TaxTMI 
TaxTMI 
2016 (4) TMI 562
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.... following details a. Details of article/things manufacture b. To produce documents in support of manufacture c. Whether separate books of accounts were maintained in respect of the same to arrive at the eligible profit of Rs. 1,06,47,239/-. d. Delay in filing return vis a vis the claim u/s 80IC. 3. The assessee, in its reply dated 26.2.2013 at sl. No. (ix) submitted as under: "(ix) Regarding your honour's query on deduction claimed under section 80lC of the Income Tax Act, 1961, we would like to submit as under: 1. That the manufacturing unit set-up by the assessee during the year under consideration at Sitarganj, District Udham Singh Nagar, Uttrakhand mainly manufactured various kinds of signages/sign boards/panels and their components, various kinds of MS/SS/Sheet Metal fabricated structures and frames, Aluminum structures, Canopy/Building fascia and cladding components and panels etc. 2. That we are submitting copy of letter submitted with Excise Authorities and Uttarakhand VAT Authorities intimating them about start of commercial production along with first Stock transfer invoice dated 06.10.2009 with copy o....
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....s engaged in executing certain job work contracts for 'signages' for the Common Wealth Games, which were held in New Delhi during 3rd to 14th October 2010. It was pointed out that the contract was a major one and required substantial efforts and time from all the partners and employees of the assessee to the extent that all other routine matters had to be held back just to enable the successful completion of CWG contract. The assessee further pointed out that the CWG contract also required extensive follow ups on the part of the assessee even post the completion of the games, which in turn consumed substantial time and efforts of the partners and employees. (iii) The third reason advanced by assessee on this count was that under similar circumstances, many courts including Hon'ble Supreme Court, have held that the technical/ machinery provisions relating to sections which are intended to provide a benefit to the assessee, should be liberally construed. For this proposition assessee has relied on following case laws: - ACIT Vs. Dhir Global Industrial (P) Ltd. 43 SOT 640, wherein it was, inter alia, held that section 10B(1) is directory and not mandatory and, theref....
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....ufacturing articles as contemplated u/s 80IC, as it did not bring into existence any new article or substance. 9. As regards the assessee's claim that the deduction u/s 80IC should be allowed as return was filed belatedly u/s 139(4), the AO referred to various case laws relied upon by assessee and pointed out that a bare perusal of section 80AC makes it very clear that the return of income should have been filed within time limit specified u/s 139(1). He relied on various case laws mentioned in his order, wherein it was held that return has to be filed before due date specified u/s 139(1) for claiming deduction u/s 80IB. 10. The third reason for denying the deduction u/s 80IC was that assessee company produced several ledgers of its unit at Sitargunj but no separate P&L A/c and balance sheet had been brought on record to justify the profit claimed. However, the AO did not go in detail on this count, inter alia, observing that since the assessee's claim was not admissible for the above two reasons viz. the assessee was not manufacturing any article or thing as contemplated u/s 80IC and the return of income was also belated, therefore, this aspect did not require any further in....
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....s cutting of pipes to size, transfer of these pipes to the site, where the work of preparing the framework is undertaken and on this frame work the sheets which have been painted and on which different logos have been pasted are fitted. It is apparent that the entire unit which is fixed in a petrol pump etc. cannot be transported from the appellant factory to the site. The appellant was therefore asked to specify !he process that are carried out at the factory and at the contractee premises and also to" specify the machinery that has been installed/purchased by him . As per the details produced by the appellant most of the machines purchased by him related to cutting, welding, drilling and bending The appellant claimed that the production of signages, structure in MS/SS/aluminum, fabrication of ACP Panels for retail visual identity elements and allied components for Oil marketing companies were carried out at the factory premises. At this site the installation of supplied signages/RVI were done to the satisfaction of the end user. The perusal of the purchase bills showed that the appellant had purchased fabricated MS Grill from various parties in New Delhi and this fabrica....
