Income Tax Appellate Tribunal - Hyderabad
Jumbo Mining Limited, Hyderabad vs Assessee on 2 May, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH 'B', HYDERABAD
BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER and
SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER
ITA No. 43/Hyd/2010 - A.Y. 2006-07
M/s. Imerys Ceramics Vs. Assistant Commissioner of
(India) Pvt. Ltd., Income-tax, Circle-2(1)
(Formerly M/s. Jumbo Hyderabad
Mining Ltd.), Hyderabad
PAN: AAACJ7424Q
Appellant Respondent
ITA No. 870/Hyd/2010 - A.Y. 2005-06
ITA No. 1056/Hyd/2010 - A.Y. 2007-08
M/s. Imerys Ceramics Vs. Deputy Commissioner of
(India) Pvt. Ltd., Income-tax
(Formerly M/s. Jumbo Circle-2(1)
Mining Ltd.), Hyderabad Hyderabad
PAN: AAACJ7424Q
Appellant Respondent
Appellant by: Shri K.C. Devdas
Respondent by: Shri M.S. Rao
Date of hearing: 02.05.2012
Date of pronouncement: 02.07.2012
ORDER
PER CHANDRA POOJARI, AM:
The above three appeals by the assessee are directed against different orders of the CIT-III, Hyderabad for assessment years 2005-06 to 2007-08. Since certain issues involved in these appeals are common in nature, these appeals are clubbed together, heard together and are being disposed of by this common order for the sake of convenience.
2. Firstly, we will take up the issue with regard to validity of initiation of re-assessment proceedings u/s. 147 of Income-tax 2 ITA Nos. 870, 43 & 1056/Hyd/2010 M/s. Imerys Ceramics (I) Pvt. Ltd.
(formerly known as M/s. Jumbo Mining Ltd.) ================================= Act, 1961 in I.T.A. No. 870/Hyd/2010 for assessment year 2005-
06.
3. Brief facts of the issue are that the assessee is a company which derives income from extraction of mineral ores and export. In this case the original assessment for A.Y. 2005-06 was completed on 31.12.2007 on an income (book profit) of Rs. 69,41,578. The assessee has filed its return of income for the said assessment year on 1.11.2005 showing income at Nil under normal provisions, after claiming deduction u/s. 80IB(5) of the Act. On scrutiny, the assessment was completed on the above book profit amount on 31.12.2007. However, later, the Assessing Officer noticed that in the said assessment the assessee has been allowed excess deduction to the extent of Rs. 51,91,951. Therefore, she re-opened. the u/s. 147 of the Act and accordingly, has issued a notice u/s. 148 for this assessment year on 24.3.2009. In response to this notice, the assessee has submitted that the original return filed may be treated as return filed in response to notice u/s., 148 of the Act.
4. During the re-assessment proceedings, the assessee has objected to such proceedings stating that all facts necessary for assessment have been disclosed by them and such present action of the Assessing Officer is a mere change of opinion. However, after discussing the factual position and referring to the proviso to section 147 of the Act, the Assessing Officer rejected such contention. She further noted that during the assessment proceedings for A.Y. 2006-07, while calling for details of excise duty liability, the assessee has filed a letter on 17.11.2008 stating that Jumbo Mining Ltd., purchases/ excavates minerals and process the same for different sizes and the final product is same as input and no other materials are added in such process. Hence, 3 ITA Nos. 870, 43 & 1056/Hyd/2010 M/s. Imerys Ceramics (I) Pvt. Ltd.
(formerly known as M/s. Jumbo Mining Ltd.) ================================= it is not subjected to excise duty. She further noted that such submission led to the new fact that the goods produced by the assessee company are not subjected to excise duty and the same caused the Assessing Officer to believe that income in this case has escaped assessment by allowance of excess deduction u/s. 80IB(5) for A.Y. 2005-06.
5. During the assessment proceedings, in response to query from the Assessing Officer to substantiate their claim of deduction made u/s. 80IB(5), the assessee has submitted that their company is into the business of production of PF Lumps, FE Lumps, PF Powder, Clay, PF Quartz and Chips from mined feldspar, quartz which is saleable in the market. The manufacturing processes carried out by their company results in FE Chips, granules/lumps and powder of Potassium Feldspar, Clay etc. These goods are classified under Chapter 25 of the Central Excise Tariff Act. It was submitted that raw materials when extracted from mines are of insignificant value and only when processed they become valuable marketable commodities. It was further submitted that plant and machinery worth Rs. 2 Gores is used for the purpose of processing and, therefore, the activity is to be treated as manufacturing. It was stated, production of PF Lumps, FE Lumps, PF Powder, Clay, PF Quartz and Chips from mined feldspar, quartz, is a manufacturing activity. After considering such submissions, the Assessing Officer noted that the assessee company is simply carrying out three activities viz., i) Crushing, ii) sorting for separation of bigger lumps from smaller ones and iii) Testing for moisture content. Bigger lumps extracted from mines, after passing through crusher, ball mill etc., are converted to chips or granules or powder without losing their mineralogical identity. She noted that no change occurs in its physical as well as chemical properties and this fact is confirmed by the assessee company 4 ITA Nos. 870, 43 & 1056/Hyd/2010 M/s. Imerys Ceramics (I) Pvt. Ltd.
(formerly known as M/s. Jumbo Mining Ltd.) ================================= itself in the course of scrutiny assessment proceedings for A.Y. 2006-07 by filing a letter dated 17.11.2008. She further noted, from the above, it can be concluded that the assessee is not doing any manufacturing or producing any article or thing which is essential condition for claiming deduction u/s. 80IB. She clearly noted that the assessee is simply extracting the mineral from the earth and then simply crushes the same into smaller pieces of various sizes.
6. The Assessing Officer further noted that as per the P&L account of the assessee, it is not incurring any direct expenses for the purpose of manufacture of anything which is new in name and character. She noted that under the head 'direct expenses', the assessee has claimed expenses just for mining, transportation, loading and unloading etc., which cannot be construed as manufacturing expenses. Further comparing the figures of turn over shown in respect of PF Lumps, PF Chips and PF Granules and the sale price of each item per metric tonne, she noted that the raw material extracted from the mines i.e., PF Lumps were sold at a higher price than the other two items, obtained during crushing activity. She further mentioned that, the above fact contradicts the claim of the assessee that raw materials when extracted from mines are of insignificant value. With the above observations, the Assessing Officer concluded that the assessee company is not involved in manufacturing of any product as required u/s. 80IB(5) of the Act. She thus held that the assessee is not entitled to deduction u/s. 80IB of the Act. Therefore, she disallowed the claim of the assessee for deduction u/s. 80IB for an amount of Rs. 51,91,951 and completed the assessment accordingly u/s. 143(3) r.w.s. 147 of the Act.
