Income Tax Appellate Tribunal - Delhi
Raj Laxmi Stone Crushers Pvt. Ltd., ... vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH : 'F' NEW DELHI)
BEFORE SHRI G.E. VEERABHADRAPPA, HON'BLE VICE PRESIDENT AND
SHRI A.D. JAIN, JUDICIAL MEMMBER
I.T.A. No.3105/Del./2010
(Assessment Year : 2007-
2007-08)
ACIT, Haldwani. Vs. M/s Raj Laxmi Stone Crushers Pvt. Ltd.,
Bareilly Road,
Haldwani.
(PAN/GIR No. : N.A.)
(Appellant) (Respondent)
Assessee by : S/Shri Tarun Kumar, Adv. Nitin Chadha, & Ashish Poddar, C.As.
Revenue by : Smt.Anusha Khurana, Sr.DR
ORDER
PER A.D. JAIN, JM
This is department's appeal for assessment year 2007-08 contending that the CIT(A) has erred in allowing the assessee's claim for deduction u/s 80IB of the Act ignoring the fact that the assessee is a stone crusher and not a manufacturer; that the CIT(A) has also erred in ignoring the decision of the Hon'ble Supreme Court in the case of 'Lucky Minmat Pvt. Ltd. vs. CIT', 245 I.T.R. 803(SC), wherein it has been held that mining of marble block and thereafter cutting and sizing the same before being sold does not amount to manufacture.
2. It was during the assessment proceedings, that the assessee claimed deduction u/s 80IB of the I.T. Act, 1961. For assessment year 2006-07, such deduction was allowed by the CIT(A). For the year under consideration, however, the AO disallowed the claim, holding that the assessee company had not claimed such deduction in its return of income filed; that as per Section 80IB(2)(iii) of the Act, the industrial undertaking must be manufacturing any article, but the stone crusher did not manufacture any article, rather it only cut stones into various shapes and sizes without altering the character and I.T.A. No.3105/Del./2010 (A.Y. : 2007-08) property thereof and did not manufacture anything; that in the business of the assessee company, boulders were broken into small pieces, i.e., grits; that bounders were broken into stone and the result of the breaking was also stone; that there was only a change in the shape of a stone from bigger size to smaller size; that the conversion of stone boulders into grits was only processing and not manufacturing; and that the company was doing the same job as that done by labourers, but with the help of machines, on a large scale.
3. The CIT(A), by virtue of the impugned order, allowed the exemption claimed, following the first appellate order in the assessee's own case for assessment year 2006-07.
4. Aggrieved, the department is in appeal before us.
5. Challenging the impugned order, the Ld.DR has argued that the CIT(A) has erred in allowing the deduction u/s 80IB of the Act to the assessee, even though the assessee is not manufacturing anything, while ignoring the decision in 'Lucky Minmat Pvt. Ltd.' vs. CIT, 245 T.R. 203(SC).
6. Ld.Counsel for the assessee, on the other hand, has placed strong reliance on the impugned order. It has been stated that the Tribunal, for assessment year 2006-07, in the assessee's own case, in I.T.A. no.3874/Del./09, vide order dated 4.6.10 (copy placed on record) has decided this issue in favour of the assessee.
7. In this regard, we find that indeed, the matter stands covered in favour of the assessee by the aforesaid Tribunal order dated 4.6.10 in the assessee's own case for assessment year 2006-07. Therein, it has been held as follows:
5. Against this order the revenue is in appeal before us. It has been inter-alia urged that the decision of the Hon'ble Apex Court in the case of Lucky Minmat Pvt. Ltd. vs. CIT 116 Taxman 1 (SC) is applicable.2
I.T.A. No.3105/Del./2010 (A.Y. : 2007-08) 5.1 Ld. counsel of the assessee on the other hand submitted that the issue is covered in favour of the assessee by the catena of decisions in this regard. He referred to the following case laws:-
i) CIT vs. M.R. Gopal 58 ITR 598. In this case Hon'ble Madras High Court held that the assessee was engaged in converting boulders into small chips of stones with the aid of labour and machinery it was a manufacturing process and the assessee engaged in such activities is an industrial undertaking entitled to relief under section 15C (which correspondence to section 80J of the IT Act, 1961);
ii) CIT vs. Sesa Goa Ltd. 271 ITR 331 (SC). In this case it was held that mining activity for extracting iron ore - Extraction and processing of ore amounts to "production" within the meaning of s. 32A(2)(b()(iii). It was also held that extraction and processing of granite amounts to "production" within the meaning of s.80-I of the IT Act.
iii) CIT vs. Sophisticated Marbles and Granite Industries ITA No. 519-2009 Delhi High Court orders dated 11.8.2009. In this case it was held that when assessee was purchasing blocks and slabs of marbles and cutting them in proper sizes. The activity fall within the definition of 'manufacturing process'.
iv) ITAT, Delhi decision in ITA No. 5000/Del/04 (A.Y. 2003-04) in the case of DCIT vs. Mallikarjun Georesources Associates order dated 31.3.2008. In this case the assessee's acitivites of mining and crushing of boulders and sale of excavated materials and stone grits was held to be manufacturing and processing of articles and things as to entitle deduction under section 80IB.
