TaxTMI 
TaxTMI 
TaxTMI 
2016 (4) TMI 562
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....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 of Form "F" of Central Sales Tax issued against this Stock transfer as evidence in support of c....
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....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, therefore, a marginal delay of one and half month in filing the return of income was not sufficient for the rejection of the assessee's claim u/s 10B(1) at the threshold. - Hans....
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....atedly 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 investigation. AO, accordingly, disallowed the assessee's claim for deduction u/s 80IC of Rs. 1,06,47,239/-. 11. Before ld. CIT(A) the assessee, inter alia, submitted that none of the notices issued to the assessee by the....
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....e 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 fabricated Grill was transported to Fiber Fill Engineers, Plot No.2, Daulatabad Road, Industrial Area), Gurgaon. The sale bills however show transportation of signage's and vertical posts from Sitar Ganj to the appellant's premises at Vasant Kunj, New Delhi. Thus from the perusal of the documents it cannot be stated with conviction - whether any process is being car....
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....lant 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 to the above, the appellant has also failed to file the audit report within time and therefore deduction under section 80lC is not eligible to the appellant. Without prejudice to the above even if any higher judicial authority holds a process carried out by the appellant as manufacturing, then too the percentage of a process carried out at the Sitarganj Factory is very nominal compared to the overall value of the process Even....
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....ring 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 manufacturing unit before dispatch of the material to the site. In the second stage, the TPI agency is required to inspect the RVI elements after erection at the site. TPI agency is appointed by the oil company so as to ensure adherence to the specifications and maintain high standards and they do not permit any of the above activities except erection at the site. Maximum error permitted in joints is l mm. Representatives are deputed at each site to assess the exact quantities of work involved at each site. Engineers from the oil company also visit the site ....
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....ite. 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 (vertically) Aluminum Extrusion was then put/installed on the MS Pipes horizontally again piece by piece i.e., as per the standard lengths available then the ACM sheet which measures 900 x 4000mm lmm required colours was cladded on the MS/Aluminum with the help of screws/rivets. GI sheet was fixed on the top of ACM sheet to avoid water seepage. The entire canopy 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 a....
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....icle 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 out as explained earlier and thereafter an article having separate commercial utility comes into existence. 20. Ld. counsel submitted that the second aspect to be considered is whether the assessee is entitled to claim deduction u/s 80IC though return has been filed belatedly u/s 139(4). He relied on various case laws, noted by us in the submissions advanced before AO, wherein it has been, inter alia, held that provision of section 139(4) is a proviso to section 139(1). 21. Ld. counsel submitted that the third aspect to be considered is regarding ld. CIT(A)'s observations that no manufacturing activity....
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.... 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 the stock transferred from Sitarganj to New Delhi on 11.10.2009 is contained. Ld. counsel further referred to page 631 of PB, wherein list of employees along with designation at Sitarganj unit is contained. He pointed out that merely because PF and ESI register was granted subsequently cannot be a basis for denying the assessee's claim regarding manufacturing activities being carried out at site in the backdrop of enormous evidences on record. 27. Ld. DR referred to the provisions of Sec. 80AC and pointed out that the said section categorically mentions section 139(1) and has used the negative language "unless". She pointed out that unless the assessee fil....
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.... 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 when the plan itself was approved on 16.2.2010, then how license could be given prior to that date to carry out activities. 33. Ld. DR referred to pages 194 and 195 of PB, wherein the inspection certificate from RITES Ltd. is contained and submitted that inspection has been carried out at Delhi though the contractor had been referred as assessee with Sitarganj, Uttrakhand. She submitted that this does not lead to any inference that the activities were carried out at Sitarganj. 34. Ld. DR further submitted that since the entire stock was transferred to New Delhi, then how the income part is explained at Sitarganj. 35. Ld. counsel in the rejoinder submitted that existence of undertaking at Sita....
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....ct 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 Fiber Fill Engineers, Plot no. 2, Daulatabad Road, Industrial Area, Gurgaon. However, the sale bills show transportation of signages and vertical posts from Sitarganj to the assessee's premises at Vasant Kunj, New Delhi. Thus, the main objection of ld. CIT(A) on this count was that the purchases were in favour of the factory at Gurgaon. 39. Ld. DR has also pointed out that the license was granted on 16.2.2010 and, therefore, no activity could be carried out prior to such date. 40. In our opinion, none of these objections can be accepted in the backdrop of enormous evidence on record, more particularly the documents furnished by assessee vide reply dated 10.9.2014 41. As far as ld. DR's objection with reference to the grant of license to the factory ....
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....ring 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 been referred to by ld. counsel for the assessee, noted in his arguments. From those details it is evident that keeping in view the nature of activity carried out by assessee, the number of employees and their qualifications could not be disputed. 47. As far as the objection regarding ESI and PF is concerned, we do not find much substance in the same because that is no where the criteria for concluding whether assessee had actually carried out activity or not. If there is any default on the part of assessee in regard to ESI and PF provision, then under the relevant Act it would be liable for action, but on that count deduction u/s 80IC cannot be denied. 48. Further it is noticeable from the observation of ld. CIT(A), reproduced earlier, that she has in the alternativ....
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....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 provision of section 80AC, the assessee is entitled to deduction u/s 80IC on account of late filing of return. Section 80AC reads as under: "Deduction not to be allowed unless return furnished. 80AC. Where in computing the total income of an assessee of the previous year relevant to the assessment year commencing on the 1st day of April, 2006 or any subsequent of assessment year, any deduction is admissible under section 80IA or section 80IAB or section 80IB or section 80IC[ or section 80ID or section 80IE], no such deduction shall be allowed to him unless he furnishes a return of his income for such assessment year on or before the due date specified under sub-section (1) of section 139." 55. While referring to the finding of assessment order, we have noted various decisions relied upon by ld. counsel for ....