5 ITA Nos. 870, 43 & 1056/Hyd/2010M/s. Imerys Ceramics (I) Pvt. Ltd.
(formerly known as M/s. Jumbo Mining Ltd.) =================================
7. The learned AR submitted that the assessee company is engaged in the business of extraction, processing and trading of mineral ores. It has set up a unit tor processing and manufacture of ores at Kadthal, Mahboobnagar District, Andhra Pradesh. The commercial production started in financial year 2004-05. For A.Y. 2005-06, the assessee company has filed return of income on 1.11.2005 showing Income at Nil, after claiming deduction u/s. 80IB(5) of the Act, under the normal provisions and total income of Rs. 69,41,576 computed u/s. 115JB of the Act. It was submitted that scrutiny assessment was completed u/s. 143(3) after due verification of records. It was stated, there is no new material fact before the Assessing Officer and the present disallowance made by her is on a mere change of opinion. It was submitted that in the case of CIT Vs. Kelvinator of India Ltd., (2010) 320 ITR 561, it was held by the Supreme Court that there must be tangible material for the formation of belief that income has escaped assessment. The AR submitted that in the instant case, there was no tangible material at the time of issuing the notice by the Assessing Officer u/s. 148 to come to a conclusion that income has escaped assessment in this case. The AR submitted that the only basis for reopening the assessment in this case is the said letter filed by the assessee during the assessment proceedings for A.Y. 2006-07, wherein it was submitted that the final product of the company is same as input and no other materials are added in the process. It was stated that the observations made by the Assessing Officer in this regard is not correct. The Assessing Officer failed to appreciate and take on records that the company's goods are subject to excise duty under the Indian Excise Laws. However, vide notification No. 36/ 2001-CE(NT), dated June 26th , 2001, the company enjoys excise duty exemption. The AR submitted that the Assessing Officer was not justified in reopening the assessment in this case. It was further contended that such action of the Assessing Officer is ab 6 ITA Nos. 870, 43 & 1056/Hyd/2010 M/s. Imerys Ceramics (I) Pvt. Ltd.
(formerly known as M/s. Jumbo Mining Ltd.) ================================= initio void both under law and facts. In this regard, the AR relied on several decisions.
8. The learned DR submitted that he is not agreeing with the contention of the AR. In the letter dt. 17.11.2008 filed during assessment proceedings for A.Y. 2006-07, the assessee has stated that the final product is same as input and no other materials are added in the process, and the Assessing Officer has referred to such submission to prima facie reach the conclusion that the assessee is not engaged in manufacturing or production of any article or thing how can the AR submit that such observations made by the Assessing Officer are not correct? Secondly, from the assessment order, made in this case on 31.12.2007 u/s. 143(3) of the Act, the claim of such deduction u/s. 80IB made by the assessee has not been examined by the then Assessing Officer. In this context, it is pertinent to reproduce the entire observations made by the Assessing Officer in the said assessment order, before computation of total income and tax calculation made in that order:
The assessee, M/s. Jumbo Mining Limited, Hyderabad, in the activity of extracting and processing of mines, has filed return of income for the A.Y. 2005-06 on 1.11.2005 declaring nil income under normal provisions and a book profit of Rs. 69,41,578/- as per section 115JB of the Income Tax Act, 1961. The same was processed u/s. 143(1) on 28.3.2007. Subsequently, the case has been selected for scrutiny by CASS and notice u/s. 143(2) was issued on 16.3.2007. In response to notices u/s, 143(2), assessee's Authorised Representative Shri Manoj Patel, ITP, has appeared from time to time and produced details called for. The information produced has been examined. After verification of details filed and discussion with the assessee's A.R., the assessment is completed accepting income returned.
9. According to AR, from the above, it may be seen that there is no reference at all to section 80IB of the Act in the said assessment order. There is no mention regarding verification of any claim made by the assessee. Even there is no reference to any 7 ITA Nos. 870, 43 & 1056/Hyd/2010 M/s. Imerys Ceramics (I) Pvt. Ltd.
(formerly known as M/s. Jumbo Mining Ltd.) ================================= manufacture or production of any article by the assessee. Under the circumstances, it cannot be said that the then Assessing Officer has formed an opinion during such assessment proceedings. Consequently, it cannot be said that the present action of the Assessing Officer in this case tantamount to change 'of such opinion. Rather, having regard to the reasons recorded by the Assessing Officer, for entertaining the belief, regarding escapement of taxable income in the hands of the assessee the reopening of assessment in this case u/s. 147 of the Act is justified.
10. We have heard both the parties on this issue and perused the material on record. Similar issue came up for consideration before this Tribunal in the case of M/s. Kernex Micro Systems (India) Ltd., in I.T.A. No. 882/Hyd/2006 & Ors. The Tribunal vide order dated 30.3.2012 held as under:
"5. We have heard both the parties and considered the material available on record. In this case there is no assessment u/s. 143(3) of the Act and only the return was processed u/s. 143(1) of the Act. The reopening of the assessment is within four years from the end of the relevant assessment year. As per clause (b) of Explanation 2 to proviso to section 147 where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return, the Assessing Officer is entitled to reopen the assessment. Further in the case of ACIT vs. Rajesh Jhaveri Stock Brokers (P) Ltd. (supra), it was held that the Assessing Officer is having jurisdiction to issue notice u/s. 148 for bringing to tax income escaping assessment on the ground that the assessee claimed excessive relief or deduction. In the present case considering the excessive claim of the assessee u/s. 80HHE, we are of the opinion that reopening of assessment is valid.
6. We have also carefully gone through the order of the Mumbai Bench of the Tribunal in the case of H.V. Transmissions Ltd. (supra). In this case the assessee 8 ITA Nos. 870, 43 & 1056/Hyd/2010 M/s. Imerys Ceramics (I) Pvt. Ltd.
(formerly known as M/s. Jumbo Mining Ltd.) ================================= incurred expenses towards Enterprise Resource Planning software amounting to Rs. 95.14 lakhs. In the accounts the assessee has debited 25% of this amount i.e., Rs. 23,78,500 whereas in the computation of income, the assessee has claimed the entire amount of Rs. 95.14 lakhs as deduction. The expenses incurred by the assessee is payment for acquisition of software which is capital in nature. Hence the assessment is reopened to disallow the same. On appeal to the Tribunal, it was held that there was no material coming to the possession of the Assessing Officer on the basis of which the assessment completed u/s. 143(1) was reopened and this position has not been disputed even by the DR. Being so, in the present case we are not in a position to apply the ratio laid down by that decision because clause (b) to Explanation 2 to proviso 2 of section 147 clearly authorises the Assessing Officer to reopen the assessment. This provision is to be considered for the purpose of adjudicating this issue. This ground relating to reopening of assessment is decided against the assessee."
11. In the present case the assessment was reopened on noticing that excess deduction to the extent of Rs. 51,91,951 was granted to the assessee. This re-opening of assessment is falling under the purview of clause (b) to Explanation 2 to proviso 2 of section 147 of the Act. Being so, considering this fact and following the ratio laid down by the tribunal in the case of M/s. Kernex Micro Systems (India) Ltd., cited (supra), we do not find any infirmity in the order of the CIT(A) and the same is upheld. This ground of the assessee fails.
12. The next common ground all these appeals is with regard to disallowance of deduction claimed by the assessee u/s. 80IB of Income-tax Act, 1961.
13. Facts of the issue, in brief, are that the assessee carried out basically three types of activities, viz., (i) extracting raw material from its own mines, (ii) manufacturing finished product at the Kadthal plant and (iii) trading of raw materials. Basically mining 9 ITA Nos. 870, 43 & 1056/Hyd/2010 M/s. Imerys Ceramics (I) Pvt. Ltd.
