Income Tax Appellate Tribunal - Kolkata
M.K. Industries, Kolkata vs Department Of Income Tax on 27 March, 2008
IN THE INCOME TAX APPELLATE TRIBUNAL
KOLKATA BENCH "A" KOLKATA
Before Shri Mahavir Singh, Judicial Member and
Shri Abraham P George, Accountant Member
IT A No.2102/Kol/2008 &
IT A No.636/Kol/2009
Assessment Year :2001-02
M.K. Industries 2/2 V/s. DCIT, Central Circle-
Justice Dwarkanath Road, XIII, Kolkata, 5 t h Floor,
Kolkata - 700 020 Podar Court, 18,
[PAN No. AAFFM 3708 E] Rabindra Sarani,
Kolkata - 700 001
DCIT, CC-III, Kolkata, 18, V/s. M/s M.K. Industries
Rabindra Sarani, Kolkata 2/2, Justice Dwarka
- 700 001 Nath Road, Kolkata -
700 020
अपीलाथȸ/Appellant .. ू×यथȸ/Respondent)
IT A No.951/Kol/2008 &
IT A No.873/Kol/2009
Assessment Year: 2003-04
M.K. Industries, V/s. Commissioner of
2/2 Justice Dwarkanath Incom e-tax, Central-II,
Road, Kolkata,3 r d Floor,
Kolkata - 700 020 Poddar Court, 18,
Rabindra Sarani,
Kolkata - 700 001
DCIT, CC-III, Kolkata, 18, V/s. M/s M.K. Industries
Rabindra Sarani, Kolkata 2/2, Justice Dwarka
- 700 001 Nath Road,
Kolkata - 700 020
अपीलाथȸ/Appellant .. ू×यथȸ/Respondent)
ITA No.2102,636,951,873,707, 221 & 2104 A.Ys.01-02, 03-04 to 05-06
M.K.Inds. v. ACIT / DCIT CC-XIII, Kol Page 2
IT A No.707/Kol/2009
(Assessment Year: 2003-04)
IT A No.221/Kol/2008
(Assessment Year: 2004-05
ITA No.2104/Kol/2008
(Assessment Year: 2005-06)
M.K. Industries, V/s. ACIT, Central Circle-
2/2 Justice Dwarkanath XIII, Kolkata,5 t h Floor,
Road, Poddar Court, 18,
Kolkata - 700 020 Rabindra Sarani,
Kolkata - 700 001
DCIT, Central Circle-
M.K. Industries, 2/2 V/s. XIII, Kolkata, 5 t h Floor,
Justice Dwarkanath Road, 18, Poddar Court,
Kolkata - 700 001 Kolkata - 700 020
अपीलाथȸ/Appellant .. ू×यथȸ/Respondent)
आवेदक कȧ ओर से/By Assessee Shri S.Jhajharia, AR
राजःव कȧ ओर से/By Revenue Shri R.P.Nag, SR-DR
सुनवाई कȧ तारȣख/Date of Hearing 28-11-2013
घोषणा कȧ तारȣख/Date of Pronouncement 19-12-2013
आदे श/O R D E R
PER Mahavir Singh, Judicial Member:-
Out of these 7 appeals - five are by assessee and 2 by Revenue. First we will take up ITA 636/Kol/2009, by revenue and ITA 2102/Kol/2008, by assessee.
These cross appeals are arising out of the order of CIT(A), Central-II, Kolkata in appeal No.111/CC-XIII/CIT(A)/C-II/07-08 dated 27th March,2008. Re-assessment was framed by ACIT CC-XIII, Kolkata for the AY 2001-02 vide his order dated 28-12-2007 u/s 147/143(3) of the Income-tax Act, 1961 (hereinafter referred to as 'the Act').
