DCIT, Haldwani v. M/s. J.P. Stone Crusher (P) Ltd, Haldwani

ITA 3872/DEL/2009 | 2006-2007
Pronouncement Date: 18-02-2010 | Result: Dismissed

Appeal Details

RSA Number 387220114 RSA 2009
Assessee PAN AABCJ5662M
Bench Delhi
Appeal Number ITA 3872/DEL/2009
Duration Of Justice 5 month(s) 6 day(s)
Appellant DCIT, Haldwani
Respondent M/s. J.P. Stone Crusher (P) Ltd, Haldwani
Appeal Type Income Tax Appeal
Pronouncement Date 18-02-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 18-02-2010
Date Of Final Hearing 18-02-2010
Next Hearing Date 18-02-2010
Assessment Year 2006-2007
Appeal Filed On 11-09-2009
Judgment Text
ITA NO. 3872/DEL/2009 A.Y. 2006-07 1 IN THE INCOMETAX APPELATE TRIBUNAL DELHI BENCH D: NEW DELHI BEFORE SHRI C.L. SETHI JUDICIAL MEMBER & SHRI SHAMIM YAHYA ACCOUNTANT MEMBER ITA NO. 3872/DEL/2009 A.Y. : 2006-07 DY. COMMISSIONER OF INCOME TAX VS. M/S J.P. STON E CURSHER (P) LTD. INCOME TAX OFFICE RAMPUR ROAD HALDWANI HALDWANI (PAN: AABCJ5662M) DISTT. NAINITAL UTTARANCHAL PIN 263 139 (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. TARUN KUMAR ADV. DEPARTMENT BY : SHRI ANOOP KR. SINGH SR. DR O R D E R PER SHAMIM YAHYA : AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDERS OF THE LD. CIT(A) DATED 19.06.2009 PERTAINING TO ASSESSMENT YE AR 2006-07. 2. THE GROUND RAISED IS THAT LD. CIT(A) ERRED IN DE LETING ADDITION OF RS. 1836804/- ON ACCOUNT OF CLAIM U/S 80IB IGNORING THE FACT THAT ASSESSEE IS A STONE CRUSHER AND NOT MANUFACTURER AT ALL AND ALSO IN RATIO OF DECISION IN THE CASE OF LUCKY MINMAT PVT. LTD. VS. CIT 116 TAXMAN 1 (SC) AND OTHER CASE LAWS ON THE SUBJECT. 3. IN THIS CASE THE ASSESSEE COMPANY CLAIMED EXEMPT ION UNDER SECTION 80IB OF THE IT ACT. AO REFERRED TO THE PR OVISIONS OF SECTION 80IB(2)(III) AND HELD AS UNDER:- ITA NO. 3872/DEL/2009 A.Y. 2006-07 2 IN THE BUSINESS OF THE ASSESSEE FIRM BOULDERS A RE BROKEN INTO SMALL PIECES I.E. GRITS. WHAT WAS BROKEN IS STONE AND THE RESULT OF THIS BREAKING IS AGAIN STONE. THERE IS ONLY A CHANGE IN SHAPE OF STONE. IT WAS CHANGED FROM BIGGER SIZE TO SMALLER SIZE. GRITS OR STONE CHIPS DO NOT LOOSE THE BASIC CHARACTER OF STONE WHICH WAS IN BO ULDERS EVEN AFTER CRUSHING THEM TO SMALL SIZES. THE COMPOSITION OF BOULDERS AND THE STONE GRITS IS THE SAME. THERE IS ONLY ONE CHANGE I N THE PHYSICAL PROPERTY I.E. THE SHAPE OF THE STONE. THE TERM STONE ALSO IN CLUDES ITS VARIOUS FORMS LIKE GRITS KANKER STONE BALLAST BOULDERS ETC. AN D THESE VARIOUS FORMS OF STONE CONTINUE TO CARRY THE SUBSTANTIAL CHARACTERIS TICS OR ITS ORIGINAL SUBSTANCE. FURTHER THE CONVERSION OF STONE BOULDERS INTO GRITS/STONE IS ONLY PROCESSING. TO BECOME MANUFACTURE SOMETHIN G MORE IS ESSENTIAL AND THIS IS DEGREE OF PROCESSING IN ORDER TO BRING INTO EXISTENCE A NEW ARTICLE DIFFERENT FROM THE ORINGIANL NOT ONLY IN PH YSICAL PROPERTY BUT IN COMPOSITION CHARACTERISTICS AND USE. THE ASSESSEE COMPANY IS DOING THE SAME JOB WITH THE HELP OF MACHINES ON LARGE SCALE WHAT THE LABOURERS DO ON T HE ROAD SIDE WITH HANDS. THE LABOURERS ALSO CONVERT THE BIGGER STONE S DO ON THE ROAD SIDE WITH HANDS. THE REQUIREMENT BUT THAT ACTIVITY DOES NOT AMOUNT TO MANUFACTURE. HOW THEN THE SAME ACTIVITY WITH THE HE LP OF MACHINES AND ON LARGER SCALE