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2014 (4) TMI 484
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....ts of the case and in law, the Appellate Tribunal erred in treating the processes employed by the assessee in segregating the metal scrap from cable scrap as 'Manufacture or produce' within the meaning of section 10B of the Income-tax Act? (2). Whether in the circumstances and the facts of the case and in law, the Appellate Tribunal erred grievously in setting aside he issue relating to DEEMED EXPORT (DTA sales) to the file of the Assessing Officer and thereby not confirming the concurrent findings of the Assessing Officer and the CIT(A)? (3). Whether in the circumstances and the facts of the case and in law, the Appellate Tribunal is right in allowing deduction u/s.80IB of the Income tax Act, 1961? (4) Whether in the circumstances and the facts of the case and in law, the Appellate Tribunal is right in confirming the order of the CIT (A) in allowing deduction u/s.80HHC without adjudicating on the ground of appeal taken by the revenue?" 2. We would refer to facts arising in Tax Appeal No.2562 of 2009. It would be convenient to deal with Questions No.(1) and (2) together. First question pertains to Revenue's objection to the assessee's deduction under section 10B....
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.... length the assessee's process and referred to the decision of Supreme Court in case of Vijay Ship Breaking Corporation and others vs. Commissioner of Income-tax reported in [2009] 314 ITR 309 (SC) to hold that the same amounted to manufacturing activity. 6. With respect to the assessee's claim for deduction on its DTA sales, the Tribunal placed the matter back before the assessing officer in following terms:- "13. Regarding claim u/s. 10B on deemed exports we have already set aside this issue to the file of assessing officer in case of M/s. Siyaram Metals P. Ltd in ITA No.377/RJT/2006 for the assessment year 2002-03. 11. This left us with ground of assessee's appeals regarding claim u/s 10B of deemed exports. Before us, Learned AR has placed written submission pressing for allowance of deduction on deemed export u/s 10B of the Act. Learned DR relied up on Para no.2.9 the order of CIT(A). Ld. AO has dealt with the written submission made by assessee vide letter dated 20/10/2004 pressing for the deduction u/s.10B of the Act. He has rejected this submission that deduction u/s 10B is allowed only in case goods are exported out of India. He held that deemed export is not menti....
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....crap,mix metal scrap and old/used transformers. From such scrap so imported, they undertake different processes for extraction of materials, which are possible to salvage from such scrap. Admittedly, part of the scrap is used for production of iron ingots. To this extent even the assessing officer accepted that the same amounted to manufacturing activity. Production of iron ingots would necessarily require not only segregation of the scrap but also melting at a high temperature and thereafter production of bars. To this aspect, therefore, the Revenue rightly did not raise any issue. 10. The process undertaken by the assessees was explained before the authorities as under:- "a) Mix Cable Scrap Principle raw material being mix metal copper cable scrap is imported. This material when received in factory is sorted and segregated in different diameters and of various lengths. This process is done manually or most of the times mechanically to remove jackets, upper layer and paper and for making them suitable for feeding in different cable cutting machines and stripping machines. After a process various strips in the cables are removed, the sorted cable scraps put in to cable cut....
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.... of such process, the Tribunal held and observed as under:- "21. We have gone through the above process and final product which is ferrous and non ferrous metal scrap and other type of scrap was quite different from the raw material. The final products of raw material were further used for industrial uses. While the raw material of the assessee is of no use in foundry or industries. The final products being the scrap of specific metal/non-metal material had distinct identity,use, character and name. The final products had been obtained after applying one or more process may be manually or mechanically and thereafter the different commodity has come into existence. Therefore the process employed by the assessee unit is falling in the four corners of manufacture or produce. 22. We find that concept of EOU is covered by Excise, Customs and Foreign Trade Rules. One of the requirements for getting EOU status was that a person should be engaged in manufacturing or production. Anybody not doing manufacturing is not granted EOU status. During the course of hearing the ld.AR drawn out attention to section 10AA in IT Act granting tax benefits to SEZ (Special Economic Zone) units and th....
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....rial being mixed metal scrap is just a mixture of different scrap material which may include used parts, fittings, shredded industrial waste of various non-ferrous metal/non-metal items. From this mixed scrap, different types of scrap material are segregated and separately collected. We find that the raw material was simply mixture of different scrap material which has been separated. 25. We find that there is difference in the raw material and final product and the process was segregation of mixed scrap. Based on the decision of the Hon SC in the case of Vijay Ship Breaking Corporation vs. CIT reported in 175 Taxman 77 and India Cine Agencies (175 Tax 361 (SC) where production is also eligible for deduction. Therefore, out of the processes of three different types of raw material, the segregation of mixed metals scrap can be held as the Production. There is one more activity which the appellant is doing which is melting the final scrap material obtained from any of these processes and foundry to make ingots. We find that this activity there is no doubt that it amounts to production. Although the AO has denied the entire claim, it is submitted by the learned AR of the assessee t....