(formerly known as M/s. Jumbo Mining Ltd.) ================================= activity is carried out at various mines situated at Dindichintapally village, Koratikal village, Mudhi Manikyam village and Rangapur village. Manufacturing activity was carried out at factory situated at Kadthal village, Mahaboobnagar District., A.P. notified as an industrially backward area. Besides the above extracting and manufacturing activities, the assessee is doing trading activity in raw material. The assessee claimed exemption u/s. 80IB on the profits of manufacturing activity. According to the assessee it was engaged in manufacturing of different mineral products and in order to have regular and uninterrupted supply of raw material it started its own mining.
14. For brevity, we will now consider the facts relating to Assessment year 2006-07. The assessee is a company which is engaged in extracting and processing of mines. For the A.Y. 2006- 07, it has filed its return of income on 26/11/2006 showing income of Rs ,46,91,230, after claiming deduction for Rs. 1,00,78,425 u/s, 80-IB and for Rs. 1,200 u/s. 80G of the Act. After processing of the return u/s. 143(1) of the Act, the same was selected for scrutiny assessment. From the Audit Report in form 3CD filed with the return, the Assessing Officer noticed that the assessee has paid a sum of Rs, 49,93,369 towards service tax, which according to him is not allowable u/s, 40A(9) of the Act. Further stating that no clarification has been filed by the assessee, the Assessing Officer disallowed the said amount. From the said Audit Report the Assessing Officer further noticed that a sum of Rs. 82,624 towards employees' contribution towards Provident Fund, was paid by the assessee after the due dates, as defined under said Act / Regulation. Since the said contribution has not been paid by the due date, referring to provisions of Sec. 36(1)(va) of the Act, the Assessing Officer disallowed the said amount. The Assessing Officer further noticed that the assessee has debited an 10 ITA Nos. 870, 43 & 1056/Hyd/2010 M/s. Imerys Ceramics (I) Pvt. Ltd.
(formerly known as M/s. Jumbo Mining Ltd.) ================================= amount of Rs, 43,909/- to P&L a/c. towards loss on sale of assets. The same being a capital loss, the Assessing Officer disallowed the said amount. He further noted that though the assessee has debited an amount of Rs. 52,950 towards donations, it has disallowed only a sum of Rs. 51,750, in the computation of income. Since the balance amount of Rs. 1,200 has not been added back, the Assessing Officer disallowed the same. Further, though the assessee has claimed deduction for a sum of Rs. 1,200 u/s. 80G of the Act, stating that it has not produced any documentary evidence for such donation, the Assessing Officer disallowed the same.
15. As stated above, in the return the assessee has claimed deduction for an amount of Rs. 1,00,78,425 u/s. 80-IB. However, according to the Assessing Officer the assessee was not manufacturing any new article or thing as required u/s. 80IB of the Act. Therefore, during the assessment proceedings, he has asked the assessee to explain as to why such claim should not be disallowed. In response to this, the assessee has submitted that their company is engaged in business of manufacturing chips, granules and powder potassium feldspar, quartz and natural calcium bentonite at their plant at Kadthal Village, Mahaboobnagar Dist. Explaining about its manufacturing process, the assessee has submitted that the raw material extracted from the earth is passed through primary crusher and then sent to impactor for further crushing into smaller pieces. Later, the metal is separated using vibrator and conveyer system. The lumps that are formed after separation, are crushed and reduced to various sizes. Stating that their Kadthal Unit is a manufacturing plant, the assessee has submitted that it is eligible for deduction u/s. 80IB. Reliance was placed on the following decisions:
1. M/s. Arihant Tiles and Marbles (P) Ltd. vs. ITO (295 ITR 148) (Raj.)
2. CIT vs. Gopal (M.R.) (58 ITR 598) (Mad.) 11 ITA Nos. 870, 43 & 1056/Hyd/2010 M/s. Imerys Ceramics (I) Pvt. Ltd.
(formerly known as M/s. Jumbo Mining Ltd.) =================================
3. CIT vs. Kutch Oil and Allied Industries Pvt. Ltd. (163 ITR 237 (Guj.)
4. CIT vs. Sree Krishna Pulverising Mills (241 ITR 262) (AP)
5. Abdul Ahad Najar (248 ITR 744) (J&K)
6. CIT vs. Jamal Photo Industries (I) (P) Ltd. (285 ITR 209) (Mad.)
16. However, the Assessing Officer has not accepted such submissions of the assessee. He noted that the assessee is not in the business of manufacturing or producing any articles or things. It is in the business of mining the stones and exporting the stones. It is not manufacturing any new article or thing which is having its own character, use and name. Referring to the clarification furnished by the assessee on manufacturing process in its case, the Assessing Officer observed that the business activity in the case of the assessee is not a manufacturing activity because the final outcome of such activity is not a new article or thing which is having distinct individual identity, name and use. He noted that because of its blasting activity, the assessee is getting different items, viz., PF Lumps, FA Lumps, PF Power, Clay, PF Quarts and Chips. However, these items are not new articles or things and they do not have any new identity or name which is distinct from the original material. He further noted that the assessee is not using skilled labour and is not making significant value addition which is essential in the manufacturing activity. The assessee incurred expenditure towards 'direct expenses', that was for the purpose of simple mining, transportation, loading and unloading etc. The same cannot be construed as manufacturing expenses. He noted that the assessee is simply engaged in processing activity. In this regard, he relied on the following decisions-
1. Bharat Forge and Press Industries Pvt. Ltd. CCE (1 SCC 532)
2. Union of India vs. J.G. Glass Industries Ltd., (1998) (2 SCC 32)
3. Devi Dass Gopal Krishnan vs. State of Punjab (AIR 1967 SC 1895)
4. Empire Industries Ltd. vs. Union of India (1985) (3 SCC 314)
5. Gramophone Co. of India Ltd. vs. Collector of Customs (1 SCC 549)
6. Collector of Central Excise vs. Rajasthan State Chemical Works (4 SCC
473)
7. Nilgiri's case (10 STC 500)(Bom)
8. Chowgule's case (1981)(1 SCC 653) 12 ITA Nos. 870, 43 & 1056/Hyd/2010 M/s. Imerys Ceramics (I) Pvt. Ltd.
(formerly known as M/s. Jumbo Mining Ltd.) =================================
17. The Assessing Officer further noted that the assessee is not assessable to Central Excise duty because its business activity does not fall under purview of 'manufacture of any thing or article', that attracts the provision of Central Excise Act. He further noted that the assessee is simply extracting the mineral from the earth and then simply crushing the same into smaller pieces of various sizes. Such activity cannot be considered as manufacturing activity. He noted that the assessee is only doing business of mining of feldspar and after cutting / sizing the same into chips, granules and powder, is selling such products in the market. With these observations, he held that the activity of the assessee cannot be construed as manufacture / production. In this regard, he relied on the decision of Supreme Court in the case of Lucky Minerals Pvt. Ltd, vs. CIT (116 Taxman 1) (SC). Stating that the assessee is not engaged in the business of manufacture or production of any article or thing, he held that the assessee cannot be allowed deduction u/s. 80IB of the Act. Accordingly, he disallowed such claim of the assessee and with the other disallowances discussed above, completed the assessment on a total income of Rs. 1,98,92,852 vide order dated 26/12/2008 passed u/s. 143(3) of the Act.
