Madras High Court
M/S. P.R.P. Granites vs Gujarat Ambuja Cement Ltd on 5 December, 2008
Author: K.Raviraja Pandian
Bench: K.Raviraja Pandian
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
DATED : 05/12/2008
CORAM
THE HONOURABLE MR. JUSTICE K.RAVIRAJA PANDIAN
W.P.(MD)No.3278 of 2006
M/s. P.R.P. Granites,
represented by its Chief
Accounts Officer R.Arumugam ... Petitioner
v.
1. The Assistant Commissioner of Income Tax,
Circle II, C.R. Buildings,
V.P. Rathnasamy Nadar Road,
Madurai 625 102.
2. The Central Board of Direct Taxes,
Central Secretariat, North Block,
New Delhi. ... Respondents
Writ Petition filed under Article 226 of the Constitution of India for the
issuance of writ of certiorari calling for the records of the proceedings in
ITNS.65 dated 31.03.2006 on the file of the first respondent and quash the same.
!For Petitioner ... Mr.V.Ramachandran
Senior Counsel for
Mr.N.Kiruphakaran
^For Respondents... Mrs.Pushya Sitaraman,
Senior Standing Counsel
for Income Tax Department
:ORDER
The writ petition is filed questioning the correctness of the assessment order dated 31.03.2006 for the assessment year 2003-04 under the Income Tax Act, 1961. ('the Act for short). The petitioner, a partnership firm, is engaged in the business of exploration, exploitation, manufacture, process and production of polished and dressed granite in assorted dimensions and a 100% Export Oriented Unit by virtue of approval granted by the Ministry of Commerce under section 14 of the Industries (Development and Regulations) Act, 1951. While filing its return of income for the assessment year 2003-04 on 26.02.2004 the petitioner claimed deduction under section 80HHC of the Act for the period from 01.04.2002 to 22.09.2002 and deduction under section 10B of the Act for the period from 23.09.2002 to 31.03.2003. The case had been taken up for scrutiny and notice under section 143(2) of the Act was issued and the petitioner was heard through the representative. Subsequently, on 30.12.2005 a show cause notice was issued. In the show cause notice referring to section 10B, it was stated as follows:
"As is evident from the foregoing provision of sub section 2(i) and (ii) of the Section 10B and Explanation 2 of section 80IA, you are not eligible for deduction under section 10B as your concern --
1.Has been formed by splitting up, or the reconstruction, of a business already in existence and also
2.It is formed by the transfer to a new business of machinery or plant previously used for any purpose and this exceeds 20% of the total value of the machinery or plant used in the business. The value of the plant and machinery as per your balance sheet as on 31.03.2003 is Rs.20,26,25,745/- and of this new machineries attributes to only Rs.4,30,75,800/- which is only around 21% and nowhere near the stipulated 80%.
Hence, you are hereby requested to show cause as to why deduction under section 10B not be disallowed while completing the assessment for the assessment year 2003-04. You should reply on or before 06.01.2006."
2. On 08.02.2006 the petitioner sent a detailed reply explaining the processes involved in the production of dressed and polished assorted dimensions of granite and about the status of the petitioner being a 100% export oriented unit approved by the Ministry of Commerce under the Industries (Development and Regulation) Act, 1951 and the issuance of green card to the petitioner considering the activity of the petitioner as manufacturing and production activity by the Board which consists of Central Board of Direct Taxes also. It was further stated in the reply that the date of formation of the export oriented unit was 23.09.2002 and not 31.03.2003. At the time of formation of the unit on 23.09.2002 all the machineries purchased were new which were more sufficient for the purpose of manufacturing and processing polished and dressed granite in assorted dimensions, and the subsequent addition of the used machinery cannot be taken as a factor to deny the claim under section 10B of the Act. Further, the value of the plant has to be taken into consideration. The objection so raised has been rejected by denying the exemption under section 10B of the Act. The correctness of the same is now canvassed before this Court.
