Income Tax Appellate Tribunal - Panji
A.C.I.T , Circle-2,, Jammu vs Sh. Deepak Kumar Handa, Jammu on 30 November, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
AMRITSAR BENCH; AMRITSAR
BEFORE SH. T.S. KAPOOR, ACCOUNTANT MEMBER AND
SH. N.K.CHOUDHRY, JUDICIAL MEMBER
I.T.A No.336(Asr)/2017
Assessment Year:2013-14
The Asst. CIT, Vs. Sh. Deekpak Kumar Handa,
Circle-2, Prop M/s Baibhav Ornaments,
Rail Head Complex, H.No.91, Ward No.12,
Panama Chowk, Jammu.
Hanuman Gali, Kachi Chawni,
Jammu.
PAN:AANPH-5157Q
(Appellant) (Respondent)
Appellant by: Sh. S.S. Knawal (Ld. DR)
Respondent by: Sh. P.N. Arora (Ld. Adv.)
Date of hearing: 22.11.2017
Date of pronouncement:30.11.2017
ORDER
PER N.K.CHOUDHRY:
The instant appeal has been preferred by the Revenue Department, on feeling aggrieved against the order dated 19.01.2017 passed in appeal No.328/15-16 by the Ld. CIT(A), Jammu, for Asst. Year: 2013-14.
2. The Revenue Department has raised the following grounds of appeal.
• Whether the Ld. CIT(A) was right in law and fact in allowing the appeal of the assessee though the department is already in appeal on the same issue before the Hon'ble ITAT Amritsar in case of M/S Padma Ornaments for the A.Y.2012-13.
• Whether the Ld. CIT(A) was right in law and fact in ignoring the Supreme Court's order in case of Tungabhadra Industries Ltd. V/s CTO[1960] II STC 827 which is squarely applicable in this case.
2 ITA No.336 (Asr)/2017Asst. Year: 2013-14 • Whether the Ld. CIT(A) was correct in law and fact in ignoring the fact that the case of Puneet Sehdev V/s ITO Ward-2(2), Jammu is still pending with ITAT Amritsar in which similar issue is involved.
• Whether the Ld. CIT(A) was correct in law & fact in ignoring the appeal in case of Smt. Shifali Sehdev V/s ITO Ward-2(3), Jammu for the A.Y. 2013-14 which is still pending with him.
3. The brief facts of the case are as under:
That during the course of assessment proceeding, it was noticed by the A.O that the assessee had claimed deduction of Rs.61,11,967/- u/s 80IB of the Income Tax Act, 1961 claiming that the conversion of gold into ornaments qualify for getting deduction u/s 80IB of the Act. On which, the assessee was asked to justify the claim as to how deduction u/s 80IB of the I.T. Act should be allowed.
The assessee filed the reply in support of its case, however, the Assessing Officer by mentioning many reasons was pleased to held that the converting of 24 Kt gold into 22Kt gold does not amounts to manufacture and such as not entitled to deduction u/s 80IB of the Act, 1961. Accordingly, the claim of the assessee to the tune of Rs.61,11,967/- was disallowed and subjected to tax.
4. Feeling aggrieved against the assessment order, the assessee carried the matter before the Ld. CIT(A) who after considering the relevant case laws and provisions of the Income Tax Act deleted the addition on account of disallowance of claim u/s 80IB of the Act, against which, the Revenue Department preferred the instant appeal and in support of its case relied upon the order passed by the Assessing Officer. However, the Ld. AR submitted that the case of the assessee for Asst. Year: 2013-14 which is under challenge in the 3 ITA No.336 (Asr)/2017 Asst. Year: 2013-14 instant appeal is squarely covered by the judgment passed by ITAT at Amritsar in the case of the assessee itself in connection with the Asst. Year:2012-13 on dated 24.10.2017 vide ITA No.254(Asr)/2016. The copy of the judgment is also submitted by the Ld. AR.
5. We have gone through with the facts and circumstances of the case and rival submissions of the parties. Let us peruse the order passed by the Ld. CIT(A). The Ld. CIT(A) passed his judgment while relying upon various case laws specifically Shri Sanjay Jain, Prop. M/s. Ganesh Jewelers, Jammu in I.T.A. No. 407 (Asr.)/2012 as well as M/s Lovelesh Jain and Ors. 204, Taxman 134 and Puneet Sachdeva in appeal No. 253/10-11 dated 29/02/2012, decided by Mumbai High Court. The determination part of the order passed by the Ld. CIT(A) is reproduced herein below for the sake of convenience and brevity.
