Income Tax Appellate Tribunal - Delhi
Khanna Brothers, New Delhi vs Department Of Income Tax on 13 February, 2015
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH ' D', NEW DELHI)
BEFORE SHRI T.S. KAPOOR, ACCOUNTANT MEMBER
AND SHRI C. M. GARG, JUDICIAL MEMBER
I.T.A. No. 227/Del/2013
Assessment year : 2010-11
ACIT, Circle 24(1), VS. Khanna Brothers,
New Delhi 44, Uday Park,
New Delhi
GIR / PAN:AAAFK9950-H
(Appellant) (Respondent)
Appellant by : Ms. Parminder Kaur, Sr. DR
Respondent by : Shri G N Gupta, Adv.
ORDER
PER T.S. KAPOOR, AM:
This is an appeal filed by Revenue against the order of Ld. CIT(A) dated 26.10.2012. the only grievance of the Revenue is the action of Ld. CIT(A) by which he had allowed the claim of deduction of Rs.,1,30,23,723/- u/s 80-IC of the I. T. Act, 1961.
2. At the outset, Ld. A.R. submitted that the case of the assessee is duly covered in favour of the assessee by the Tribunal order dated 14.06.2013 in I.T.A. No. 397/Del/2010 & 2210/Del/2012 in assessee's own case for the Assessment Years 2006-07 and 2008-09.
3. Ld. D.R. fairly conceded that the issue was covered in favour of the assessee.
4. After going through the material on record along with Tribunal order dated 14.06.2013, we find that the assessee is a partnership firm and has claimed deduction u/s 80-IC which the A.O. had denied. However, Ld. CIT(A) had allowed deduction in Assessment Year 2006-07 and 2008-09 2 ITA No.227/Del/2013 and the Tribunal had upheld the action of Ld. CIT(A) vide order dated 14.06.2013. The Hon'ble Tribunal in its order has reproduced the findings of Ld. CIT(A) for Assessment Year 2008-09 which is reproduced below:
"6. The Ld.Counsel for the assessee Mr.GN Gupta on the other hand submitted that the Ld.DR is factually incorrect in his arguments as the assessee was establishing a steel factory and not a tobacco factory. He submitted that the assessee was supplying steel structures after fabricating and manufacturing the same and was not constructing a building. He referred to the definition of 'manufacture' in S.2(29)BA of the Act. He relied on the order of the Ld.CIT(A) and supported the same. He relied on the following case laws.
i. CIT vs. Beehive Engineering Co.and Allied Industries P.Ltd., 221 ITR 561(AP) ii. CIT vs. Elemech Industrial Constructions, 229 ITR 503 (A.P.) iii. CIT vs. Northern Aromatics Ltd., 326 ITR 27 (P&H) iv. CIT vs. Alcam Engineering P.Ltd., 336 ITR 294 (Mad)
7. In reply the Ld.D.R. relied on some survey findings. He distinguished the case laws relied upon by the assessee.
8. After hearing rival contentions, we are of the considered opinion that the order of the First Appellate Authority has to be upheld for the reason that, the facts of the case clearly demonstrate that the assessee has manufactured an article or a thing. The ld.CIT(A) in the order dt. 30.1.2012 for the AY 2008-09 has discussed the issue at length. At para 6 and 7 of his order he held as follows:-
"(6) I have also called for and examined the purchase order placed on the appellant by M/s. Dharmpal Premchand Ltd. dated 07.07.2006 for the fabrication, supply, shot/sand blasting, painting and erection of 1500 MT of steel structures for its steel project at Agartala. As per the order, the entire work was to be executed strictly in conformity with technical details provided to the appellant through detailed fabrication drawings made available by M/s. Dharampal Premchand Ltd. As held by the High Court of Delhi in the case of CIT vs. Northern Aromatics Ltd. (supra), the activity of the assessee is to be 3 ITA No.227/Del/2013 regarded as manufacturing activity irrespective of the facts whether the products manufactured by it are for its own business or it is doing job work for others. The appellant has produced, during the assessment proceedings as well as appellate proceedings, the copies of excise returns filed before the Central Excise Authority at Agartala, bills of machinery and of raw material purchased, details of freight and cartage for purchase of raw material, and details of job work paid. The appellant has credibly argued that in view of manufacture and fabrication work carried out with the help of contract labour to whom job charges of Rs. 1,66,17,876/- has been paid, there was no requirement for a large number of regular employees. It is also correct that the provisions of section 80IC do not include any requirement regarding the number of workers to be employed directly.
