TaxTMI 
TaxTMI 
2025 (8) TMI 1266
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..... 2 ITA No. 180 / Chny / 2025 2007-08 DIN & Order No. ITBA / NFAC / S / 250 / 2024-25 / 1071963609(1) dated 17.01.2025 Both the above appeals are centering around common issues and hence for the purposes of convenience were heard and are adjudicated together. We have taken ITA No.180 for AY-2007-08 as lead year to consider facts and figures. The decision taken in ITA No.180 shall apply mutatis mutandis in ITA No.179 for AY-2006-07. 2.0 The only issue raised through its grounds of appeal is regarding the addition of Rs. 65,01,148/- made by the Ld.AO and its confirmation by the Ld.CIT(A). At the outset, the Ld.Counsel for the assessee submitted that this is the second round of litigation. It was submitted that pursuant to the directions of the Ld.PCIT, Chennai while exercising his revisionary authority u/s. 263 of the Act, the Ld.AO had denied the assessee its claim of deduction u/s. 80IB(2)(iv). In appeal a coordinate bench of this tribunal while through its order vide ITA No.1929 and 1930 / Mds / 2015 dated 01.04.2016 for AY-2006-07 & 2007-08 reverted back the matter to the Ld.AO for re-examination afresh. It was submitted that the Hon'ble Coordinate B....
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....he Act stands allowed by the Revenue. The Ld. Counsel vehemently argued that the facts of the case as available in AY-2005-06 as also in subsequent year are identical. The Ld.Counsel for the assessee further relied upon the judicial precedent laid down by the Hon'ble Bombay High Court in the case of Jyoti Plastic Pvt Ltd dated 15.11.2011 as at 16 taxmann.com 172. In support of its contentions, the Ld. AR has filed a voluminous paper book comprising documents, inter-alia, including agreement / invoices for contract labour, register of wages, copies of return of income / balance sheet / profit & loss account for AY-2006-07 and 2007-08, remand report and its rejoinders etc, all of which were available before the lower authorities. 4.0 Per contra, the Ld.DR relied upon the order of the lower authorities. It was argued that the decision of Jyoti Plastic Pvt Ltd (Supra) is not applicable in this case since the same pertain to issue of contractual workers in manufacturing process and that in the present case the contracted workers were not engaged in manufacturing process. The Ld. DR urged that the distinguishment made by the Ld.AO on the issue of absence of any manufacturing process w....
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....e" had been omitted. Explanation 1.-For the purposes of clause (ii), 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 clau....
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....should be totally different from the original ingredients. This process of manufacturing can be simple like a mere mixing of two items or a complex process involving mechanical, electrical and other attributes. In the present case, the Ld.AO has admitted in his remand report(supra) that the assessee is engaged in the activity of mixing of certain raw materials. It is another thing that according to the Ld.AO, the same does not require any expert knowledge. In the process of manufacturing, it is not necessary that there should be any involvement of any expert knowledge. The basic requirement is that two ingredients should be united to give birth to another new ingredient which is fundamentally different from the consequents. It is not the case of the Revenue that the assessee has not joined different chemicals to give birth to vanish and thinners. This proposition finds favour in the decision of Hon'ble Madras High Court in the case of DXN Herbal Manufacturing India Private Limited 96 taxmann.com 299 holding as under:- "......23. The factual matrix clearly demonstrates that what has been done by the assessee is manufacture. The decision relied on by the Revenue in the case ....
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....n is an exhaustive definition and not an expansive one. The procedures are in the nature of producing, making, mining, collecting, extracting, altering, ornamenting, finishing or otherwise processing, treating or adapting; but the definition does not include such manufacture or manufacturing processes as may be prescribed. On a reading of the said definition of 'manufacture' we note that it does not use the expression 'includes'. This clearly indicates that the intention of the Legislature is to give a strict or a restricted meaning to the expression 'manufacture' and not an expansive meaning. That is exactly what has been held by a three Judge Bench of this Court in the case of M/s Shiv Datt and Sons(supra)wherein, the question was, whether, the process where the plates of the battery are immersed in a solution of sulfuric acid and distilled water and connected together by a direct current and then connected to the two terminals of as source of supply and thereafter the plates are dried in the ordinary way, the electrolyte which is formed is thrown out and the plates assembled in the battery manufactured by the manufacturers are dried and sold would amount ....
