COMMISSIONER OF INCOME TAX, KOTTAYAM vs. M/S. POABSON GRANITE PRODUCTS PVT. LTD

ITA/576/2009HC KeralaKLHC01025337200920 January 2014Author: HONOURABLE MR.JUSTICE A.M.SHAFFIQUE,HONOURABLE THE CHIEF JUSTICE DR. MANJULA CHELLUR13 pages
AI SummaryDismissed

What were the facts?

The Revenue is appealing against orders of the Income Tax Appellate Tribunal (ITAT) concerning the respondent assessee, M/s. Poabson Granite Products Pvt. Ltd., for various assessment years. The assessee operates metal crushing units, processing granite boulders into graded metal of different sizes for construction. The Assessing Officer (AO) rejected the assessee's claims for deductions under Sections 80HH and 80I (and 80IB for one assessment year) on the grounds that the process was not manufacturing and the output was not a distinct product. The Commissioner of Income Tax (Appeals) allowed the deductions, a decision upheld by the ITAT, which followed its own prior rulings. The Revenue's contention is that the activity does not constitute manufacturing or production of a new article or thing.

What did the High Court hold?

The High Court held that the activity carried on by the respondent unit, involving digging, breaking boulders, crushing them into various sizes of granite aggregates and 'M Sand', results in a commercially distinct product with different utilities compared to the original granite boulder. The Court referred to the detailed process undertaken by the assessee, which transforms the raw material into rubbles and 'M Sand' of different sizes. The Court cited Supreme Court decisions such as Sesa Goa Ltd. and Arihant Tiles and Marbles P. Ltd., which clarified that 'production' is wider in ambit than 'manufacture', and that while every manufacture is production, not every production is manufacture. The Court found that the assessee's process involves both manufacture and production, creating a different marketing product. Regarding the deductions under Sections 80HH, 80I, and 80IB, the Court followed the Apex Court's decision in Joint Commissioner of Income Tax v. Mandideep Engineering and PKG. Industries P. Ltd. [(2007) 292 ITR 1 (SC)], stating that if deductions are independent and available under different provisions, they should be allowed if they meet the criteria of each provision, and an assessee can claim benefits under multiple provisions simultaneously if facts warrant. Consequently, the Tribunal was justified in confirming the orders of the CIT(Appeals).

What were the issues?

1. Whether, on the facts and in the circumstances of the case, and in light of Supreme Court decisions in 249 ITR 307 and Associated Stone (2003) 10 SCC 771, the Tribunal was right in holding that the assessee is entitled to deduction under Section 80HH and 80I of the Income Tax Act? 2. Whether, on the facts and in the circumstances of the case, the conversion of granite boulders into small pieces of different sizes amounts to production or manufacture? 3. Whether, on the facts and in the circumstances of the case, and if the answer to question 2 is in the affirmative, the assessee is entitled to deduction both under Sections 80HH and 80I in view of sub-section (9) of Section 80HH? Assessee's Contentions: The assessee relies on Supreme Court judgments in Income Tax Officer v. Arihant Tiles and Marbles P. Ltd. [(2010) 320 ITR 79 (SC)], CIT v. N.C. Budharaja and Co. [(1993) 204 ITR 412 (SC)], CIT v. Sesa Goa Ltd. [(2004) 271 ITR 331 (SC)], and Lucky Minmat Pvt. Ltd. v. Commissioner of Income Tax [(2000) 830 ITR 245 (SC)] to argue that their activity constitutes manufacture and/or production. Revenue's Contentions: The Revenue contends that the process of crushing boulders into smaller pieces does not amount to manufacturing or production of a commercially different product, as both boulders and crushed granite are used in construction. They refer to the Tribunal's earlier decision in Panchayil Industries (ITA Nos. 336, 337 & 338/Coch/2002) which considered trade practices and common parlance.

Which sections of the Income-tax Act were involved?

Section 80HH,Section 80I,Section 80IB

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HON'BLE THE CHIEF JUSTICE DR. MANJULA CHELLUR & THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE MONDAY, THE 20TH DAY OF JANUARY 2014/30TH POUSHA, 1935 ITA.No. 576 of 2009 --------------------- AGAINST THE ORDER IN ITA 495/COCH/2004 of I.T.A.TRIBUNAL, COCHIN BENCH, DATED 04-08-2005 ........... APPELLANT/APPELLANT : ---------------------------- THE COMMISSIONER OF INCOME-TAX, KOTTAYAM. BY ADVS.SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT/RESPONDENT : --------------------------------- M/S.POABSON GRANITE PRODUCTS PVT.LTD., WEST OTHERA, THIRUVALLA. BY ADV. SRI.N.JAMES KOSHY THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 20-01-2014, ALONG WITH ITA Nos. 784, 788 & 1210 OF 2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

Manjula Chellur, C.J. & A.M. Shaffique, J. - - - - - - - - - - - - - - - - - - - - - - - - - - - - I.T.A. Nos. 576, 784, 788 & 1210 OF 2009 - - - - - - - - - - - - - - - - - - - - - - - - - - - - Dated this the 20th day of January, 2014 JUDGMENT Manjula Chellur, C.J. The Revenue is before us in all the appeals. The Following

The order continues below.

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