Madras High Court
Commissioner Of Income Tax vs M/S.Pallava Granite Industries (I) Pvt on 19 November, 2013
Author: Chitra Venkataraman
Bench: Chitra Venkataraman, T.S.Sivagnanam
IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated : 19.11.2013 Coram The Honourable Mrs.Justice CHITRA VENKATARAMAN and The Honourable Mr.Justice T.S.SIVAGNANAM Tax Case (Appeal) Nos.1118 of 2009 and Tax Case (Appeal) No.888 of 2010 --- Commissioner of Income Tax, Chennai. ... Appellant in both T.Cs. -vs- M/s.Pallava Granite Industries (I) Pvt., Ltd., 10, Sriram Nagar, North Street, Alwarpet, Chennai 600 018. ... Respondent in both T.Cs. Tax Case (Appeal) filed under Section 260A of the Income Tax Act, 1961, against the order of the Income Tax Appellate Tribunal Chennai 'B', Bench, dated 09.05.2008, and 10.03.2010 in I.T.A.No.1948/MDS/2007 and I.T.A.No.1625/Mds/2009 For Appellant : Mr.N.V.Balaji in both T.Cs. For Respondent : No Appearance in both T.Cs. COMMON ORDER
(The Judgment of the Court was made by CHITRA VENKATARAMAN, J.) The Revenue is on appeal as against order of the Income Tax Appellate Tribunal relating to the assessment years 2003-04, 2004-05 and 2005-06. Inspite of service of notice on the assessee, there is no representation by the assessee before this Court either in person or through a counsel.
2. The assessment years under consideration are 2003-04, 2004-05, 2005-06, however, the facts in all the above cases are common.
3. The assessee is a private limited company, engaged in the business of manufacture and export of cut polished granite building slabs. It is a 100% Export Oriented Unit approved by the competent authority. Thus, the assessee claimed exemption from levy of tax under Section 10B of the Income Tax Act, it being 100% Export Oriented Unit. The Assessing Officer however rejected the assessee's claim under Section 10B of the Income Tax Act, on the ground that cutting and polishing of granite slabs did not amount to manufacture or production of an article or thing. The assessee however contended that it had been granted relief under Central Excise and Customs meant for Export Oriented Unit, since the processed granite was different from raw goods. Thus, the assessee placed reliance on the decisions reported in Commissioner of Income-tax v. Gogte Minerals (No. 2) reported in 225 ITR 60 (Kar), and Commissioner of Income-tax v. Raghavendra Trading Co reported in 250 ITR 595 (Kar). The Assessing Officer however rejected the assessee's claim, based on the observations of the Assessing Officer for the assessment year 2002-03 that the assessee was not entitled to deduction under Section 10B of the Income Tax Act and the said decision was upheld by the Commissioner of Income Tax (Appeals) by order dated 30.08.2005. Apart from this the Assessing Officer viewed that with the deletion of the definition 'manufacture' contained in Section 10B of the Income Tax Act, from 2001 which included process, the expression 'manufacture' was to be understood in the normal sense; consequently, polishing of rough granite was not a manufacture or production of an article or thing. Aggrieved by this, the assessee went on appeal before the Commissioner of Income Tax (Appeals), who accepted the plea of the assessee that cutting and polishing was manufacture. Referring to insertion of Explanation 4 below the omitted sub-section (9A) of Section 10B of the Income Tax Act with effect from 01.04.2004, as per which, the word 'manufacture' or 'produce' included the cutting and polishing of precious and semi-precious stones, the First Appellate Authority viewed that cutting and polishing of granite blocks would also invariably fall within the meaning and in the category of 'manufacture'/'production'. Following the order passed by the Commissioner of Income Tax (Appeals) for the assessment year 2004-05 dated 26.03.2007, the assessee's claim was allowed, thereby the assessment for the year 2003-04 was set aside. This is so, as regards the assessment year 2005-06 also. Aggrieved by this, the Revenue went on appeal for the assessment years 2003-04 and 2004-05, before the Income Tax Appellate Tribunal.
