TaxTMI 
TaxTMI 
2015 (6) TMI 612
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....2280 pcs of garments were sold and 940 pcs. remained as closing stock. It is worthy to mention here that the datas in Item 28(a) No of the Form 3CD are given in case of a trading concern. 2. The Ld. CIT(A)-XIV is mistaken in not considering the fact that at item No.28(b) A of the Form No. 3CD (which is applicable in case of manufacturing concern) the description of Raw Material purchased and closing stock is same while the raw material consumed is nil which transpires that the assessee did not manufacture or produce any thing. 3. The Ld. CIT(A)-XIV is mistaken in not considering the fact that in Item No.B of 28(b) of Audit Report (in Form No.3CD)where datas of finished products/key products are furnished has been kept blank evidencing the fact that no article or thing was manufactured. 4. The Ld. CIT(A)-XIV is mistaken in Considering the fact that the assessee purchased unfinished goods and afterwards the unfinished goods were converted into finished goods for the reason that data given against Item No. 28(a) of Audit Report evidences that in course of Trading activity the assessee purchased & sold ready-made garments manufactured by others. 5. The Ld. CIT(A)-XIV is mistaken in....
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.... the words "at least In part" corroborate the fact that the Ld. CIT(A) is not also fully convinced that the goods purchased from the sister concerns as a whole were subjected to labeling, heat treatment, bar coding, putting hangers, packing etc. While the Ld. CIT(A)-XIV is not fully satisfied that the whole of the garments were not subjected to labeling, heat treatment, bar coding, putting on hangers and packing he is mistaken in considering the fact that the goods were produced are allowing the exemption u/s.1OB. 10. The Ld. CIT(A)-XIV erred in considering the fact that garments manufactured in the proprietary concern in their individual capacity as proprietor actually manufactured by the firm, as the firm and proprietorship concern have separate entity and treated as different "Person" and are taxed as different assessee. Moreover, here the assessee firm placed purchase order before proprietorship concern and the proprietorship concern supplied the goods to the assessee ' ------exported them ultimately. The assessee firm did not give any contract to manufacture the .......to the proprietorship concern and in that case the assessee firm should have deduct tax which the assess....
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....o depreciation was claimed as those machine were not put to use within 31.03.2004. The auditor has also specifically mentioned in the schedule of Fixed Assets that those machines were not put to use within 31.03.2004. The copy of schedule of Fixed Asset as on 31.03.2004 . is enclosed-(Annexure-2) with the order. As such, it is evident that the assessee firm did not manufacture an article or thing. 'From Item No.28(9) of the audit report submitted in Form No, 3CD it is found that the assessee purchased 513220 pcs of garments, out of it 512280 pcs of garments were sold and 940 pes. remained as closing stock. It is worthy to mention here that the datas in Item 28~(a) No. Of the Form 3CD are given in case of a trading concern, Datas at Item N028(b) of 3CD form are. furnished in case of a anufacturing concern. At Item No.28(b) A of the Form No. 3CD the description of Raw Material is given where in it is stated that the assessee purchased during the relevant par 684 Ks. Of cloth and 3939 kgs of yarn which were neither consumed nor sold and such the whole of the quantities of cloth a yam purchased remained as closing stock which is evident from the Item No.A of 28(b). As no raw materi....
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....rs. The assessee also tned to establish that they have labelled & packed the garments and that labelling and packing are also manufacturing activities as per Para 9.30 of EXIM policy 2002-07. But from the details of expenditure filed with the manufacturing account, it is found that iabelling of the garments was done from "Excel India" and emblem Graphics". The assessee firm itself did not label the garments, instead, it has been got done from other. The Development Commissioner. Falta Special Economic Zone approved the unit of the assessee firm under 100% EOU Scheme for manufacture & Export of Girls Night Suit two pes., Boys Night,;suit, T Suits Pant, Track Suit. The assessee firm did not manufacture these item which is evident from the Item No. A of 28(b) from where it is found that the assessee did not utilise raw material and also from the Schedule of Fixed Asset it is found that the assessee did not utilise the machineries for production. Therefore. it is a fact that the assessee did not manufacture or produce any Article or things. The assessee was given approval by the Development Commissioner not for labelling of garments but for manufacturing of garments. As such the asse....
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....unt of above mentioned processes were duly reflected in the books of account and have been verified by the AO. It was argued that to constitute manufacture, it is not necessary that one should absolutely make out a new thing because it is well settled that one cannot make a thing or create a matter by hand but it is transformation of matter into something else is a question of degree. The ld. Counsel for the assessee gave many definitions of manufacture and some of them are reproduced hereunder :- "Manufacture" would be to work up materials into forms for use, making of articles or materials by physical labour or mechanical power and making of goods by hand or by machinery often in large scale by division of labour. "Manufacture" in relation to drug or cosmetic includes any process or part of a process for making, altering, ornaments, finishing and packing, labeling. Breaking up as otherwise treating or adopting any drug with a view to it sale and distribution Drugs and Cosmetics Act 1940 (Sec.3(f). "Manufacture" Means any process for making altering, repairing ornamenting finishing oiling, washing, cleaning breaking up demolishing or otherwise treating or adopting any article o....
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....turer may hire plain machinery and employed hired labour and manufacture has goods. The assessee doing so is an industrial company. 5. 235 ITR 5 - In the absence of definition of industrial undertaking in the Income Tax Act, 1961, it was held that where the assessee purchased cashew nuts and entrusted them with another company for processing obtained the processed cashew kernels packed and exported the same, the assessee was entitled to deduction u/s80HH and 80J of the Income Tax Act, 1961 in respect of profit derived from such activity of processing raw cashew and exporting the same. 6. Allahabad High Court, CrT Vs. Talwar Khullar Pvt. LtC!. the assessee company got manufactured various articles of brass wire from Artisan under its supervision andcontrol I he assessee gave the pattern and design of the articles to be manufactured by the Artisan who purchased the raw materials, manufactured the articles according to the different models supplied by the assessee. The articles in raw form were examined by the assessee and directions were given to the Artisan to modify and polish the same. The assessee sold finished products and claimed that it owned an industrial undertaking in res....
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....in invoices were raised on the assessee were impounded. The word semi-finished goods were not mentioned. It was explained in this regard that the word " unpacked and unlable condition" is mentioned and packing and labelling were also made by the assessee. This description means that the said garments were semi-finished. Therefore there is no discrepancy in the said invoices. No garment can be sold in the export market without making proper label, tags, iron and packing etc as has been done by the assessee in the present case. It was also explained that supplier was not able to manufacture finished garments. They had to manufacture semi finished garment and export the semi finished garments was not possible. The assessee had received huge export order and therefore the assessee had to make export of the garments. The suppliers could not export since they did not have any export order and therefore no question of claiming duty draw back by the suppliers and therefore they had to issue disclaimer certificates to the assessee. Therefore the suppliers did not supply any ready made garments. It was also clarified that the assessee is not doing all the processes on each and every piece of....