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2018 (4) TMI 982
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..../- u/s 10B of the Act in the return of income filed on 29.9.2011 by declaring taxable income of Rs. 66,71,810/-. The assessee established a 100% Export Oriented Unit (EOU) in terms of the EXIM policy and obtained approval (letter of permission) from the Development Commissioner, Special Economic Zone, Falta, to establish a new undertaking at 5, Khagendra Chatterjee Road, Cossipure, Kolkata for production of ready made garments from 31st May 2002, which was later shifted to Sankrail Indsutrial Park, Dhulagarh, Howrah. The said unit was declared to be a warehousing station u/s 9 of the Customs Act and placed under the administrative control of the Howrah Division of the Central Excise Department of Haldia Commissionerate. It got license for private bonded warehouse to carry out its manufacturing activities from the said premises and export the finished goods without payment of excise duty. The ld AO observed that as per audit report of section 10B, the nature of business has been mentioned as manufacturing and exports of readymade garments. He observed that for the purpose of provisions of section 10B of the Act, the primary condition is that the undertaking must be engaged in the ma....
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....Rs 47,92,405/- Salary and Bonus - Rs. 2,93,000/- Wages - Rs. 5,21,858/- Based on the aforesaid observations, the ld AO concluded that the assessee is not engaged in any manufacturing activity and hence not eligible for deduction u/s 10B of the Act and accordingly he disallowed the claim of deduction u/s 10B of the Act in the sum of Rs. 7,26,56,048/- and completed the assessment. 4. The ld CITA granted deduction u/s 10B of the Act by observing as under:- "I have examined the submissions made by the Ld. AR, the findings of the AO in the assessment order, perused the facts of the case .and other materials brought on record. As regards to Whether assessee' '''ad due infrastructure to carry out the manufacturing, the Ld. AR discussed with me about a general allegation made by the AO that assessee has not carried out manufacturing as it has not possessed any machineries to carry out the production process except few machines. He mentioned that the appellant enjoys recognition as a 100% EOU, which is granted by the Development Commissioner, Falta Exports Processing Zone, Ministry of Commerce & Industry, Govt. of India and had obtai....
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....nd basic accounting records like purchase bill, payment voucher, sale bill Nothing was mentioned in the Tax Audit Report regarding violation of arm's length pricing for purchase of inputs from parent concern. ' On the other hand, the Ld. AR had pointed out that the assessment order itself had mentioned about carrying out manufacturing process like design development, pressing and incurring manufacturing expenses like labour payments, cost of diesel, electricity, packing materials etc. I have considered the issues raised in the assessment order regarding running of the undertaking by the appellant as an independent units and the rebuttals made by the appellant. The AO has not brought any material on record to show that the appellant had been doing nothing and its parent had actually carried out the manufacturing process even relevant for the assessee. In the absence of any material. It cannot be held that claim of certain process carried out by the appellant was a smoke screen and it was only its parent which carried out everything* As regards to Whether making design development, embroidery, fixing accessories, final sewing, Industrial pressing, t....
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....facture involves the concept of changes affected to a basic raw material resulting in the emergence of a finished products into a new commercial commodity. It is not necessary that original article or material should have lost its identity completely. All that is required is to find out whether as result of operation /process carried out, a totally different commodity has been produced having its own name, identity and character or end use. In that case, the assessee used negative films and exposed them into printed positive photos. The assessee was held as involved in manufacturing activities as the final photos were different than the original or negative.- .. (iii) In CIT vs. Darshak Ltd. (2001) 2471TR 489 (Kar) the Hon'ble Karnataka High Court held that manufacture would imply a change and transformation. A new and different article must emerge having a distinct and different character and use. In that case the assessee was transforming the blank glassware into decorative glassware with process which was irreversible and end product was distinct and different in character. It was marketed as a commodity different from plain glass. The assessee was held to be entitl....
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....r-media and thus blank CD was converted into recorded CD by such an integrated process. The duplicating process changed the basic character of a blank CD which became marketable for a specific use. Without such processing, blank COs would be not fit for their intended purposes, It was held that it would amount to manufacture in terms of section 80IA r. w. Sec 33B. 5.2.11 While discussing the undisputed facts, I have seen that department has accepted the position that few processes like design development, pressing, fixing, accessories, packing, testing etc. were actually done' by the unit. It is my considered view that the sequence of process from purchasing of fabrics, cutting, stitching, testing and packing are part of entire process in the manufacturing of raw T-shirts. A combination of few processes may become manufacturing of intermediate product but for that matter combination of the rest of the processes, namely doing embroidery and embossing, putting accessories, steam pressing, folding, packing and quality checking cannot be held as not forming manufacturing process. In manufacturing of a final product there can be several intermediate stages, differe....
