Appeal details
Counselvise Citation
170120114 RSA 2010
Assessee PAN
Bench
Appeal Number
Duration Of Justice
3 month(s) 7 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
23-07-2010
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
I
Next Hearing Date
19-07-2010
Assessment Year
2005-2006
Appeal Filed On
15-04-2010
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH I NEW DELHI) BEFORE SHRI RAJPAL YADAV AND SHRI A.K. GORADIA I.T.A. NO. 1703/DEL/2010 ASSESSMENT YEAR: 2005-06 DEPUTY COMMISSIONER OF IT, VS. M/S. YFC PROJECTS ( P) LTD., CIRCLE-18(1), B-28, SHIVALIK MALVIYA NGR., NEW DELHI. NEW DELHI. (APPELLANTS) (RESPONDENT) APPELLANT BY: MS. ANUSHA KHURAN A, DR RESPONDENT BY: SHRI DAV INDER YADAV, DIRCTOR ORDER PER RAJPAL YADAV: JUDICIAL MEMBER THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORD ER OF LEARNED CIT(APPEALS) DATED 20.1.2010 PASSED FOR ASSESSMENT YEAR 2005-06. THE SOLITARY GRIEVANCE OF THE REVENUE IS THAT LEARNED C IT(APPEALS) HAS ERRED IN ALLOWING THE ADDITIONAL DEPRECIATION OF RS.5,56,483 UNDER SEC. 132(1)(IIA) OF THE INCOME-TAX ACT, 1961. THE REPRESENTATIVE OF THE ASSESSEE AT THE VERY OUTSET SUBMITTED THAT THE ISSUE IN DISPUTE IS SQUAR ELY COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE ITAT PASSED IN ASSESSM ENT YEAR 2004-05. THIS ORDER HAS BEEN FOLLOWED BY THE LEARNED CIT(APPEALS) IN THE IMPUGNED ORDER. HE PLACED ON RECORD COPY OF THE ITATS ORDER REPORTED IN 37 SOT 2 130. ON THE OTHER HAND, LEARNED DR RELIED UPON THE ORDER OF THE ASSESSING OFFICER. 2. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS AN D GONE THROUGH THE RECORD CAREFULLY. THE FINDINGS OF THE ITAT IN ASSES SMENT YEAR 2004-05 IN ITA NO.4672/DEL/07 ON THIS ISSUE READ AS UNDER: 6. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND GO NE THROUGH THE RECORDS CAREFULLY. HON'BLE SUPREME COURT IN THE CAS E OF INDIA CINE AGENCY HAS CONSIDERED VARIOUS JUDGMENTS OF HON'BLE HIGH COURT AS WELL OF HON'BLE SUPREME COURT, WHILE CONSTRUING THE MEANING OF EXPRESSION, MANUFACTURE AND PRODUCTION. HON'BLE COU RT HAS ALSO CONSIDERED THE JUDGMENT IN THE CASE OF N.C. BUDHIRA JA WHICH HAS BEEN RELIED UPON BY THE ASSESSING OFFICER. THE HONBLE C OURT HAS CONSIDERED THE DICTIONARY MEANING OF EXPRESSION MA NUFACTURE AS WELL AS HOW THIS TERM HAS BEEN CONSTRUED AND EXPOUN DED BY THE COURTS IN VARIOUS JUDGMENTS. THE AUTHORITATIVE OBSERVATION S OF THE HONBLE COURT ARE WORTH TO NOTE FOR UNDERSTANDING THE MEANI NG OF WORD MANUFACTURE: 2. AS NOTED ABOVE, THE CORE ISSUE IS WHETHER THE ACTIVITY UNDERTAKEN WAS MANUFACTURE OR PRODUCTION. 3. IN BLACKS LAW DICTIONARY (5 TH EDITION), THE WORD , THE MANUFACTURE HAS BEEN DEFINED AS, THE PROCESS OR OPERATION OF MAKINGS GOODS OR ANY MATERIAL PRODUCED BY HAND, BY MACHINERY OR BY OTHER AGENCY; BY THE HAND, BY MACHI NERY, OR BY ART. THE PRODUCTION OF ARTICLES FOR USE FROM RAW OR PREPARED 3 MATERIALS BY GIVING SUCH MATERIALS NEW FORMS, QUALI TIES, PROPERTIES OR COMBINATIONS, WHETHER BY HAND LABOUR OR MACHINE. THUS, BY A PROCESS OF MANUFACTURE SOMETHI NG IS PRODUCED AND BROUGHT INTO EXISTENCE WHICH IS DIFFE RENT FROM THAT, OUT OF WHICH IT IS MADE IN THE SENSE THAT THE THING PRODUCED FROM THAT, OUT OF WHICH IT IS MADE