TaxTMI 
TaxTMI 
2008 (6) TMI 248
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.... Year 2004-05 1. Sales Export FOB 29,65,50,905 40,28,46,121 63,09,27,581 SFT 62,60,902 56,62,289 66,96,039 Local 56,53,249 77,23,597 1,15,10,010 Total 30,84,65,056 41,62,32,007 64,91,33,630 2. Gross Profit 12,51,65,024 16,90,31,373 26,08,73,585 3. Gross profit rate 40.58% 40.61% 40.19% 4. Net profit 7,51,67,641 10,19,64,102 14,42,22,167 5. Net profit rate 24.73% 24.50% 22.22% 6. Export Incentive Received Duty Draw Back 51,14,502 64,67,220 71,02,986 Sales of DEPB 20,45,040 56,48,457 1,12,65,925 7. Unclaimed export receipts 33,91,352 26,43,784 - 8. Deduction under section 80HHC claimed 4,98,10,474 5,12,12,082 1,35,14,971 9. Deduction under section 10BA claimed. - - 8,99,43,092 3. The assessee has claimed a deduction under s. 10BA of IT Act amounting to Rs. 8,99.43.092 in the following three units: S.No. Name of the Unit Amount (Rs.) 1. Kusum Sarovar Unit, Maharani Farm Near Nala, Mansarovar, Jaipur 4,07,39,801 2. Kusum Sarovar Unit-II, FCI Godown, Durgapura, Jaipur 4,36,24,323 3. Lali Unit Ramgarh Road, Delhi National Highway, Jaipur 55,78....
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....ufacture' 'produce' 'worker' 'artistic value'. The citations quoted by the assessee can also not be applied in the assessee's case as these have no relevance with regard to interpretation of s. 10BA. As per s. 10BA, the deduction is admissible to the export concern who manufactures or produces handmade articles which are of artistic value and which require use of wood as raw material. The items exported by the assessee are furniture and other items of general utility nature just as coffee table, dinning table, shutter cabinet, bar cabinet, bookshelf, mirror frame etc. These items cannot be said to be the items having artistic value whereas as per s. 10BA of the IT Act the articles mean all handmade articles or things which are not artistic value. This unit purchased semi-finished wooden articles and got it finished through contractors on jobwork basis and no manufacturing has been done by the unit as his own level because the same is got done from contractors on jobwork basis and also labour employed by the assessee in number is 18, which is less than the prescribed limit of 20. Therefore, the arguments, submissions put forth by the assessee are no....
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....nces and within the period specified in that section. (c) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose. Explanation: The provisions of Expln. 1 and Expln. 2 to sub-s. (2) of s. 80-I shall apply for the purpose of this clause as they apply for the purpose of cl. (ii) of sub-s. (2) of that section; (d) ninety per cent or more of its sales during the previous year relevant to the assessment year are by way of exports of the eligible articles or things; (e) it employs twenty or more workers during the previous year in the process of manufacture or production." 6. As regards the conditions laid down under s. 10BA(2)(a) of the Act, it is not applicable in the present case since the assessee has not used any imported raw material. 7. As regards the conditions laid down under s. 10BA(2)(b) and 10BA(2)(c) of the Act, the AO has observed that in the Kusum Sarovar Unit, Maharani Farm, Mansarovar, Jaipur (KS-1), there was an opening balance of plant and machinery as at 1st April, 2003 for an amount of Rs. 2,52,321 and as at 31st March, 2004 and 31st March, 2005, the closing balance of plant and machinery was Rs. 3,23,945 and....
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....or production for grant of relief under s. 10BA. This section is available for asst. yrs. 2004-05 to 2009-10. To put it otherwise, the existing undertakings were not excluded from claiming the benefit under s. 10BA. This explanation of the assessee was not considered by the assessing authorities. On perusal of the provisions laid down in s. 10BA(2)(b) and 10BA(2)(c), the assessee's undertakings has not been formed by splitting up or reconstruction of a business already in existence and none of the undertakings have been formed by the transfer to a new business of machinery or plant previously used for any purpose, since the assessee has not started any new business and the assessee was carrying on the existing business. Therefore, there is no condition laid down under the Act where the existing business of the assessee having the plant and machinery can be denied deduction under s. 10BA(1) of the Act. The deduction is available for a limited period starting from asst. yr. 2004-05 to asst. yr. 2009-10. There is no mention of the commencement of the manufacture or production for claiming the deduction under s. 10BA(1) of the Act. Therefore, it appears that the AO has made wrong i....
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....(6) CIT vs. Haji P. Mohammed (1981) 23 CTR (Ker) 39 : (1981) 132 ITR 623 (Ker). 11. It appears that the assessee was made to make the confession to withdraw, the claim under s. 10BA of the Act which was not permissible. The Departmental authorities cannot force the assessee to make such confession and if retracted when no credible evidence is found, then the Departmental authorities should collect the evidences of material during the survey operation or while framing the relevant assessment orders. The CBDT has also issued the Instruction F. No. 286/2/2003-IT(Inv. II), dt. 10th March, 2003 which is reproduced for the sake of clarity as under: "872. Confession of additional income during the course of search, and seizure and survey operation - Instances have come to the notice of the Board where assessees have claimed that they have been forced to confess the undisclosed income during the course of the search and seizure and survey operation. Such confessions, if not based upon credible evidence, are later retracted by the concerned assessees while filing return of income. In these circumstances, such confessions during the course of search and seizure and survey operations do ....