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....bove contain definitions of the term "manufacture", which definitions are worded slightly differently, the Courts have accepted the principle of fairly universal application that where the change or series of changes brought about by the application of processes take the commodity to the point where, commercially, it can no longer be regarded as the original commodity but is, instead, recognised as a distinct and new article that has emerged as a result of the process, it would amount to manufacture of an article or thing. Reference in this respect may be made to the decision of the Supreme Court in the case of M/s. Ujagar Prints and others (II) vs. Union of India and others reported in (1989) 3 SCC 488. 16. At the same time, it is also well settled that the word "manufacture" implies a change but every change in the raw material is not manufacture. There must be such a transformation that a new and different article must emerge having a distinct name, character or use. Reference may be made in this respect to the decision of the Supreme Court in the case of M/s. Tungabhadra Industries Ltd., Kurnool vs. The Commercial Tax Officer, Kurnool reported in AIR 1961 SC 412. 17. In t....
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....ntire ship breaking activity, the articles which emerged from that activity, the various steps which are required to be undertaken for ship breaking activity and, consequently, after placing reliance on the judgment of this Court in Budharaja's case [1993] 204 ITR 412, it has held that the ship breaking activity resulted in production of articles which emerged when the ship breaking activity stood undertaken. In our view, the important test which distinguishes the word 'production' from 'manufacture' is that the word 'production' is wider than the word 'manufacture' as held in Budharaja's case. Further, it is true that in Budharaja's case, the Division Bench has used the word 'new article'. However, what the Division Bench meant was that a distinct article emerges when the process of ship breaking is undertaken. Further, the Legislature has used the words 'manufacture' or 'production'. Therefore, the word 'production' cannot derive its colour from the word 'manufacture'. Further, even according to the dictionary meaning of word 'production', the word 'produce' is defined as something....
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....ed by various Government Authorities as manufacture. To say that the activity will not amount to manufacture or production under Section 80IA will have disastrous consequences, particularly in view of the fact that the assessees in all the cases would plead that they were not liable to pay excise duty, sales tax etc. because the activity did not constitute manufacture. Keeping in mind the above factors, we are of the view that in the present cases, the activity undertaken by each of the respondents constitutes manufacture or production and, therefore, they would be entitled to the benefit of Section 80IA of the Income Tax Act, 1961." 23. Under the circumstances Question No.(1) is answered in favour of the assessee and against the Revenue. Insofar as second question is concerned, since the Tribunal has merely remanded the entire issue before the assessing officer for fresh consideration of the entire issue without any observations and/or directions, we do not see any reason to interfere. The assessing officer shall examine whether on DTA sales by the assessee, claim of deduction under section 10B of the Act would be allowable. It is clarified that whether the remittances on such ....
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....tention of both the parties. We relied upon the decision of Hon Punjab and Haryana High Court in the case of Ramco Industries reported in 17 DTR 241, wherein it is held as under:- "When the assessee having fully furnished the documents and submitted form no.10CCB during the assessment proceedings, claiming the deduction under 80IB which was not claimed in the return, the deduction is admissible even in absence of revised return. The Hon. High Court held that there was no requirement for filing of any revised return. Hon. High Court has further considered the decision of the Hon. Goetz (India) Limited (284 ITR 323) (SC) and after considering the decision of SC the High Court has held that when the assessee has filed form no.10CCB during the assessment proceedings, the claim is admissible and CIT(A) has rightly allowed the claim of the assessee and we find that there is no requirement of filing any revised return." 37. In the instant case, on hand, the assessee has filed all the required documents before AO. We find that in support of the claim, audit report in form no.10CCAC was also submitted and that claim was also forwarded to the AO. Therefore, we are of the view that CIT(....
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....n do what the Income Tax Officer can do and also direct him to do what he has failed to do." It was observed that there was no reason why the appellate authority cannot modify the assessment order on an additional ground even if not raised before the Income Tax Officer. The Act does not place any restriction or limitation on the exercise of appellate power. It was observed that:- "The above observations are squarely applicable to the interpretation of s. 25 1(1) (a) of the Act. The declaration of law is clear that the power of the Appellate Assistant Commissioner is co-terminus with that of the Income Tax Officer, if that he so, there appears to be no reason as to why the appellate authority cannot modify the assessment order on an additional ground even if not raised before the Income Tax Officer. No exception could be taken to this view as the Act does not place any restriction or limitation on the exercise of appellate power. Even otherwise an Appellate Authority while hearing appeal against the order of a subordinate authority has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitations if any prescrib....
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....of the Tribunal to entertain an additional ground which according to the Tribunal arose in the matter and for just decision of the case. 35. In case of Commissioner of Income-tax vs. Pruthvi Brokers and Shareholders P.Ltd. reported in [2012] 349 ITR 336 (Bom) the Bombay High Court considered the issue at considerable length and held that Commissioner (Appeals) as well as the Tribunal have the jurisdiction to consider the additional claim and not merely additional legal submissions. The appellate authorities have discretion to permit such additional claims. Such claims need not be those which became available on account of change of circumstances of law but which were even available when the return was filed. 36. The Delhi High Court once again in recent judgment in the case of Commissioner of Income-tax vs. Sam Global Securities Ltd. reported in [2014] 360 ITR 682 (Delhi) observed that the Courts have taken a pragmatic view and not a technical one as to what is required to be determined in taxable income. In that sense assessment proceedings are not adversarial in nature. With these observations Court confirmed the view of the Tribunal reversing the decision of the assessing ....