18. Before the CIT(A) it was contended by the assessee that the Assessing Officer erred in disallowing service tax of Rs, 49,93,369/- u/s. 40A(9) of the Act, after noticing the item No. 17 in 3CD report, without seeking any clarification on the said matter during the assessment proceedings. The same was already disclosed in the annual report under the Accounting Policy and Notes to Accounts, in Schedule 'Q' in para 4 of notes to accounts, which forms part of account furnished. It was further submitted that said service tax of Rs. 49,93,369 is a contingent liability, as the same has been disputed by the company vide their letter dated 13 ITA Nos. 870, 43 & 1056/Hyd/2010 M/s. Imerys Ceramics (I) Pvt. Ltd.
(formerly known as M/s. Jumbo Mining Ltd.) ================================= 12/06/2007, against the show cause notice dated 28/09/2006, received from Commissioner of Customs & Central Excise, Hyderabad. It was further submitted that the same has no impact over the financial statement as no entry for the said contingent liability is passed in the books of account. It was contended, therefore, there cannot be any disallowance on that account.
19. The lower authorities disallowed the claim of the assessee on the reason that the assessee is only extracting and processing of minerals from mines. It was further observed that the nature of activity carried out by the assessee is only crushing the lump ores extracted from the mines for obtaining smaller pieces of various sizes. Even though it has referred using of vibrator, conveyer system and ball mill etc. in its plant, it may be seen that the end products are only the same minerals of smaller sizes. There is no change in physical and chemical composition, after subjecting the original ores to different stages of processing at its plant at Kadthal Village. In the letter dated 17/11/2008, filed before the Assessing Officer, the assessee has admitted that Jumbo Mining Ltd., purchase / excavate mineral and process it for the different sizes. It is further stated that the final product is same as input and no other materials are added in the .process, Thus, the entire activity at their plant at Kadthal Village, can be categorized as crushing of the ores/ minerals, extracted from the mines. It is not engaged in any manufacturing activity. It is not manufacturing any new article or thing involving change both in physical and chemicals composition. In Clause (a) to the newly inserted section 2(29BA), while defining 'manufacture', there is reference to the word transformation. However, even though, following the crushing of the ore at the plant at Kadthal, there is transformation to the original raw material, since the above newly inserted section (inserted vide Finance Act, 2009) shall be effective from 14 ITA Nos. 870, 43 & 1056/Hyd/2010 M/s. Imerys Ceramics (I) Pvt. Ltd.
(formerly known as M/s. Jumbo Mining Ltd.) ================================= 01/04/2009 the same is not applicable to the case of the assessee for this assessment year, i.e., 2006-07. Thus, the assessee cannot contend that it was doing business of manufacture during the previous year relevant to A.Y. 2006-07. Accordingly, the CIT(A) rejected the claim of the assessee. Against this, the assessee is in appeal before us.
20. The learned AR submitted that the raw mineral extracted from the earth is passed through the primary crusher and then it is sent to the impactor where it is further crushed into smaller pieces. The metal is then separated using vibrator and the convertor. The lumps that are formed after the separation are crushed and reduced into various sizes ranging from 2 mm to 12 mm. The lumps could either be processed into chips or converted into powder in the ball mill. Thereafter, the product is tested for its quality and moisture, after which it is packed for distribution. It was further stated that in its manufacturing process, raw- materials of insignificant value is processed to get valuable marketable commodity. It was contended that the processes undertaken by the assessee fulfils all the criteria for 'manufacture'. It was further contended that by no stretch of imagination, the Potash Feldspar Lumps, Fullers Earth Lumps, Quartz etc. be regarded as the same commercial commodity as Potash Feldspar Chips, Potash Feldspar Granules, Potash Feldspar Powder, Fullers Earth Chips Quartz Granules and Quarter Power. Stating that the assessee is engaged in manufacture/production of Potash Feldspar Chips, Potash Feldspar Granules, Potash Feldspar Powder, Fullers Earth Chips, Quartz Granules and Quartz Powder, the assessee has contended that it is entitled for deduction u/s. 80IB of the Act. In support of their claim for deduction under this section the AR has relied on 15 ITA Nos. 870, 43 & 1056/Hyd/2010 M/s. Imerys Ceramics (I) Pvt. Ltd.
(formerly known as M/s. Jumbo Mining Ltd.) ================================= several decisions stated above. Further he relied on the following judgements:
