TaxTMI 
TaxTMI 
TaxTMI 
2015 (4) TMI 638
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....red. 4.The 'appellant company' has set up an industrial undertaking at 118-E, Shyam Nagar, Kanpur. It is 100% export unit, as per the certificate granted by the Central Government under Section 14 of the Industries (Development and Regulation) Act, 1951. The assessee, during the period under consideration, was engaged in manufacture of 'Ballistic Helmet' and 'Bullet Proof (bullet resistant) Jackets" (hereinafter called 'Helmet and Jackets'). 5. The assessee claimed benefit under Section 10B of the Income Tax Act, which was denied by the A.O. But the C.I.T.(A) has allowed the claim of the assessee. However, the Tribunal has restored the order of the A.O. Being aggrieved, the assessees have knocked the door of this Court by filing the present appeals. 6. Sri S. K. Garg assisted by Sri Ashish Bansal, advocate on behalf of the assessees, submitted that the assessee company being '100% EOU' qualifies for exemption on purchase of raw materials meant for manufacturing under section 3B of the Trade Tax Act. Similarly, exemption under Section 10B of the Income Tax Act is allowable to the assessee. 7. On 25.2.2008, a survey under Section 133A was carri....
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....he submission of the learned counsel that the managerial and technical staff was available with the assessee for direct control and supervision of the goods to be manufacture through outsourcing. 11. The C.I.T.(A) has already verified this fact as mentioned in his order dated 15.7.2010. The C.I.T.(A) found that only a part of the manufacturing activity of 'Ballistic Helmets' and 'Bullet Proof (bullet resistant) Jackets' was out sourced. The entire raw material needed for the job work was procured by the assesee company and sent to the site of the job worker with due permission of the Excise Authorities. The job work was carried out by the job worker, under the supervision of the staff of the assessee. After the job work, the product was returned to the assessee factory, where final product was assembled, packed and dispatched to the overseas buyers. 12. Learned counsel, further submitted that the powers of the first appellate authority are co-terminus with the power of the A.O. as per the ratio laid down in the case of Jute Corporation of India Vs. C.I.T. 187 ITR SC 688, 693. In support of his submissions counsel for the assessee relied upon the ratio laid down in....
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....s. 5.98 lacs only). The conclusion drawn by the C.I.T.(A) is incorrect and the order passed by the Tribunal is reasonable. 15. We have heard both the parties and gone through the material available on record. For facilitation, Section 10B of the Income Tax Act is reproduced below:- Sec.10B (2) This Section applied to any undertaking which fulfills all the following conditions, namely:- (i) it manufactures or produces any articles or things or things computer software; (ii) it is not formed by the splitting up, or the reconstruction, of a business already in existence; Provided that this condition shall not apply in respect of under-taking which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such undertaking as is referred to in section 33B, in the circumstances and within the period specified in that section; (iii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose." 16. From the records, it appears that during the year under consideration, part of the activity connected with manufacturing of 'Ballistic Helmets' and 'Bullet Proof (bullet resista....
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....by hand or machine, a new product having a distinctive name, character or use and shall include processes such as refrigeration, cutting, polishing, blending, repair remaking, re-engineering and includes agriculture, aquaculture, animal husbandry, floriculture, horticulture, pisciulture, poultry, sericulture, viticulture and mining" (c). Inserted by the Finance Act 2009 (29BA) "manufacture", with its grammatical variations, means a change in a non-living physical object or article or thing - (a) resulting in transformation of the object or article or thing into a new and distinct object or article or thing having a different name, character and use: or (b) brining into existence of a new and distinct object or article or thing with a different chemical composition or integral structure." In the case of Commissioner of Income Tax Vs. U.P. State Agro Industrial Corporation (No.1) (1991) 188 ITR 370 decided by this Court it was observed:- "The assessee imported innumerable components of a tractor. These various parts were first assembled together in turn resulted in a tractor. The components imported by the assessee did not have propulsion and could not be called a tractor. The ....