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....nstalled is a mere eye wash to claim manufacturing activities at the Sitarganj factory. The nature of the employees, their qualification, the wages being paid to them, and work assigned to each also show that the manufacturing activity claimed 0 be carried out at Sitarganj Unit is a mere eye wash. ESI and PF in respect of Sitarganj factory separately has not produced. It is only in 2012 for the year 2011 that the appellant has filed nominal roll of emp10yees and employment in ESIP, Sitarganj. Thus there is no evidence of employees at Sitarganj for the year under consideration. On the basis of the facts presented, the conclusion' that inevitably follows is that the Appellant cannot be said to have undertaken business activities which amount to manufacture or production of an article and therefore does not merit requisite deduction under section 80-IC(2) of the Act. In the light of the fore-going discussion and the given set of facts, the Appellant is not eligible for deduction under section 80-IC of the Act, as it cannot be said to have manufactured or produced any article or a thing. The decision of the Assessing Officer is, therefore, confirmed. 5.7 Without prejudice ....
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.... coating of painting of the structural members in the workshop of vendor. iv) Cutting, bending to shape and fabrication ACM as per given drawings . v) Pre dispatch inspection by third party inspection at the vendor premises vi) Transportation vii) Erection at site viii) Post installation inspection by third party inspecting (TPI) at site installation ix) Inspection by the oil company engineer at site of installation The entire work of Procurement and fabrication is done in the manufacturing premises: The completed elements are transported to the sites and erected/installed with the help of nuts, bolts and screws Fabrication work involving welding is not permitted at the site. The structures and A.CM for RVI features involving canopy and building fascia are brought to site in ready to erect condition from the manufacturing unit. The process of galvanizing, powder coating or painting of the structurals members take in the manufacturing unit. The inspection takes place In two stages. In the first stage the third party inspection (TPI) agency appointed by the oil company inspects the fabricated RVI items at the manufacturin....
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.... ACt-1 sheets and Aluminum Angle/Extrusion length were also made and dispatched as per the requirement. They were cut to size as per requirements of that particular site/petrol pump. They were installed on the existing sites Building Top of the petrol pumps. The entire building fascia after taking the exact measurements of the site, were manufactured at the manufacturing unit and the completed elements after inspection, were transported to the sites and erected/installed with the help nuts, bolts and strews as the fabrication work involving welding is not permitted at the site. Canopy Fascia: It is cladding work on existing canopies of the Oil Companies as per their colour scheme and designs provided by the oil companies for aesthetic looks. For a canopy fascia measurement of canopy with regards to size, string level/straightness, water level were taken and a mean level was worked out that, so that water does not stop on the canopy. In order to make a Canopy Fascia MS Pipe (Coated) Aluminum extension, ACM sheets, GI sheets are required. MS Pipes of 900 mm are to be installed on the canopy piece by piece, single by single on the desired line levels, as worked out earlier (v....
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....What one needs to examine in each case is the process undertaken by the assessee. Our judgment is confined strictly to the process. impugned in the present case. It is for this reason that the American courts in such cases have evolved a new test to determine as to what constitute manufacture. They have laid down the test which states that if a process renders a commodity or article fit for use which otherwise is not fit, the operation falls within the letter and spirit of manufacture. (See United States v. International Paint Co. ) 18. Ld. counsel pointed out that the relevant test is whether article produced has separate commercial use as compared to sourced material or not. Ld. counsel further submitted that in the case of CIT Vs. Ms. Megha Dadoo 232 Taxmann 419 (HP), it has been held that manufacturing of 'Route Markers' by undertaking process of cutting stainless steel pipes of larger sizes with electric cutter including pointing and welding of pipes, would amount to manufacture or production entitling assessee to deduction u/s 80IC. 19. Ld. counsel submitted that in case of assessee also the raw material is sourced from outside and then fabrication process is carried ou....
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....itial security deposit shall be forfeited." 23. Ld. counsel further referred to page 196 of the PB, wherein the report of third party inspection is contained. He pointed out that assessee is manufacturing signages etc. for IOC which nominates third party for inspection. He pointed out that third party has certified that the process of manufacture was carried out in terms of specification. 24. Ld. counsel further referred to pages 23 & 25 of the PB, wherein details of machinery installed at Sitarganj factory is contained to demonstrate that substantial investment was made at Sitarganj factory. 25. Ld. counsel further referred to pages 215 to 265 of the PB, wherein the copy of invoice of the machinery purchased for setting up the industrial undertaking at Sitarganj is contained. He further referred to pages 268 to 484 of the PB wherein the copy of bills of items purchased by assessee are contained in which the address of Sitarganj factory is given. He pointed out that the observations of ld. CIT(A) to the contrary on this count are not correct in the light of enormous evidence being on record. 26. Ld. counsel further referred to page 486 wherein the invoices evidencing th....
