AI Drafter 
TaxTMI 
TaxTMI 
2022 (7) TMI 1018
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....o claimed and vide assessment order dated 30.11.2007 passed under Section 143(3) of the Act assessed total income of assessee at Rs.1,66,61,240/-. The assessee assailed the assessment order in appeal No. IT/212/2007-08/SML. The appeal of assessee was dismissed by CIT(A), Shimla on 29.04.2009. The assessee filed further appeal before the ITAT, Chandigarh which was allowed on 30.11.2009 as ITA No. 499/Chd, 2009. Revenue assailed the order dated 30.11.2009 passed by the ITAT Chandigarh in ITA No. 15/2010 before this Court, which later came to be withdrawn by the Revenue on 22.12.2021 on account of involvement of low tax effect. 4. The point in issue in the aforesaid litigation was whether the process undertaken by the assessee in its industrial unit at Parwanoo amounted to 'manufacture' or 'production' of the Anchors so as to qualify the requirements of Section 80IC of the Act? Whereas, the Assessing Officer and CIT(A) concurrently held that since the substantial process involved in production of Anchors was being got done by the assessee from Ludhiana on work order basis and only a small part of it was being done at Parwanoo, the assessee could not be said to have the necessary qu....
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....it had been inflated by the assessee for the purpose of deduction u/s 801C. 8. We have heard Mr. Vinay Kuthiala learned Senior Advocate with Mrs. Vandana Kuthiala Advocate for the appellants and Mr. Vishal Mohan Advocate learned counsel for the assessee and have also gone through the records. Questions Nos. 3 and 4 9. Questions Nos 3 and 4, as noted above, are being taken up for consideration by us in the first instance. The consideration of these questions requires us to briefly recapitulate the material on record. 10. The Assessing Officer had found that the assessee, in the assessment year 2006-07 had declared total sale of Rs. 15,63,28,569/- and had shown profit of Rs.6,10,30,054/- which gave gross profit rate at 39.04% and net profit rate at 32.54%. The Assessing Officer, by making a comparison between the assessee and M/s Kay Pee Industries in respect of their sales during the relevant year and expenses incurred, held that the assessee had not fully debited expenses and profit shown by the assessee was not acceptable. Further, it was held by the Assessing Officer that since nothing was shown to have paid by the assessee to its sister concern for the technical know....
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....The Assessing Officer was held to have arrived at his conclusions merely on estimation. The basis for estimation of the GP & NP ratio that too in comparison with the M/s Kay Pee Industries was not held to be correct as there was no similarity in the products manufactured by two different concerns. The Assessing Officer, according to the impugned order passed by the ITAT, had estimated profits of assessee on estimation, conjectures and surmises. No basis was found in documents in assuming declaration of inflated profits by the assessee. Further, the deduction at the rate of 5% of total sales on account of non-payment of charges to M/s Kay Pee industries for technical know-how and deduction of equivalent amount on account of non-payment of charges for goodwill etc., to the said concern, as concluded by the Assessing Officer, have also been held to be without any basis. 15. Learned counsel for the appellant has not been able to show that findings recorded by the ITAT, as noticed above, were against the records or were perverse. The ITAT being the final fact finding authority, in our considered view, has drawn the conclusions on the basis of records. There is nothing in the order of....
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.... Court has further expounded as under: - "12. In our view, if one examines the above process in the light of the details given hereinabove, commercial duplication cannot be compared to home duplication. Complex technical nuances are required to be kept in mind while deciding issues of the present nature. The term "manufacture" implies a change, but, every change is not a manufacture, despite the fact that every change in an article is the result of a treatment of labour and manipulation. However, this test of manufacture needs to be seen in the context of the above process. If an operation/ process renders a commodity or article fit for use for which it is otherwise not fit, the operation/ process falls within the meaning of the word "manufacture". 19. In Income Tax Officer vs. Arihant Tiles and Marbles, 2010(2) SCC 699, it has been noted that the expression used in Section 80IA - which is analogous to the expression used in Section 801B, which uses words manufactures or produces, as applicable to the present case mandates the Court to consider not only word "manufacture" but also the connotation of word "production". Having noted this position, the Court went on to obs....
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....006-07 and 2007-08. It was held that the enterprise of assessee was not involved in the manufacture or production of Anchors at Parwanoo. Such finding was based on the premise that substantial work in the entire process of production was got done by the assessee from Ludhiana in Punjab by outsourcing the jobs. Only minimal job was given effect to at Parwanoo which included threading of rods on both the ends, assembly of nuts/washers and application of asphalt coat thereon. The Assessing Officer, for arriving at such conclusion, had taken into consideration the findings of survey, report of Chartered Engineer, statements of partners of assessee recorded under Section 131 of the Act etc. Thus, there was clear finding of fact recorded by the Assessing Officer that only small part of entire process involved in production of the Anchors was done at Parwanoo and that by itself could not be considered sufficient to hold that the assessee was engaged in manufacture or producing the end product at Parwanoo. 23. The Assessing Officer had relied upon the following flow chart relating to manufacture of Anchors by the assessee:- Raw material check Drawing to Size Inspection Ba....