COMMISSIONER OF INCOME TAX vs. M/S. AL-GAYATRI TRADING CO.PVT. LTD.

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ITA/189/2013HC KeralaKLHC01026074201320 November 2013Bench: HONOURABLE MR.JUSTICE A.M.SHAFFIQUE,HONOURABLE THE CHIEF JUSTICE DR. MANJULA CHELLUR4 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the Tribunal was justified in relying on the existing judgments of the Kerala High Court in M/s. Girnar Industries v. CIT Kochi and M/s. Girnar Industries' case (Supra). The Court noted that while these judgments were pending before the Apex Court, no stay had been granted. Therefore, until such judgments are set aside or modified by the Apex Court, the Tribunal's decision to place reliance on them to confirm the order of the CIT (Appeals) was not considered erroneous. The appeal was dismissed on this basis. The Court did not decide on the merits of the Section 10A claim itself but on the Tribunal's adherence to existing High Court precedents.

What were the facts?

The appeal concerns assessment year 2004-2005. The assessee, M/s. Al-Gayatri Trading Co. Pvt. Ltd., a company dealing in tea bags and other commodities, claimed a deduction of ₹94,76,772/- under Section 10A of the Income Tax Act. The assessment was reopened under Section 148. The Assessing Officer rejected the claim, holding that the assessee was not involved in manufacturing or production. The assessee contended it was a new industrial undertaking manufacturing tea packets and tea bags, thus eligible for exemption. The CIT (Appeals) allowed the deduction, relying on this Court's decision in M/s. Girnar Industries v. CIT Kochi. The Tribunal confirmed the CIT (Appeals)'s order, distinguishing CIT v. Tara Agency and relying on M/s. Girnar Industries. The Revenue is the appellant.

What were the issues?

1. Whether the Tribunal erred in law and on facts in holding that the assessee unit is engaged in manufacturing of tea from the Export Processing Zone and is therefore entitled to deduction under Section 10A of the Income Tax Act, despite the Assessing Officer's finding that the assessee was not involved in manufacturing or production. Assessee's Contentions: Not explicitly recorded in the judgment. Revenue's Contentions: The Revenue contended that the earlier judgments in M/s. Girnar Industries' case and Tara Agency's case were pending before the Apex Court, although no stay had been granted. The Revenue argued that the Tribunal's decision should be reviewed in light of the law laid down by this Court and whether it was applied correctly to the facts. The Revenue is aggrieved by the Tribunal's confirmation of the CIT (Appeals)'s order.

Which sections of the Income-tax Act were involved?

Section 10A,Section 148

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 WEDNESDAY, THE 20TH DAY OF NOVEMBER 2013/29TH KARTHIKA, 1935 ITA.No. 189 of 2013 () ----------------------- AGAINST THE ORDER/JUDGMENT IN ITA 235/2010 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 11-01-2013 APPELLANT(S)/APPELLANT: ----------------------- COMMISSIONER OF INCOME TAX KOTTAYAM. BY ADVS.SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT(S)/RESPONDENTS: -------------------------- M/S. AL-GAYATRI TRADING CO.PVT. LTD. 363-A, GAYATHRI HOUSE, CHERIYANAD P O CHENGANNUR-689511 THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 20-11-2013, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

MANJULA CHELLUR, C.J & A.M.SHAFFIQUE, J. ---------------------------------------------- I.T.A.No. 189 of 2013 ---------------------------------------------- Dated this the 20th November, 2013 JUDGMENT Manjula Chellur, C.J. The present appeal relates to assessment year 2004-2005. The undisputed facts are, appellant assessee, a Company is dealing in the business of making tea bags and export the same apart from other commodities. When return of income was originally filed by the assessee declaring the total income, the assessee had claimed deduction of 94,76,772/- under Section ₹ 10A of the Income Tax Act. Later on notice came to be issued under Section 148 of the Act suggesting reopening of the assessment. When show cause notice was issued to explain the claim of exemption under Section 10A of the Act on the ground that assessee Company is not involved in manufacturing process or production of any article, the assessee claimed that the business set up by him is a new industrial undertaking to manufacture tea packet and tea bags, therefore, they are entitled for such exemption. This was rejected by the assessing officer

ITA.189/13 2 rejecting the contention of the assessee that it automatically become a manufacturing unit, as it is set up in the Cochin Export Processing Zone. Appeal came to be filed and the appellate authority, relying on the decision of this Court in the case of M/s.Girnar Industries v. CIT Kochi [(2011)338 ITR 277(Ker)) opined, the assessee unit is engaged in manufacturing of tea from Export Processing Zone, therefore, they are entitled for deduction under Section 10A of the Income Tax Act. The department, aggrieved by the said order, approached Tribunal and the Tribunal, distinguishing the judgment of the Apex Court in CIT v. Tara Agency (292 ITR 444 (SC) and relying on the judgment in M/s.Girnar Industries' case (Supra), proceeded to confirm the order of the CIT (Appeals). Aggrieved by the same, the present appeal is filed. 2. According to the department, the earlier judgments in M/s.Girnar Industries' case (Supra) and Tara Agency's case (Supra) are pending before the Apex Court, however, no stay is granted. In this appeal we are required to see whether Tribunal has decided the matter applying the law laid down by this Court to the facts prevalent in the case before the Tribunal was justified or not. As on today, the two judgments of this court covering the

ITA.189/13 3 issue are in existence. Till those judgments are set aside or modified by the Apex Court, we cannot find any error on the part of the Tribunal in placing reliance on those decisions to arrive at a conclusion. Accordingly, the appeal is dismissed. MANJULA CHELLUR, CHIEF JUSTICE A.M.SHAFFIQUE, JUDGE vgs20.11

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