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2015 (8) TMI 37
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..... Act. ii. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal. 2. Grounds of appeal raised in ITA No. 4732/Del/2011 are as follows: 1. The order of the learned CIT(A) is erroneous and contrary to facts & law. 2. (i) On the facts and in the circumstances of the case and in law, the learned CIT(Appeals) has erred in directing the A.O. to allow deduction u/s 80IC of the I.T. Act to the tune of Rs. 4,56,03,108/-. (ii) The ld. CIT(A) ignored the fact that the disallowance u/s 80IC of the I.T. Act was made by the A.O. on the basis of material and facts gathered during the Survey u/s 133A of the I.T. Act at the business premises of the assessee at Faridabad and Rudarpur. 3. The appellant craves leave to add, to alter, or amend any grounds of appeal raised above at the time of the hearing. ITA No. 4732/Del/2011 for A.Y. 2008-09: 3. Both sides agree that the appeal of the Revenue for AY 2008-09 is adjudicated first; therefore we are adjudicating first the Revenue's appeal for AY 2008-09. 4. Ground nos. 1 & 3 are general in nature, so it is not adj....
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.... has given authorization to Sh. A.K. Pandey, Dy. Director of Income Tax, Haldwani. Sh. A.K. Pandey, Dy. Director of Income Tax. Haldwani has sent his report dated 175.02.2010 which received in the office of undersigned on 025.03.2010. Upon perusal of report, the following points emerge: i) Production in the unit was started at 22.07.2005. ii) Machinery installed at the premises was purchased by Faridabad unit and the same was transferred to the premises in the shape of either stock transfer or asset sale and all the payments were also made from Faridabad unit. iii) The main supply to this unit is from Faridabad unit and the Rudarpur unit is engaged in assembling of parts which are being manufactured at Faridabad unit. iv) At the time of survey at Rudarpur Unit less than 20 persons were present and most of the persons available were not skilled persons ..... " 7. Further the relevant findings as given in paras 2, 3 & 4 of survey report dated 17/02/2010 submitted by Dy. Director of Income Tax (Inv.), Haldwani for the survey conducted by him on 16/02/2010 at the Pantnagar Unit of assessee are reproduced below: "2. In this connection, I entered in the said premise at ....
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..... 3. From the above narrated facts, it can be clearly concluded that this premise is engaged in assembling of very basic in nature and is not involved in any manufacturing activity in any remote sense. This aspect also gets support from the P/L a/c ex retracted from the computer relevant for a period 01.04.09 to 16.02.2010, in which trading a/c tallies at Rs. 36,73,25,089.73. However, the purchase a/c declared as per this trading a/c, there are no manufacturing expenses. The purchase a/c tallies at Rs. 23,80,42,515/-, out of which expense on job work is declared at Rs. 62,14,786.80 and all other expenses claimed are related to either purchase or CST or Excise duty only. There is no other manufacturing expense, without which it is impossible to manufacture anything. Such huge turnover from manufacturing with electric connection of 92KW only and without having skilled or technical persons seems to be next to impossible. The trading a/c clearly speaks that stock is being transferred to this premise, manufactured at Faridabad unit or somewhere else and the same is being sold/claimed to be sold from this premise. 4. From the few machine installed, it cannot be surely that these we....
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....manufacturing facilities, with no adverse comments. The Assessee has been regularly filing its Returns on month to month basis to Excise Deptt. furnishing the details of the production of the unit. Copies of the Returns for the month of January, 2010 and February, 2010 are enclosed and marked as Annexure-7 at page Nos. 82 to 90. v) All necessary registrations such as DIC Registration, Sales Tax Registration, Registration under Factory Act, NOC from Pollution Control Board etc. have been obtained by the Rudrapur unit and copies are annexed and marked as Annexure-8 (Colly.) at page Nos. 91 to 99. As a matter of fact, this plant was put up at the instance of OE customer Mahindra and Mahindra(M&M) because M&M had put up its plant at Rudrapur, to meet the logistics for supply of products like Starter Motor and Alternators. As on date the Unit's main supplies are to M&M and is also supplying its products to TAFE, Eicher, PTL, International Tractors, Indo Farm Tractors etc and others. From the above it is apparent that the Rudrapur Unit against which deduction u/s 80(1 )(c) are being taken, is a manufacturing unit qualifying the eligibility such as: a) That the plant....
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....tal 63 Copies of Attendance reqisier, Salary sheet, Contractors BII/ & Challans for provident Fund and ESI for the month of October, 2010 are enclosed and marked as Annexure-10 (page from 125 to 143). In view of the above it is submitted that the actual numbers of employees were 55 on 16.02.2010 and not 20 as reported by survey because the Incharge Mr. Chauhan never stated in his statement that the number of employees present were 20. 3) Sir, you have queried as to why no manufacturing expenses were incurred by the unit from 01.04.2009 to 16.02.2010. It is humbly submitted that the manufacturing expenses itself, is not a separate head of account but under this head so many subheads are housed like: a) Wages b) Electricity expenses c) Fuel a) Freight inward c) Consumable stores d) Repair & maintenance e) Security expenses etc. The audited accounts for the year ending 31 s' March 2010 of the Unit are enclosed and marked as Annexure-14. Therefore, the contention that no manufacturing expenses were incurred during 1.4.2009 to 16.02.2010 is unfounded and untrue. 4. Your Honour has stated that a power load of 92 KVA was granted to the unit an....