IN THE SENSE THA T THE THING PRODUCED IS BY ITSELF A COMMERCIAL COMMODITY CAPABL E OF BEING SOLD OR SUPPLIED. THE MATERIAL FROM WHICH THE THING OR PRODUCT IS MANUFACTURED MAY NECESSARILY LOSE ITS IDENTITY O R MAY BECOME TRANSFORMED INTO THE BASIC OR ESSENTIAL PROP ERTIES (SEE DEPUTY COMMISSIONER OF SALES-TAX (LAW), BOARD OF RE VENUE (TAXES), ERNAKULAM V. COCO FIBRES (1992) SUPP (1) S CC 290:). MANUFACTURE IMPLIES A CHANGE BUT EVERY CHANGE IS NO T MANUFACTURE, YET EVERY CHANGE OF AN ARTICLE IS THE RESULT OF TREATMENT, LABOUR AND MANIPULATION. NATURALLY, MANU FACTURE IS THE END RESULT OF ONE OR MORE PROCESS THROUGH WHICH THE ORIGINAL COMMODITIES ARE MADE TO PASS. THE NATURE AND EXTENT OF PROCESSING MAY VARY FROM ONE CASE TO ANOTHER. THERE MAY BE SEVERAL STAGES OF PROCESSING, A DIFFERENT KIND OF P ROCESSING AT EACH STAGE. WITH EACH PROCESS SUFFERED, THE ORIGINA L COMMODITY EXPERIENCES A CHANGE. WHENEVER A COMMODITY UNDERGOE S A CHANGE AS A RESULT OF SOME OPERATION PERFORMED O IT OR IN REGARD TO IT, SUCH OPERATION WOULD AMOUNT TO PROCESSING OF THE COMMODITY. BUT IT IS ONLY WHEN THE CHANGE OR A SERI ES OF CHANGES TAKES THE COMMODITY TO THE POINT WHERE COMM ERCIALLY IT CAN NO LONGER BE REGARDED AS THE ORIGINAL COMMOD ITY BUT 4 INSTEAD IS RECOGNIZED AS A NEW AND DISTINCT ARTICLE THAT A MANUFACTURE CAN BE SAID TO TAKE PLACE. PROCESS IN M ANUFACTURE OR IN RELATION TO MANUFACTURE IMPLIES NOT ONLY THE PRODUCTION BUT ALSO VARIOUS STAGES THROUGH WHICH THE RAW MATER IAL IS SUBJECTED TO CHANGE BY DIFFERENT OPERATIONS. IT IS THE CUMULATIVE EFFECT OF THE VARIOUS PROCESSES TO WHICH THE RAW MA TERIAL IS SUBJECTED THAT THE MANUFACTURED PRODUCT EMERGES. TH EREFORE, EACH STEP TOWARDS SUCH PRODUCTION WOULD BE A PROCES S IN RELATION TO THE MANUFACTURE. WHERE ANY PARTICULAR P ROCESS IS SO INTEGRALLY CONNECTED WITH THE ULTIMATE PRODUCTION O F GOODS THAT BUT FOR THAT PROCESS PROCESSING OF GOODS WOULD BE I MPOSSIBLE OR COMMERCIALLY INEXPEDIENT, THAT PROCESS IS ONE IN RE LATION TO THE MANUFACTURE. (COLLECTOR OF CENTRAL EXCISE V. RAJAST HAN STATE CHEMICAL WORKS [1991] 4 SCC 473). MANUFACTURE IS A TRANSFORMATION OF AN ARTICLE, WH ICH IS COMMERCIALLY DIFFERENT FROM THE ONE, WHICH IS CONVE RTED. THE ESSENCE OF MANUFACTURE IS THE CHANGE OF ONE OBJECT TO ANOTHER FOR THE PURPOSE OF MAKING IT MARKETABLE. THE ESSENT IAL POINT THUS IS THAT IN MANUFACTURE SOMETHING IS BROUGHT IN TO EXISTENCE, WHICH IS DIFFERENT FROM THAT WHICH ORIGINALLY EXIST ED IN THE SENSE THAT THE THING PRODUCED IS BY ITSELF A COMMER CIALLY DIFFERENT COMMODITY WHEREAS IN THE CASE OF PROCESSI NG IT IS NOT NECESSARY TO PRODUCE A COMMERCIALLY DIFFERENT ARTIC LE. (SEE SARASWATI SUGAR MILLS V. HARYANA STATE BOARD [1992] 1 SCC 418} 5 6. THE PREVALENT AND GENERALLY ACCEPTED TEST TO ASC ERTAIN THAT THERE IS MANUFACTURE IS WHETHER THE CHANGE O R THE SERIES OF CHANGE BROUGHT ABOUT BY THE APPLICATION OF PROCE SSES TAKE THE COMMODITY TO THE POINT WHERE, COMMERCIALLY, IT CAN NO LONGER BE REGARDED AS THE ORIGINAL COMMODITY BUT IS, INSTE AD, RECOGNIZED AS A DISTINCT AND NEW ARTICLE THAT HAS E MERGED AS A RESULT OF THE PROCESS. THERE MIGHT BE BORDERLINE CA SES WHERE EITHER CONCLUSION WITH EQUAL JUSTIFICATION CAN BE R EACHED. INSISTENCE ON ANY SHARP OR INTRINSIC DISTINCTION BE TWEEN PROCESSING AND MANUFACTURE, RESULTS IN AN OVERSIM PLIFICATION OF BOTH AND TENDS TO BLUR THEIR INTERDEPENDENCE. (S EE UJAGAR PRINTS V. UNION OF INDIA [1989] 3 SCC 488:). 