"5. I have considered the assessment order and the submission made by the appellant. The AO has disallowed the claim of deduction u/s 80IB amounting to Rs.61,11,967/- The AO has held that the conversion of 24 KT gold into 22KT Gold ornament does not amount to manufacture and as such it is not entitled to deduction u/s 80IB. The AO has also cited decisions of various courts including the decisions of Hon'ble Supreme Court. On the other hand, the appellant has brought before me that in similar case Hon'ble Income Tax Tribunal, Amritsar Bench, Amritsar in the case of Income Tax Officer vs. Shri Sanjay Jain, Prop. M/s. Ganesh Jewelers, Jammu in I.T.A. No. 407 (Asr.)/2012 for assessment year 2009-10 has held as under:-
"We have heard the rival contentions and perused relevant record available with us. We are of the view that the Ld. First Appellate authority has decided the issue in dispute in favour of the assessee by the respectfully following the various decisions rendered by the various benches of the tribunal and the hon'ble high courts. For the sake of convince the findings of the Ld CIT (A) given at page 3 & 4 of the order are reproduced as under:- "
"I have carefully considered the submissions made and find that assessee is to succeed. Even before the definition of manufacturing was not on the statute the direct decision of hon'ble Delhi high court and hon'ble ITAT Mumbai as referred above held that conversion of gold into ornaments amounted to manufacture.' In the case of M/s Lovelesh Jain and Ors. 204, ' 4 ITA No.336 (Asr)/2017 Asst. Year: 2013-14 Taxman 134 the issue was elaborately discussed by the Hon'ble High Court as under:-
"The activity for converting gold bricks, biscuits or bars, into jewellery amounts to "production or manufacture of a new article. The gold, silver or platinium in bar, biscuits or brick form, is converted by manual labour and by the use of implements / tools or by machinery, culminating into an entirely new article or thing called jewellery or ornaments. Jewellery is a wearable item and is used by both men and women. This process has been referred to above in paragraph 6.4, while adverting to the factual matrix in the case of Shashi Kant Mittal. Jewellery/ ornaments in common parlance or in commercial terms as distinct identity , treated as new article and not the same as raw or standard gold in the form of bricks , biscuits or bars. As a result of the said processing a commercially different saleable product comes into existence. Jewellery has a distinctive name, character and use. It can no longer be regarded as the original commodity. The activity of the respondent assessee amount to 'manufacture or production and therefore, qualify for deduction u/s 10A/ 10B."
Also, in the case of M/s Tribuwan Dass Bhimjee Jhaveri 110TTJ 942, the Hon'ble ITAT, Mumbai has held as under:
"Deduction u/s 80 IB allowability - industrial undertaking or
-
branch office - assessee's unit at Hyderabad is getting the jewellery made from Karigars at Mumbai under the supervision and control of its employees with the help of Mumbai office (head office of the assessee) - Operations carried out by the Hyderabad unit cannot be ignored merely because the Mumbai Office facilitating its activities - therefore, assessee is entitled to deduction u/s 80 IB in respect of Hyderabad unit."
In the case of Puneet Sachdeva in appeal No. 253/10-11 dated 29/02/2012, I have also held that the conversion of gold into gold ornaments was a manufacturing activity relying on the order of Hon'ble High Court and Hon'ble ITAT, Mumbai referred to as above.
Further, the definition of 'manufacture' is inserted w.e.f 01.04.2009 in section 2 (24BA) of I. T. Act as under:-
" Manufacture' with its grammatical variations means a change in non living physical object or article or thing :5 ITA No.336 (Asr)/2017
Asst. Year: 2013-14
a) Resulting in transformation of the object or article or thing into anew and distinct object or article or thing having a different name, character and use, or;
b) Bringing into existence of a new and distinct object or article or thing with different chemical composition or integral structure.
The conditions are alternate to each other and on satisfying any one of the two the activity woule be treated as 'manufacture'. In the present case 2 (29BA ) (a) of I.T.A Act is clearly satisfied as there is transformation of 24K gold into new and distinct object as ornament which has different name, character in the usage.
The AO has not commented in his order as to how the activity of assessee is not covered by the definition of 'manufacture'. In the present case 2(29BA ) (a) of I. T. Act is clearly satisfied as there is transformation of 24K gold into new and distinct object as ornament which has different name, character in and usage.
