M/S REGAL INDUSTRIES LTD. vs. CIT, CHANDIGARH

The assessee has preferred this appeal under Section 260A of the Income Tax Act, 1961 (for short, “the Act”) against the order dated 19.12.2008 (Annexure A-7) passed by the Income Tax Appellate Tribunal, Chandigarh, Bench 'A', Chandigarh in I.T.A. No. 732/CHD/01 for assessment year 1997-98, proposing to raise the following substantial questions of law: “i)Whether the Assessing Officer can deny the ITR 669 and CIT vs. Paul Brothers, 216 ITR 548? ii)Whether on the facts and in the circumstances of the present case, the learned ITAT is right in law in coming to the conclusion that the process of manufacturing rubber latex solution 9 [2] (adhesive) from the natural latex is not 'manufacture' as stipulated in Section 80IA of the Income Tax Act, 1961. iii) Whether the learned ITAT gravely erred in not considering the Certificates issued by the Industries Department, Government of Himachal Pradesh, clearly showing that the appellant was manufacturing the rubber latex solution w.e.f. 1.11.1994? iv)Whether the learned ITAT gravely erred in not relying upon the Labour Inspector's report dated 26.2.1997 as well as the attendance registers duly checked by the Labour Inspector on 18.2.1997 which clearly shows that the appellant was employing 25 persons in his factory premises? v) Whether the learned ITAT misread the evidence with regard to Labour Inspector's report dated 26.2.1997?

The assessee claimed deduction under Section 80IA. The said claim was rejected by the Assessing Officer, which view has been upheld by the CIT(A) as well as by the Tribunal. It was held that the assessee claimed that it was purchasing latex and diluting it in a big drum called 'emulsifiers fire', which could not be termed 'manufacturing'. The factum of 9 [3] carrying on manufacturing activity was also not established. The assessee could not produce any electricity bill. There was no evidence of ESI or PF returns nor any evidence of sale of goods. The assessee claimed that books of accounts were burnt in fire and though every effort was made to lodge FIR, the police department did not do so. Reliance was also placed on a certificate issued by the General Manager, Solan. The assessee produced extract from payment of wages register. The evidence of the assessee was rejected concurrently by all the authorities.

The Tribunal observed: “In view of these facts, since at any stage, nothing has been produced/furnished evidencing that the assessee has actually manufactured anything, therefore, we have not found any infirmity in the impugned order. Our above view is also fortified by the following decisions: CIT vs. Hindustan Metal Refining Works Pvt. Ltd. 128 ITR 472 (Cal). CIT v. Relish Foods 237 ITR 59 (SC), Sax Eagle Chicory v. CIT 255 ITR 178 (SC) D.D.Shah & Bros. vs. Union of India 148 Taxman 1 (Raj). If the aforesaid facts and the judicial pronouncements are kept in juxtaposition with the facts of the present appeal, we have found that the assessee neither produced the records of purchasing raw material nor explained the process of manufacturing and also no proof of 9 [4] sale. For claiming deduction under Section 80IA, the assessee is supposed to explain that the end product, if any, is commercially known differently. However, in the present appeal the assessee even has not explained what is manufactured by it or whether the assessee is actually manufacturing anything, therefore, in the absence of all these facts, the benefit of deduction cannot be extended to the assessee. Consequently, we have no t found any infirmity in the impugned order, the same is upheld.”

The above findings are findings of fact and cannot be held to be perverse. The factum of manufacturing and selling having not been established, no substantial question of law arises.

The appeal is dismissed. (ADARSH KUMAR GOEL) JUDGE (DAYA CHAUDHARY) September 10, 2009