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....previous year. The assessee was entitled to the deduction of the sum of Rs. 1,49,776 being the amount of sales-tax which it was liable under the law to pay during the relevant accounting year. That liability did not cease to be a liability because the assessee had taken proceedings before higher authorities for getting it reduced or wiped out so long as the contention of the assessee did not prevail. Further, the fact that the assessee had failed to debit the liability in its books of account did not debar it from claiming the sum as a deduction either under s. 10(1) or under s. 10(2)(xv)." And the Hon'ble Supreme Court of India at p. 367 further held in the said decision as under: "The main contention of the learned Solicitor General is that the assessee failed to debit the liability in its books of account and therefore, if was debarred from claiming the same as deduction either under s. 10(1) or under s. 10(2)(xv) of the Act. We are wholly unable to appreciate the suggestion that if an assessee under some misapprehension or mistake fails to make an entry in the books of account and although, under the law, a deduction must be allowed by the ITO, the assessee will lose the....
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....d liberally, the restriction on it too has to be construed so as to advance the objective of the provision and not frustrate it. Therefore, in the circumstances and facts of the case and the decisions of the various Courts of law mentioned hereinbefore, we find that, the assessee has not violated the conditions laid down under s. 10BA(2)(a) and 10BA(2)(b) of the Act and the learned CIT(A) has rightly reversed the decision of the AO on this issue. 13. As regards the conditions contained in s. 10BA(2)(d) and 10BA(2)(e) of the Act, the AO has observed that the items exported by the assessee are furniture and other items of general utility and these items cannot be said to be the items having artistic value as per Expln. (b) to s. 10BA of the Act. The AO further observed that the assessee purchased semi-finished wooden articles and got it finished through contractors on job work basis and no manufacturing has been done by the assessee at his own level and the labour employed by the assessee was also less than 20. 14. The assessee has submitted the explanation as regards the employment of the persons, the definition of the workman/worker and also decisions of various Courts of law in ....
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....aid and is the responsibility of the assessee. The expenses in this regard have duly been reflected in the books of account and are verifiable. We appreciate the explanation submitted by the assessee and find that in the circumstances and facts of the case, the assessee has employed the personal labour of the persons engaged through the contractor. Therefore, the said employees, in our view, should be considered as workers for the purpose of claiming the deduction under s. 10BA of the Act. Our views find support from the decision of various Courts of law as under: (1) Rajasthan Co-operative Dairy Federation Ltd. vs. Judge Industrial Tribunal and Labour Court [D.B. Civil Special Appeal No. 1248 of 1999 decided on 19th Jan., 2001 and published in Western Law Cases (Raj) pp. 128 and 130.] "11. So far as the Rajasthan is concerned the definition of 'workman' as provided in s. 2(s) of the Act of 1947 was amended by the Rajasthan Act No. 34 of 1958 through its s. 3, w.e.f. 1st July, 1960. The definition of workman under s. 2(s) of the Act of 1947 as applicable in the State of Rajasthan since said amendment included any person employed in any industry by an employer or by a co....
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....r as provided under cl. (iv) of sub-s. (2) of s. 80HH and cl. (iv) of sub-s. (4) of s. 80J. The assessee was entitled to the special deductions under ss. 80HH and 80J." (3) Y.L. Agarwala vs. Tazihilali Union (1978) Lab. I.C. 1264 "Where a worker or group of workers labours to produce goods or services and these goods or services are for the business of another, that other is in fact the employer. He has economic control over the workers 'subsistence' skill and continued employment. If he for any reason chokes off, the worker is virtually laid off. The presence of immediate contractors with whom along the workers have direct or immediate or in direct relation excontractu, is of no consequence when, on lifting the veil or looking at the conspectus factors governing employment, it is found though draped in different perfect paper arrangement, that the real employer is the management and not the immediate contractors." (4) Crown Talkies Madras vs. M.P. Seluraian (1975) 48 FJR 344 "The expression 'manual work' occurring in the definition of workman according to me has been used as antithesis to mental or intellectual work so as to distinguish between work done by....
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....9;semi finished' goods from the suppliers (JO) and in-house simultaneously. Rejection of defective items out of the lot of semi-finished goods on receipt by in house quality check official to be redone/rectified before issue of relevant GR. (7) Goods received sent for fumigation (all in house). (8) After fumigation all goods issued for "colonial" finishing as per each buyer's order which is in-house. (9) Specified items issued for art painting. (All in house at KS-I, KS-II and Lali) (10) Final brass fittings by skilled workmen. (11) After quality check, goods sent for packing division for proper packaging of preparation of supervised packing list. 16. The assessee also submitted that the assessee in all the preceding years has been accepted as exporter of wooden handicrafts and has been allowed (benefit) under s. 80HHC of the Act. The assessee has also been recognized by other departments of Government of India, Handicraft Export Council of India, the Sales-tax Department of Government of Rajasthan and all other concerned authorities, all along. The assessee caters to the requirement of diverse buyers of Europe, USA, Japan, Australia, South Africa, etc. for wood ....
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....Manglam Arts has successfully developed its leading position in designing colour shading artistry in hand in printing on wooden articles/things, but its wooden products are presently a brandname by itself and this is duly reflected in the continuous surge in its sales of wooden handicrafts since 2001. The brandname 'Patin' means (i) Old artistic French wooden items with special brass knobs and latches. (ii) "Commod" means French style drawer chest with artistic pure brass fittings. (iii) Louis 16 is a special style of wood used in green white grey shades. (iv) Trumo wooden items laced with mirror fittings/carvings etc. Manglam Arts is engaged in promoting those types of manufacturing and with those steps within the manufacturing value chain that require more people inputs that cannot be easily performed by machinery and may require less capital. The creative talent visualization and originality of its carpenters in the "product development" section the dexterity of its workmen (directly) employed or through contractors and job workers, the increased efficiency of our large fleet of labour in polishing, finishing packing division is the big strength of our wood....