ITA No.2102,636,951,873,707, 221 & 2104 A.Ys.01-02, 03-04 to 05-06 M.K.Inds. v. ACIT / DCIT CC-XIII, Kol Page 3
2. First we will deal with assessee's appeal. The assessee has raised the issue regarding denial of claim of exemption by the lower authorities, as claimed u/s. 10B of the Act and alternative claim of the assessee was to allow the claim of deduction u/s. 80HHC of the Act. For this, assessee has raised following ground Nos. 2 & 3:-
"2. That the rejection of the appellant's claim for exemption u/s. 10B of the Act for the assessment year 2001-2002 in the sum of Rs.5,39,47,889, is arbitrarily made without any relevance to the facts.
3. That the rejection of the appellant's additional ground for alternate claim for deduction u/s. 80HHC of the Act for the assessment year 2001-2002, is arbitrarily made without any relevance to the facts."
3. Briefly stated facts are that the original assessment was framed u/s. 143(3) by the Assessing Officer vide his order dated 31-03-2004, in which the exemption claimed u/s.10B of the Act was allowed. Even in the re-assessment the AO has recorded the fact that the assessee has blended tea and blending is not manufacturing or production. The relevant finding of the AO in his re- assessment order dated 28-12-2007 reads as under:-
"Upon perusal of the materials on record, it is seen that the assessee firm has not manufactured or produced any article or thing. It has only employed a manual and or to some extent machine-driven process for mixing different varieties of tea whose end-result was obtained by the assessee as 'blended tea' for the purpose of sale including export sale during the year. In this process, no physical chemical, bio-chemical or any other change has taken place in the input resulting in definite change in the composition of the output ingredients and shape of raw materials. Precisely, the input on a physical admixture does not result in compositional change in the output, though the tasted of the product, being blended tea, may be different from the input. The existence of qualitatively two or more varieties of tea granules in an alleged blending activity is not at all a manufacturing activity for the simple reason that the granules of two or more varieties of tea are still maintaining their original character and there is no change in their composition even after blending and packaging. Thus, the assessee cannot claim that the activity of blending simplicitor, without having engaged itself in the manufacture or production of tea before resorting to the activity of blending and packaging, amounts to 'manufacture' or 'production'."
ITA No.2102,636,951,873,707, 221 & 2104 A.Ys.01-02, 03-04 to 05-06 M.K.Inds. v. ACIT / DCIT CC-XIII, Kol Page 4 In view of the above the Assessing Officer denied the claim of exemption u/s.10B of the Act and also claim of deduction u/s. 80HHC of the Act was not allowed.
4. Aggrieved, assessee preferred appeal before CIT(A), who also confirmed the action of the AO. Before CIT(A) assessee has also raised the issue of re-opening u/s 147 r.w.s. 148 of the Act. Before us also the assessee has also raised the issue of re-opening by way of additional ground. The relevant additional ground raised by assessee reads as under:-
"1. For that the Assessing Officer was wholly wrong and justified in initiating the re-assessment proceedings u/s 147 of the Income Tax Act, 1961 by issue of notice u/s. 148 on 08.12.2006. The learned CIT (Appeals) was also equally wrong and unjustified in dismissing the appeal without deciding this pertinent issue of the unlawful initiation of the re-assessment proceedings u/s. 147 / 143(3) raised in appeal filed before him. The actions of the AO and the Ld. CIT(A) were wholly unreasonably, uncalled for and bad in law. The re-assessment made u/s. 147 / 143(3) is liable to be wholly quashed / cancelled."
5. As regards to reopening of the assessment, the Assessing Officer recorded the following facts in his assessment order:-
"In the instant case, the assessee filed the original return of income on 31/10/2001 for the AY 2001-02 declaring total income of Rs.54,53,870/-. An assessment was made u/s. 143(3) on 31/03/2004 assessing the total income at Rs.54,53,870/-. In the original return, the assessee made a claim for exemption u/s. 10B amounting to Rs.5,39,47,889/- which was allowed in the assessment made u/s. 143(3). Perusal of the return and materials on record reveals that the assessee was merely engaged in the activity of blending of tea and did not disclose the relevant materials truly and fully as to how the activity of blending of tea amounted to manufacture or production for the purpose of claiming exemption u/s.10B. In the facts and circumstances of the case and under the provisions of law, the activity of blending of tea does not amount to either manufacture or production, in the absence of which the assessee is not eligible for exemption u/s. 10B. Since the assessee has already claimed exemption u/s. 1210B amounting to Rs.5,39,47,889/- for which it was otherwise not eligible, notice u/s. 148 was issued on 08/12/2006 requiring the assessee to file its return of income within 30 days of the receipt of this notice. The notice was duly served on the assessee on 29/01/2007."
