The Commissioner vs. R.F. Network Pvt. Ltd.

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ITA/22/2012HC Madhya Pradesh11 November 2014Bench: HON'BLE SHRI JUSTICE RAJENDRA MENON3 pages
For Petitioner: Sanjay Lal
AI SummaryDismissed

What did the High Court hold?

The High Court held that the concurrent orders passed by the Commissioner (Appeals) and the ITAT were in accordance with the law and did not warrant interference. The Court reasoned that the assessee, by importing kits and converting them into electrical filters, was engaged in a manufacturing process. The Court relied on the Supreme Court's decision in Commissioner of Income Tax, New Delhi Vs. Oracle Software India Limited, which held that commercial duplication of software constitutes manufacturing, and the Gujarat High Court's decision in Commissioner of Income Tax Vs. Ambika Recycling, where processing imported scrap into various articles was considered manufacturing. The High Court found that the assessee's activities of converting kits into electrical filters were analogous to these precedents. Therefore, the concurrent findings that the assessee was an export-oriented undertaking involved in manufacturing and eligible for exemption under Section 10-B were upheld. No substantial question of law arose for consideration.

What were the facts?

The assessee, RF Network Private Limited, engaged in job work for certain years, claimed exemption under Section 10-B of the Income Tax Act, 1961, asserting they were involved in manufacturing activities. The Assessing Officer disallowed the exemption, contending the assessee merely assembled units and did not manufacture or produce articles or computer software. The Commissioner (Appeals) and the Income Tax Appellate Tribunal (ITAT) allowed the assessee's appeals, finding the assessee to be a 100% export-oriented unit whose systematic activity resulted in the production of goods, thus qualifying as a "manufacturing process." The revenue, Commissioner of Income Tax, Bhopal, challenged these concurrent orders before the High Court.

What were the issues?

1. Whether the assessee, engaged in importing kits and converting them into electrical filters, is undertaking a manufacturing process eligible for exemption under Section 10-B of the Income Tax Act, 1961, as held by the Commissioner (Appeals) and the ITAT? (Question of law and fact) Assessee's Contention: The assessee argued that their activities constituted manufacturing, entitling them to exemption under Section 10-B. Revenue's Contention: The revenue contended that the assessee was merely engaged in job work and assembling units, not manufacturing or producing any article or computer software, and therefore, the exemption under Section 10-B was not applicable. The revenue challenged the concurrent findings of the lower appellate authorities.

Which sections of the Income-tax Act were involved?

Section 10-B,Section 260-A

AI-generated summary — verify with the full judgment below

HIGH COURT OF MADHYA PRADESH : AT JABALPUR

ITA No : 22 of 2012 Commissioner of Income Tax, Bhopal - V/s - RF Network Private Limited

ITA No : 159 of 2012 Commissioner of Income Tax, Bhopal - V/s - RF Network Private Limited

Present :

Hon’ble Shri Justice Rajendra Menon. Hon’ble Shri Justice Sanjay Yadav.

-------------------------------------------------------------------------------------- Shri Sanjay Lal, counsel for the appellant.

Shri Sumit Nema with Shri Mukesh Agrawal, counsel for the respondent. --------------------------------------------------------------------------------------

Whether approved for reporting:

Yes / No.

JUDGMENT

11/11/2014

As common questions of law and facts are involved in both these appeals filed by the revenue under section 260-A of the Income Tax Act, both these appeals are being decided by this common order. 2-

Except for the fact that the assessment years are different, the question of law and facts involved are identical. 3-

Assessee for the years in question derived income from certain job work undertaken by them and it was their case that they are involved in manufacturing activities. Being an Unit exempted under section 10-B of the Income Tax Act, they sought exemption with regard

ITA NOS :: 22 & 159 /2012

Commissioner of Income Tax, Bhopal Vs. R.F. Network Private Limited. 2 to the work done. The Assessing Officer disallowed the exemption on the ground that the assessee is simply doing job work by assembling of certain units, is not engaged in manufacturing or producing any article or computer software and, therefore, disallowed the same. On appeals being filed, the Commissioner (Appeals) and the Tribunal found that the assessee is a 100% export oriented Unit and the work done by the assessee is a systematic activity, which results in production of goods, it comes within the purview of “manufacturing process” and, therefore, allowed the appeals. The concurrent orders passed are challenged in these appeals. 4-

From the facts that have come on record, we find that the appellate authorities have found that the appellant is a manufacturer and exporter of electrical filters and is granted exemption under section 10- B. It is found that the assessee has a manufacturing unit and the finished goods are produced after processing and undertaking certain manufacturing activities. Taking note of various judgments, the concurrent findings recorded by both the appellate authorities are that the assessee is an export oriented undertaking, manufacturing certain items based on the raw material procured and it has been granted exemption under section 10-B of the Act. 5-

The concurrent orders in this regard passed by the appellate authorities are in accordance to the requirement of law. In the case of Commissioner of Income Tax, New Delhi Vs. Oracle Software India Limited, [2010] 187 TAXMAN 275, Hon’ble Supreme Court under similar circumstances has held that when commercial duplication process is undertaken with blank CD and the same is transformed into software loaded disc, dedicating it for a specific use, the process constitutes manufacturing of processed goods, eligible for exemption. Similar views are expressed by the Gujarat High Court in the case of Commissioner of Income Tax Vs. Ambika Recycling, (2014) 45 TAXMN 386 (Gujarat), wherein the assessee – an export oriented undertaking which imported metal scrap and after segregating such scrap, produced various articles including graded brass metal, metal

ITA NOS :: 22 & 159 /2012

Commissioner of Income Tax, Bhopal Vs. R.F. Network Private Limited. 3 wires etc, were held to be indulging in the process of manufacturing of goods entitled for exemption under section 10-B. 6-

In the case of the present assessee also, the assessee is importing the kits and converting it into electrical filters and selling it. Commissioner (Appeals) and the Appellate Tribunal having found that this amounts to manufacturing process, the concurrent orders passed by the authorities does not call for any interference, as no substantial question of law arises for consideration now. 7-

The appeals are, therefore, dismissed.

( RAJENDRA MENON )

( SANJYA YADAV ) J U D G E J U D G E

Aks/-

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