TaxTMI 
TaxTMI 
2023 (1) TMI 756
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.... and had paid labour charges of Rs.45,18,797/- thereby not satisfying one of the conditions of section 80IB(2) (iv) of the Income Tax Act, 1961? 3. The appellant craves leave to add, alter, amend and modify any of the above grounds of appeal." 2. Assessee by moving an application sought to condone the delay of 13 days on the ground that under bonafide belief Department presumed that as per order passed by Hon'ble Supreme Court dated 10.01.2022 limitation has been extended up to 28.05.2022 due to pandemic. In view of the decision rendered by Hon'ble Supreme Court in case of Land Acquisition Collector vs. MST Katiji & Others 167 ITR 471 (SC) that, "it is on contention of delay that when substantial justice and technical considerations are pitted against each other, the case of substantial justice deserves to be preferred, for the other side cannot claim to have a vested right in injustice being done because of a non deliberate delay", I am of the considered view that there are sufficient grounds to condone the delay of 13 days sought for by the assessee to advance the cause of justice. Hence, delay is condoned and appeal is ordered to be registered. 3. Briefly stated f....
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....it had rightly claimed deduction u/s. 80IB of the Act and only on the basis of part of the manufacturing activity being done from outside unit, the deduction u/s. 80IB could not be disallowed. However, the AO was not satisfied with the assessee's submission. The AO mentioned that since the assessee got its own goods manufactured at an non 80-IB units(s) and had paid labour charges of Rs. 45,18,7977- to outside party namely M/s. Petuela Industries, hence it is not eligible for deduction u/s. 80IB as it does not fall under the industrial activity carried out by the assessee's own industrial undertaking. The appellant has contested this action of the AO by stating that it satisfied all conditions for claim of deduction u/s 80IB. It was stated that only a part of the manufacturing activity was done outside and the provisions of section 80IB nowhere states that entire manufacturing activity must be done in-house. It was argued that outside agency from whom the work was got done worked directly under appellant's supervision and control. The appellant has also relied on certain judicial precedents to argue that // part of the manufacturing activity is being done from outside a....
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....#39;), any machinery or plant which was used outside India by any person other than the assessee shall not be regarded as machinery or plant previously used for any purpose, if the following conditions are fulfilled, namely :- (a) such machinery or plant was not, at any time previous to the date of the installation by the assessee, used in India; (b) such machinery or plant is imported into India from any country outside India; and (c) no deduction on account of depreciation in respect of such machinery or plant has been allowed or is allowable under the provisions of this Act in computing the total income of any person for any period prior to the date of the installation of the machinery or plant by the assessee. Explanation 2.-Where in the case of an industrial undertaking, any machinery or plant or any part thereof previously used for any purpose is transferred to a new business and the total value of the machinery or plant or part so transferred does not exceed twenty per cent of the total value of the machinery or plant used in the business, then, for the purposes of clause (//') of this sub-section, the condition specified therein shall....
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.... It should not be formed by transfer of machinery or plant previously used for any purpose. C. It manufactures or produces any articles or things (not being an article or thing specified in the Eleventh Schedule) or operates cold storage plant, in any part of India. D. It begins to manufacture or produce of articles or things or to operate cold storage plants within a specified time limit. E. In case where the industrial undertaking manufacture or produces articles or things, the undertaking employs 10 or more workers in a manufacturing process carried on with the aid of power, or employs 20 or more workers in a manufacturing process without the aid of power. There is no dispute about the fact that the assessee firm was engaged in the business of manufacturing of plastic containers, bottles, caps etc. and it is eligible for deduction u/s. 80IB of the Act. The only dispute is whether if a part of the manufacturing is done outside, the deduction u/s. 80IB is allowable or not. From the process as explained by the appellant firm, it can be noted that the major activity of the manufacturing is carried out inside the factory by own labour. Only part of....
