C.I.T.UDAIPUR vs. M/S TIRUPATI MICROTECH PVT.LTD.

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ITA/22/2013HC RajasthanRJHC01031509201325 January 20186 pages
AI SummaryDismissed

What did the High Court hold?

The High Court, in agreement with the Tribunal's view, held that the activity undertaken by the assessee constitutes manufacture or production. The Court referred to the Supreme Court's observations in Income Tax Officer, Udaipur Vs. Arihant Tiles and Marbles (P) Ltd., particularly paragraph 23, which highlighted the serious revenue consequences if such activities were not considered manufacture, especially when excise duty is paid and recognized by government authorities. The Court also considered the Government Circular stating the zircon sand process is liable for excise. Therefore, the Court concluded that the assessee would be entitled to the benefit of Section 80IB. All issues were answered in favour of the assessee and against the department. The appeal was dismissed.

What were the facts?

The appeal was filed by the Commissioner of Income Tax, Udaipur (appellant) against M/s Tirupati Microtech Pvt. Ltd. (respondent). The appeal challenged the order of the Income Tax Appellate Tribunal (Tribunal) which had dismissed the department's appeal. The core of the dispute revolved around whether the conversion of Zircon Sand into Zircon Powder constituted 'manufacture or production' eligible for deduction under Section 80IB(3)(ii) of the Income Tax Act, 1961. The Assessing Officer (AO) had denied this benefit, relying on specific judgments. The Tribunal, however, had allowed the benefit. The High Court noted that this appeal was analogous to other appeals decided by it on January 24, 2018, which dealt with similar issues.

What were the issues?

1. Whether, on the facts and circumstances and in law, the Tribunal was justified in holding that the conversion of Zircon Sand into Zircon Powder is irreversible and therefore amounts to manufacture or production eligible for deduction under Section 80IB(3)(ii), ignoring the cases of Dy. Commissioner of Sales Tax and others Vs. Bheraghat Minerals Industries and Sacs Eagles Chicory Vs. CIT? 2. Whether, on the facts and circumstances and in law, the Tribunal was justified in allowing relief regarding the non-inclusion of other income for the purpose of calculating deduction under Section 80IB, ignoring that other income does not form part of the profit derived from an industrial undertaking? Assessee's contentions: The assessee argued that the conversion of Zircon Sand into Zircon Powder is an irreversible process amounting to manufacture or production, entitling them to deduction under Section 80IB. They also contended that other income should not be excluded from the calculation of deduction. The assessee relied on the Supreme Court decision in Income Tax Officer, Udaipur Vs. Arihant Tiles and Marbles (P) Ltd. and a Government Circular regarding excise duty on the zircon sand process. Revenue's contentions: The revenue contended that the process undertaken by the assessee is not manufacturing and therefore the benefit of Section 80IB is not allowable. The revenue relied on the judgments reported in Dy. Commissioner of Sales Tax and others vs. Bherhaghat Minerals Industries and Sacs Eagles Chicory vs. CIT.

Which sections of the Income-tax Act were involved?

Section 80IB,Section 80IA

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR D.B. Income Tax Appeal No. 22 / 2013 Commissioner of Income Tax, Udaipur ----Appellant Versus M/S Tirupati Microtech Pvt.Ltd., 1604/1610, Village Thoor, District Udaipur (Raj.) ----Respondent _____________________________________________________ For Appellant(s) : Mr. K.K. Bissa For Respondent(s) : _____________________________________________________ HON'BLE MR. JUSTICE K. S. JHAVERI HON'BLE DR. JUSTICE PUSHPENDRA SINGH BHATI

Order 25/01/2018

1.

By way of this appeal, the appellant has challenged the impugned judgment and order passed by the learned Tribunal whereby the learned Tribunal has dismissed the appeal.

2.

This Court, while admitting the present appeal on 30.05.2013 has framed the following substantial questions of law:

“1. Whether on the facts and circumstances of the Chicory Vs. CIT, reported in 255 ITR 178 (SC)?

2.

Whether on the facts and circumstances of the case as well as in the law, the learned Tribunal is justified (Uploaded on 23/06/2023 at 09:37:47 AM) (Downloaded on 28/10/2026 at 12:13:28 AM) (2 of 6) [ITA-22/2013] in allowing the relief in respect of the non-inclusion of other income for the purpose of calculation of deduction under Section 801B ignoring the fact that other income does not form the part of profit derived from an industrial undertaking?”

3.