3. Mr.Ramachandran, learned senior counsel appearing for the petitioner very strenuously contended as follows: That the assessment order has been passed in total disregard to the object of section 10B of the Act. The reasons stated in the assessment order are totally in variance with the reasons stated in the show cause notice. The activity of the petitioner has been considered by the CBDT itself as a manufacture and production activity as one of the members of the Board of approval of the 100% Export Oriented Unit. Hence, the assessing officer, being a lower authority cannot take a different view and non suit the petitioner for the benefit, which is specifically granted as a special deduction in respect of 100% export oriented unit. Though certain judgments of the jurisdictional High Court have been taken in aid to reject the benefit, the Apex Court judgment on that issue has been totally lost sight of. He relied on various judgments in Central Excise, Sales tax and other allied Acts to contend that the activity of the petitioner is a manufacturing and production activity.
4. Per Contra, Mrs.Pushya Sitaraman, learned senior Standing Counsel, while answering the contention that the CBDT, as one of the members of the Board of Approval of 100% Export Oriented Unit, considered the activity of the petitioner as manufacturing and processing activity, submitted that the difficulty experienced by the person like the petitioner has been taken note of by the Central Government, particularly, the Ministry of Commerce and Industries and Finance and deliberations are going on to give redressal or the benefit conferred under the Statute to 100% export oriented unit, however, she contended that as on date, the position of law is, as stated in the assessment order, which requires no interference from this Court.
5. Heard the learned counsel on either side and perused the materials available on record.
6. Generally, this Court would not entertain a writ petition under Article 226 of the Constitution of India, against assessment orders, as there are effective and efficacious alternative remedies available to the assessee by way of appeals. It is essentially a rule of policy, convenience and discretion. Despite the existence of an alternative remedy, it is well within the discretion of the High Court to grant the relief to the petitioner under Article 226 of the Constitution. The petitioner, approaching the Court, without availing the alternative remedy, should be able to establish to the satisfaction of the Court that the assessment order is passed without jurisdiction or in a pulpably arbitrary manner or the order infringes the principles of natural justice. (See : State of H.P. vs. Gujarat Ambuja Cement Ltd., (2005) 142 STC 1; Calcutta Discount Co. Ltd. v. ITO, AIR 1961 SC 372; A.V.Venkateswaran, Collector of Customs v. Ramchand Sobhraj Wadhwani, AIR 1961 SC 1506.
7. In the impugned assessment order, I am of the view that arbitrariness is writ large on the face of it. Hence the writ petition is taken up for consideration on merits without non suiting the petitioner on the ground of availability of alternative remedy.
8. Mr.Ramachandran, learned senior counsel appearing for the petitioner is correct in pointing out that the reasons given in the assessment order to non suit the petitioner in respect of the claim for deduction under section 10B is totally extraneous and alien to the reasons stated in the show cause notice dated 30.12.2005. The show cause notice proceeded as if the petitioner was not entitled to deduction under section 10B of the Act for the reason that the petitioner unit had formed by splitting up or the reconstruction, of a business already in existence and also formed by the transfer to a new business of machineries and plant previously used and the total value of the used machinery or plant exceeded 20% of the total value of such machinery or plant. However, in the impugned assessment order, the assessing officer delved deep into the activity of the petitioner as to whether the activity of the assessee is a manufacturing activity or not, which is not found as one of the reasons in the show cause notice. Hence, the contention of Mr.Ramachandran is well founded and has force in it.
9. The other contention that even otherwise, the assessing officer has relied on the judgment which is convenient and favourable to him to reject the claim by discording the judgment of the superior Court of India is also having its own force. In order to come to the conclusion that the activity of the petitioner is not 'manufacture' or 'production' activity, the assessing officer relied on the judgment of this Court in CIT v. Vijay Granites P. Ltd., (2004) 267 ITR 606 and CIT v. Gomatesh Granites, (2000) 246 ITR 737.