Regarding the finding during survey that the machines appeared to be old and no longer in use, the appellant has explained that the contract for supply and erection of steel structures was completed in July,2009, hence, at the time of survey on 09.03.2010, there was no longer any manufacturing activity underway.
7. The appellant firm is found to be registered with VAT, CST, Service Tax, and Central Excise Authorities. The appellant has produced details of rent paid to Tripura Industrial Development Corporation Ltd., the bills of construction of the factory sheds and the details of payment of electricity charges to Tripura State Electricity Corporation Ltd. The appellant has produced the bills of purchase of the machinery installed at the premises, comprising drilling machines, welding machines, motors, gas cutting machines, air compressor, etc. The appellant has also produced details and bills of purchase of raw material comprising nuts, bolts, rods, M.S.angles, channels, HR sheets, metal paints etc. After carefully considering the various evidences filed, I am unable to uphold the finding of the Assessing Officer that no manufacturing activity has been carried out by the appellant. In my opinion, the appellant has furnished adequate evidence of fabrication and assembly of the steel structure for the steel project of M/s. Dharampal Premchand Ltd. at Agartala. The evidences relied on by the Assessing Officer, namely the few numbers of regular employees, and the deserted appearance of the factory shed, have been satisfactorily explained by the appellant. There can be no reasonable doubt that the appellant manufactured trusses, 4 ITA No.227/Del/2013 columns, gantries, etc. in its factory and transported these articles to the project site of M/s. Dharmapal Premchand where these articles were erected by fastening bolts on the civil work already completed by M/s. Dharampal Premchand. The appellant has carried out customised fabrication of the steel structure as per drawings provided by the contractee. The appellant has been granted registration/approval from various regulatory and Government authorities and has paid excise duty on the articles manufactured by it. For all the above stated reasons, it is held the appellant is entitled to the deduction u/s 80IC in respect of its manufacturing activities. The disallowance of Rs.3,29,76,090/- is accordingly deleted."
9. This decision is in line with the judgement of Hon'ble A.P.High Court in the case of CIT vs. Beehive Engineering Co. and Allied Industries Ltd. (supra) where the facts and decisions are as follows:
"The assessee, a private limited company, purchased M.S.angles, joints, channels etc. and cut them into required sizes, and thereafter, the pieces were welded, drilled with holes and fitted with bolts, nuts, etc. for manufacturing trusses. The assessee company had also undertaken the work of fixing the trusses for purposes of roofing on the building which were under construction. The assessee claimed that it was an industrial company and entitled to the benefit of the reduced rate of tax. The ITO rejected the claim. However, the appellate Assistant Commissioner and the Tribunal allowed the claim. On a reference:
Held, that having regard to the findings of fact recorded by the Tribunal, the assessee company squarely fell within the meaning of 'industrial company' whether or not the income from the activities exceeded 51 per cent. It was entitled per cent. It was entitled to the reduced rate of tax."
10. The Ld.CIT(A) has relied on the following case laws which in our view are applicable to the facts of the case.
i. CIT vs. Alcam Engineering P.Ltd., 336 ITR 294 ii. CIT vs. Northern Aromatics Ltd., 196 CTR 479 (Del) iii. CIT vs. Impel Forge & Allied Industries Ltd., 326 ITR 27 (P&H) 5 ITA No.227/Del/2013
11. Applying the propositions laid down in these cases to the facts of this case, we uphold the order of the Ld.CIT(A) as on facts, the Ld.D.R. could not controvert the findings of the Ld.Commissioner of Income Tax (Appeals).
