TaxTMI 
TaxTMI 
2008 (6) TMI 594
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.... 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 drawback 51,14,502 64,67,220 71,02,986 Sale 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 s. 80HHC claimed 4,98,10,474 5,12,12,082 1,35,14,971 9. Deduction under s. 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 Ne....
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....assessee have been given thoughtful consideration and find no substance in the matter. In the reply the assessee just tried to substantiate its claim by taking the help of ladder of definition of various words such as 'manufacture' '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 sa....
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....xistence : Provided that this condition shall not apply in respect of any undertaking 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 s. 33B, in the circumstances 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, th....
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....tion of certain percentage of profits of different undertakings also provide that this benefit is available for certain specified period from the date on which the manufacture is started. As against all these provisions, it is significant to note that there is no mention about the commencement of manufacture 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 ....
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....jad Ali Nazir Ali vs. CIT (1976) CTR (All) 217 : (1977) 110 ITR 419 (All); (3) CIT vs. J.K.A. Subramania Chettiar 1978 CTR (Mad) 35 : (1977) 110 ITR 602 (Mad); (4) Sulemanji Ganibhai vs. CIT (1979) 8 CTR (MP) 11 : (1980) 121 ITR 373 (MP); (5) Addl. CIT vs. Radhey Shyam (1979) 9 CTR (All) 171 : (1980) 123 ITR 125 (All); (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 claim....
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....rose. Although that liability could not be enforced till quantification was effected by assessment proceedings. The liability for payment of tax was independent of the assessment. The assessee, which followed the mercantile system of accounting was entitled to deduct from the profits and gains of its business liability to sales-tax which arose on sales made by it during the relevant 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 i....
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.... the assessee also finds support from the decision of Hon'ble Supreme Court of India in the case of Bajaj Tempo Ltd. vs. CIT (1992) 104 CTR (SC) 116: (1992) 196 ITR 188(SC) where it has been held that a provision in a taxing statute granting incentives for promoting growth and development should be construed liberally; and since a provision for promoting economic growth has to be interpreted 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 purc....
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....cy, including a contractor)." "'Workman' means any person (including an apprentice) employed in any industry to do any manual, unskilled, skilled, technical, operational, clerical or supervision work for hire or reward, whether the terms of employment be expressed or implied." The explanation submitted before the assessing authority also was that all the medical expenses and compensation to such workmen are duly paid 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 West....
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....wages payable for a fixed number of hours such workers were considered to be outsiders i.e. outside the regular employment. The AAC of the AO did not specifically state that, according to them, the concerned persons doing the work were working outside the factory premises of the assessee. The Tribunal having applied the correct test, it was right in holding that the assessee had employed ten or more workers in a manufacturing process carried on with the aid of power 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 l....
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.... the specified 'models' each for production of 'semi-finished' goods. (4) Purchase orders for unique brass fittings as per each foreign buyer's order (all the work relating to these fittings is done in house only under very skilled supervision). (5) Duties assigned to quality check inspecting team both for outside suppliers of semi-finished items in confirming with each model issued. The review of period reports of these quality team is done by the chief production manager. (6) Receipt of the '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 pro....
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....original index. During the course of survey under s. 133A on 23rd Dec., 2005, the authorized officers themselves had occasion to visit and see Manglam Arts woodbased more than 850 items of artistic nature developed by Manglam Arts from time to time at one place for review by visitors. Besides they had also visited the product development section where the skilled and trusted craftsmen were busy in crafting new models and the videography was also done by the department. Likewise, the survey authorities had visited and saw the picture painting artists doing art work on wooden boxes, wooden containers etc. 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 wh....
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....s. Talwar Khuller (P) Ltd. (1998) 149 CTR (All) 117 : (1998) 235 ITR 70 (All); (10) CIT vs. Rajmohan Cashews (I) Ltd. (1994) 122 CTR (Ker) 376 : (1995) 211 ITR 659 (Ker); (11) CIT vs. S.H. Kelkar & Co. (P) Ltd. (1991) 96 CTR (Bom) 18 : (1991) 191 ITR 612 (Bom); (12) CIT vs. Madhav Marbles & Granite Ltd. Tax World 2008 Vol. 39 p. 59; (13) Mysore Minerals Ltd. vs. CIT (supra); (14) Gem Granites vs. CIT (2004) 192 CTR (SC) 481 : (2004) 271 ITR 322 (SC); (15) Broach District Co-operative Cotton Sales, Ginning & Pressing Society Ltd. vs. CIT (1989) 77 CTR (SC) 70 : (1989) 177 ITR 418 (SC); (16) CIT vs. Sesa Goa Ltd. (2004) 192 CTR (SC) 577 : (2004) 271 ITR 331 (SC); (17) CIT vs. Oricon (P) Ltd. (1984) 38 CTR (Bom) 212 : (1985) 151 ITR 296 (Bom); (18) CIT vs. Univmines (P) Ltd. (1993) 109 CTR (Del) 75 : (1993) 202 ITR 825 (Del); (19) CIT vs. U.P. State Agro Industrial Corpn. Ltd. (1991) 93 CTR (All) 214 : (1991) 188 ITR 370 (All); (20) CIT vs. Lucky Mineral (P) Ltd. (1996) 134 CTR (Raj) 541: (1997) 226 ITR 245(Raj). 19. Therefore, in the circumstances and facts of the case, we are of the....