CAN AMOUNT TO MANUFACTURING ACTIVIT Y. RELIANCE MAY BE PLACED ON FOLLOWING CASE LAWS: (A) CENTRAL EXCISE VS. AMBA LAL SARABHAI ENTERPRISE [43 ELT 214 (SC)] (B) ARIHANT TILES AND MARBLE (P) LTD. VS. ITO (2006) 1 0 SOT 225 (JODHPUR TM) (CONCLUSION : CUTTING OF MARBLE BLOCKS INTO MARBLE SLAPS AND TILES AND SELLING THE SAME ITA NO. 3872/DEL/2009 A.Y. 2006-07 3 AFTER POLISHING DOES NOT AMOUNT EITHER PRODUCTION O R MANUFACTURING OF ANY ARTICLE OR THINGS). THEREFORE CLAIM OF THE ASSESSEE REGARDING EXEMPTION U/S 80IB OF THE IT ACT 1961 ARE HEREBY REJECTED. 4. UPON ASSESSEES APPEAL LD. CIT(A) ACCEPTED THE CONTENTION THAT IT IS ONLY AFTER THE BLOCKS OF THE STONE HAVE BEEN CUT TO SIZES THAT THEY BECOME MARKETABLE. IT WAS THE PROCESS OF CRUSHING / BREAKING THE STONE BOULDERS INTO SMALL PIECES THAT THE SAME BECAME MA RKETABLE. THE STONE BOULDERS CANNOT BE USED FOR THE SAME PURPOSE AS THE STONE GRITS AND AFTER THE STONE BOULDER HAVE BEEN CUT INTO DI FFERENT SIZES THE END PRODUCTS SIMULTANEOUSLY CANNOT BE USED AS A BLOCK. ACCORDINGLY CIT(A) HAS ALLOWED THE ASSESSEES APPEAL BY INTER-ALIA PLA CING RELIANCE UPON ITAT DECISION IN THE CASE OF MALLIKARJUN GEORESOURC ES ASSOCIATES. 5. AGAINST THIS ORDER THE REVENUE IS IN APPEAL BEFO RE US. IT HAS BEEN INTER-ALIA URGED THAT THE DECISION OF THE HONBLE A PEX COURT IN THE CASE OF LUCKY MINMAT PVT. LTD. VS. CIT 116 TAXMAN 1 (SC) IS APPLICABLE. 5.1 LD. COUNSEL OF THE ASSESSEE ON THE OTHER HAND S UBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE C ATENA 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 C ONVERTING BOULDERS INTO SMALL CHIPS OF STONES WITH THE AID O F LABOUR AND MACHINERY IT WAS A MANUFACTURING PROCESS AND THE ASSESSEE ENGAGED IN SUCH ACTIVITIES IS AN INDUSTRIAL UNDERTA KING ITA NO. 3872/DEL/2009 A.Y. 2006-07 4 ENTITLED TO RELIEF UNDER SECTION 15C (WHICH CORRESP ONDENCE 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 WITH IN THE MEANING OF S. 32A(2)(B()(III). IT WAS ALSO HELD TH AT EXTRACTION AND PROCESSING OF GRANITE AMOUNTS TO PRODUCTION W ITHIN THE MEANING OF S.80-I OF THE IT ACT. III) CIT VS. SOPHISTICATED MARBLES AND GRANITE INDU STRIES ITA NO. 519-2009 DELHI HIGH COURT ORDERS DATED 11.8.2009. I N THIS CASE IT WAS HELD THAT WHEN ASSESSEE WAS PURCHASING BLOCKS AND SLABS OF MARBLES AND CUTTING THEM IN PROPER SIZ ES. THE ACTIVITY FALL WITHIN THE DEFINITION OF MANUFACTURI NG PROCESS. IV) ITAT DELHI DECISION IN ITA NO. 5000/DEL/04 (A .Y. 2003-04) IN THE CASE OF DCIT VS. MALLIKARJUN GEORESOURCES AS SOCIATES ORDER DATED 31.3.2008. IN THIS CASE THE ASSESSEES ACITIVITES OF MINING AND CRUSHING OF BOULDERS AND SALE OF EXCA VATED MATERIALS AND STONE GRITS WAS HELD TO BE MANUFACTUR ING AND PROCESSING OF ARTICLES AND THINGS AS TO ENTITLE DE DUCTION 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 HONBLE APEX COURT CO MPRISING THREE OF THEIR LORDSHIPS HAVE TAKEN INTO ACCOUNT TH E JUDGEMENT OF THE HONBLE APEX COURT IN THE CASE OF LUCKY MINMAT PVT. LTD. VS. CIT (2001) 9 SCC 669. THE HON BLE ITA NO. 3872/DEL/2009 A.Y. 2006-07 5 COURT ELABORATELY CONSIDERED THE ISSUE AND THE HON BLE APEX COURT EARLIER DECISION ON THE SUBJECT AND HELD AS UNDER:- APPLYING THE ABOVE TESTS LAID DOWN BY THIS COURT I N