NIRMAN SYNTEX PVT. LTD. vs. ASSISTANT COMMISSIONER OF INCOME TAX

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TAXAP/436/2007HC GujaratGJHC24040355200703 December 2013Bench: HONOURABLE MR. JUSTICE M.R. SHAH,HONOURABLE MR. JUSTICE R.P.DHOLARIA4 pages
AI SummaryAllowed

What did the High Court hold?

The High Court allowed the appeals, quashing and setting aside the impugned common order of the ITAT. The Court held that the process of twisting and texturising of partially oriented yarn amounts to manufacture in terms of Section 80IA of the Income Tax Act. This finding means the assessee is entitled to claim deduction under Sections 80HH and 80I of the Income Tax Act. The Court applied the ratio laid down by the Supreme Court in Commissioner of Income Tax Vs. Emptee Poly-Yarn P. Ltd. and Commissioner of Income Tax Vs. Yashasvi Yarn Ltd. The operative direction was to grant the deduction to the assessee. No issue was left undecided.

What were the facts?

The assessee, Nirman Syntex Pvt. Ltd., filed these appeals against the common judgment and order of the Income Tax Appellate Tribunal (ITAT) dated September 8, 2006. The appeals pertain to Assessment Years 1995-96 and 1996-97. The core dispute revolves around whether the process of texturising yarn constitutes manufacturing or producing an article or thing, thereby qualifying for deduction under Sections 80HH and 80I of the Income Tax Act. The ITAT had ruled against the assessee on this point, leading to the present appeals before the High Court.

What were the issues?

1. Whether, in the facts and circumstances of the case, the ITAT was right in law in holding that the process of texturising of yarn is not manufacturing or producing an article or a thing so as to be eligible for claiming deduction under Section 80HH and 80I of the Income Tax Act? Assessee's Contention: The assessee argued that the issue is covered by the Supreme Court's decision in Commissioner of Income Tax Vs. Emptee Poly-Yarn P. Ltd. ([2010] 320 ITR 665), which held that twisting and texturising partially oriented yarn amounts to manufacture for the purposes of Section 80IA. The assessee further noted that this decision was followed in Commissioner of Income Tax Vs. Yashasvi Yarn Ltd. ([2013] 350 ITR 208). Revenue's Contention: The revenue's counsel was unable to point out any contrary decision to the Supreme Court's rulings.

Which sections of the Income-tax Act were involved?

Section 80HH,Section 80I,Section 80IA

AI-generated summary — verify with the full judgment below

O/TAXAP/435/2007 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 435 of 2007 With TAX APPEAL NO. 436 of 2007

FOR APPROVAL AND SIGNATURE:

HONOURABLE MR.JUSTICE M.R. SHAH and HONOURABLE MR.JUSTICE R.P.DHOLARIA ====================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ====================================== NIRMAN SYNTEX PVT. LTD.....Appellant(s) Versus ASSISTANT COMMISSIONER OF INCOME TAX....Opponent(s) ====================================== Appearance: MR SN SOPARKAR, SR. ADVOCATE for the Appellant(s) No. 1 MRS SWATI SOPARKAR, ADVOCATE for the Appellant(s) No. 1 MS PAURAMI B SHETH, ADVOCATE for the Opponent(s) No. 1 ====================================== CORAM: HONOURABLE MR.JUSTICE M.R. SHAH and HONOURABLE MR.JUSTICE R.P.DHOLARIA

Date : 03/12/2013 Page 1 of 4

O/TAXAP/435/2007 JUDGMENT

ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE M.R. SHAH) 1. As common question of law and facts arise in both these appeals and as they arise out of the impugned common judgment and order passed by the ITAT with respect to the same assessee but different Assessment Years, both these appeals are decided and disposed of by this common judgment and order. 2. Being aggrieved and dissatisfied with the impugned common judgment and order passed by the Income Tax Appellate Tribunal (hereinafter referred to as ‘ITAT’) dated 08/09/2006 in ITA Nos. 2898 & 2899/Ahd/1999 for the Assessment Years 1995-96 & 1996-97, the assessee has preferred the present Tax Appeals. 3. In both these appeals, the short question, which is posed for consideration is, ‘whether in the facts and circumstances of the case, the ITAT was right in law in holding that the process of texturising of yarn is not manufacturing or producing an article or a thing so as to be eligible for claiming deduction under Section 80HH and 80I of the Income Tax Act?’ 4. Heard Shri S.N. Soparkar, learned Counsel appearing on behalf of the appellant-assessee and Ms. Paurami Sheth, learned Counsel appearing on behalf of the opponent-revenue. 5. Shri S.N. Soparkar, learned Counsel appearing on behalf of the assessee has vehemently submitted that as such the Page 2 of 4

O/TAXAP/435/2007 JUDGMENT issue involved in both the Tax Appeals is covered against the revenue in the case of Commissioner of Income Tax Vs. Emptee Poly-Yarn P. Ltd. reported in [2010] 320 ITR 665 (SC). It is submitted that in the aforesaid decision, the Hon’ble Supreme Court has held that twisting and texturising partially oriented yarn amounts to manufacture in terms of Section 80IA of the Income Tax Act. It is reported that the aforesaid decision has been subsequently followed by Hon’ble the Supreme Court in the case of Commissioner of Income Tax Vs. Yashasvi Yarn Ltd. reported in [2013] 350 ITR 208. 6. Ms. Sheth, learned Counsel appearing on behalf of the revenue is not in a position to point out any contrary decision to the aforesaid decisions of the Hon’ble Supreme Court. 7. Having heard Shri S.N. Soparkar, learned Counsel appearing on behalf of the assessee and Ms. Paurami Sheth, learned Counsel appearing on behalf of the revenue, applying the ratio/law laid down by Hon’ble the Supreme Court in the case of Yashasvi Yarn Ltd. (Supra) and in the case of Emptee Poly-Yarn P. Ltd. (Supra), the question formulated/raised in the present Tax Appeals is answered in favour of the assessee and consequently the impugned common order is hereby quashed and set aside and it is held that the assessee shall be entitled to the deduction under Section 80HH and 80I of the Income Tax Act by holding that the process of twisting and texturising of partially oriented yarn amounts to manufacture in terms of Section 80IA of the Income Tax Act. Page 3 of 4

O/TAXAP/435/2007 JUDGMENT 8. Under the circumstances, the present Tax Appeals are allowed to the aforesaid extent. No order as to costs. (M.R.SHAH, J.) (R.P.DHOLARIA,J.) Siji Page 4 of 4

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