10. In Vijay Granites case, the Division Bench of this Court has held that the act of cutting and polishing granite slabs did not involve any process of manufacture or production, mainly relying upon the reasons stated in the decision of another Division Bench of this Court in Gomestesh's case cited supra. In the said case, it was held that the extraction of granite cannot be regarded as a result of any manufacturing activity and the activity of cutting stones into smaller sizes and polishing the same and thereafter exporting the polished slabs would not amount to production. The decision was arrived at on the basis of the facts of that case, which read as under :
"In the order of the Tribunal, the business of the assessee is described thus :
"The assessee is an exporter of unpolished granite blocks...... It owns a compressor and crane. With the help of the compressor, holes are drilled in the hills containing granites in a pattern to facilitate extraction to big blocks more or less in cubical form or about . tonne to one tonne each. The holes are filled with explosives and exploded so as to extract the blocks from the hills. The blocks are then thoroughly washed with water to see whether there is any crack in it. The washed blocks are lifted by crane to the platformed lorries and exported as such. The assesee does not polish or does not undertake any other processing on the blocks on the granite stone so extracted. It is only the importers in other countries who were polishing and cutting the blocks to suit their requirements."
(Emphasis supplied) But in the case on hand, the activities carried out by the petitioner is stated in detail both in the reply to the show cause notice as well in as para 2 of the affidavit to the following effect :
1. Exploration of granite minerals.
2. Evaluation and estimation.
3. Exploitation,
4. Removal and preservation of top soil and sub soil.
5.Drilling and blasting of unwanted weathered boulders and rocks over lying on the bed rock.
6.Removal of blasted unwanted products to waste dump by using heavy crawler excavator, heavy crawler crane and dumpers.
7. Pit designing for safe and economical operation.
8. Flame cutting of mass deposit.
9. Diamond cutting by using wire saw machines.
10. Primary drilling and secondary drilling by using pneumatic rock drills and compressors.
11. Primary splitting and secondary splitting by using pneumatic rock drills and compressors combination and also with diamond cutting wire saw machines.
12. Separating the granite blocks using heavy crawler excavators.
13. Lifting of granite blocks using heavy crawler excavators.
14. Transporting of blocks to dressing yard and waste yard depends upon the quality.
15. Dimensioning, dressing, squiring and polishing in order to make them as export worthy.
The above said processes which included polishing of granite, which was not available in Gometesh Granites' case. This crucial aspect has not been taken into consideration by the assessing officer while deciding the case.
11. In Vijay Granite's case cited supra, the judgment of the Karnataka High Court in CIT v. Mysore Minerals Ltd., (2001) 250 ITR 725, wherein it was observed that extracting granite from the quarry and cutting it to various sizes and polishing amounted to manufacture or production of any article or thing and the assessee is entitled to the benefit under sections 32A and 80-I of the Act, has been referred to. But the principles so stated have not been taken into consideration on the simple ground that the judgment in Mysore Minerals's case relied upon the earlier decision in the case of CIT v. Mysore Minerals Ltd., 205 ITR 461, which in turn, relied upon the earlier decision of the Karnataka High Court in Shankar Construction Co. v. CIT, (1991) 189 ITR 463. Those decisions have been overruled by the Supreme Court in Budharaja's case and further observed that the earlier case of Mysore Minerals' case 205 ITR 461 was not accepted by the Division Bench of this Court in Gometesh Granites' case cited supra. Now that the said reasoning is not available, because in the case of CIT v. Sesa Goa Ltd., (2004) 271 ITR 331, Mysore Mineral's case 205 ITR 461 has been approved by the Supreme Court. Mere sieving process of sand which contains iron ore is regarded to be the mining process by the Supreme Court in that case.