1. CIT v. Chiranjeevi Wind Energy Ltd. (333 ITR 192) (Mad).
2. CIT vs. Zainab Trading Pvt. Ltd. (333 ITR 144) (Mad)
3. CIT v. Jackson Engineers Ltd. (341 ITR 518) (Del)
4. CIT v. I. Tech Electronics (341 ITR 533) (Gau.)
5. CIT vs. Mallikarjun Georesources Associates (341 ITR 581) (Uttarakhand)
6. CIT v. Sesa Goa Ltd (271 ITR 331) (SC)
7. Bajaj Tempo Ltd v. CIT (196 ITR 188) (SC)
8. Aspinwall and Co v. CIT (251 ITR 323) (SC)
9. India Cine Agencies v. CIT(308 ITR 98) (SC)
10. CIT v. Emptee Poly-Yarn P .Ltd. (320 ITR 665) (SC)
11. CIT v. Oracle Software India Ltd. (320 ITR 546) (SC)
12. ITO v. Arihant Tiles and Marbles P. Ltd. (320 ITR 79) (SC)
13. Vijay Ship Breaking Corpn. & Ors.v. CIT (314 ITR 309) (SC)
14. Orissa State Warehousing Corporation v. CIT (237 ITR 589) (SC)
15. CIT v. Eastern Book Company (322 ITR 605) (All)
16. CIT v. Dimac Industries (2 DTR 355) (Bom)
17. CIT v. Mercantile Construction Co. (74 Taxman 41) (Cal)
18. CIT v. Ramsons Organics Ltd. (31 DTR 83) (Del)
19. CIT v. Univmines Pvt. Ltd. (202 ITR 825) (Del)
20. CIT v. R.C. Construction (222 ITR 658) (Gauhati)
21. CIT v. Shri Janak Raj Bansal (2010-TIOL-10-HC-HP-IT)
22. CIT v. M/s. Shiv Ram Veg Food Industries (2010-TIOL-114-HC-HP-IT)
23. D.J. Stone Crusher v. CIT. (33 DTR 267) (HP)
24. CIT vs. Mysore Minerals Ltd. (250 ITR 725) (Karn)
25. CIT v. Gopal (MR) (58 ITR 598) (Mad)
26. CIT v. Tata Locomotive and Engineering Co. Ltd. (68 ITR 325) (Bom)
27. CIT v. Gogte Minerals (No. 2) (225 ITR 60) (Karn)
28. CIT v. Air Survey Co. of India (P) Ltd. (232 ITR 707) (Cal)
29. CIT v. Tamil Nadu Heat Treatment and Fetting Services (P) Ltd. (No. 1) (238 ITR 529) (Mad)
30. CIT v. Jalna Seeds Processing and Refrigeration Co. Ltd. (246 ITR 156) (Bom)
31. CIT v. Comp-Help Services P. Ltd. (246 ITR 722) (Mad)
32. CIT v. Darshak Ltd. (247 ITR 489) (Karn)
33. CIT v. J.K.K. Textile Processing Mills (249 ITR 487) (Mad)
34. CIT v. Laxmi Art Studio (249 ITR 710) (Raj)
35. CIT v. Hemsons Industries (251 ITR 693) (AP)
36. CIT v. Kashiram Textile Mills (P) Ltd. (252 ITR 162) (Guj) ,
37. CIT vs. Gordhanbhai Jethabhai Tobacco Industries Ltd. (258 ITR 727) (Guj)
38. CIT v. Vinay Kumar Sigtia (262 ITR 686) (Orissa)
39. CIT v. Sesa Goa Ltd (266 ITR 126) (Bom)
40. CIT v. Sultan and Sons Rice Mill (272 ITR 181) (All)
41. CIT v. Professional Information Systems and Management (274 ITR 242) (Guj)
42. CIT v. Supreme Graphics Creations P. Ltd. (276 ITR 668) (Bom)
43. CIT v. Shri Swasan Chemicals (M) P. Ltd. (300 ITR 115) (Mad)
44. Andaman & Nicobar Islands Forest & Plantation Development Corpn. Ltd. v.
CIT (280 ITR 118) (Cal)
45. CIT v. Sesa Goa (India) Ltd. (282 ITR 197) (Bom)
46. CIT v. P. Damodaran (282 ITR 446) (Mad)
47. CIT v. Prabhudas Kishordas Tobacco Products P. Ltd. (282 ITR 568) (Guj)
48. CIT v. Jansons and Co. (283 ITR 175) (All)
49. CIT v. Premier Tobacco Packers P. Ltd. (284 ITR 222) (Mad)
50. CIT v. Jamal Photo Industries (I) P. Ltd. (285 ITR 209) (Mad)
51. General Contracts Co. V. CIT (287 ITR 416) (Guj)
52. CIT v. Suresh Amin Family Trust (288 ITR 101) (Guj) 16 ITA Nos. 870, 43 & 1056/Hyd/2010 M/s. Imerys Ceramics (I) Pvt. Ltd.
(formerly known as M/s. Jumbo Mining Ltd.) =================================
53. CIT v. Jamal Photo Industries (I) P. Ltd. (287 ITR 620) (Mad)
54. CIT v. Best Chem & Limestone Industries P. Ltd. (210 ITR 883) (Raj)
55. CIT v. Sree Krishna Pulverising Mills. (241 ITR 262) (AP)
56. Arihant Tiles and Marbles P. Ltd v. I.T.O. (295 ITR 148W) (Raj)
57. CIT v. Vijay Ship Breaking Corporation (261 ITR 113W) (Guj)
58. Sri Balaji Metal Finishers v. I.T.O. (15 ITD 26) (Hyd)(TM)
59. DCIT Vs. Sri Sai Roller Flour Mills Pvt. Ltd. 2 ITR (Trib) 490 (Hyd)
60. ACIT v. Panachayil Industries (7 SOT 96) (Coch)
61. ACIT v. M/s.Vinayagar Silks Pvt. Ltd. (2010-TIOL-99-ITAT-MAD)
62. Vinbros and Co. v. ITO (297 ITR (AT) 280) (Chenn)
63. CIT v. Balaji Hotels and Enterprises Ltd. (311 ITR 389) (Mad)
64. Neyveli Lignite Corporation Ltd v. ACIT (2 SOT 863) (Chenn)
65. DCIT vs. Gem Granites (64 ITD (Mad) 296)
66. ITO v. Punchline Forms (278 ITR 165) (Mum)
67. ITO v. Agarwal Stone Industries (21 ITD 622) (Jaipur)
68. Suraj Marbles (P) Ltd and Ors v. ITO (104 TTJ 192) (Jaipur)
69. ITO vs. World Wide Stones (115 TTJ 613) (Jaipur)
70. Aravali Minerals and Chemicals Industries (P) Ltd. v. ACIT (108 ITD 163) (Jodh)
71. ACIT v. Wolkem India Ltd. (107 TTJ 439) (Jodh)
72. ACIT v. Tirupati Microtech (P) Ltd. (111 TTJ 149) (Jodh)
73. Kushal Bagh Marbles I(P) Ltd v. ACIT (111 TTJ 122) (Jodh)
74. ACIT v. National Lamination Industries (Ahd.)
75. V.M. Jog Engg. Ltd. v. Jt. CIT (104 TTJ 487) (Pune)
76. Dy. CIT v. SociedadeDe Fomento Industrial Ltd. (59 TTJ 481) (Pune)
77. CIT v. Oswal Woollen Mills Ltd. (289 ITR 261) (P&H)
78. CIT v. Shri Mahesh Chandra Sharma (308 ITR 222) (P&H)
79. M/s. Midas Polymer Compounds (P) Ltd. v. ACIT (ITA No. 84 of 2009) (Ker)
21. The learned DR submitted that the assessee has stated that it has claimed deduction in respect of the profit derived from the manufacturing activity at the plant at Kadthal Village. Since the entire activity in the said plant, is in the nature of crushing of minerals, now it has to be seen whether the assessee is eligible for deduction u/s 80IB of the Act from such operation / activity, carried out at the said plant. In the case of Divisional Deputy Commissioner of Sales Tax vs. Bherhaghat Mineral Industries (2000) (246 ITR 230), it was held by the Hon'ble Supreme Court that crushing of dolomite lumps into chips sand powder is not a process of manufacture that brings about a new commercial commodity.
22. The learned DR relied in the case of ACIT vs. G.T.C. Enterprises (2003) (87 ITD 188), wherein the Tribunal, Chennai Bench, held that conversion of large mass of quartz into smaller pieces / sizes of required dimension cannot be considered as 17 ITA Nos. 870, 43 & 1056/Hyd/2010 M/s. Imerys Ceramics (I) Pvt. Ltd.
(formerly known as M/s. Jumbo Mining Ltd.) ================================= manufacture as no consumption is involved in such process, and therefore, the assessee is not entitled to deduction u/s. 80-I. In that case, for obtaining the end product of required smaller size, the assessee was crushing the quartz mass by using compressor and further crushing the same by feeding into the crusher. The decision of the Tribunal in this regard (as per head note), is as follows:
"Coming to deduction under section 80-I, to be an 'industrial undertaking' the assessee should be engaged in the 'manufacture of an article or thing'. From the decision of the Apex Court it is crystal clear that mining of marble blocks and cutting and polishing them will not amount to manufacture. Further the Madras High Court observed in the case of CIT vs. Sacs eagles Chicory (2000) 241 ITR 319 that the process of manufacture involves the consumption of one or more articles in order to produce a different article and consumption is necessary in the process of manufacture and there can be no manufacture without consumption. In the instant case, there was no consumption involved in the process. Hence, the process undertaken by the assessee in converting large mass of quarts into smaller size of required dimension could not be considered as manufacture. Once there was no manufacturing activity, the assessee was definitely not entitled for the deduction under section 80-I."
