PRINCIPAL COMMISSIONER OF INCOME TAX vs. M/S ROYAL RECYCLING INDUSTRIES

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TAXAP/195/2018HC GujaratGJHC24016536201814 March 2018Bench: HONOURABLE MR. JUSTICE AKIL KURESHI,HONOURABLE MR. JUSTICE B.N. KARIA2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the issue of when the manufacturing activity commenced was purely a factual matter. The Tribunal, after perusing the material on record, had arrived at a definite factual finding that the manufacturing of production commenced only during the financial year 2001-2002. The Court found no question of law arising from the ITAT's decision. Therefore, the addition made by the Revenue was deleted based on the Tribunal's factual determination. The appeal was dismissed as no substantial question of law was involved.

What were the facts?

The Revenue, represented by the Principal Commissioner of Income Tax, is in appeal against an order of the Income Tax Appellate Tribunal (ITAT), Rajkot Bench, dated September 11, 2017. The appeal concerns Assessment Year 2011-2012 and relates to the assessee, M/s Royal Recycling Industries, claiming deduction under Section 10B of the Income-tax Act, 1961. The dispute centers on the commencement date of the assessee's manufacturing activities. The Revenue contended that manufacturing began in the Financial Year (FY) 2000-2001, citing the Auditor's report in Form 56G, while the assessee claimed commencement in FY 2001-2002. The ITAT, after examining voluminous evidence, concluded that manufacturing commenced in FY 2001-2002.

What were the issues?

1. Whether the Appellate Tribunal has erred in law and on facts in deleting the addition of Rs. 9,49,91,927/= by ignoring the Statutory report of the Auditor in Form 56G, and also ignoring vital and legally admissible evidence proving that manufacturing activity was started in FY 2000-2001? (Question of law and fact, concerning Section 10B of the Income-tax Act, 1961). Assessee's Contention: The assessee argued that its manufacturing activities commenced only during the financial year relevant to AY 2002-2003. They placed voluminous evidence before the Assessing Officer to support this claim. Revenue's Contention: The Revenue contended that manufacturing activities commenced on October 26, 2000, relying on the Auditor's report in Form 56G as clinching evidence. They argued that the ITAT ignored this report and other admissible evidence proving the earlier commencement date.

Which sections of the Income-tax Act were involved?

Section 10B

AI-generated summary — verify with the full judgment below

C/TAXAP/195/2018 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL No. 195 of 2018 ============================================================= PRINCIPAL COMMISSIONER OF INCOME TAX Versus M/S ROYAL RECYCLING INDUSTRIES ============================================================= Appearance : Mrs MAUNA M BHATT, Advocate for the PETITIONER(s) No. 1 Mr B S SOPARKAR, Advocate for the RESPONDENT(s) No. 1 ============================================================= CORAM: HONOURABLE Mr. JUSTICE AKIL KURESHI and HONOURABLE Mr. JUSTICE B.N. KARIA 14th March 2018

ORAL ORDER (PER : HONOURABLE Mr. JUSTICE AKIL KURESHI) Revenue is in appeal against the judgment of the Income Tax Appellate Tribunal, Rajkot Bench dated 11th September 2017, raising the following question for our consideration : “Whether the Appellate Tribunal has erred in law and on facts in deleting the addition of Rs. 9,49,91,927/= made under Section 10B by ignoring the Statutory report of Auditor in form no. 56G, also ignoring the vital and legally admissible evidences proving that manufacturing activity was started in FY 2000-2001 ?” Page 1 of 2

C/TAXAP/195/2018 ORDER Issue pertains to the assessee’s claim of deduction under Section 10B of the Income-tax Act, 1961 for A.Y 2011-2012. As is well-known, such deduction would be available for ten consecutive years from the commencement of the assessee’s business. Revenue treated such commencement from AY 2001-2002 as against the assessee’s claim that the entire operations; including manufacturing activities, started only during the period relevant to AY 2002-2003. The Revenue relied on a clinching reference to Auditor’s report that the manufacturing activities commenced on 26th October 2000. As against this, the assessee placed voluminous evidence before the Assessing Officer which was examined by the Tribunal to come to the conclusion that the manufacturing of production commenced only during the financial year 2001-2002. We have perused the observations of the Tribunal in this respect and find that the entire issue is purely factual in nature. On the basis of material on record, the Tribunal has come to a definite factual finding. No question of law arises. Tax Appeal is dismissed. [Akil Kureshi, J.] [B.N Karia, J.] Prakash Page 2 of 2

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