12. The Supreme Court in Sesa Goa's case has observed that 'manufacture' and 'production' of any article or thing, has been considered and held that excavating and processing ores amount to production within the meaning of section 80-I of the Act and would qualify for the special deduction. In the said decision, the question that arose for consideration was whether the assessee was entitled to deduction under section 32A of the Act, in respect of the machinery used in mining activity ignoring the fact that the assessee is engaged in extraction and processing of iron ore, not amounting to manufacture or production of any article or thing?
13. In that case, the High Court while dismissing the appeal preferred by the revenue, held that extraction and processing of iron ore did not amount to 'manufacture', however concluded that extraction of iron ore and various process would involve 'production' within the meaning of section 32A(2)(b)(iii) of the Act. On appeal by the revenue, while considering the question whether the business of the assessee is one of manufacture or production, the Supreme Court, observed as follows:
"....There is no dispute that the plant in respect of which the assessee claimed deduction was owned by it and was installed after March 31, 1976, in the assessee's industrial undertaking for excavating, mining, and processing mineral ore. Mineral ore is not excluded by the Eleventh Schedule. This issue has arisen before different High Courts over a period of time. The High Courts have held that the activity amounted to 'production' and answered the issue in question in favour of the assessee. The High Court of Andhra Pradesh did so in CIT v. Singareni Collieries Co. Ltd., (1996) 221 ITR 48, the Calcutta High Court in Khalsa Bros. v. CIT, (1996) 217 ITR 185; CIT v. Mercantile Construction CO., (1994) 74 Taxman 41 (cal) and the Delhi High Court in CIT v. Univmine (P) Ltd., (1993) 202 ITR 825. The Revenue has not questioned any of these decisions, at least not successfully, and the position of law, therefore, was taken as settled. The reasoning given by the High Courts, in the decisions noted by us earlier, is, in our opinion, unimpeachable. This Court had, as early as in 1961, in Chrestien Mica Industries Ltd. v. State of Bihar, (1961) 12 STC 150, defined the word "production", albeit, in connection with the Bihar Sales Tax Act, 1947.
The definition was adopted from the meaning ascribed to the word in the Oxford English Dictionary as meaning "amongst other things that which is produced; a thing that results from any action, process or effort, a product; a product of human activity or effort". From the wide definition of the word "production", it has to follow that mining activity for the purpose of production of mineral ores would come within the ambit of the word "production" since ore is "a thing", which is the result of human activity or effort. It has also been held by this Court in CIT v. N.C. Budharaja & Co., (1993) 204 ITR 412 that the word "production" is much wider than the word "manufacture". It was said: (Page 423) "The word 'production' has a wider connotation than the word 'manufacture'. While every manufacture can be characterised as production, every production need not amount to manufacture. ?
The word 'production' or 'produce' when used in juxtaposition with the word 'manufacture' takes 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."
It is, therefore, not necessary, as has been sought to be contended by learned counsel for the Revenue, that the mined ore must be a commercially new product. The decisions and other authorities on the definition of the word 'ore', as cited by the appellant are irrelevant.
Learned counsel appearing on behalf of the assessee, correctly submitted that the other provisions of the Act, particularly section 33(1)(b)(B) read with item No.3 of the Fifth Schedule to the Act, would show that mining of ore is treated as "production". Section 35E also speaks of production in the context of mining activity. The language of these sections is similar to the language of section 32A(2). There is no reason for us to assume that the word 'production' was used in a different sense in section 32A. We are, therefore, of the opinion that extraction and processing of iron ore amounts to 'production' within the meaning of the word in section 32(A)(2)(b)(iii) of the Act and consequently, the assessee is entitled to the benefit of section 32A(1) of the Act. The question whether the High Court was correct in holding that the activity did not amount to 'manufacture' is left open."
(emphsis supplied) It is pertinent to state in the case on hand, the language employed in section 10B of the Act as 'manufacture' or 'production" is the same as found in Section 32(A)(2)(b)(iii) of the Act.
