THAT:- We find that the issue involved in the present case has already been decided by the coordinate bench of the Tribunal in assessee’s own case for the A.Y.2009-2010 in [2015 (5) TMI 1212 - ITAT CUTTACK] wherein the Tribunal has already been decided in favour of the assessee Issues:1. Allowance of exemption u/s 10B to the assessee for not engaging in manufacturing activity.2. Justification of exemption u/s 10B for business process not resulting in a new article.3. Reliance on ITAT's decision for allowing exemption u/s 10B.4. Disallowance u/s 40A(3) on transport payments estimate.5. Consideration of cross objection grounds regarding transport expenses.Issue 1:The Revenue appealed against the CIT(A)'s order allowing exemption u/s 10B to the assessee despite not engaging in manufacturing. The AO disputed the manufacturing activity claim based on the process of removing impurities from chrome ores. The Tribunal observed the need for the AO to reconsider the case, emphasizing the intention to export minerals and manufacturing for deduction eligibility.Issue 2:The Revenue contended that the business process of removing impurities did not result in a new article, thus disallowing exemption u/s 10B. The Tribunal referred to the assessee's previous case, emphasizing the need for the AO to reevaluate the manufacturing aspect for deduction eligibility based on the nature of the activity and export intentions.Issue 3:The Revenue challenged the reliance on ITAT's decision for allowing exemption u/s 10B, citing a pending challenge before the High Court. The Tribunal upheld the CIT(A)'s decision, referring to the applicability of the previous case's decision in favor of the assessee, emphasizing the production of chrome concentrate as a manufacturing activity.Issue 4:The Revenue contested the CIT(A)'s direction to disallow 10% of transport payments under section 40A(3). The Tribunal referred to a previous case where a similar issue was decided in favor of the assessee, rendering the grounds raised by the Revenue and the cross objection infructuous.Issue 5:The cross objection raised by the assessee regarding transport expenses was considered, with the Tribunal finding the issue settled in a previous case. The Tribunal dismissed the grounds raised by both the Revenue and the assessee, partly allowing the Revenue's appeal for statistical purposes and dismissing the cross objection.This detailed analysis covers the various issues raised in the judgment, outlining the arguments presented by both parties and the Tribunal's decisions on each matter.