ITA No.2102,636,951,873,707, 221 & 2104 A.Ys.01-02, 03-04 to 05-06 M.K.Inds. v. ACIT / DCIT CC-XIII, Kol Page 5
6. At the outset, Ld. Counsel for the assessee stated that the re-opening is a jurisdictional issue and it will go to the root of the case and hence the same be admitted and decided. On query from the Bench, the Ld. SR-DR fairly conceded that the issue can be admitted and can be adjudicated upon. We have heard both the sides and gone through the facts and circumstances on the issue of re-opening. As reproduced above the para from the assessment order, it is clear that the Assessing Officer has re-opened only for the purpose of disallowing claim of exemption u/s.10B of the Act for the reason that activity of blending of tea does not amount to either manufacture or production and according to him, in the absence of which assessee is not eligible for exemption u/s. 10B of the Act. Admittedly, the assessment year involved is 2001-02 and original assessment was framed u/s. 143(3) of the Act vide order dated 31-03-2004 and there is no failure on the part of the assessee to disclose fully and truly all material facts necessary for framing of assessment of this assessment year. Even now before us, Ld. SR-DR could not bring any argument or evidence which proves that there is any failure on the part of the assessee to disclose fully and truly all material facts necessary for framing of assessment of this assessment year. In such eventuality, we are of the view that the re-opening is bad in law and we quash the same.
7. The next issue on merits, the Assessing Officer has recorded the facts in assessment order and admitted the blending in view of the details filed before him and the relevant finding of the AO are re-produced by us in para-3 above, which clearly reveals the mind of the AO that he has accepted the "blending" in view of the details filed before him. The relevant details filed by letter dated 25-06-2003 before the AO, which reads as under:-
"1. We are into the business of exporting blended, branded packet tea / blended tea. Therefore, the principal raw material in our processing industry is TEA.
2. The chief source of procurement of TEA of various grades for various seasons is from six different Tea Auction Centres of India viz., Kolkata, ITA No.2102,636,951,873,707, 221 & 2104 A.Ys.01-02, 03-04 to 05-06 M.K.Inds. v. ACIT / DCIT CC-XIII, Kol Page 6 Siliguri, Guwahati, Cochin, Coonoor and Coimbatore. Apart from purchases through auctions as aforesaid, there are instances of buying tea from private parties but the quantity and amount involved in such purchases from private parties when compared with the total purchases, are very insignificant. The auction centre wise details of purchases of TEA (both in terms of quantity and also in monetary terms) have been set out in Exhibit-1.
3. A brief note has been prepared which describes the major steps of processing of manual mixing / blending of tea, packeting of tea till its shipment for export. This brief note also contains a photographic presentation as appearing in Annexure-1 through Annexure-7 of the major steps of manual processing of tea mixing / blending and packeting of tea meant for exports. This brief note along with the photographic presentation appears as Exhibit-2.
4. Invoice wise details of exports of blended TEA made during the financial year ended March 31, 2001, duly certified by our bankers, which inter alia gives details of (a) Invoice No. (b) Invoice Date (c) Bank reference (d) GR No. (e) GR Date (f) Total Net Weight in Kilogram (g) Value in US $ (h) To whom Packet TEA exported (i) Bill of Lading Number (j) Bill of Lading Date (k) Letter of Credit No. (m) Date of Receipt of Export Proceeds. The whole set of papers have been marked as Exhibit - 3. During the year under reference the assessee has not effected any sale in the local market. In other words, the entire turnover comprises of Exports only.