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....ng of the expression 'manufacture.' It was accordingly held that the words used by the statute namely "processed or altered in any manner after such purchase" were very wide, and there was need to read down the scope of the expression and therefore, the purpose of the definition that there should be some alteration in the nature or character of the goods had to be construed accordingly. It was also categorically held that if the expression "process and manufacture" is given too wide a definition than what is necessary it may result in an absurd or an impractical consequence. The said conclusion was recorded in paragraph 10 of the judgment. "10. But, on careful consideration, we are of the opinion that the terms of section 2(17) should not begiven such a wide interpretation. If such a wide interpretation is given there may be very absurd results flowing as a consequence thereof. For instance, the definition includes the word 'ornamenting'. If a dealer purchases certain goods and merely adds some decorative material thereto, according to the State's interpretation, there will be a 'manufacture'. For instance, if a car is purchased and some lights ....
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.... in Nilgiri Ceylon Tea Supplying Co.(supra) did not lay down the correct law. 13. However, we wish to state that the nature of the product that was contracted for in Chowgule & Co. (P.)Ltd. namely, a particular combination of ore, was the pertinent point which actually distinguished the case from the facts in Nilgiri Ceylon Tea Supplying Co. (supra) from Chowgule & Co. Private Ltd. (supra). 14. Since another three-Judge Bench of this Court has considered the ramifications of the order of reference of the Bombay High Court in Nilgiri Ceylon Tea Supplying Co., although without reference to Chowgule & Co. Private Limited (supra), we find that the judgment of this Court in Chowgule & Co. Private Limited (supra)as well as M/s Shiv Datt and Sons proceed on different sets of facts and therefore, in that context, the perception of respective three judge Benches on the order of reference made by the Bombay High Court is distinct as it is with reference to the particular factual matrix under consideration. 15. We find that having regard to what has been opined by the three-Judge Bench of this Court in M/s Shiv Datt and Sons vis a vis the order on reference made by ....
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....80IB(2) that the assessee engaging 10 or more persons in its undertaking while using power. The Ld.AO in his remand report has stated that the assessee is having only six regular employees comprising a factory manager, a quality controller, an accountant, a receptionist, an office boy and a driver. It is the case of the Ld.AO that the contractual workers utilized by the assessee from a contractor namely one Mr. R. Sivakolundhu cannot be taken as part of assessee's employees. During the course of present hearing the Ld. Sr. DR Ms. R. Anitha, submitted that the said contractual workers are not engaged in the business of manufacturing and therefore the assessee will not get benefit of the ruling of Hon'ble Bombay High Court in the case of Jyoti Plastic (supra). It was argued that they are engaged in activities of gardening, housekeeping etc. As far as the controversy as to whether the contractual workers can be considered for the numerical satisfaction prescribed in section 80IB(2)(iii), we have noted that Hon'ble Bombay High Court in the case of Jyoti Plastic (supra) has deliberated upon the matter extensively to hold that contractual workers have to be included in the condition of 1....
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....gular workers and it may be said to have satisfied that requirement if the aggregate actual number of workers engaged in the manufacturing process, both regular and normal, is ten in number. However, where the undertaking employs less than ten regular workers, it cannot be heard to say that on any particular day it wanted to employ additional casual workers to enhance the figure to ten or more, but that it could not do so by reason of non-availability of casual labourers. If it chooses to have less than ten regular workers on its muster roll, it runs the risk of not satisfying the requirement on such days on which the necessary number of casual workers is not available." 15. In the present case, it is not the case of the Revenue that the total number of workers employed in the manufacturing were less than ten at any point of time during the relevant assessment year. Therefore, when Section 80IB(2)(iv) of the Act merely provides that the undertaking must employ ten or more workers(whether directly employed or not) in the manufacturing process carried on with the aid of power, it would not be proper to hold that Section 80IB(2)(iv) refers to ten workers employed by the asses....
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....atisfied that requirement if the aggregate actual number of workers engaged in the manufacturing process, both regular and normal, is ten in number. Therefore, under Section 80IB(2)(iv) what is relevant is the employment of ten or more workers and not the mode and the manner in which the said workers are employed by the assessee. In other words, irrespective of the terms of employment, condition of Section 80IB(2)(iv) would stand fulfilled if the assessee in aggregate employs ten or more workers in its manufacturing activity. The fact that the employer - employee relationship between the workers employed by the assessee differs cannot be a ground to deny deduction under Section 80IB of the Act, so long as the workers employed by the assessee in aggregate exceed ten in number. Accordingly, we find it difficult to follow the decision of the Allahabad High Court in the case of Venus Auto Private Ltd. (supra). 18. In the result, in the facts of the present case, since the actual number of workers employed in the manufacturing process exceeded ten in number, the Tribunal was justified in holding that the condition of Section 80IB(2)(iv) have been fulfilled. Accordingly, the sec....