23. The DR also relied on the order of the Tribunal in the case of ITO vs. Jitendra Stone Crushing Company (2007) 105 ITD 52, where it was held by Tribunal, Chandigarh Bench, that by breaking big boulders into 'gitty' or small pieces of stone, it cannot be said that the assessee was engaged in manufacturing of article and hence, it is not entitled for deduction u/s. 80-IB of the Act. In this context, it is pertinent to refer to the following observations made by the Hon'ble Tribunal in para 6.8 of the said decision:
"6.8. The Hon'ble Supreme Court in the case of Aman Marble Industries (P.) Ltd. v. CCE [2003J 58 RLT 595 has held that cutting of marble block into marble slabs or tiles does not amount to manufacture, as in both the forms, marble remains marble. In the present case the boulder is the big stone while the pieces of the boulders i.e., gitty or bajri are small stones but there is no change in the composition of the material, so it cannot be said that the breaking of boulders 18 ITA Nos. 870, 43 & 1056/Hyd/2010 M/s. Imerys Ceramics (I) Pvt. Ltd.
(formerly known as M/s. Jumbo Mining Ltd.) ================================= into 'gitty' (small stones) is a manufacturing activity. Since activity of the assessee was not a manufacturing, the deduction under section 80-IB was not available to the assessee. In that way of the matter, for this issue, we reverse the orders of the learned CIT (Appeals) and restore that of the Assessing Officer."
24. The DR submitted that in support of its claim for deduction u/s. 80IB of the Act, the assessee has referred to various decisions of Supreme Court, of High Courts and of different benches of Income Tax Appellate Tribunal. However, the facts and also the issues in those cases being distinguishable from that of the assessee, the same can not be applicable to the case of the assessee.
25. The DR further submitted that the assessee has contended that the various end products in its case, namely, PF Lumps, FE Lumps, PF chips, PF Granules, PF powder, FE chips and Quartz Granules, being commercially different commodity from the original ore / mineral extracted from the mines, it is eligible for deduction. However, the same is not acceptable since merely being commercially different, it cannot be said that the assessee was carrying on manufacturing activity. In this context, the DR made a reference to the decision of Supreme Court in the case of CIT vs. Gem India Mfg. Co. (249 ITR 307), wherein, although the polished diamond obtained after cutting and polishing the raw diamond, is commercially a different commodity, it was held that the activity carried out by the assessee for obtaining the same does not amount to manufacture. The decision of the Apex Court, as per head note, is as follows:
"In the absence of any material to show that polished diamond is a new article or thing which is the result of manufacture or production, subjecting raw uncut diamonds to a process of cutting and polishing, which yields the polished diamond, cannot be said to amount to manufacture or production of an article or thing, for the purpose of obtaining the benefit of deduction under section 80- I of the Income-tax Act, 1961."19 ITA Nos. 870, 43 & 1056/Hyd/2010
M/s. Imerys Ceramics (I) Pvt. Ltd.
(formerly known as M/s. Jumbo Mining Ltd.) =================================
26. The learned DR submitted that since in the instant case, at its plant at Kadthal, the assessee is basically engaged in crushing the ores/minerals into chips and smaller pieces of different sizes applying the ratio of above decision of Supreme Court in the case of Bherhaghat Mineral Industries (cited supra), and the decisions of Tribunal, Chennai Bench in G.T.C. Enterprises (cited supra) and Tribunal Chandigarh Bench in Jitendra Stone Crushing Company (cited supra) the assessee is not eligible for deduction u/s. 80IB of the Act. Accordingly he submitted that the decision Assessing Officer in denying the claim of deduction u/s. 80-IB of the Act is justified.
27. We have heard the lengthy arguments of both the parties and perused the material on record. The crucial issue to be decided before us is whether the crushing the lump ore extracted from the mines, for obtaining smaller pieces of various sizes is eligible for deduction under Section 80- IB or not. The deduction under Section 80-IB is available to an Industrial Undertaking if it manufactures or produces any article or thing not being any article or thing specified in the list in the Eleventh Schedule. The words 'Industrial Undertaking' has not been defined in the Income-tax Act, however, cropped up many a time before the Hon'ble Supreme Court and various High Courts. In the present case, interpretation of the words 'Industrial Undertaking' does not pose much difficulty before us because nobody has disputed that the assessee is an industrial undertaking. It is true that each and every industrial undertaking would not be eligible for the deduction under Section 80-IB of the Income-tax Act because it is only the industrial undertaking which specifies test indicated in Section 80-IB, would only be eligible and qualified for such deduction. An 'industrial undertaking' which is engaged in manufacture and production of an article or thing would be eligible for the deduction under Section 80-IB.
28. For allowing the deduction under Section 80-IB it is necessary to understand the meaning of the word 'manufacture'.
20 ITA Nos. 870, 43 & 1056/Hyd/2010M/s. Imerys Ceramics (I) Pvt. Ltd.
(formerly known as M/s. Jumbo Mining Ltd.) ================================= The word 'manufacture' used as a verb is generally understood to mean as that bringing into existence a new substance and does not mean merely to produce some change in a substance, however, minor in a consequence the change may be. In the case of B.S. Bajaj & Sons v. CIT (222 ITR 418) (P&H), the Hon'ble High Court interpreted the word 'manufacture' and observed that the distinction between processing and manufacturing is well brought about in a passage quoted in Permanent Addition of Words and Phrases Vol. 26 the passage runs thus:
29. Manufacture' implies a change, but every change is not manufacture and yet every change of an article is the result of treatment, labour and manipulation. But something more is necessary and there must be transformation; a new and different article must emerge having a distinctive name, character or use.
30. The Hon'ble P & H High Court had also considered, and opined on the word 'manufacture' in the case of Sidhu Ram Atom Parkash v. State of Haryana [1974] 34 STC 344 (Punj. & Har.) (at page 346) as under:
"Applying the above definition to the instant case, the question is when the logs are converted into planks and rafters; does it mean that a manufacturing process has been gone into? In other words, has a new substance has occurred? As we look at the matter, when a log, either by manual labour or mechanical process, is converted into a plank or a rafter, a new substance does not come into being, and this process is not covered by the definition of the word 'manufacture' as given by the Supreme Court."
31. The Tribunal, Calcutta Special Bench in the case of Shah Scott Distilleries (P.) Ltd. v. Asstt. CIT [2002] 255 ITR (AT) 14 [2001] 76 Taxman 89, also interpreted the meaning of the word 'manufacturing' in the following words:
"Manufacturing normally involves consumption of a particular commodity in the process of manufacturing of another commodity. The goods purchased should be consumed, the consumption should be in the process of manufacture and the result must be the 21 ITA Nos. 870, 43 & 1056/Hyd/2010 M/s. Imerys Ceramics (I) Pvt. Ltd.
