Rajasthan High Court - Jodhpur
M/S Grace Exports vs I.T.O.Ward-2(1),Udaipur on 29 August, 2012
Author: Dinesh Maheshwari
Bench: Dinesh Maheshwari
D.B. INCOME TAX APPEAL NO.20/2010
M/s Grace Exports Vs. ITO Ward-2 (1), Udaipur
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D.B. INCOME TAX APPEAL NO.20/2010
M/s Grace Exports Vs. ITO Ward-2 (1), Udaipur
..
Date of Order :: 29th August 2012.
HON'BLE MR. JUSTICE DINESH MAHESHWARI HON'BLE MR. JUSTICE NARENDRA KUMAR JAIN-II Mr.Anjay Kothari for the appellant.
Mr. KK Bissa for the respondents.
<<>> This appeal under Section 260-A of the Income Tax Act, 1961 ('the Act') is directed against the judgment and order dated 29.06.2009 as passed by the Income Tax Appellate Tribunal, Jodhpur Bench, Jodhpur ('the ITAT') in ITA No.49/JU/2007 for the assessment year 2001-02. This appeal has been admitted on the following substantial questions of law:-
"(1) Whether the Tribunal was justified in disallowing the benefit available to assessee under Section 10B of the Income Tax Act and if so whether the view taken by the Tribunal is in conformity with the law laid down by their lordships of the Supreme Court in Income Tax Officer Vs. Arihant Tiles reported in (2010) 320 ITR -
79 (SC)?
(2) Having granted the benefit to the assessee under Section 10B in the base year, whether it could be denied to the assessee for the subsequent 9 years? (3) Whether the Tribunal was justified on facts in remanding the case to the Assessing Officer for examining the question as to whether the assessee is entitled to claim the benefit under Section 80HHC?"
D.B. INCOME TAX APPEAL NO.20/2010 M/s Grace Exports Vs. ITO Ward-2 (1), Udaipur 2 The factual aspects so far relevant for the purpose of determination of the questions aforesaid could be noticed in brief as follows: The appellant-assessee, said to be engaged in the business of manufacture and export of finished marble slabs and tiles, in its return for the assessment year 2001-02 claimed exemption under Section 10-B of the Act in respect of its Unit-2 as being 100% Export Oriented Undertaking with the essential submissions that it had been engaged in the activity of manufacturing, producing and processing of marble slabs and tiles from its own plants and machineries and whole of the manufactured material was sold outside the country. The claim of the assessee before the Assessing Officer was that the definition as given in EXIM Policy would be applicable in respect of 'manufacturing' for the purpose of Section 10-B of the Act but the same was not accepted by the Assessing Officer with the observations that the conversion of marble blocks by sawing into slabs, tiles and polishing did not amount to manufacture of article or things while relying, inter alia, on the decision of the Hon'ble Supreme Court in Lucky Minmet's case: 245 ITR 830.
In appeal, the Commissioner of Income-Tax (Appeals), Udaipur ['the CIT(A)'] accepted the contention as urged on behalf of the assessee for allowing the claim under Section 10-B of the Act while holding that the appellant's case definitely fell under the scheme of production and the appellant was entitled for the claimed deduction. The ITAT, however, proceeded to accept the appeal filed by the revenue with the following observations and findings:-
"8. On careful analysis of the material made available before the Tribunal in the light of the submissions made by both the parties, it is found that undisputedly the assessee is carrying on the activity of processing of rough marble slabs by edge-cutting them and polishing them before exporting and it is an EOU not D.B. INCOME TAX APPEAL NO.20/2010 M/s Grace Exports Vs. ITO Ward-2 (1), Udaipur 3 trading in domestic market. The assessee is contending that by activity of processing marble slabs by edge-cutting and polishing them amounts to manufacture in the light of the decision of the Hon'ble Apex Court rendered in the case of Sesa Goa Ltd [supra] wherein it was held that extraction and processing of mineral ore amounts to production within the meaning of the word in section 32A(20)(b)(iii) of the I.T. Act. It was further held that excavating and processing of ore amount to production within the meaning of sec. 80I of the Act and the ld. CIT(A) while agreeing to the contentions of the assessee, gained further support from the definition of 'produce' mentioned in sub-section (1) of section 10B which included from F.Y. 1.4.2000 to 31.3.2001, the word 'manufacture' includes any process from the F.Y. 1.4.2000 to 31.3.2001 onwards this term 'manufacture' has been replaced by the word 'produce'. The said word 'produce' is not defined anywhere in the section. Therefore, taking into consideration in the normal sense of the word produce which is derived from the word 'production' is taken by the ld. CIT(A) as normal meaning of production which is involvement of manpower, skill and some degree of complexity. However, the Hon'ble Apex Court in the case of Lucky Minmat P. ltd [supra] held that mining of lime stones, marble blocks and cutting and sizing the same do not involve any manufacturing process. In the present case on hand, undisputedly the assessee is carrying on the activity of processing of rough marble slabs by edge cutting and polishing them before their export. So, in view of similarity of the facts in the present case on hand with that of the facts in the case of Lucky Minmat P. Ltd [supra], it is to be held that the activity of the assessee will not amount to manufacture, which word is used in sec. 10B. Therefore, under these facts and circumstances of the case, we are of the considered view that the reasoning given by the ld. CIT (A) is going contra to the dictum laid by the Hon'ble Apex Court in the case of Lucky Minmat P. ltd [supra] and relied on by the Assessing Officer. Therefore, we are of the considered view that the ld. CIT(A)'s finding on this issue is not sustainable for legal scrutiny and hence the same is hereby set aside by restoring that of the Assessing Officer by allowing the ground raised by the department in both the assessment years under consideration."
