C.I.T.1,JODHPUR vs. M/S KWAL PRO EXPORTS

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ITA/113/2011HC RajasthanRJHC01041504200905 May 2018Author: VINIT KUMAR MATHUR2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the issue of whether the assessee's activities constitute manufacture or production for the purpose of Section 10B exemption is no longer res integra. The Court referred to its earlier decision in D.B. Income Tax Appeal No.299/2009, C.I.T. Vs. Goverdhan Prasad, which was followed in D.B. Income Tax Appeal No.30/2008, M/S Kwal Pro Exports Vs. The Assistant Commissioner of Income Tax. In these prior decisions, the view taken was that the assessee would be entitled to the exemption claimed. Therefore, the High Court decided the present appeal in favor of the assessee and against the department. The operative direction was that the appeal is dismissed.

What were the facts?

The appeal was filed by the Commissioner of Income Tax-I, Jodhpur (the Revenue) against an order of the Income Tax Appellate Tribunal (ITAT). The assessee, M/s Kwal Pro Exports, carries on business in Jodhpur, purchasing wooden blocks and subjecting them to carving, finishing, and polishing to manufacture wooden handicrafts. The Revenue challenged the ITAT's decision that the assessee's activities amounted to manufacture and that the assessee was eligible for deduction under Section 10B of the Income Tax Act, 1961. The assessment year(s) are not explicitly stated in the provided text, but the procedural history mentions an earlier ITAT order for AY 2001-02.

What were the issues?

The High Court had to decide three questions of law: 1. Whether the Tribunal was justified in holding that the assessee undertook business activity amounting to manufacture, contradicting its own earlier order for AY 2001-02. 2. Whether the assessee is eligible for deduction under Section 10B of the Income Tax Act. 3. Whether the Tribunal was legally correct in holding that the assessee's activities of assembling, labeling, relabeling, and repacking constituted manufacturing or production activities, ignoring the law laid down in CIT vs. Lucky Mineral P.Ltd. Assessee's Contentions: The assessee argued that its activities of converting wood into handicrafts, involving processes like grinding, surface smoothing, chemical dipping, drawing, polishing, and packaging, amounted to manufacture or production, making it eligible for exemption under Section 10(B)(A) of the Income Tax Act, 1961. The judgment does not explicitly record the Revenue's specific arguments on each issue, but the appeal itself indicates their disagreement with the ITAT's findings.

Which sections of the Income-tax Act were involved?

Section 10B,Section 10(B)(A)

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR D.B. Income Tax Appeal No. 113 / 2011 Commissioner of Income Tax-I, Jodhpur. ----Appellant Versus M/S Kwal Pro Exports, 12 Kamal Apartment, Circuit House Road, Jodhpur. ----Respondent _____________________________________________________ For Appellant(s) : Mr.K.K.Bissa For Respondent(s) : Mr.Anil Bhandari _____________________________________________________ HON'BLE THE CHIEF JUSTICE HON'BLE MR. JUSTICE VINIT KUMAR MATHUR

Order 05/05/2018

1.

Three questions of law were settled by this Court on 28.4.2011 they read as under:- " (i). Whether on the facts and in the present circumstances of the case, the Tribunal was justified in holding that the assessee is said to have undertaken business activity amounting to manufacture by contravening its own earlier order dt. 6.10.2006 for A.Y. 2001-02 in appeal No.633/JU/2005 ? (ii). Whether on the facts and in the present circumstances of the case, the Tribunal was justified in holding that the assessee is eligible for deduction under Section 10B of the Income Tax Act ? (iii). Whether on the facts and in the present circumstances of the case, the Tribunal was legally correct in holding that assessee’s activity of assembling, P.Ltd. Reported in 226 ITR 245 ?”

(2 of 2) [ITA-113/2011]

2.

Relevant would it be to note that the respondent carries on business at Jodhpur purchasing wooden blocks and subjecting the same to carving, finishing and polishing. Wooden handicrafts are manufactured and sold as a commercially distinct product.

3.

The issue would therefore be whether the activity carried out by the respondent in converting wood into the handicraft involving grinding, surface smoothing, chemical dipping, drawing, polishing, pacakaging etc. would amount to manufacture or produce an article so as to make the assessee eligible for make expemtion under Section 10(B) (A) of the Income Tax Act, 1961. 4. The issue is no longer res integra. On 02.03.2017 deciding D.B.Income Tax Appeal No.299/2009, C.I.T. Vs. Goverdhan Prasad followed in D.B.Income Tax Appeal No.30/2008, M/S Kwal Pro 90

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