5. The manual process of mixing / blending of Packet TEA does not yield any by-products or semi-processed materials.
6. During the financial year ended March 31, 201, the assessee had out-source the process of mixing / blending of tea and packeting thereof at Kolkata at their places stated in the Exhibit-4. The same exhibit also indicates the name and addresses of the contractors who had done the above processing activities during the financial year ended March 31,2001, at our rented premises at EL-1, Mahape M.I.D.C., Navi Mumbai - 400 705. The payments to these parties have been made chiefly by account payee cheques 7 drafts and have been recorded into regular books of accounts. However, the annualized summary of amount thus credited / paid have been set out in Exhibit -4. A specimen copies of the bills / contracts are appended with this Exhibit-4. It is to be noted that the entire expenses amounting to Rs.49,69,293 of blending / packeting / clearing etc., have been charged to Profit & Loss Account for the year ended March 31,2001 under the broad head "Clearing & Forwarding Charges". It may be noted that presently the assessee ITA No.2102,636,951,873,707, 221 & 2104 A.Ys.01-02, 03-04 to 05-06 M.K.Inds. v. ACIT / DCIT CC-XIII, Kol Page 7 operates at D-1441, TTC Industrial Area, MIDC, Shirwane, Nerul, Navi Mumbai - 400 706."
Aggrieved assessee came in appeal before us.
8. We have heard rival contentions and perused the materials placed before us. The assessee claimed exemption u/s.10B of the Act for manufacturing of packed tea from its 100% EOU. During the course of assessment proceeding, assessee in response to specific query regarding as to how the undertaking fulfilled the criteria laid down u/s.10B of the Act and claimed that it is "manufacturing" packed tea. Assessee-company replied that it was engaged in manufacturing of packed tea that the manufacturing activity was undertaken in 100% EOU at Falta. Assessee claimed that it has been given by Ministry of Commerce a sanction of 100% EOU of green card. Before the Assessing Officer, assessee filed a sanction letter of 14-03-2000 issued by the EPZ of Falta Export Processing Zone and in the permission letter of 15- 09-2000 issued by the EOU-NRI Section of the Secretariat for industrial Assistance of the Department of Industrial Policy and Promotion under the Ministry of Commerce and Industry. The assessee-company manufactured during the financial year 2000-01 packed tea. The invoices of the assessee- firm also endorse this fact and each invoices is issued under the signature of the official of "the Department of Customs" before the manufactured packet tea is shipped." But according to AO, the assessee-company has not manufactured or produced any article or thing but it has only blended tea and for blending assessee has filed details.
9. Before us Ld. Counsel, Shri S. Jhajharia drawn our attention to assessment order at page-2, where the Assessing Officer has noted the fact that the assessee has filed details and the same is reproduced above by us. In view of the fact that assessee has blended tea and complete details are filed before the AO, the issue is squarely covered in favour of assessee by the decision of Special Bench of this Tribunal in the case of Madhujayanti ITA No.2102,636,951,873,707, 221 & 2104 A.Ys.01-02, 03-04 to 05-06 M.K.Inds. v. ACIT / DCIT CC-XIII, Kol Page 8 International Ltd. v. DCIT in ITA No. 1463/Kol/2007 as reported in (2012) 137 ITD 377 (Kol) (SB), wherein it is held as under:-
"35. We find from the above facts and circumstances and case laws relied on by both the sides that the assessee was exclusively engaged in blending, packaging and export of tea bags, tea packets and bulk tea packs. The assessee's division enjoys recognition as a 100% EOU, which is granted by the Development Commissioner, Ministry of Commerce & Industry, Govt. of India. The assessee claimed exemption u/s. 10B of the Act for AYs 2000-01 onwards, which was granted upto the AY 2003-