12. Coming to the arguments of the Ld.D.R. based on survey and on the ground that the assessee is constructing above factory which is prohibited/undesirable etc. and that it is a casual activity etc., we are of the opinion that these are not the grounds on which the A.O. denied the claim of the assessee. Such fresh grounds and factual arguments are not borne out of record and hence are dismissed as devoid of merit."
5. In the present case, Ld. CIT(A) has passed the order after following the findings of Ld. CIT(A) in Assessment Year 2008-09, which was upheld by the Tribunal vide order dated 14.06.2013. For the sake of convenience, the findings of Ld. CIT(A) are reproduced below:
"{5} The above written submissions have been carefully considered. The sole issue in contention is whether the appellant is engaged in manufacture or not. The Assessing 'Officer has entirely relied on the findings in the assessment order under section 143(3) for the Assessment Year 2008-09. In fact the Assessing Officer has simply reproduced the relevant paragraphs of the earlier assessment order at para 5 of his order, from which it can be seen that the conclusions drawn followed from the assessment order for the Assessment Year 2006-07. In the Assessment Year 2006-07, the said addition was deleted by the CIT(A)' XXIII vide order dated 27.11.2009, wherein a detailed analysis of the manufacturing processes carried on by the appellant had been made. It is further seen that the appeal of the appellant for Assessment Year 2008-09 has been allowed in its favour by this office order dated 30.01.2012. It was found that the appellant had carried out the contract of fabrication, supply, shot/sand blasting, painting and erection of 1500 metric tonnes of steel structures for the steel project at Agartala of M/s Dharmpal Premchand Ltd. The entire work was executed in conformity with technical details provided through detailed fabrication drawings of the client. The appellant had produced copies of excise returns filed, bills of purchase of machinery and raw material, and details of job work paid. The firm was found to 6 ITA No.227/Del/2013 be registered with VAT, CST, Service tax and Central Excise Authorities. Reliance was placed on the judgement of the Delhi High Court in the case of CIT vs Northern Aromatics Ltd (2005) 196 CTR 479, to hold that the activity of the appellant had to be regarded as manufacture irrespective of whether the products manufactured are for its own business or as job work for others. After considering the evidence furnished of fabrication and assembly of trusses, columns, gantries, etc. for the steel plant of M/s Dharmpal Premchand Ltd., it was held that the appellant was entitled to the deduction under section 80le. No new facts have been brought on record in the current year to disprove the appellant's claim. It is held accordingly that the appellant is engaged in the 'manufacture' of articles and is therefore, eligible for the deduction under section 80IC."
6. We find that the facts under appeal are similar to the facts in Assessment Year 2006-07 and 2008-09 and, therefore, following the above Tribunal order, we do not find any infirmity in the order of Ld. CIT(A).
7. In view of above, appeal filed by Revenue is dismissed.
8. Order pronounced in the open court on 13th Feb., 2015.
Sd./- Sd./-
( C. M. GARG) (T.S. KAPOOR)
JUDICIAL MEMBER ACCOUNTANT MEMBER
th
Date: 13 Feb., 2015
Sp
Copy forwarded to:-
1. The appellant
2. The respondent
3. The CIT
4. The CIT (A)-, New Delhi.
5. The DR, ITAT, Loknayak Bhawan, Khan Market, New Delhi. True copy.
By Order (ITAT, New Delhi).
7 ITA No.227/Del/2013S.No. Details Date Initials Designation
1 Draft dictated on 11/02/2015 Sr. PS/PS
2 Draft placed before author 11, Sr. PS/PS
Draft proposed & placed
3 JM/AM
before the Second Member
Draft discussed/approved 12/2
4 AM/AM
by Second Member
Approved Draft comes to the 12/2
5 Sr. PS/PS
Sr. PS/PS
6 Kept for pronouncement 13/2 Sr. PS/PS
7 File sent to Bench Clerk 13/2 Sr. PS/PS
Date on which the file goes
8
to Head Clerk
Date on which file goes to
9
A.R.
10 Date of Dispatch of order