TaxTMI 
TaxTMI 
2006 (3) TMI 210
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....ctivity. 3. That even after cutting and crushing the stones, it does not lose its original identity as stones and nothing new is produced. Stone crushing industry is not entitled for exemption under section 80-IB. 4. That the worthy CIT (Appeals) has erred in ignoring the case laws of CIT v. Gem India Mfg. Co. [2001] 249 ITR 307 (SC) and Divisional Dy. CST v. Bheraghat Minerals Industries [2000] 246 ITR 230 (SC) with similar nature of work as that of the assessee. 5. The worthy CIT (Appeals) has erred in comparing the case of the assessee with CIT v. Hemsons Industries [2001] 251 ITR 693 (AP) and CIT v. Abdul Ahad Najar [2001] 114 Taxman 655 (J&K) which has no relevancy of nature of work as compared to with assessee's nature of work. 6. That the appellant craves to leave to add or amend the grounds of appeal before the appeal is heard or disposed of. 7. That the order of the learned CIT (Appeals) be set aside and that the Assessing Officer be restored." The grievance of the Department in these appeals relate to the deduction under section 80-IB of the Income-tax Act claimed by the assessee and allowed by the learned CIT (Appeals). 2. The facts of the case in br....
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....ITR 737 (Mad.) In the assessment year 2001-02, the return was filed by the assessee on 24-10-2001 which was processed on 22-2-2002. However, the case was reopened by issuing the notice under section 148 on 9-12-2003. The Assessing Officer did not allow the claim of assessee under section 80-IB as was done for the assessment year 2002-03. 3. The assessee had taken the matter to the learned CIT (Appeals) and submitted that the provisions of sub-section (8) to section. 80-IB required the assessee to get its accounts audited by a Chartered Accountant and to furnish along with the return the report of such audit in the prescribed form duly signed and verified by such Chartered Accountant and that under rule 18BBB, such report was required to be furnished in Form No. 3CCB. It was further submitted that prima facie on the face of those returns, there could not be any reason to believe that the said claim of the assessee was inadmissible. It was further submitted that the assessee's crusher was registered with the Industries Department, Dharamshala (H.P.). The crusher was also registered with RP. State Environment Protection and Pollution Control Board, Hotel King's, The Mall, Shimla....
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....R 323 (SC), (ii) CIT v. Hemsons Industries [2001] 251 ITR 693 (AP), (iii) CIT v. Goverdhanbhai Jethabhai Tobacco Industries (P.) Ltd [2002] 258 ITR 727 (Guj.), (iv) CIT v. Abdul Ahad Najar [2001] 114 Taxman 655 (J&K), (v) Union of India v. Onkar S. Kanwar [2002] 258 ITR 761 (SC). Now, the Department is in appeal. 4. The learned DR strongly supported the order of the Assessing Officer and submitted that the assessee was not engaged in the manufacturing activities, so the deduction under section 80-IB was not allowable. He further submitted that mere breaking the boulders into smaller pieces was not manufacturing activity. Reliance was placed on the following case laws: (i) CIT v. Gem India Mfg. Co. [2001] 249 ITR 307 (SC) (ii) Lucky Minmat (P.) Ltd. v. CIT [2000] 245 ITR 830 (SC), (iii) CIT v. Vijay Granites (P.) Ltd. [2004] 267 ITR 606 (Mad.). 5. In his rival submissions, the learned counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the assessee was engaged in the activity of manufacturing since the products i.e., stone (bajri) was different from boulders and it was manufactured with the he....
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....uld only be eligible and qualified for such deduction. An 'industrial undertaking' which is engaged in manufacture and production of an article or thing would be eligible for the deduction under section 80-IB. For allowing the deduction under section 80-IB it is necessary to understand the meaning of the word 'manufacture'. The word 'manufacture' used as a verb is generally understood to mean as that bringing into existence a new substance and does not mean merely to produce some change in a substance, however, minor in a consequence the change may be. In the case of B.S. Bajaj & Sons v. CIT [1996] 222 ITR 418 (Punj. & Har.), the Hon'ble jurisdictional High Court interpreted the word 'manufacture' and observed that the distinction between processing and manufacturing is well brought about in a passage quoted in Permanent Addition of Words and Phrases Vol. 26 the passage runs thus: "'Manufacture' implies a change, but every change is not manufacture and yet every change of an article is the result of treatment, labour and manipulation. But something more is necessary and there must be transformation; a new and different article must emerge having a distinctive name, character or ....