(formerly known as M/s. Jumbo Mining Ltd.) ================================= manufacture of other goods. There are several criteria for determining whether a commodity is consumed in the manufacture of another. The generally prevalent test is whether the article produced is regarded in the trade, by those who deal in it, as distinct in identity from the commodity involved in its manufacture. Commonly, manufacture, is the end result of one or more processes through which the original commodity is made to pass. The nature and extent of processing may vary from one case to another, and indeed there may be several stages of processing and perhaps a different kind of processing at each stage. With each process suffered, the original commodity experiences a change. But it is only when the change, or a series of changes take the commodity to the point where commercially it can no longer be regarded as the original commodity but instead is recognized as a new and distinct article that a manufacture can be said to take place."
32. It is also relevant to point out that under Clause (iii) to Sub- section (2) of Section 80-IB, the Legislature has used two separate words i.e., 'manufactures' and 'produces' any article with an 'or' in between. Thus, both have to be read separately and the meaning assigned to them. These two words cannot have the same meaning. The word 'produce' an article has a wider connotation than 'manufacture', every manufacture can be said to be production but not vice versa. Their Lordships of the Hon'ble Apex Court in the case of CIT v. N.C. Budharaja & Co. (204 ITR 412) considering the provisions of Section 80HH of the Income-tax Act had held as under:
"That the word 'production' has a wider connotation than the word 'manufacture'. Every 'production' may not amount to 'manufacture' whereas every 'manufacture' can be termed as 'production'. 'Manufacture' does not imply only a change but something more is necessary. A new and different article must emerge having a distinct name, character or use to bring it within the meaning of the word 'manufacture'. The word produce an article may not amount to a 'manufacture' but it would include all the by-products, intermediate products and residual products which emerge in the course of manufacture of goods. It was held as under (at page 423):"
33. The words 'manufacture' and 'production' have received extensive judicial attention both under this Act as well as the 22 ITA Nos. 870, 43 & 1056/Hyd/2010 M/s. Imerys Ceramics (I) Pvt. Ltd.
(formerly known as M/s. Jumbo Mining Ltd.) ================================= Central Excise Act and the various sale tax laws. The word 'production' has a wider connotation than the word 'manufacture'. While every manufacture can be characterized as production, every production need not amount to manufacture. The meaning of the expression 'manufacture' was considered by this Court in Deputy CST v. Pio Food Packers (1980) 46 STC 63 among other decisions. In the said decision, the test evolved for determining whether manufacture can be said to have taken place is, whether the commodity which is subjected to the process of manufacture can no longer be regarded as the original commodity but is recognized in the trade as a new and distinct commodity. Pathak J., as he then was, stated the test in the following words (at page
65):
"Commonly, manufacture is the end result of one or more process through which the original commodity is made to pass.
The nature and extent of processing may vary from one case to another, and indeed there may be several stages of processing and perhaps a different kind of processing at each stage. With each process suffered, the original commodity experiences a change. But it is only when the change, or a series of changes, take the commodity to the point where commercially it can no longer be regarded as the original commodity but instead is recognized as a new and distinct article that a manufacture can be said to take place'.
The word 'production' or 'produce' when used in juxtaposition with the word 'manufacture' taken in bringing into existence new goods by a process which may or may not amount to manufacture. It also takes in all the by-products, intermediate products and residual products which emerge in the course of manufacture of goods."
34. From the combined reading of the ratios laid down in the aforesaid referred to cases, it can be concluded that when the change or a series of changes lakes one commodity to the point where commercially it can no longer be regarded as the original commodity, but instead is recognized as a new and distinct article, then it can be said that 'manufacture' takes place. In the present 23 ITA Nos. 870, 43 & 1056/Hyd/2010 M/s. Imerys Ceramics (I) Pvt. Ltd.
(formerly known as M/s. Jumbo Mining Ltd.) ================================= case, the assessee had broken the boulders in small pieces, but there is no change in the composition of the boulder. Only the big size had been reduced to small size. So, it cannot be said that breaking of boulders into small pieces of stone is a manufacturing activity.
35. A similar issue had been considered and decided by the Hon'ble Supreme Court in the case of Commissioner of Sales Tax v. Lai Kunwa Stone Crusher (P.) Ltd. AIR 2000 SC 1161 (SC). In the said case, the respondent was a dealer engaged in purchasing of stone boulders and crushing them into small chips, gitty and dust for the purpose of further sale. The contention put-forth by the dealer was that the process adopted by him in conversion of boulders to the small stones, dust etc. was physically and chemically not different from the original goods. The assessing authority rejected the contention of the dealer and the Assistant Commissioner of Sales Tax noticed that the trader had not manufactured gitty nor had sold it having crushed boulders into small stones and dust. The view of the Assistant Commissioner was upheld by the Tribunal. The matter was carried to the Hon'ble High Court wherein the petition was dismissed. In the appeal before the Hon'ble Supreme Court, the question raised was whether gitty, stone chips and dust continued to be stone or on crushing stone boulders into gitty, stone chips and dust different commercial goods emerged. On behalf of the Department, it was contended that the process adopted by the dealer would amount to 'manufacture' as per definition of 'manufacture' under Section 2(e-
1) of the U.P. Sales Tax Act, 1948. Under the said provision, 'manufacture' has been defined to mean producing, making, mining, collecting, extracting, altering, ornamenting, finishing or otherwise processing, trading or adopting any goods. Thus, it was submitted that the definition used for the purpose of manufacture in the Act made it very clear that every activity in relation to goods not only altering the same but also processing of the same had also been included.
24 ITA Nos. 870, 43 & 1056/Hyd/2010M/s. Imerys Ceramics (I) Pvt. Ltd.
(formerly known as M/s. Jumbo Mining Ltd.) =================================
36. Their Lordships had pointed out at page 1162 para 5 that the view taken by the Tribunal and affirmed by the High Court was that the goods continued to be stone and they were not commercially different goods to be identified differently for the purpose of sale tax.
37. In the aforesaid discussed case, their Lordships of the Hon'ble Apex Court have held that the stone, as such and 'gitty' and articles of stone are all of similar nature though by size, they may be different. Even if 'gitty', 'kankar', stone, blast etc. may all be looked upon a separate in commercial character from stone boulders offered for sale in the market, yet it cannot be presumed that entry 40 of the Notification is intended to describe the same as not stone at all. In fact the term 'stone' is wide enough to include the various forms such as gitti, kankar, stone blast.
38. Similarly, in the case of Lucky Minmat (P.) Ltd. v. CIT (245 ITR 830), Their Lordships of the Hon'ble Apex Court at page No. 831 while distinguishing the judgment of the Hon'ble Rajasthan High Court in the case of CIT v. Best Chem & Limestone Industries (P.) Ltd. (210 ITR 883) had observed that the conversion into lime and lime dust or concrete by stone crusher could legitimately be considered to be a manufacturing process while the mere mining of lime stone and marble and cutting the same before it was sold in the market could not be so considered. In the present case also, there was cutting of boulders into small pieces. So, it cannot be said that it was a manufacturing activity, because by breaking the boulders i.e., big stone into small pieces i.e., small stone or bajri no new and distinct commodity came into existence, so it can neither be a production by the process of manufacture or a thing otherwise produced, because in either case, bringing into existence a new product is a necessary condition.