The AO has not commented in his order as to how the activity of assessee is not covered by the definition of 'manufacture'. His reliance is on case laws which are not direct on the issue whereas the decision of Hon'ble Delhi High Court and Hon'ble ITAT, Mumabi are direct on the issue which are relied by me in case of Puneet Sachdev in appeal No. 253/10-11 dated 29/02/2012 . Following the above, I hold that assessee was engaged in 'manufacture' and was entitled to deduction u/s. 80IB of the Income tax Act. I am not going into the issue of consistency as raised by the Ld. Representative assessee as the matter stands decided on merits.Ground No. 1 to 6 stands disposed".
Keeping in view the aforesaid findings, we are of the view that no interference is called for in the well reasoned order passed by Ld First Appellate authority, who has decided the issue in dispute in favour of the assessee, by respectfully following decisions of the Hon'ble high court as well as ITAT, Mumbai Bench. Therefore, we uphold the impugned order by dismissing the appeal filed by the revenue." Further, Hon'ble ITAT, Amritsar Bench, Amritsar again in the case of ACIT, Circle- 2, Jammu vs. M/s Padma Ornaments, Jain Bazar, Jammu vide its Order ITA No. 138 (Asr.)/2015 dated 10/12/2015 for AY 2009-10 has followed its earlier order in the case of ITO, Jammu vs. Sanjay Jain, Jammu (supra).
6 ITA No.336 (Asr)/2017Asst. Year: 2013-14 Since the issue under consideration has already been decided by the Hon'ble Income Tax Appellate Tribunal, Amritsar in the two cases cited above and there is no adverse order after that, I also respectfully follow the above decisions of ITAT and deleted the addition on account of disallowance of claim u/s 80 IB of the Act."
5.1 We have also gone through with the order passed by the Co-
ordination Bench of ITAT, Amritsar in the case of assessee itself for the Asst.
Year:2012-13 vide ITA No.254(Asr)/2016 decided on 24th October, 2017. The operative part of the order is reproduced herein below.
"6. We find that only issue involved in this case is as to whether the conversion of 24K gold into 22K gold jewellery amounts to manufacture and is therefore entitled to deduction u/s 80IB of the I.T. Act. The ld. CIT(A) has relied on the earlier orders of Amritsar Bench of Tribunal in the case of Sh. Sanjay Jain (supra) wherein the similar issue was decided by the Bench in favour of assessee. The similar issue has also been decided by ITAT, Amritsar Bench in the case of ACIT vs. Sh. Lokesh Handa, in ITA No.332(Asr)/2015 vide order dated 10.12.2015 wherein the Hon'ble Tribunal has dismissed the appeal of Revenue. The operative part of the order of Tribunal is reproduced herein below.
"5. We have heard the rival contentions and have perused the material available on record. We find that the issue involved in the present appeal is squarely covered by the order of this Bench of the Tribunal in ITA No.407(Asr)/2012, dated 19.02.20913, in the case of ITO Wards 2(3), Jammu vs. Sh. Sanjay Jain, Jammu (supra). The ld. CIT(A) has also followed the aforesaid order of the Tribunal. The relevant findings of the Tribunal are as follows:
4. We have heard the rival contentions and perused relevant record available with us. We are of the view that the ld. first appellate authority has decided the issue in dispute in favour of the assessee by respectfully following the various decisions rendered by the various Benches of the Tribunal and the Hon'ble High Courts. For the sake of convenience, the findings of the ld. CIT(A) given at pages 3 & 4 of the order are reproduced as under:
"4. I have carefully considered the submissions made and find that assessee is to succeed. Even before the definition of manufacturing was not on the statute the direct decision of Hon'ble Delhi High Court and Hon'ble ITAT, Mumbai as referred above held that conversion of gold into ornaments amounted to 'manufacture'. In the case of M/s. Lovelesh Jain and others 204 Taxman 134 the issue 7 ITA No.336 (Asr)/2017 Asst. Year: 2013-14 was elaborately discussed by the Hon'ble Delhi High Court as under:
"The activity for converting gold bricks, biscuits or bars, into jewellery amounts to "production or manufacture of a new article. The gold, silver or platinum in bar, biscuits or brick form, is converted by manual labour and by the use of implements/tools or by machinery, culminating into an entirely new article/thing called jewellery or ornaments. Jewellery is a wearable item and is used by both men and women. This process has been referred to above in paragraph 6.4, while adverting to the factual matrix in the case of Shashi Kant Mittal.Jewellery/ornaments in common parlance or in commercial terms has a distinct identity, treated as a new article and not the same as raw or standard gold in the form of bricks, biscuits or bars. As a result of the said processing a commercially different saleable product comes into existence. Jewellery has a distinctive name, character and use. It can no longer be regarded as the original commodity, has separate consumers and is a new commercial commodity. The activity of the respondent assessee amounts to 'manufacture or production and, therefore, qualifies for deduction u/s 10A/10B."