7. TO PUT IT DIFFERENTLY, THE TEST TO DETERMINE WHE THER A PARTICULAR ACTIVITY AMOUNTS TO MANUFACTURE OR NOT IS : DO NEW AND DIFFERENT GOODS EMERGE HAVING DISTINCTIVE NAME, USE AND CHARACTER. THE MOMENT THERE IS TRANSFORMATION INTO A NEW COMMODITY COMMERCIALLY KNOWN AS A DISTINCT AND SEPA RATE COMMODITY HAVING ITS OWN CHARACTER, USE AND NAME, W HETHER IT BE THE RESULT OF ONE PROCESS OR SEVERAL PROCESSES MANUFACTURE TAKES PLACE AND LIABILITY TO DUTY IS ATTRACTED. ETY MOLOGICALLY THE WORD MANUFACTURE PROPERLY CONSTRUED WOULD DOUBTLE SS COVER THE TRANSFORMATION. IT IS THE TRANSFORMATION OF A M ATTER INTO SOMETHING ELSE AND THAT SOMETHING ELSE IS A QUESTIO N OF DEGREE, WHETHER THAT SOMETHING ELSE IS A DIFFERENT COMMERCI AL COMMODITY HAVING ITS DISTINCT CHARACTER, USE AND NA ME AND COMMERCIALLY KNOWN AS SUCH FROM THAT POINT OF VIEW, IS A 6 QUESTION DEPENDING UPON THE FACTS AND CIRCUMSTANCES OF THE CASE. (SEE EMPIRE INDUSTRIES LTD. V. UNION OF INDIA [1985] 3 SCC 314): 7. IN THE LIGHT OF ABOVE JUDGMENT, IF WE EXAMINE TH E ACTIVITY OF THE ASSESSEE THEN IT WOULD REVEAL THAT PREPARATION OF R MC IS NOT AS SIMPLE AS CONSTRUED BY THE LEARNED CIT(APPEALS). THE ASSES SEE HAS BEEN CARRYING OUT THIS ACTIVITY IN AN ORGANIZED MANNER W ITH THE HELP OF HEAVY MACHINERY AND COMPUTER. ITS ACTIVITY IS NOT A S SIMPLY AS MIXING OF SAND, CEMENT ETC. BY A LABOURER ON THE RIGHT SID E. THOUGH IN THE COMMON PARLANCE, SOMETIME IT DOES NOT SOUND LOGIC T O SAY THAT MIXING OF R.M.C. IS A MANUFACTURING ACTIVITY BUT IF WE LOO K INTO THIS ACTIVITY CARRIED OUT BY THE ASSESSEE FROM THE POINT OF AN EXPERT WHO HAS LAID DOWN BIS STANDARD PLACED ON THE PAPER BOOK THEN IT WOULD INDICATE THAT IT IS A COMPLICATED AFFAIRS. THE MIXI NG OF FOUR PRODUCTS IN PRESCRIBED RATIO WOULD RESULT A DIFFERENT IDENTIFIA BLE PRODUCT WHICH CANNOT BE RECONVERTED TO ITS ORIGINAL SHAPE. HON'BL E SUPREME COURT IN THE CASE OF INDIA CINE (SUPRA) HAS CONSIDERED CUTTI NG OF A JUMBO FILMS ROLLS INTO SMALL PIECE OF FILMS A MANUFACTURING ACT IVITY. IF WE ANALYSIS THE FACTS OF ASSESSEES CASE, AS PER THE RATIOS OF HON'BLE SUPREME COURTS DECISION THEN ITS CASE IS ON A BETTER FOOTI NGS. THEREFORE, WE ARE OF THE OPINION THAT LEARNED REVENUE AUTHORITY HAVE ERRED IN HOLDING THAT ASSESSEE IS NOT CARRYING OUT ANY MANUFACTURING ACTIVITY. WE ALLOW THE FIRST ISSUE RAISED BY THE ASSESSEE AND PLEADED IN GROUND NOS. 3 TO 7 5. WE DIRECT THE ASSESSING OFFICER TO ALLOW ADDITIO NAL DEPRECIATION ON MACHINERY USED FOR THE PRODUCTION OF READY MIXED CO NCRETE. 3. THERE IS NO DISPARITY ON FACTS. RESPECTFULLY FOL LOWING THE ORDER OF THE ITAT IN THE EARLIER YEAR, WE DO NOT FIND ANY MERIT IN THIS CASE. THE APPEAL OF THE REVENUE IS DISMISSED. 4. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 23.07.201 0 ( A.K. GORADIA ) ( RAJPAL YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 23/07/2010 MOHAN LAL COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEALS) 5) DR:ITAT ASSISTANT REGISTRAR