14. The said decision has been recently reaffirmed by the Supreme Court on 01.10.2008 in the case of Vijay Ship Breaking Corpn. v. CIT, 219 CTR 639. One of the questions considered in that case, which is relevant to the fact of the present case was whether the appellant/assessee was entitled to deduction under section 80HHC and 80-I of the Act in respect of the ship breaking activity undertaken by it. While answering the said question, the Supreme Court, after extracting that portion of the order in the case of N.C. Budharaja & Co., (1993) 204 ITR 412 (SC), which is also extracted in Sesa Goa Ltd., (2004) 271 ITR 331, and which is extracted in this order in paragraph 14, it was held as follows :
"Firstly, in the case of Ship Scrap Traders & Ors. v. CIT, (2001) 168 CTR (Bom) 489 : (2001) 251 ITR 806 (Bom), the Bombay High Court has analysed the entire ship-breaking activity, the articles which emerged from that activity, the various steps which are required to be undertaken for ship-breaking activity and, consequently, after placing reliance on the judgment of this Court in Budharaja's case, it has held that the ship-breaking activity resulted in production of articles which emerged when the ship-breaking activity stood undertaken. In our view, the important test which distinguishes the word 'production' from 'manufacture' is that the word 'production' is wider than the word 'manufacture' as held in Budharaja's case. Further, it is true that in Budharaja's case, the Division Bench has used the word 'new article'. However, what the Division Bench meant was that a distinct article emerges when the process of ship-breaking is undertaken. Further, the legislature has used the words 'manufacture' or 'production'. Therefore, the word 'production' cannot derive its colour from the word 'manufacture'. Further, even according to the dictionary meaning of word 'production', the word, 'produce' is defined as something which is brought forth or yielded either naturally or as a result of effort and work (See : Webster's New International Dictionary). It is important to note that the word 'new' is not used in the definition of the word 'produce'. Secondly, the judgment of the Bombay High Court in the case of ShipScrap Traders & Ors. (supra) stands affirmed by the judgment of this Court in the case of CIT v. Sesa Goa Ltd. (2004) 192 CTR (SC) 577 : (2004) 271 ITR 331 (SC). In that case, the question arose before a Bench of three Judges of this Court was as to whether extraction and processing of mineral ore amounts to production within the meaning of the word in S.32A(2)(b)(iii) of the 1961 Act? It was held that the word 'production' is wider than the word 'manufacture'. It was held that the word 'production' has a wider connotation than the word 'manufacture' . It was further held that the mined ore need not be a new product. In fact, the Department had raised an identical argument in that case stating that the mined ore was not a new product and, consequently, there was no production. This argument has been specifically rejected in Sesa Goa's case (supra)"
(emphasis supplied)
15. The Supreme Court in the case of Chowgule and Co. P. Ltd. v. Union of India (1981) 47 STC 124 the activity of mining was held to result in production of goods and in the latter judgment of the Supreme Court in Sesa Goa Ltd's case cited supra, has taken the view by examining the issue directly and affirming the judgment of the Karnataka High Court in Mysore Minerals' case in (2001) 250 ITR 725, wherein the activity of converting the marble block which is not usable as such into slabs and polishing them and making it into marketable commodity was held to be manufacturing activity. This aspect of the matter was not touched at all and the claim was negatived.
16. It is further contended that under the Income Tax Rules, 1962, the assessee, under section 44AB read with Rule 6G is required to furnish the report of audit of his accounts and also required to furnish statement of particulars in Form No.3CD provided under the Rules which include furnishing information about the nature of business carried on by the assessee in Part B of the annexure to be appended to the statement of particulars in which the "marble and granite" has been classified under the manufacturing industry sector. Thus, for the purpose of income tax, under the rules, marble and granite industry has been considered to be manufacturing industry. Under the rules governing the compulsory audit in respect of various businesses also, marble and granite industry has been included in the sector of manufacturing industry. This goes to show that so far as the authorities under the income tax entrusted with the task of its implementation are concerned the cutting of marble and granite blocks into slabs and polishing them for bringing them to the stage of usability as an activity of industrial undertaking engaged in manufacture and production of articles or things are required to be regarded as such. The rules framed under the Act are statutory in nature and became part of the statute. Thus, under the scheme of the Act and the rules framed thereunder, cutting and polishing of marble and granite blocks have been held to be an industrial activity of manufacture. As a block, it is not of any use and has been held to be a manufacturing industry for the purpose of the Act. The assessment order is silent in this regard inspite of pointing out the same.