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....gs of the Tribunal in our opinion conclusively show that the assessee was carrying on the activity of manufacturing and also of processing of books which are also goods. The argument, namely, that the assessee was not mainly carrying on manufacturing or processing activities in view of the Tribunal's finding that "the assessee's activity cannot be called purely a trading activity" does not appeal to us. The assessee did not purchase any books from market or sell them at a profit. The assessee published books and sold them in the market. We also agree with the finding of the Tribunal that the assessee was also carrying on the processing activity in as much as the assessee had to do many things as stated in its order..." The Hon'ble Delhi High Court in its decision in the case of Orient Longman Ltd. vs. CIT reported in 130 ITR 477 observed as below. "Held, that though the assessee as a publisher would not be doing more than getting the manuscript and preparing the same for printing and book binding, yet the fact that printing and book binding was done by someone else did not imply that someone else was the manufacturer. It was the business of the assesse....
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....and processing of goods. 2. The Board has been advised to accept these decisions. In view thereof, book publishing companies even though they may themselves not be engaged in the printing or binding of books qualify to be treated as industrial companies for the purpose of section 104 as well as for the concessional tax treatment given to industrial companies". If payment to workers is made on job work basis or piece rate basis, persons doing work are to be considered as employees of the assessee. In the case of CIT vs. Rajmohan Cashews (P.) Ltd. reported in 185 ITR 472 (Ker), order was challenged by the Revenue before the Tribunal. The Tribunal held: ". . . An activity of 'manufacture or processing' could be carried on by an assessee either with plant and machinery belonging to others by paying the necessary charges for the use of such plant and machinery. In the present case, the assessee has chosen the latter course as it would have been an onerous responsibility to start a factory of its own, install plant and machinery and engage labour and create certain permanent commitments. The payments made by the assessee towards the processing of the nu....
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....uction under the Act. Neelu Textiles v. Addl. CIT-128 Taxman 93 (Jodh) The assessee-firm was engaged in cloth manufacturing. Entire production process included, inter alia, purchase of yam, weaving of yarn and production of grey cloth, mending, processing and putting the logo/name of company, its trade name and to market the products. However, a part of the production process, i.e., weaving of yarn and production of grey cloth, was got done by outside agency. The assessee claimed deduction under section 80-IA. But the Commissioner (Appeals) partly sustained the disallowance, holding that the deduction should be confined only to the cloth manufactured in the assessee's factory.... ".... We have considered the rival contentions, the relevant material on record as also the cited decisions. In 196 ITR 813 (supra) the fact-situation was that the assessee was getting machinery manufactured by somebody else under its direct supervision and control whereas all other activities were undertaken by assessee which included (1) canvassing of orders, (ii) preparing of designs and drawings on the basis of orders (Hi) placing orders for the manufacture of machinery w....
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....was right in holding that the assessee was an industrial company as defined in section 8(c) of the Finance Act, 1975, entitled to the concessional rate of tax". In the case of CIT Vs. Indian Resins and Polymers reported in 235 ITR 5, it was held as below:- "The assessee carried on business in respect of kernels and shell oils. The assessee purchased raw cashew nuts and after drying them, it entrusted them with a company for processing. The processed cashew kernels were brought back to the assessee's unit and packed and exported. The assessee was also extracting oil from the cashew shell and exporting the same. The assessee claimed deduction under sections 80HH and 80J of the Income-tax Act, 1961, on the ground that it was an industrial undertaking engaged in the manufacture and production of an article or thing. The Assessing Officer rejected the claim for deduction on the ground that the assessee did not manufacture or produce the cashew kernels and that it played only the role of a trader and, therefore, was not entitled to claim deduction under section 80HH. The Assessing Officer also rejected the claim of the assessee for deduction under section 80J of the....
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....ers." It can be noted that the work given on job was verified by the appellant and then only payments were made. Control and supervision does not mean that it must be constant. It can vary according to the nature of work. Control and supervision does not mean that either the appellant or his agent should daily go and inspect the work as also the quality. Needles to mention that the ownership over the goods remained with the appellant all the time. The goods were manufactured at the cost and risk of the appellant and the appellant received the same material after job done by outside party. There was no exchange of raw material with the outside party. Under the circumstances, it requires to be held that the manufacturing actually belonged to the appellant. In view of the facts of the case, legal position and judicial precedents as discussed in para nos. 8 to 10 (supra), I am of the considered view that the appellant-firm was engaged in manufacturing or produce of article or thing as required u/s 80IB of the Act and therefore, it is entitled for deduction u/s 80IB to the extent of Rs. 13,20,693/- as claimed by the appellant. The disallowance made by the AO at Rs. 5,4....