04. However, for the AY 2004-05, exemption was declined for the reasons that by the Finance Act 2000, the definition of 'manufacture' which included 'processing' contained in section 10B of the Act was deleted w.e.f. 01.04.2001. The argument of the department is that manufacture or production had liberal meaning under the definition clause contained in section 10B of the Act until its deletion which covers even processing and, therefore, blending and packaging of tea for export was treated as 'manufacture' or 'production' of an article qualifying for exemption. We are of the considered view that the contention of the assessee that the scheme of income tax exemption available to units in the SEZ u/s. 10A of the Act and units in the free trade zone provided u/s. 10AA of the Act and the exemption available to 100% EOU u/s. 10B of the Act are very similar in nature and the wordings of the statutory provisions are similar in nature is correct. We find that Hon'ble Kerala High Court also considered the judgment in the decision of Supreme Court in Tara Agencies, supra relied on by the Ld. CIT, DR, wherein Hon'ble Supreme Court clearly held that blending of tea does not amount to 'manufacture' or 'production' of an article, but is only processing. We find that the assessee was exclusively engaged in blending and packing of tea for export and was not manufacturing or producing any other article or thing. It was recognised as a 100% EOU division and the Department had no case that the assessee's unit engaged in export of tea bags and tea packets was not a 100% EOU. If exemption was denied on the ground that products exported were not produced or manufactured in the industrial unit of the assessee's 100% EOU, it would defeat the very object of sections 10B of the Act.
36. We, in view of the above, hold that when the products for which the assessee's unit is recognized as a 100% EOU are tea bags, tea in packets and tea in bulk packs and the assessee is exclusively engaged in blending and packing of tea for export may not be manufacturer or producer of any other article or thing in common parlance. However, for the purpose of Section 10A, 10AA and 10B, we have to consider the definition of the word "manufacture" as defined in Section 2(r) of SEZ Act, Exim Policy, Food Adulteration Rules, 1955, Tea (Marketing) Control Order, 2003, etc. We also find that the definition of 'manufacture' as per Section 2(r) of the SEZ Act, 2005 is incorporated in Section 10AA of the Income-tax act with effect from
10.02.2006. Hon'ble Kerala High Court in the case of Girnar Industries (supra) had held such amendment in Section 10AA to be of clarificatory in nature. The definition of 'manufacture' under the SEZ Act, Exim Policy, Food Adulteration Rules and Tea (Marketing) Control Order is much wider than what is the meaning of the term 'manufacture' under the common parlance, and it includes processing, blending, packaging etc. In view of the above and respectfully following the decision of Hon'ble Kerala High Court in the case of Girnar Industries (supra) and Tata Tea Limited (supra), we hold that the assessee is entitled for exemption under Section 10B of the Act on account of blending of tea. Similarly, in our view, the industrial units ITA No.2102,636,951,873,707, 221 & 2104 A.Ys.01-02, 03-04 to 05-06 M.K.Inds. v. ACIT / DCIT CC-XIII, Kol Page 9 engaged in the very same activity i.e. blending, packing and export of tea in the free trade zone shall also be entitled to enjoy tax exemption under Section 10A of the Act.
37. Accordingly, we answer the question referred in favour of the assessee by holding that the assessees who are in the business of blending and processing of tea and export thereof, in 100% EOUs are manufacturer/ producer of the tea for the purpose of claiming exemption u/s.10B of the Act. Further, assessees who are in the business of blending and processing of tea in respect of undertakings in free trade zones are manufacturer/producer of tea for the purpose of claiming exemption u/s. 10A of the Act. We have examined and discussed the facts in the case of Madhu Jayanti International Ltd. and found that there is blending of tea and consequently the assessee is eligible for exemption u/s. 10B of the Act as prayed for. Their appeal for the AY 2004-05 is allowed. As regards other appeals and that of the interveners, the matters are restored back to the Division Bench, with directions to decide those appeals in the light of principle laid down herein, so far as the claim for relief u/s. 10A or 10B of the Act in accordance with law. "
10. As the facts and circumstances are exactly identical, as what was before Special Bench in the case of Madhujayanti International Ltd. (supra), taking a consistent view, we allow the claim of the assessee. As we have allowed the claim of exemption u/s10B of the Act, we need not to go into the issue of deduction u/s.80HHC of the Act as the same have become infructuous. Both the parties also conceded the issue of deduction u/s.80HHC of the Act.