4.1. Also, in the case of M/s. Tribhuwan Dass Bhimjee Jhaveri 110 TTJ 942, the Hon'ble ITAT, Mumbai has held as under:
"Deduction u/s 80IB - Allow ability - industrial undertaking or branch office-Assessee's unit at Hyderabad is getting the jewellery made from Karigars at Mumbai under the supervision and control of its employees with the help of Mumbai Office (head office) of the assessee- operations carried on by the Hyderabad unit cannot be ignored merely because the Mumbai office is facilitating its activities -Therefore, assessee is entitled to deduction under section 80IB in respect of Hyderabad unit."
4.2. In the case of Puneet Sachdeva in appeal No.253/10-11 dated 29.02.2012, I have also held that the conversion of gold into gold ornaments was manufacturing, relying on the order of Hon'ble High Court and Hon'ble ITAT, Mumbai as referred above.
4.3. Further, the definition of 'manufacure' is inserted w.e.f.
01.04.2009 in section 2(24BA) of I.T.Act as under:
"Manufacture" with its grammatical variations means a change in non-living physical object or article or thing:-8 ITA No.336 (Asr)/2017
Asst. Year: 2013-14
a) Resulting in transformation of the object or article or thing into a new and distinct object or article or thing having a different name, character and use, or
b) Bringing into existence of a new and distinct object or article or thing with different chemical composition or integral structure.
4.4. The conditions are alternate to each other and on satisfying any one of the two the activity would be treated as 'manufacture'. In the present case 2(29BA)(a) of I.T. Act is clearly satisfied as there is transformation of24 k gold into new and distinct object as ornament which has different name, character in and usage.
4.5. The AO has not commented in his order as to how the activity of assessee is not covered by the definition of 'manufacture'. His reliance is on case laws which are not direct on the issue whereas the decision of Hon'ble Delhi High Court and Hon'ble ITAT, Mumbai are direct on the issue which are relied by me in case of Puneet Sachdev in appeal No.253/10-11 dated 29.02.2012. Following the above, I hold that assessee was engaged in 'manufacture' and was entitled to deduction u/s 80IB of I.T.Act. I am not going into the issue of consistency as raised by the Ld. Representative of assessee as the matter stands decided on merits. Ground No. 1 to 6 stands disclosed."
5. Keeping in view the aforesaid findings, we are of the view that no interference is called for in the well reasoned order passed by the ld. first appellate authority, who has decided the issue in dispute in favour of the assessee, by respectfully following the decisions of the Hon'ble High Court as well as ITAT, Mumbai Bench. Therefore, we uphold the impugned order by dismissing the appeal filed by the Revenue."
6. The said Tribunal order has not been shown to have been either upset, or even stayed on appeal. The facts therein have also not been stated to be any different from those before us.
7. Thus, respectfully following the aforesaid order of the Tribunal in the case of "ITO, Ward-2(3), Jammu vs. Sanjay Jain, Jammu" (supra) which has also been followed by the ld. CIT(A), and is squarely applicable to the facts and circumstances of the present case, we dismiss the appeal of the Revenue."
The case laws relied on by the Revenue & taken in grounds of appeal relates to General Sales Tax and are distinguishable from the facts and circumstances of the present case whereas the case laws relied 9 ITA No.336 (Asr)/2017 Asst. Year: 2013-14 on by assessee are directly applicable to the facts and circumstances of the present case.
Therefore, keeping in view the above judicial precedents, we do not find any infirmity in the order of ld. CIT(A), therefore, the appeal filed by the Revenue is dismissed."
5.3. We have given our thoughtful consideration to the material on record as well as submissions of the parties as the ITAT Bench at Amritsar in ITA No.254(Asr)/2016, relevant to the Asst. Year:2012-13 vide its order 24.10.2017 in the case of assessee itself have duly considered the issues in hand and dismissed the appeal of the Revenue.
Therefore, considering the case laws on record and specifically as the matter is squarely covered by the order by this Bench itself. Hence, we do not find any infirmity, impropriety and illegality in the order passed by the Ld. CIT(A).
6. In the result, the appeal filed by the Revenue Department stands dismissed.
Order pronounced in the open Court on 30.11.2017.
Sd/- Sd/-
(T. S. KAPOOR) (N.K.CHOUDHRY)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated:30.11.2017.
/PK/ Ps.
Copy of the order forwarded to:
(1) The Assessee:
(2) The
(3) The CIT(A),
(4) The CIT,
(5) The SR DR, I.T.A.T.,
True copy
By order