25 ITA Nos. 870, 43 & 1056/Hyd/2010M/s. Imerys Ceramics (I) Pvt. Ltd.
(formerly known as M/s. Jumbo Mining Ltd.) =================================
39. The Hon'ble Supreme Court in the case of Aman Marble Industries (P.) Ltd v. CCE [2003] 58 RLT 595 has held that cutting of marble block into marble slabs or tiles does not amount to manufacture, as in both the forms, marble remains marble. In the present case the boulder is the big stone while the pieces of the boulders i.e., gitty or bajri are small stones but there is no change in the composition of the material, so it cannot be said that the breaking of boulders into 'gitty' (small stones) is a manufacturing activity. The same view was taken in the case of Income tax Officer v. Jitendra Stone Crushing Co. (105 ITD 52) (Chd).
40. In the present case the lower authorities disallowed the claim of the assessee on the reason that the assessee is only crushing the lump ore extracted from the mines, for obtaining smaller pieces of various sizes. There is no change in physical and chemical composition, after subjecting the original ores to different stages of processing at its plant. According to the assessee the various products generated by the assessee being commercially different commodities from the original ore/mineral extracted from the mines and eligible for deduction u/s. 80IB of the Act. The lower authorities are of the opinion that merely being commercially different product, it cannot be said that the assessee was carrying on manufacturing activity and placing reliance on the judgement of Supreme Court in the case of CIT v. Gem India Manufacturing Co. (249 ITR 307) wherein, although the polished diamonds obtained after cutting and polishing the raw diamond, is commercially different commodity it was held that the activity carried out by the for obtaining the same does not amount to manufacture. In the present case the assessee basically engaged in crushing the ores/minerals into chips and smaller pieces of different sizes the assessee cannot be considered as manufacturing any product/ article. In the case of Lucky Minmat Pvt. Ltd. vs. CIT (245 ITR 830) (SC) it was held that mere mining of limestone and marble and cutting the same before it was sold, will not constitute "manufacture" or "production" but conversion into 26 ITA Nos. 870, 43 & 1056/Hyd/2010 M/s. Imerys Ceramics (I) Pvt. Ltd.
(formerly known as M/s. Jumbo Mining Ltd.) ================================= lime and lime dust are concrete by stone crushers could legitimately to be considered as a manufacturing process. While mere mining of limestone and marble and cutting the same before it was sold in the market could not be considered so. The assessee was not entitled to deduction u/s. 80HH. It was held by Supreme Court in the case of Dy. CST & Anr. Vs. Bherhaghat Minerals Industries (246 ITR 230) that the crushing of dolomite lumps into chips is not a process of manufacture that brings about new commercial commodity. In the case of ACIT vs. Wolkem India Ltd. (107 TTJ 439) (Jodh) held that if the assessee is engaged integrated activity of mining, processing and grinding of wollastonite and calcite products is engaged in the manufacture/production eligible for deduction u/s. 80IA and 80IB of the Act. In other words if an assessee is engaged in the activity of extracting granite, cutting the same into slabs/tiles, polishing and selling the end product in the market, that would amount to production of an article or thing. If the assessee only purchases granite/marble from the market and thereafter carries out further process like cutting, polishing, etc., it would not amount manufacture or production.
41. Adverting to the facts of present case, we find that the assessee has not carried on the integrated activity of mining, processing and polishing and it is engaged only mining and crushing into small pieces. In our opinion, facts of the assessee case are similar to the facts involved in the case of Lucky Minmat Pvt. Ltd. cited (supra) and this judgement of Supreme Court is directly applicable to the facts of the present case and the lower authorities are justified in rejecting the claim of the assessee u/s. 80IB of the Act and various judgements relied by AR is no assistance to the assessee on the face of judgement in the case of Lucky Minmat Pvt. Ltd. cited (supra). Accordingly, this ground of appeal raised by the assessee is rejected.
27 ITA Nos. 870, 43 & 1056/Hyd/2010M/s. Imerys Ceramics (I) Pvt. Ltd.
(formerly known as M/s. Jumbo Mining Ltd.) =================================
42. The next ground is that the CIT(A) erred in dismissing the claim of the assessee for grant of TDS for A.Y. 2005-06 and 2007-
08. On this issue the assessee wants a direction from the Tribunal to give credit for TDS for A.Ys. 2005-06 and 2007-08.
43. The learned AR submitted that consequent to the processing of return u/s. 143(1) the assessee filed a rectification petition enclosing the copy of TDS certificate for which no action has been taken by the lower authorities. The CIT(A) rejected the claim of the assessee holding that non-granting of TDS does not arise out of the impugned assessment order before her.
44. In our opinion, the observation of the CIT(A) is not correct. If the TDS is relating to the assessment year under consideration, the Assessing Officer whenever determines an amount of tax due from the assessee, he should consider the TDS certificate relevant to assessment years under consideration. Accordingly, we direct the Assessing Officer to consider the TDS certificate filed by the assessee relating to these assessment years and give credit for the same.
45. The next ground is with regard to confirmation disallowance being employee share of contribution to PF after prescribed and within the financial year. This issue is relating to assessment year 2006-07 and 2007-08. Brief facts of the issue are that in this case disallowance was made u/s. 36(1)(va) of the Act on the reason that PF payment was made beyond the due date within the financial year. The lower authorities disallowed the same on the reason that the said amount was paid after the grace period.
46. We have heard both the parties and perused the material on record. This issue came up for consideration before the Karnataka High Court in the case of CIT v. Sabari Enterprises (298 ITR 141) and also in the case of CIT vs. ANZ Information Technology Pvt. Ltd. (318 ITR 123) where in held that contribution made towards 28 ITA Nos. 870, 43 & 1056/Hyd/2010 M/s. Imerys Ceramics (I) Pvt. Ltd.
(formerly known as M/s. Jumbo Mining Ltd.) ================================= provident fund by the employer belatedly and contribution towards employees' State Insurance i.e., beyond the stipulated period provided under the Provident Fund Act were allowable deduction in view of section 43B of the Income-tax Act, 1961. In view of these judgements we direct the Assessing Officer to allow deduction if the impugned amounts were paid by the assessee on or before the due date of furnishing return of income u/s. 139(1) of the Act.
47. The next ground in all appeals is levy of interest u/s. 234B and 234C of the Act. Levy of this interest is consequential and mandatory in nature and interest has to be computed by the Assessing Officer in accordance with law.
48. In the result, appeals of the assessee are partly allowed.
Order pronounced in the open court on 2nd July 2012.
Sd/- Sd/-
(ASHA VIJAYARAGHAVAN) (CHANDRA POOJARI)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Hyderabad, dated the 2nd July 2012
Copy forwarded to:
1. M/s. Imerys Ceramics (I) Pvt. Ltd. (formerly known as M/s. Jumbo Mining Ltd.), 6-3-1239/2/A, Kotis Court, IV Floor, Rajbhavan Road, Somajiguda, Hyderabad-82.
2. The Assistant Commissioner of Income-tax, Circle-2(1), Room No. 824, 8th Floor, I.T. Towers, AC Guards, Hyderabad.
3. The Deputy Commissioner of Income-tax, Circle-2(1), I.T. Towers, AC Guards, Hyderabad..
4. The CIT(A)-III, Hyderabad.
5. The CIT-II, Hyderabad
6. The DR - B Bench, ITAT, Hyderabad.
Tprao