11. Now we will deal with Revenue's appeal. Revenue has raised following grounds.
"1. That the Ld. CIT(A) has erred in law and on fact in rectifying his earlier order by allowing the alternative claim of deduction u/s. 80HHC, whereas the main claim of the assessee was deduction u/s.10B, which was denied as the assessee was not entitled to such deduction.
2. In doing so, the Ld. CIT(A) has erred in law and on fact in not appreciating that by filing the special audit in report Form No.10CCAC the assessee satisfied one of the conditions for claiming the deduction u/s. 80HHC whereas no finding was given on the other conditions, namely as to whether assessee's turnover comprised of export only and Foreign Exchange remittance received as certified by the bank, are required to be satisfied for the deduction u/s. 80HHC."
ITA No.2102,636,951,873,707, 221 & 2104 A.Ys.01-02, 03-04 to 05-06 M.K.Inds. v. ACIT / DCIT CC-XIII, Kol Page 10
12. Since we have already allowed the appeal of assessee on the re- opening assessment, hence, the issue of Revenue's appeal as regards to deduction u/s. 80HHC of the Act has become infructuous, which needs no adjudication.
13. In the result, appeal of assessee is allowed and that of Revenue is dismissed.
Now coming to ITA No./951/Kol/2008 of assessee's appeal..
14. This appeal by assessee is arising out of the order of CIT CC-II, Kolkata u/s. 263 of the Act vide order dated 10-03-2008 for the assessment year 2003-04. The only issue in this appeal of assessee is against the revision order passed u/s.263 of the Act directing the AO to withdraw exemption u/s 10B of the Act.
15. At the outset, Ld. Counsel for the assessee stated that this issue of blending, whether blending is manufacturing or production or not? According to him, this issue is settled in assessee's own case by this Tribunal in ITA No. 1173/Kol/2007 dated 09-01-2012 in immediately preceding AY i.e. AY 2002- 03, wherein similar revision proceedings were undertaken by the CIT CC Kolkata and Hon'ble Tribunal vide order dated 09-01-2012 quashed revision order passed u/s. 263 of the Act vide para 8 and 9 as under:-
"8 In view of the above facts and case laws of Tata Tea Ltd. and Girnar Industries (supra), as referred by the Ld. Counsel the case law of Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. Vs. CIT (2000) 243 ITR 83 (SC), is applicable to the facts of this case. Hon'ble Supreme Court has considered the phrase 'prejudicial to the interest of the revenue',, and interpreted that it has to be read in conjunction with an erroneous order passed by the AO and interpreted that it has to be read in conjunction with an erroneous order passed by the AO and every loss of revenue as consequence of an order of AO, it cannot be treated as prejudicial to the interest of revenue. Hon'ble Supreme Court discussed example, where the AO adopted once of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and he has taken one view with which ITA No.2102,636,951,873,707, 221 & 2104 A.Ys.01-02, 03-04 to 05-06 M.K.Inds. v. ACIT / DCIT CC-XIII, Kol Page 11 the Commissioner does not agree, it cannot be treated that the assessment order is erroneous so as to prejudicial to the interest of revenue unless the view taken by AO is unsustainable in law. We have gone through the judgment of Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. (supra) and find that this phrase 'prejudicial to the interest of revenue', where one of the possible views is taken by the AO, has been interpreted as under:
'The phrase "prejudicial to the interests of the Revenue" has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue. For example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of Revenue; or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue, unless the view taken by the Income-tax Officer is unsustainable in law. It has been held by this court that where a sum not earned by a person is assessed as income in his hands on his so offering, the order passed by the Assessing Officer accepting the same as such will be erroneous and prejudicial to the interests of the Revenue. Rampyari Devi Saraogi v. CIT[1968] 67 ITR 84 (SC) and in Smt. Tara Devi Aggarwal v. CIT[1973] 88 ITR 323 (SC)".