v) ITO, Udaipur vs. M/s Arihant Tiles and Marbles (P) Ltd. in Civil Appeal no. 8036 of 2009 order dated 2.12.2009. In this case the Larger Bench of the Hon'ble Apex Court comprising three of their Lordships have taken into account the judgement of the Hon'ble Apex court in the case of Lucky Minmat Pvt. Ltd. vs. CIT (2001) 9 SCC 669. The Hon'ble Court elaborately considered the issue and the Hon'ble Apex Court earlier decision on the subject and held as under:-3
I.T.A. No.3105/Del./2010 (A.Y. : 2007-08) "Applying the above tests laid down by this court in Budharaja's case (supra) to the facts of the present cases, we are of the view that blocks converted into polished slabs and tiles after undergoing the process indicated above certainly results in emergence of a new and distinct commodity. The original block does not remain the marble block, it becomes a slab or tile. In the circumstances, not only there is manufacture but also an activity which is something beyond manufacture and which brings a new product into existence and, therefore, on the facts of these cases, we are of the view that the High Court was right in coming to the conclusion that the activity undertaken by the respondents-assessee did constitute manufacture or production in terms of Section 80IA of the Income Tax Act, 1961.
Before concluding, we would like to make one observation. If the contention of the Department is to be accepted, namely that the activity undertaken by the respondents herein is not a manufacture, then, it would have serious revenue consequences. As stated above, each of the respondents is paying excise duty, some of the respondents are job workers and the activity undertaken by them has been recognized by various Government Authorities as manufacture. To say that the activity will not amount to manufacture or production under section 80IA will have disastrous consequences, particularly in view of the fat that the assesses in all the cases would plead that they were not liable to pay excise duty, sales tax etc. because the activity did not constitute manufacture. Keeping in mind the above factors, we are of the view that in the present cases, the activity undertaken by each of the respondents constitutes manufacture or production and, therefore, they would be entitled to the benefit of Section 80IA of the Income Tax Act, 1961."
5.2 From the above case laws, it is evident that the issue involved is covered in favour of the assessee.
We may quote the observations of the tribunal's 4 I.T.A. No.3105/Del./2010 (A.Y. : 2007-08) decision in ITA No. 5000/Del/04 - DCIT vs. Mallikarjun Georesources Associates cited above in identical case as under, on which, the ld. CIT(A) has also relied:
"12. We, after having going through the chart of process of production placed at page 5/PB are of the view that this process of production amounts to manufacturing inasmuch as in this case also the original commodity boulders could not be used for building/ road purpose as such until it is broken into small pieces i.e, grits to be used as building/road material. It is only by the process of breaking the boulders into grits that it is made marketable. The boulders cannot be used for the same purpose as the grits can be used and after boulders have been broken into grits, the end product by putting it simultaneously cannot be used as a boulder. The boulder as a mineral produced/ excavated from riverbed or by blasting rocks by itself is not usable for any purpose, therefore, to make it usable, various processes which could not be applied to bring it to that stage would amount to manufacturing. Obviously so far as physical characteristic of boulders and grits may have same physical properties i.e., stone. Thus, keeping in view the decision in the case of Arihant Tiles Marbles (P) Ltd. (supra), Kores India Ltd. (supra) and Mysore Mineral Ltd. (supra). We hold that the assessee is engaged in the activity of manufacture or produce of article or thing and as such, entitle to deduction u/s 80IB. Hence, we uphold the order passed by the CIT(A)."
13. The decision in the case of Lucky Minerals (P) Ltd.
vs. CIT 116 Taxman 1(SC) relied by the ld. DR is distinguisable from the present case. in the said case. Hon'ble Supreme Court has observed that it has not been found by the Tribunal that the assessee company converted the boulders into powder, chips or any other article commercially known by another name and used as a different article. Thus, the Court held that the activities 5 I.T.A. No.3105/Del./2010 (A.Y. : 2007-08) carried on by the assessee company did not amount to manufacture. Similarly, other decisions relied upon by the Revenue are distinguishable on facts."
8. 'Lucky Minmat Pvt. Ltd. vs. CIT'(supra), it is seen, stands considered in 'ITO, Udaipur vs. Arihant Tiles and Marbles(P) Ltd.' by a larger Bench of the Hon'ble Supreme Court. This has been taken note of by the Tribunal vide its order dated 4.6.10(supra). The Hon'ble Supreme Court has held, inter alia, that blocks converted into polished slabs and tiles, after undergoing the process involved in such activities result in the emergence of a new and distinct commodity; that having undergone this process, the original block does not remain a marble block and it becomes a slab or tile; and that so, there is not only manufacture, but an activity which is something beyond manufacture and which brings a new product into existence.
9. No decision opposed to 'Arihant Tiles' (supra) has been cited before us.
10. Therefore, respectfully following the aforesaid Tribunal order dated 4.6.10 in the assessee's own case for assessment year 2006-07, the grievance sought to be raised by the Department is found to be shorn of merit and is rejected as such.
11. In the result, the appeal filed by the department is dismissed.
Order pronounced in open court on 03.05.2011.
Sd/- Sd/-
(G.E. VEERABHADRAPPA) (A.D. JAIN)
VICE PRESIDENT JUDICIAL MEMBER
Dated: May 03, 2011.
*SKB*
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I.T.A. No.3105/Del./2010
(A.Y. : 2007-08)
Copy forwarded to:-
1. The Appellant
2. The Respondent
3. The CIT
4. The CIT(A), Dehradun.
5. The DR, ITAT, Loknayak Bhawan, Khan Market, New Delhi.
AR/ITAT 7