4. In the common order passed by the Income Tax Appellate Tribunal for the assessment years 2003-04 and 2004-05, the Income Tax Appellate Tribunal accepted the case of the assessee by following the decisions of the Supreme Court in the case of M/s.Gem Granites vs. CIT, in Civil Appeal Nos.3633 to 3637 of 2005, dated 11.07.2005 and held that the decisions of this Court in the case of CIT vs. Vijay Granites P.Ltd., reported in 267 ITR 606; CIT vs. Pooshya Exports P. Ltd., reported in 262 ITR 417; and CIT vs. Gomatesh Granites reported in 246 ITR 737, are no longer good law. Consequently, the Income Tax Appellate Tribunal allowed the assessee's case by following the decision of the Supreme Court in the case of M/s.Gem Granites vs. CIT, in Civil Appeal Nos.3633 to 3637 of 2005, dated 11.07.2005. Aggrieved by this, the Revenue has filed the present Tax Case (Appeals).
5. Learned Standing counsel appearing for the Revenue referred to the definition of 'manufacture' as existed prior to substitution under the Finance Act, 2000, with effect from 01.04.2001 and submitted by reason of the omission of such a definition, the assessee's case of processing of granites and polishing granites, could not be treated as one of manufacture for the purposes of claiming deduction under Section 10B of the Income Tax Act. Learned counsel further submitted that even under Explanation 4, the expression 'manufacture' or 'produce' defined to include cutting and polishing is with reference to precious and semi-precious stones. Thus, the polishing of granites could not be taken as amounting to manufacture.
6. We do not agree with the said submissions made by the learned Standing counsel appearing for the Revenue.
7. It is seen that even though the definition of 'manufacture' was omitted from Section 10B of the Income Tax Act with effect from 01.04.2001, yet under Section 2(29BA) inserted with effect from 01.04.2009 under the Finance (No.2) Act, 2009, 'manufacture' is defined as follows:-
2(29BA) "manufacture", with its grammatical variations, means a change in a non-living physical object or article or thing:-
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 a different chemical composition or integral structure.
8. We are conscious of the fact that during the assessment years under consideration 2003-04, 2004-05, 2005-06, the definition of Section 2 (29BA) of the Income Tax Act, was not there. So too, sub-section (7) sub-clause (iii) of Section 10B of the Income Tax Act, defining 'manufacture' was not there. Nevertheless, we may note that in the case of M/s.Gem Granites vs. CIT, reported in [2004] 271 ITR 322, the Supreme Court considered the issue of polishing granites and held the same is different from rough granites and that rough granites under the process as amounting to manufacture. Thus, when the resultant article no longer retained its original character, but has a different name and character, we do not find any justifiable ground to accept the plea of the Revenue solely by the reason of the absence of definition of 'manufacture' under Section 10B of the Income Tax Act, during the relevant assessment years namely, 2003-04, 2004-05 and 2005-06, that the terms 'manufacture' has to be read in a restricted way that the processing could not be included within the meaning of 'manufacture'.
9. Thus, going by the decision of the Supreme Court in the case of M/s.Gem Granites vs. CIT, reported in [2004] 271 ITR 322, on the scope of the expression 'manufacture', in the absence of any specific definition, we have no hesitation in giving common man's understanding as to the scope of the expression that the expression 'manufacture' would include every process, which would ultimately result in the production of new article having a different character in view.
10. In the circumstances, we reject the appeals filed by the Revenue and confirm the order of the Income Tax Appellate Tribunal and answer the question against the Revenue. As regards the claim of the Revenue that for earlier years, the assessee's case was rejected, it does not deserve any consideration, particularly in the context of the decision of the Supreme Court in the case of M/s.Gem Granites vs. CIT, reported in [2004] 271 ITR 322, on the question as to whether polishing of rough granites would amount to manufacture.
11. In the result, the Tax Case (Appeals) stand dismissed. No costs.
(C.V.,J) (T.S.S.,J)
19.11.2013
Index :Yes
Internet:Yes
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CHITRA VENKATARAMAN, J.
and
T.S.SIVAGNANAM, J.
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To
1. The Income Tax Officer, Ward-1(1), Chennai-34
2.The Commissioner of Income Tax (Appeals)-VI, 121, Mahathma Gandhi Road, Chennai 600 034.
3.The Income Tax Appellate Tribunal, Bench 'A', Chennai.
Tax Case (Appeal) Nos.1118 of 2009 & 888 of 2010 19.11.2013