TaxTMI 
TaxTMI 
1998 (2) TMI 157
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....e paid. When nothing was manufactured by the assessee, the basic condition of s. 80-I remained to be fulfilled, according to the AO. The AO also noticed that raw material was purchased and the same was supplied to the sister-concern for manufacturing process. On these facts the AO was of the view that the assessee could not be considered an industrial undertaking and accordingly deduction claimed under s. 80-I for the asst. yr. 1986-87 was disallowed. For similar reasons the deduction claimed for the asst. yr. 1987-88 was also disallowed. 3. On appeal it was contended that the assessee was getting its products manufactured from sister-concerns, was not factually correct as observed by the AO. The assessee in fact was getting the shoes manufactured by it, fabricated from cobblers employed by it on piece rate basis. A list of 21 cobblers was furnished to show that the assessee had employed more than twenty persons in the manufacturing process as the manufacturing process was not being carried out with the aid of power. It was also argued that for the purpose of claiming deduction under s. 80-I it was not necessary that article or thing should be manufactured under its own roof and....
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....CPF, ESI, etc. the appellant is taking the stand that these cobblers are not employees of the appellant and accordingly not entitled to the benefits of these labour welfare laws. However, for claiming the deduction under s. 80-I, the appellant claims that these cobblers are its employees and accordingly, the deduction should be allowed to it. Under the law, an assessee cannot take contrary stands under different laws as held by the Allahabad High Court in the judgment reported in Shiv Prasad Ram Sahai vs. CIT (1966) 61 ITR 124 (All). The appellant cannot, therefore, be permitted to take the plea in IT proceedings that these cobblers from whom the appellant was getting the shoes manufactured, are its employees when the appellant itself is not accepting this position under the various labour welfare laws mentioned above. Also, it is considered relevant here to reproduce the following extract from the order-sheet of the learned AO dt.8th Aug., 1989which is duly signed for the appellant: "(1) Registered claim under s. 80-I it is admitted that no manufacturing is done in the assessee's own premises and no arrangement of such manufacturing of assessee's own. The manufacturing is got d....
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.... the owner of the machinery who would be eligible to the deduction under s. 80-I and not the several thousand persons who get the job work done from him. Deductions like 80-I are allowed for setting up of new industrial undertakings. In my view, only the person who instals the machine, can be said to be a manufacturer who has set up a new industrial undertaking and the person who gets job work done from him cannot be said to have set up any new industrial undertaking. A new industrial undertaking which manufactures an article or thing, as popularly understood, would mean an undertaking with some manufacturing facilities of its own and cannot mean an undertaking which gets its entire manufacturing done from outside and its only job is to pack the goods and despatch them to the customers." For the above reasons, the appellant is considered to be not eligible for the deduction under s. 80-I. The appellant's reliance on three Tribunal orders for the proposition that for deduction under s. 80-I, the assessee should be manufacturing its own articles, is not considered to be of any help to the appellant as nowhere in these decisions, it is mentioned that an assessee getting articles ma....
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....acts, there is no reason for denying the benefit in the current asst. yrs. 1986-87 and 1987-88. In support he has also cited decisions in the cases of Indocean Engg. Systems (P) Ltd. vs. Dy. CIT (1997) 60 ITD 649 (Pune) and CIT vs. Penwalt India Ltd. (1991) 96 CTR (Bom) 20 : (1992) 196 ITR 813 (Bom). 5. The learned Departmental Representative on the other hand, narrating the facts of the case, submitted that assessee in fact was not an industrial undertaking nor it was manufacturing any article or thing. The assessee also did not have any facility of its own for manufacturing the shoes. It is also an admitted fact that the assessee got the shoes manufactured from cobblers on piece rate basis on supply of material to them. He also submitted that the assessee has not admitted its liability in respect of EPF, CPF, ESI, etc. in respect of the cobblers manufacturing shoes on piece rate basis and further under the excise laws also the assessee has claimed that it is not manufacturing shoes whereas the claim made before the Department is contrary to that taken under the excise laws and other labour laws. The learned Departmental Representative further placed reliance on the decisions i....
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....ng facilities available nor carried out any manufacturing process of its own. The shoes were got manufactured wholly from the cobblers on piece rate basis. They were not in fact employees of the assessee. We also find from the paper-book that there were 21 cobblers engaged in the manufacturing of shoes on job work basis in the asst. yr. 1986-87 and 24 in the asst. yr. 1987-88. It so appears, the assessee was doing the packing of the shoes after the same were received readymade from the cobblers for further sale, as is seen from the fact that the assessee has claimed in the trading and manufacturing account, packing material expenses of Rs. 5,07,041 in the asst. yr. 1986-87 and of Rs. 9,56,140 in the asst. yr. 1987-88. The employees which the assessee engaged were working as packers, salesmen, typists, assistants, driver, etc. and they did not come under the category of workers engaged in the manufacturing of shoes. Sec. 80-I for proper appreciation is reproduced hereunder: "80-I(1) Where the gross total income of an assessee includes any profits and gains derived from an industrial undertaking or a ship or the business of a hotel or the business of repairs to ocean-going vessels....
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....e purchased yarn from market and gave it to weavers for weaving clothes. Cloth was then dyed and calendered. The assessee did not employ any workers for getting the manufacturing work done from industrialist who carried it out in its own factory. The Tribunal held that deduction under s. 80-I was not allowable. We also note that the assessee-firm has not employed any worker of its own in shoe manufacturing and accordingly the condition prescribed in cl. (iv) of sub-s. (2) of s. 80-I is not satisfied. 6.3 As regards the latter asst. yrs. 1989-90 to 1992-93, we find that in those assessment years the assessee had carried out certain manufacturing activities with its own machinery installed in those years and accordingly it fulfilled the necessary condition as required under s. 80-I. The AO has admitted that the assessee-firm installed substantial machinery during those years including those imported valued at Rs. 13,85,620. The assessee carried out manufacturing activities like folding, crumping, pnoumatic fusing, ironing, fugible innerlining, comenting and stamping, etc. with the help of its own machinery and the workers employed thereon. The AO in this view of the matter allowed....
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....ohan Meakins Breweries (1979) 10 CTR (HP) 405 : (1979) 118 ITR 101 (HP), and also contended that as per that decision, advertisement expenses could never be of capital nature. As regards the expenditure on neon-sign and glow-signboards, reliance was placed on the order of the CIT(A) in the case of Atlas Cycle Industries Ltd. for the asst. yrs. 1982-83 and 1983-84 wherein it was held that expenses incurred ought to be treated as for the purpose of business and following the decision of the Tribunal in its own case for asst. yr. 1978-79 expenses claimed were allowed as revenue expenses. It was also contended that the Department has accepted the findings so given by the CIT(A) in the case of Atlas Cycle Industries. It was also contended, referring to the judgment of the Hon'ble Himachal Pradesh High Court, cited, that even if there are other contrary judgments of other High Courts, the view favourable to the assessee should prevail as has been held by the Hon'ble Supreme Court in large number of cases. The first appellate authority having regard to such pleadings allowed the expenses claimed as revenue expenditure with the following observations: "4.3.I have carefully considered th....