Another issue involved in the matter had been in relation to the claim of benefit under Section 80-HHC of the Act that had also been decided by the CIT(A) in favour of the assessee but the ITAT proceeded to hold that the issue required to be verified afresh by the Assessing Officer with reference to the books of account maintained by the assessee for all the periods of business so as to find the fact as to whether the partners had withdrawn any amount from the firm on account of their remuneration and interest on their capital. With these observations, the ITAT restored the issue to the file of the Assessing Officer for de novo consideration.
D.B. INCOME TAX APPEAL NO.20/2010 M/s Grace Exports Vs. ITO Ward-2 (1), Udaipur 4 So far the question of benefit under Section 10-B of the Act is concerned, the learned counsel for the appellant-assessee has submitted that the view as taken by the ITAT cannot be sustained for the authoritative pronouncement of the Hon'ble Supreme Court in the case of Income-Tax Officer Vs. Arihant Tiles and Marbles P. Ltd.:
(2010) 320 ITR 79 (SC) holding, inter alia, that step-wise activity of cutting marble blocks and converting into the polished slab and tiles constitute manufacture or production in terms of Section 80-IA of the Act while distinguishing the decision in Aman Marble's case, and while observing, inter alia, held as under:-
"......What we find from the process indicated hereinabove is that there are various stages through which the blocks have to go through before they become polished slabs and tiles. In the circumstances, we are of the view that on the facts of the cases in hand, there is certainly an activity which will come in the category of "manufacture" or "production" under section 80-IA of the Income-tax Act...."
The learned counsel for the revenue is not in a position to controvert the submissions so made on behalf of the assessee- appellant.
Having gone through the decision of the Hon'ble Supreme Court in Arihant Tiles and Marbles (supra), we are clearly of the opinion that the view as taken by the ITAT cannot be sustained.
Accordingly, the answer to Question No.1 is that the Tribunal was not justified in disallowing the benefit available to the assessee under Section 10-B of the Income Tax Act; and the view as taken by the Tribunal does not stand in conformity with the law declared by the Hon'ble Surpeme Court in the case of Income Tax Officer Vs. M/s Arihant Tiles & Marbles P. Ltd. (2010) 320 ITR 79. Accordingly, D.B. INCOME TAX APPEAL NO.20/2010 M/s Grace Exports Vs. ITO Ward-2 (1), Udaipur 5 the appeal as filed by the revenue before ITAT (ITA No.49/JU/2007) for the assessment year 2001-02 shall stand dismissed as regards the claim under Section 10-B of the Act.
In view of what has been found hereinabove in Question No.1, there appears no necessity of much dilatation on Question No.2. Suffice is to observe that if the benefits have been granted for the above year 2001-02 under Section 10-B of the Act; and the benefit is available for a block of 10 years, it cannot, ordinarily, be withdrawn when the nature of work and benefits remain the same.
So far as Question No.3 is concerned, the learned counsel for the parties are ad idem that this question is rendered academic because the assessing authority, pursuant to the order of remand of ITAT, has decided the issue relating to the benefit under Section 80- HHC of the Act afresh on 30.12.2010. Accordingly, it is held that this question is rendered academic and is not required to be answered.
Accordingly, and in view of the above, this appeal of the assessee is partly allowed to the extent and in the manner indicated above.
(NARENDRA KUMAR JAIN-II), J. (DINESH MAHESHWARI), J. MK