9. We find \from the assessment order passed u/s 143(3) of the Act after due consideration of facts as well as the revision order of CIT passed u/s 263 of the Act that there is no dispute regarding the fact that the assessee is exclusively engaged in blending and packaging of tea for export and is not manufacturing or producing any other article or thing but still it is recognised as a 100% EOU unit by a Board appointed by Central Government in exercise of powers conferred u/s. 40 of the Industries (Development & Regulation) Act, 1951 and the Rules made thereunder. This recognition is within the meaning of term contained in the definition clause of section 10B of the Act and it is not the case of revenue that assessee's unit is not engaged in export of tea bags or tea packets or is not a 100% EOU unit. Further, it is a worse position that the assessee was even denied deduction u/s. 80HHC of the Act which is available to merchant exporter, which the assessee is. Hence, we are of the view that the AO while framing assessment has taken a possible view and in term of the decision of Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. (supra), the AO has taken the course permissible in law and where two views are possible and the AO has taken one view, with which the CIT does not agree, it cannot be said ITA No.2102,636,951,873,707, 221 & 2104 A.Ys.01-02, 03-04 to 05-06 M.K.Inds. v. ACIT / DCIT CC-XIII, Kol Page 12 that the assessment order is erroneous so as to prejudicial to the interest of revenue. In the present case also the view taken by the AO is not unsustainable rather it is a view which is sustainable in view of the decision of Hon'ble Kerala High Court in the cases of Tata Tea Ltd. and Girnar Industries (supra). In view of the above facts and circumstances, we hold that revision order passed u/s. 263 of the Act is not sustainable in law and hence, quashed."
Ld. Counsel for the assessee stated that similar are the facts are in the present case also wherein during the year under consideration, the assessee- firm has claimed exemption u/s. 10B of the Act in respect of profit derive from 100% EOU which has been engaged in 'manufacturing of packed tea'. Even on merits, Ld. Counsel for the assessee stated that this issue is now covered of assessee's own case in other AY also, which we need not to reproduce again, as the order of Special Bench in the case of Madhujayanti International Ltd. (supra), wherein the Tribunal has allowed the claim of exemption u/s. 10B of the Act in the case of the assessee. As the issue is squarely covered, even on merits, we quash this revision proceedings u/s. 263 of the Act and allow the appeal of assessee.
16. In the result, assessee's appeal is allowed.
Now assessee's appeal in ITA No. 707/Kol/2009 and Revenue's appeal in ITA No.873/Kol/2009.
17. These cross-appeals are arising out of order of CIT(A) CC-II, Kolkata in appeal No. 134/CC-II-13/CIT-C-II/80 dated 05-03-2009. Assessment order framed by DCIT CC-XIII for assessment year 2003-04 vide his order dated 30- 12-2008 u/s. 263 r.w.s. 143(3) of the Act to give effect to the order of CIT CC passed u/s. 263 of the Act. In appeal of assessee, the issue is regarding disallowance of claim of exemption u/s. 10B of the Act and the relevant ground No.2 reads as under:-
"2. That the rejection of the appellant's claim for exemption u/s. 190B of the Act for the assessment year 2003-2004 in the sum of Rs.8,18,09,141, is arbitrarily made without any relevance to the facts."
ITA No.2102,636,951,873,707, 221 & 2104 A.Ys.01-02, 03-04 to 05-06 M.K.Inds. v. ACIT / DCIT CC-XIII, Kol Page 13 In Revenue's appeal, the following are the three grounds:-
"1. That the Ld. CIT(A) has erred in law and on fact allowing claim of deduction u/s. 80HHC, whereas the main claim of the assessee was deduction u/s. 10B, which was denied as the assessee was not entitled to such deduction.