17. It is further contended that the decision of the Karnataka High Court in Mysore Minerals Ltd.'s case, 250 ITR 725 as affirmed by the Supreme Court is in consonance with the above said view emerging from rules and expressed by the Central Board of Direct Taxes. The authority entrusted for smooth implementation of the enactment had framed the rules for discharging functions under the Act. The same binds the authorities under the Act.
18. The other contention that the petitioner is 100% Export Oriented Unit established in Madras Export Processing Unit pursuant to the approval granted by the Ministry of Commerce under section 14 of the Industrial (Development and Regulation) Act, 1951 considering that the process of exploration, exploitation, manufacture, process and production of polished and dressed granite in assorted dimensions is a manufacturing and processing activity. The CBDT, the decision making authority under the Act is also one of the members of the committee of approval. The authorities under the Act who are subordinates to the Board cannot take a different view for the purpose of assessing the activity of the petitioner. The above said points were not at all answered in the impugned order.
19. In addition to that, Explantory notes on section 139, Circular No.528 dated 16.12.1998 explaining the object of insertion of new section 10B by the Finance Act, 1998 was also pressed into service in favour of the assessee. The said note proceeds that with a view to provide incentive for earning foreign exchange, section 10B has been inserted so as to secure that the income of 100% export oriented undertaking shall be exempt from tax, for a stated period. The exemption provided under the new section is similar to the provision in Indutrial undertaking in free trade zones. The exemption so granted to the Unit that manufactures or produces any article or things. The term 'manufacture' would include any processing or assembling or recording of programmes on disc, tape, perforated media or other information storage device. It also explains to the effect that as defined in Explanation (i) below sub section (7) of the newly inserted section 10B, a 100% EOU is an undertaking which has been approved as such by the Board appointed in this behalf by the Central Government in exercise of the power conferred by section 14 of the Industries (Development and Regulation) Act, 1951 and the rules made under that Act. This object has also not been taken note of while passing the impugned order.
20. Learned senior counsel contended that in respect of tax administration, the Government has to strike a balance between collection of tax and the difficulties experienced by the subject. He also contended that the benefit conferred by one department of the Government has been taken away by another department of the Government, which is impermissible in law. In support of his contention, the learned senior counsel for the petitioner relied on the Supreme Court judgment in the case of State of Kerala v. Kurian Abraham (P) Ltd., (2008) 3 SCC 582, wherein it was held as follows :
"Tax administration is a complex subject. It consists of several aspects. The Government needs to strike a balance in the imposition of tax between collection of revenue on one hand and business-friendly approach on the other hand. Today, Governments have realised that in matters of tax collection, difficulties faced by the business have got to be taken into account. Exemption, undoubtedly, is a matter of policy. Interpretation of an entry is undoubtedly a quasi-judicial function under the tax laws. Imposition of taxes consists of liability, quantification of liability and collection of taxes. Policy decisions have to be taken by the Government. However, the Government has to work through its senior officers in the matter of difficulties which the business may face, particularly in matters of tax administration. That is where the role of the Board of Revenue comes into play. The said Board takes administrative decisions, which includes the authority to grant administrative reliefs. This is the underlying reason for empowering the Board to issue orders, instructions and directions to the officers under it."
None of the above contentions are found answered in the order impugned.