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....order of CIT(A) page 9 para 5.4.2 wherein ld. CIT(A) disputed the feasibility of transportation. She submitted that as far as the decision of Hon'ble Punjab & Haryana High Court is concerned that is with reference to "Route Markers" and, therefore, she submitted that all these aspects taken together make it very clear that no manufacturing activity is carried out by assessee. 31. She submitted that the third issue is whether any activity carried out was not at Sitarganj. She referred to page 21 of AO's order wherein he has observed that assessee has not filed any balance-sheet and P&L A/c before the AO. She further referred to the notice issued by AO u/s 142(1) contained at pages 32 to 144 of PB and assessee's reply to various aspects. In this connection she referred to page 65 of PB, wherein form no. 3 under Rule 7(1) for registration and license to work a factory is contained, in which it is, inter alia, stated as under: 'To licensed premises shown on plan approved vide letter no. 467F/Rekha dated 16.2.2010 are situated in M/s FiberFill Engineers Plot no. B-212 Eldico Sidcul Sitarganj, U.S. Nagar add consists of Building as shown by maps." 32. She submitted that wh....
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....producing of any article or thing as contemplated u/s 80IC. (c) Whether assessee was entitled to deduction even though it filed the return belatedly in view of the provisions contained u/s 80AC. 38. As far as the first issue is concerned, we find that AO has not questioned this aspect, but ld. CIT(A) has questioned this for the following reasons- (i) Machinery installed at the Sitarganj factory reflects the activity or the lack of it being undertaken at the unit. (ii) The nature of the employees, their qualifications, the wages being paid to them and the work assigned to each also showed that the manufacturing activity claimed to be carried out at Sitarganj Unit was a mere eye wash. (iii) ESI and PF in respect of Sitarganj factory separately had not been produced. It was only in 2012 for the year 2011 that the assessee had filed nominal role of employees and employment for ESI/ PF in Sitarganj. Thus, there was no evidence of employees at Sitarganj in the year under consideration. (iv) The purchase bill show that the assessee had purchased fabricated MS Grill from various parties in New Delhi and this fabricated bill was transported to....
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....ivity was carried out at the said premises. The submissions of ld. DR to the contrary are not correct when the entire report is considered. 45. Ld. counsel has also relied on the decision in the case of Faith Biotech Pvt. Ltd. (supra), where even though assessee was carrying out assembling and manufacturing of air purifier by using sample tools and testing equipments. It was held that assessee would be entitled to deduction u/s 80IC.This decision clearly counters the claim of revenue that the value of fixed asset is one of the deciding criteria for arriving at a finding whether assessee was carrying out manufacturing or not. The assessee has filed copies of invoices in the paper book from which it is evident that the raw material was purchased at Sitarganj unit during the relevant year under consideration and the fabricated items were transported from the Sitarganj to the site of contratees. We do not find any reason to doubt the credentials of these invoices particularly when ld. CIT(A) has not referred to the specific invoices to which she has referred in her order in para no. 5.4.2 reproduced earlier. 46. The next objection is regarding employees, the details of which have....
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....reate an article which is of use to assessee's customer as per their specifications. 52. Ld. counsel has referred to the decision of Hon'ble Supreme Court in the case of Oracle Software India Ltd. (supra), which clearly holds that if a process renders a commodity or article fit for use, which otherwise is not fit, the operation falls within the letter and spirit of manufacturing. In our opinion this test is clearly met in the case of assessee and, therefore, following the decision of Hon'ble Supreme Court in the case of Oracle Software India Ltd. (supra), assessee's claim is liable to be allowed. 53. Ld. counsel has also referred to the decision in the case of Ms. Megha Dadoo (supra),wherein it has been held that manufacture of 'Route Markers' by undertaking process of cutting stainless steel pipes of larger sizes with electric cutter including painting and welding of pipes amounts to manufacture or production. In our opinion both these decisions clearly support the assessee's claim that it was carrying on the manufacturing activity and, therefore, this objection of revenue authority stands rejected. 54. The third issue four our consideration is whether in view of the prov....