2. In doing so, the Ld. CIT(A) has erred in law and on fact ion following his order u/s. 154 for AY 2001-02 in the case of the assessee in not appreciating that the order relied upon by the Ld. CIT(A) was not accepted by the department and second appeal was filed, which is sub judice.
3. In doing so, the Ld. CIT(A) has erred in law and on fact allowing the deduction u/s. 80HHC in not appreciating that tan identical issue is sub judice before the Hon'ble Tribunal in the case of the assessee for AY 2004-05 and also other years and the matter has not yet reached finality."
18. At the outset, Ld. Counsel for the assessee fairly conceded that the Tribunal has already quashed the revision proceedings u/s. 263 of the Act and as we quash the revision proceedings, these consequent appeals in response to assessment framed u/s. 263 r.w.s. 143(3) of the Act have become infructuous and academic. Hence, need no adjudication.
19. In the result, appeal of assessee and that of Revenue is dismissed.
Coming to assessee's appeals in ITA Nos. 221 & 2104/Kol/2008.
20. These two appeals by assessee are arising out of different orders of Commissioner of Income-tax (Appeals)-Central-II, Kolkata in appeals No. 271,106/CC-XIII/CIT(A)/C-II/06-07/07-08 dated 18-12-2007 and 27-03-2008. Assessments were framed u/s. 143(3) of the Act vide order dated 22-12-2006 and 28-12-2007 by DCIT/ACIT for the assessment years 2004-05 & 2005-06 respectively. The assessee has raised the following grounds in both the years:-
"2. That the rejection of the appellant's claim for exemption u/s. 10B of the Act for the assessment year 2004-2005 in the sum of Rs.6,49,38,617, is arbitrarily made without any relevance to the facts.
ITA No.2102,636,951,873,707, 221 & 2104 A.Ys.01-02, 03-04 to 05-06 M.K.Inds. v. ACIT / DCIT CC-XIII, Kol Page 14
3. That the levy of interest of Rs.71,97,861 in terms of section 234B of the Act for the assessment year 2004-2005, is arbitrary and without any relevance to the facts.
4. That charging of interest under section 234D in the sum of Rs.42,132 for the assessment year 2004-2005, is arbitrary and without any relevance to the facts.
AY.2005-06
2. That the rejection of the appellant's claim for exemption u/s. 10B of the Act for the assessment year 2005-2006 in the sum of Rs.1,77,99,295, is arbitrarily made without any relevance to the facts."
21. On merits this issue of exemption u/s.10B of the Act is already decided in favour of assessee in assessee's appeal in AY 2001-02 by following the case law in the case of Madhujayanti International Ltd. (supra). As regards to the issue of charging of interest u/s. 234B and 234D, this is in the nature of consequential and AO will determine accordingly. In view of the facts and circumstances, which are exactly identical in the present appeals, hence taking a consistent view, we allow these appeals of assessee.
22. In the result, both the appeals of assessee are allowed.
23. In combined result, appeals of assessee are allowed and that of Revenue's are dismissed.
. Order pronounced in the open court 19 /12/2013
Sd/- Sd/-
(Abraham P Gorge) (Mahavir Singh)
(Accountant Member) (Judicial Member)
Kolkata,
*Dkp
Ǒदनांकः- 19/12/2013 कोलकाता ।
ITA No.2102,636,951,873,707, 221 & 2104 A.Ys.01-02, 03-04 to 05-06 M.K.Inds. v. ACIT / DCIT CC-XIII, Kol Page 15 आदे श कȧ ूितिलǒप अमेǒषत / Copy of Order Forwarded to:-
1. अपीलाथȸ / Appellant
2. ू×यथȸ / Respondent
3. संबंिधत आयकर आयुƠ / Concerned CIT
4. आयकर आयुƠ- अपील / CIT (A)
5. ǒवभागीय ूितिनिध, आयकर अपीलीय अिधकरण, कोलकाता / DR, ITAT, Kolkata
6. गाड[ फाइल / Guard file.
By order/आदे श से, उप/सहायक पंजीकार आयकर अपीलीय अिधकरण, कोलकाता ।