21. An interesting factor is placed on record and pressed into service by Mr.Ramachandran that in a comprehensive writ petition filed before the Principal Bench of this Court at Chennai in writ petition No.27973 of 2006 by arraying Union of India, represented by the Secretary of Board of Approvals (EOUs); the Director General of Foreign Trade; the Development Commissioner, MEPZ Special Economic Zone; the Joint Development Commissioner, MEPZ Special Econonomic Zone; the Central Board of Direct Taxes, and the Assistant Commissioner of Income Tax, as respondents 1 to 6, seeking an identical prayer, in which the fourth respondent, for himself and for respondents 1 to 3 filed a counter affidavit, in a way accepting all the factual statements made in the present writ petition, such as granting of the approval by the Board of approval for 100% EOU as composition of committee which included the representative of the CBDT stated that the petitioner's application was thoroughly examined and only thereafter the letter of permit/licence was granted to the petitioner to manufacture, process, and polish the granites in assorted dimensions as stated in the licence. It is the fact that as per the EXIM policy, 2002-2007 the Board of approval has been constituted and EOU status has been granted to the petitioner's unit. Hence, respondents 5 and 6, i.e., the CBDT and the Assistant Commissioner of Income tax, have no jurisdiction to deny the benefit granted to the petitioner by way of interpreting the word 'manufacture'. The main object of EOU scheme is to promote, earn valuable foreign exchange for the country. The petitioner's unit is entitled to utilise all the facilities granted under the EOU scheme as per the provisions of the Exim policy 2002 - 2007. But, the CBDT and the assessing officer are yet to file their counter as they are unable to answer this point.
22. The averments contained in the counter affidavit filed in writ petition No.27973 of 2006 is clearly exhibiting the state of affairs prevailing in the Government - One department granting the relief and the other department stalling the same. Of-course, the counter affidavit of the fourth respondent, the Joint Development Commissioner, MEPZ Social Economic Zone, cannot be treated as a statutory provision. But the CBDT and the assessment officer have to answer this point keeping in mind the policy of the Government and also the tax administration.
23. The last contention that the reasoning given in the assessment order that as on 31.03.2003 as per the balance sheet filed along with the return, the new machinery works out to 21.4% and as such the petitioner is not entitled to the relief is not correct, is also having some force, in my view. Because the section does not say as to whether the last date of the assessment year is the date of formation of EOU. According to the petitioner, the EOU was formed and commenced the activities on 23.09.2002 by purchasing 100% new plant and machinery, to the value of Rs.3,26,89,940/- and it is more than enough for commencing production. The petitioner started production and exported the new granite so produced, it is stated. It is further stated that the subsequent addition of old machineries, though in larger value would not disentitle the petitioner's claim. It is also stated that the petitioner also brought virgin granite deposit field to the value of Rs.10,11,20,331/- as plant. The total value of the plant and machinery is Rs.13,88,10,271/- (Rs.3,26,89,940/- + Rs.10,11,20,331/-), which is more than 80% of the value as on 31.03.2003. Thus, on both the dates, i.e., as on 23.09.2002 and as on 31.03.2003, the petitioner satisfied the requirements. However, this contention has been just like that brushed aside by the assessing officer by simply stating that as on 31.03.2003, the value of the new machinery works out only to 21.4%. Even the question as to what is the crucial date - whether it is the date of formation of EOU or the last date of the assessment year has not been taken up for consideration and decided with reference to the relevant provisions by giving reasons.
24. For all these reasons, I am of the view that the impugned order has to be set aside and the matter has to be remitted back to the assessing officer to reconsider the issue taking into consideration the reasonings stated in the judgment and also by giving an opportunity to the petitioner to place any material to sustain its claim and frame fresh assessment in accordance with law. Such an order is passed. The writ petition is allowed. No costs.
mf To
1. The Assistant Commissioner of Income Tax, Circle II, C.R. Buildings, V.P. Rathnasamy Nadar Road, Madurai 625 102.
2. The Central Board of Direct Taxes, Central Secretariat, North Block, New Delhi.