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....eaning assigned to them. These two words cannot have the same meaning. The word 'produce' an article has a wider connotation than 'manufacture', every manufacture can be said to be production but not vice versa. Their Lordships of the Hon'ble Apex Court in the case of CIT v. N.C. Budharaja & Co. [1993] 204 ITR 412 while considering the provisions of section 80HH of the Income-tax Act had held as under: "That the word 'production' has a wider connotation than the word 'manufacture'. Every 'production' may not amount to 'manufacture' whereas every 'manufacture' can be termed as 'production'. 'Manufacture' does not imply only a change but something more is necessary. A new and different article must emerge having a distinct name, character or use to bring it within the meaning of the word 'manufacture'. The word produce an article may not amount to a 'manufacture' but it would include all the by-products, intermediate products and residual products which emerge in the course of manufacture of goods. It was held as under: "The words 'manufacture' and 'production' have received extensive judicial attention both under this Act as well as the Central Excise Act and the various sale ....
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....n'ble Supreme Court in the case of Commissioner of Sales Tax v. Lal Kunwa Stone Crusher (P.) Ltd. AIR 2000 SC 1161. In the said case, the respondent was a dealer engaged in purchasing of stone boulders and crushing them into small chips, gitty and dust for the purpose of further sale. The contention put-forth by the dealer was that the process adopted by him in conversion of boulders to the small stones, dust etc. was physically and chemically not different from the original goods. The assessing authority rejected the contention of the dealer and the Assistant Commissioner of Sales Tax noticed that the trader had not manufactured gitty nor bad sold it having crushed boulders into small stones and dust. The view of the Assistant Commissioner was upheld by the Tribunal. The matter was carried to the Hon'ble High Court wherein the petition was dismissed. In the appeal before the Hon'ble Supreme Court, the question raised was whether gitty, stone chips and dust continued to be stone or on crushing stone boulders into gitty, stone chips and dust different commercial goods emerged. On behalf of the Department, it was contended that the process adopted by the dealer would amount to 'manuf....
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....s a necessary condition. 6.8 The Hon'ble Supreme Court in the case of Aman Marble Industries (P.) Ltd. v. CCE [2003] 58 RLT 595 has held that cutting of marble block into marble slabs or tiles does not amount to manufacture, as in both the forms, marble remains marble. In the present case the boulder is the big stone while the pieces of the boulders i.e., gitty or bajri are small stones but there is no change in the composition of the material, so it cannot be said that the breaking of boulders into 'gitty' (small stones) is a manufacturing activity. Since activity of the assessee was not a manufacturing, the deduction under section 80-IB was not available to the assessee. In that way of the matter, for this issue, we reverse the orders of the learned CIT (Appeals) and restore that of the Assessing Officer. 6.9 It is relevant to point out that in the cases relied by the learned counsel for the assessee, the judgment of the Hon'ble Supreme Court (which is the law of land), in the cases of Lal Kunwa Stone Crusher (P.) Ltd. and Lucky Minmat (P.) Ltd., had not been considered. 7. In ITA No. 463/2005 for the assessment year 2001-02, the Department had also raised an additional ....
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....as reopened considering that the assessee had made a wrong claim. 9.1 Before the learned CIT (Appeals) it was submitted that the notice could be issued only if there were 'reasons to believe' that a particular deduction/exemption claimed by the assessee was inadmissible, it was stated that the 'reasons to believe' was a term which was much stronger than term 'reasons to suspect'. It was argued that the claim under section 80-IB was made and the audit report as required in Form No. 10CCB was furnished along with the return of income, thus, prima facie, there could not be any reason to believe that the said claim of the assessee was inadmissible when it had been allowed. Accordingly, it was submitted that the jurisdiction under section 147 had been wrongly assumed. 9.2 The learned CIT (Appeals), after considering the submissions of the assessee observed that the assessee filed the return of income along with audit report in Form No. 10CCB, audited statements of account and balance sheet. The return was accepted under section 143(1) and subsequently notice under section 148 was issued. According to the learned CIT (Appeals), the reasons recorded by the Assessing Officer to assum....
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....ws: (i) CIT v. Kelvinator of India Ltd [2002] 256 ITR 1 (Delhi) (FB), (ii) Mercury Travels Ltd v. Dy. CIT [2002] 258 ITR 533 (Cal.), (iii) Calcutta Discount Co. Ltd v. ITO [1961] 41 ITR 191 (SC), (iv) Vipin Khanna v. CIT [2002] 255 ITR 220 (Punj. & Har.), (v) Jindal Photo-Films Ltd v. Dy. CIT [1998] 234 ITR 170 (Delhi), (vi) Siesta Steel Construction (P.) Ltd. v. K.K. Shikare [1985] 154 ITR 547 (Bom.), (Vii) Jt. CIT v. George Williamson. (Assam) Ltd. Everyday Industries (India) Ltd. [2002] 258 ITR 126 (Gauhati), (viii) CIT v. Former France [2003] 264 ITR 566 (SC). Now the Department is in appeal. 10. Learned DR strongly supported the order of the Assessing Officer and submitted that the case was rightly re-opened in accordance with Explanation 2(b) appended to the proviso to section 147 of the Income-tax Act, which states that: "Explanation 2: For the purpose of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely:- (b) Where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has und....