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.... and your honor would be kind in accepting our submissions in support of the manufacturing activities pursued by the Rudrapur unit and oblige. " 9. After consideration of the reply of the assessee company, the Assessing Officer concurred with the findings of the survey report and concluded that no manufacturing activity was carried on at Pantnagar and hence disallowed the deduction u/s 80IC claimed by the assessee and made an addition of Rs. 4,56,03,108/- 10. Aggrieved by the aforesaid disallowance of the deduction claimed u/s 80IC of the Act, the assessee company preferred an appeal before the learned CIT(A) who was pleased to find that the assessee company is entitled to deduction under Section 80IC of the Act and allowed the claim of the assessee. 11. Now, Revenue is before us assailing the impugned order of the learned CIT(A). 12. The learned DR contended that the unit at Pantnagar, Rudrapur did not manufacture anything and when survey was conducted at the unit, there were only 20 workers and that too they were not skilled workers. The unit had only electric connection of 92 kw and trading account clearly speaks that stock was being transferred to the said unit whic....
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....ssing Officer dated 22.11.2010 to the assessee, we find that the A.O. has not taken into consideration the reply and supporting documents filed by the assessee dated 30.11.2010 which has been reproduced above. The Assessing Officer has based his finding only on the basis of survey report and has not made any attempt to look into the documents filed before him by the assessee company to substantiate its claim that it's Rudrapur, Pantnagar unit is eligible for deduction under section 80-IC of the Act. The AO has not controverted the document of Ministry of Commerce & Industry, Secretariat for Industrial Assistant (S/A), dated 25.04.2005 (page 80 of PB) which has acknowledged the memorandum submitted before it for manufacture of the following are reproduced as under: Item code 3607 Proposed Item: STARTER MOTOR of Manufacture falling under NIC- broad description MANUFACTURE OF ELECTRICAL STARTING AND IGNITION EQUIPMENT FOR INTERNAL COMBUSTION ENGINES AND ELECTRICAL LIGHTNING/SIGNALLING EQUIPTION FOR MOTOR VEHICLES Proposed Capacity : 75000.00 NOS. 3607 Proposed Item: ALTERNATORS of Manufacture falling under - NIC - broad description MANUFAC....
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....ER MOTOR MAHINDRA & MAHINDRA LIMITED-NAGPUR & MAHINDRA GUJRAT TRACTORS LTD. 16. STM1131-W STARTER MOTOR TAFE MOTORS & TRACTORS LTD. -BHOPAL 17. STM1144-V STARTER MOTOR MAHINDRA & MAHINDRA LIMITED - NAGPUR 17. The details of Manufacturing Expenses for F.Y. 2007-2008 found at page 101 of Vol.-I, are as under: Expenditure Amount Remarks Wages 10,519,996 (Out of total personal expenses) Job work charges 6,499,377 Freight and delivery inward expenses 6,176,670 (shown under raw material consumption in balance sheet) Stores and spares consumed 54,096 Rent Paid (lease rent) 24,000 Electricity charges 3,436,555 Fuel (diesel ) expenses 2,338,041 Repair & Maintenance-Plant and Machinery 2,564,981 Security Expenses 937,235 Depreciation 692,078 Total manufacturing exps. 33,243,028 18. In the light of these documents and other documents produced before the authorities below which are produced before us by filing Paper book- I & II. We need to see whether....
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.... it is only when the change, or a series of changes, takes the commodity to the point where commercially it can no longer be regarded as the original commodity but instead is recognised as a new and distinct article that a manufacture can be said to take place. [131 CTR 305, 219 ITR 293, 85 TAXMAN 554J ] Manufacture 1997 AAR Arthur E. Newell Vs. CIT The expression manufacture involves the concept of changes effected to a basic raw material resulting in the emergence of, or transformation into, a new commercial commodity. Whether an article is converted into a different article depends on several criteria and one of the essential tests is whether in a commercial sense, the original article has ceased to exist and and a new article has taken its place. It is, however, not necessary that the original article or material should have lost its identity completely: all that is important is whether, what has emerged as a result of the operations is a different commercial commodity, having its own name, identity, character or end use. This determination is essentially one of fact and has to be arrived at on a consideration of all relevant factors such as the quality and....
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....derived from such undertakings during the first five years. The object of the section pre-supposes that profits are capable of being earned. Hence, until an assessee reaches a stage where it is in a position to decide that a final product which can be ultimately sold in the market can be manufactured it cannot be said to have started manufacture of the articles. If it becomes necessary for an assessee to produce a trial product at an earlier stage to verify whether it can be used ultimately in the manufacture of the final article, the commencement of operation for the manufacture of the trial product would not constitute commencement of manufacture of articles for the purposes of section 15C. [93 ITR 548] 19. The ld CIT(A) has observed that in the instant case various parts are assembled by the assessee using its machinery results in achieving of a final product. The parts or components utilized by the assessee in its assembling process undergo a transformation and result into a product namely motorcycle wheel, which is distinct and separate commodity in character, name and use than each of the parts or components. Therefore, on the basis of the principles referred to above case....
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....eration the corroborative evidence, we concur with the view of the learned CIT(A) and we find no infirmity in the same. Therefore, we uphold the order of the learned CIT(A). The appeal of the Revenue stands dismissed. ITA Nos. 6349 to 6351/Del/2012 for AY 2006-07, 2007-08 & 2009-10 22. We will now consider the impugned order passed for the assessment years 2006-07, 2007-08 & 2009-10. 23. The sole ground raised by the Revenue is that the challenging/quashing of reopening of the assessment proceedings under Section 147/148 of the Act when there was material before the Assessing Officer in the form of survey report that the assessee company's Rudrapur unit is not manufacturing anything so deduction under Section 80-IC claimed by the assessee company was incorrect and therefore escapement of income was there. 24. We have gone through the impugned order dated 01.10.2012 of the learned CIT(A) who has deleted the entire addition made by the Assessing Officer on the ground that the predecessor CIT(A) had on merits found out for assessment year 2008-09 that the assessee company is eligible for deduction under Section 80-IC of the Act. Nowhere in the impugned order we find any ob....