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....said to take place. Given the admitted fact that what was purchased by the appellant as raw material and what was exported as finished goods are totally different items and commercially known as a different product, I am in agreement with the contention. I also agree with the pleading made by learned counsel that while the raw material i.e. the raw T-shirt has no market in the retail outfit, the fashioned T-shirt has so and therefore both the items are commercially known as different products in different market segments. The issue that how both the entities i.e.* the appellant and its parent are claiming deduction for manufacture of the same item, is of no relevance as the appellant has rightly pointed out that the finished product of one concern can be raw material for the other and both shall be qualified to be manufacturer in their respective product. Moreover, I also notice that the appellant, a foreign exchange earner, as an EOU is required to carry out manufacturing activity and on its DTA sales, following the Central Excise laws, is also required to pay excise duty. It would be a dichotomy if on the same activity the appellant were to pay excise duty on th....
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....the eligibility of the undertaking which is further strengthened by the fact that the Development Commissioner of the EPZ; Falta had also allowed renewal of the approval even after the name change .. On the other hone the AO has not brought on record any material leading to an evidence of splitting-up of process or business. Accordingly, I am unable to accept the view point of the AO in this regard. 5.2.13 Whether any new fact is established from survey operation. From the assessment proceedings, it is noted that the Department had carried out a survey operation in appellant's premises on 18th September 2013 mainly on two aspects: whether the unit has been engaged in the manufacturing of articles or things as its own and whether the unit has been formed by the splitting up, or the reconstruction, of a business already in existence. Survey is an important tool to understand the truth in respect of any aspect. But mere survey cannot be much help if the same is not carried out in a proper manner considering the perspectives. It was on record that the undertaking stopped manufacturing since 1st April 2011. The survey was conducted on 13th September 2013 i.e. after....
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.... raised by the AO and the corresponding rebuttal made by the Ld. AR in the written submission. Considering the detailed and complete explanation of the same, I fully agree with the submission put forward for each specific point. Further the facts of the case are identical with the facts of the case before the Hon'ble Calcutta High Court in the case of CIT, Kol. Vs. Ektara Exports Pvt. Ltd, ITA no 657 2008, Jay tee Exports, Kol. Vs. IT Dept by ITAT, Kol, ITA no 35, 36/Kol/2011 and CIT Vs. Continental Engines Ltd 338 ITR 290 (Delhi), therefore, the rejection of the claim of deduction u/s 10B of the Act amounting to Rs. 7,26,56,048/- is held to be unjustified and the decision of the AO is reversed and the AO is directed to allow the deduction u/s 10B amounting to Rs. 7,26,56,048/- to the appellant." 5. Aggrieved, the revenue is in appeal before us on the following grounds:- 1. Ld. CIT(A) erred in law and in facts in deleting the addition of Rs. 7,26,56,048/- made by the assessing officer by holding that no cogent evidence, as a fall out of survey operation, has been brought on record to determine eligibility of exemption u/s. 10B when detailed discussion of evidences w....
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....Department of Haldia Commissionerate. It got license for private bonded warehouse to carry out its manufacturing activities from the said premises and export the finished goods without payment of excise duty. These facts indicate that the assessee is engaged in manufacturing activity. The ld AR submitted that the first year of claim of deduction u/s 10B of the Act was Asst Year 2003-04 which was granted by the ld AO upto Asst Year 2010-11. Out of these, the assessments for the Asst Years 2004- 05, 2007-08, 2008-09, 2009-10 and 2010-11 were completed u/s 143(3) of the Act vide orders dated 26.12.2006, 24.11.2009, 24.12.2010, 9.11.2011 and 26.3.2013 respectively. Based on the assessment framed for the Asst Year 2011-12 (i.e the year under appeal), the ld AO reopened the assessments for the Asst Years 2007-08, 2008- 09, 2009-10 and 2010-11 by issuing notice u/s 148 of the Act. The ld AR stated that the reasons recorded by the ld AO for those years were the same as was recorded in the assessment order for the Asst Year 2011-12. We find from the paper book enclosed before us that :- a) The re-assessments for the Asst Years 2007-08 and 2008-09 were completed by the ld AO wherein....
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.... deduction u/s 10B of the Act stood nullified by his own orders or the order of his higher authority. These facts were not controverted by the revenue before us. The facts for the year under appeal are not different from the earlier years wherein relief was granted to the assessee. Hence we hold that the assessee should be given deduction u/s 10B of the Act. We place reliance on the decision of the Hon'ble Supreme Court in the case of Shasun Chemicals & Drugs Ltd vs CIT reported in (2016) 388 ITR 1 (SC) wherein it was held that :- 13. In the Income Tax Return which was filed for the Assessment Year 1995- 96 the assessee had claimed that it had incurred a sum of Rs. 45,51,890/- towards the share issue expenses and had claimed 1/10th of the aforesaid share issue expenses under Section 35D of the Act from the Assessment Years 1995-96 to 2004-05. This claim of the assessee was found to be justified and allowable under the aforesaid provisions and on that basis 1/10th share issue expenses was allowed under Section 35D of the Act. When it was again claimed for the Assessment Year 1996-97, though it was disallowed and on directions of the Appellate Authority, the Assessing Office....