BUDHARAJAS 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 AL SO AN ACTIVITY WHICH IS SOMETHING BEYOND MANUFACTURE AND WHICH BRINGS A NEW PRODUCT INTO EXISTENCE AND THEREF ORE ON THE FACTS OF THESE CASES WE ARE OF THE VIEW THA T THE HIGH COURT WAS RIGHT IN COMING TO THE CONCLUSION T HAT THE ACTIVITY UNDERTAKEN BY THE RESPONDENTS-ASSESSEE DID CONSTITUTE MANUFACTURE OR PRODUCTION IN TERMS OF SEC TION 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 W OULD HAVE SERIOUS REVENUE CONSEQUENCES. AS STATED ABOVE EACH OF THE RESPONDENTS IS PAYING EXCISE DUTY SOME O F 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 PRODUCTI ON ITA NO. 3872/DEL/2009 A.Y. 2006-07 6 UNDER SECTION 80IA WILL HAVE DISASTROUS CONSEQUENCES PARTICULARLY IN VIEW OF THE FAT THAT THE ASSESSES I N ALL THE CASES WOULD PLEAD THAT THEY WERE NOT LIABLE TO PAY E XCISE 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 CAS ES 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 TH E ISSUE INVOLVED IS COVERED IN FAVOUR OF THE ASSESSEE. WE MAY QUOTE THE OBSERVATIONS OF THE TRIBUNALS DECISION IN ITA NO. 5000/DEL/04 DC IT VS. MALLIKARJUN GEORESOURCES ASSOCIATES CITED ABOVE IN IDENTICAL CA SE AS UNDER ON WHICH THE LD. CIT(A) HAS ALSO RELIED. 12. WE AFTER HAVING GOING THROUGH THE CHART OF PR OCESS 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 COMMODIT Y BOULDERS COULD NOT BE USED FOR BUILDING/ ROAD PURPOSE AS SUCH UNTIL IT IS BROKEN INTO SMALL PIECES I.E GRIT S TO BE USED AS BUILDING/ROAD MATERIAL. IT IS ONLY BY THE P ROCESS OF BREAKING THE BOULDERS INTO GRITS THAT IT IS MADE MARKETABLE. THE BOULDERS CANNOT BE USED FOR THE SAM E PURPOSE AS THE GRITS CAN BE USED AND AFTER BOULDERS HAVE BEEN BROKEN INTO GRITS THE END PRODUCT BY PUTTING I T 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 AN Y PURPOSE THEREFORE TO MAKE IT USABLE VARIOUS PROC ESSES WHICH COULD NOT BE APPLIED TO BRING IT TO THAT STAGE WOULD AMOUNT TO MANUFACTURING. OBVIOUSLY SO FAR AS PHYSIC AL CHARACTERISTIC OF BOULDERS AND GRITS MAY HAVE SAME ITA NO. 3872/DEL/2009 A.Y. 2006-07 7 PHYSICAL PROPERTIES I.E. STONE. THUS KEEPING IN V IEW THE DECISION IN THE CASE OF ARIHANT TILES MARBLES (P) LT D. (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 THI NG AND AS SUCH ENTITLE TO DEDUCTION U/S 80IB. HENCE WE UPH OLD THE ORDER PASSED BY THE CIT(A). 13. THE DECISION IN THE CASE OF LUCKY MINERALS (P) L TD. VS. CIT 116 TAXMAN 1(SC) RELIED BY THE LD. DR IS DISTINGUISA BLE FROM THE PRESENT CASE. IN THE SAID CASE. HONBLE SU PREME 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 AC TIVITIES CARRIED ON BY THE ASSESSEE COMPANY DID NOT AMOUNT TO MANUFACTURE. SIMILARLY OTHER DECISIONS RELIED UPON BY THE REVENUE ARE DISTINGUISHABLE ON FACTS. 6. IN VIEW OF THE AFORESAID DISCUSSION FOLLOWING T HE PRECEDENT WE UPHOLD THE ORDER OF THE LD. CIT(A) AND DECIDE THE I SSUE IN FAVOUR OF THE ASSESSEE. 7. IN THE RESULT THE REVENUES APPEAL IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 18/02/2010 UP ON CONCLUSION OF THE HEARING. SD/- SD/- [C.L. SETHI] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 18/02/2010 SRB COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR ITAT TRUE COPY DEPUTY REGISTRAR ITAT DELHI BENCHES