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....g process is carried on by TH under the direct supervision of the assessee-company, (v) to have a check over the quality and control and to be responsible for the proper functioning of the machinery and guarantee after sale service for a stipulated period. The assessee claimed special deduction under section 80-I of the Income Tax Act, 1961." In the case of Commissioner of Income Tax Vs. Elgi Ultra Industries Ltd. TC(A) Nos.451 of 2006 and 218 & 219 of 2007 dated 10.8.2012 it was observed that the assessee himself is not personally engaged in manufacture, would not disentitle assessee from claiming the relief as one engaged in manufacturing activity, so long as assessee exercises control in work entrusted to job workers and the assessee will be entitled for benefit of manufacturing:- "The order of the authorities below show that the assessee exercised supervision and control in the manufacturing of the parts done by the job workers on the materials supplied by the assessee in according to the specification in the dyes supplied by the assessee. They were subjected to quality control too. Thus even though the assessee had not employed its own employees, yet, the fact is that at eve....
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....ad. The biris were then brought to the factory of the firms and were heated for a short time. They were then packed in bundles of 25 each, wrapped in specially designed paper bearing trade mark and label of the firms. Therefore, from the tendu leaves and the tobacco, a new and different article, viz., biris, emerge as a result of various processes to which the tendu leaves and the tobacco were subjected. Therefore, the firms were industrial undertakings as contemplated by the Explanation to s. 5(1)(xxxi) of the Act and the assessee was entitled to the exemption of the value of his shares held in the two firms under s. 5(1)(xxxii) of the Act." 19. In the light of above discussion, we are of the view that the assessee is a manufacturer of the 'Ballistic Helmets' and 'Bullet Proof (bullet resistant) Jackets'. Only a part of the manufacturing activities was got done by the assessee from outside agency and that to under the direct control and supervision of the managerial and technical staff available with the assessee. Therefore, even on the basis of such an outsourcing the assessee has to be held to be the 'manufacturer' of the products for which it had been a....
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....n (2003) 263 ITR 62 (St.) which reproduced hereunder:- 21. Allowing deduction under sections 10A and 10B, to the resulting entity in the case of amalgamation or demerger: 21.1 The deduction under sections 10A and 10B, are not allowed to the assessee where the ownership or the beneficial interest in the undertaking is transferred by any means, due to the provisions of the sub-section (9) of section 10A and sub section (9) of section 10B. However, this condition is not applicable in certain cases, such as where a firm or sole proprietary concern is succeeded by a company as a result of the reorganization of the business, or where as a result of change in ownership, the resultant entry is a public limited company or a venture capital company. 21.2 With a view to give boost to the export-led growth, and to eliminate the hurdles in the Mergers and Acquisitions (M&A) and other modes of business restructuring, a new sub-section (7A) in section 10A and a new sub section (7A) in section 10B have been inserted to provide that where an undertaking of an Indian company is transferred to another company under a scheme of amalgamation or demerger, the deduction shall be allowable in the hands....
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....dversely against the assessee. Normally, these circulars cannot be ignored. A circular may not override or detract from the provisions of the Act but it can seek to mitigate the rigour of a particular provision for the benefit of the assessee in certain specified circumstances. So long as the circular is in force, it aids the uniform and proper administration and application of the provisions of the Act. {Refer to UCO Bank, Calcutta v. Commissioner of Income Tax, W.B. (1999) 4 SCC 599]}." (Page 270) "It is not disputed before us that for the earlier assessment years exemptions have been granted to the undertaking. In this view of the matter, the Tribunal was justified in holding that the assessee is entitled to get exemption under Section 10-A of the Act, 1961. The argument of the learned counsel for the department that since the proprietorship has been converted into partnership, therefore, this disentitles the assessee to claim benefits under Section 10-A of the Act,1961 does not borne out either from the plain language of sub-sections (9) and (9A) of Section 10-A of the Act, 1961 or in view of the Circular of the CBDT referred to above. No substantial question of law is involv....