The issues now covered by the decision rendered by this Court in Commissioner of Income Tax, Udaipur Vs. M/s Tirupati Microtech Pvt. Ltd., (D.B. Income Tax Appeal No. 20 / 2013) decided on 24.01.2018 along with other analogous matters, which reads as under:

“1. By way of these appeals, the appellant has challenged the judgment and order of the Tribunal whereby the Tribunal has dismissed the appeals of the department and affirmed the order of CIT (Appeals).

2.

While admitting the appeals, this Court framed following substantial questions of law :- ITA 20/2013

1.

Whether on the facts and circumstances of the 178 (SC)?

2.

Whether on the facts and circumstances of the case as well as in the law, the learned Tribunal is justified in allowing the relief in respect of the non- inclusion of other income for the purpose of calculation of deduction under section 801B ignoring the fact that other income does not form the part of profit derived from an industrial undertaking? ITA 23/2013

1.

Whether on the facts and circumstances of the (Uploaded on 23/06/2023 at 09:37:47 AM) (Downloaded on 28/10/2026 at 12:13:28 AM) (3 of 6) [ITA-22/2013] 178 (SC)?

2.

Whether on the facts and circumstances of the case as well as in the law, the learned Tribunal is justified in allowing the relief in respect of the non- inclusion of other income for the purpose of calculation of deduction under section 801B ignoring the fact that other income does not form the part of profit derived from an industrial undertaking? ITA 24/2013

1.

Whether on the facts and circumstances of the 178 (SC)?

2.

Whether the Tribunal was justified in ignoring the statement of lender admitting to have provided accommodation entry instead of actual amount and the learned Tribunal coming to the conclusion which is perverse. ITA 51/2008

1.

Whether on the facts and in the circumstances 178 (SC)?

2.

Whether on the facts and in the circumstances of the case as well as in the law, the learned Tribunal is justified in allowing the relief in respect of the non-inclusion of other income for the purpose of calculation of deduction under Section (Uploaded on 23/06/2023 at 09:37:47 AM) (Downloaded on 28/10/2026 at 12:13:28 AM) (4 of 6) [ITA-22/2013] 801B ignoring the fact that other income does not form the part of profit derived from an industrial undertaking? ITA 40/2008 178 (SC)? ITA 21/2013

1.

Whether on the facts and circumstances of the 178 (SC)?

2.

Whether on the facts and circumstances of the case as well as in the law, the learned Tribunal is justified in allowing the relief in respect of the non- inclusion of other income for the purpose of calculation of deduction under Section 801B ignoring the fact that other income does not form the part of profit derived from an industrial undertaking? ITA 144/2013 Whether on the facts and in the circumstances of the case as well as in the law, the Tribunal is justified in holding that conversion of Zircon Sand into Zircon Powder is irreversible and, therefore, deduction under Section 801B(3) (ii) ignoring the cases of Dy. Commissioner of Sales Tax & Ors. Vs. 178 (SC)?

3.

Learned counsel for the appellant has taken us (Uploaded on 23/06/2023 at 09:37:47 AM) (Downloaded on 28/10/2026 at 12:13:28 AM) (5 of 6) [ITA-22/2013] has relied upon the decision of the Hon'ble as under :- "

23.

Before concluding, we would like to make one observation. If the contention of the Department is to be accepted, namely that the activity undertaken by the respondents herein is not a manufacture, then, it would have serious revenue consequences. As stated above, each of the respondents is paying excise duty, some of the respondents are job workers and the activity undertaken by them has been recognised by various Government Authorities as manufacture. To say that the activity will not amount to manufacture or production under Section 80IA will have disastrous consequences, particularly in view of the fact that the assessees in all the cases would plead that they were not liable to pay excise duty, sales tax etc. because the activity did not constitute manufacture. Keeping in mind the above factors, we are of the view that in the present cases, the activity undertaken by each of the respondents constitutes (Uploaded on 23/06/2023 at 09:37:47 AM) (Downloaded on 28/10/2026 at 12:13:28 AM) (6 of 6) [ITA-22/2013] manufacture or production and, therefore, they would be entitled to the benefit of Section 80IA of the Income Tax Act, 1961." 4.1He also relied on Government Circular No.556/52/2000-CX dated 30.10.2000 wherein zircon sand process was considered and held to be a process and liable for excise.

5.

Taking into consideration the observations made by the Hon'ble Supreme Court in para 23 referred to herein, we are in complete agreement with the view taken by the Tribunal which has described the activity of assessee as manufacturing process. Thus, all the issues are answered in favour of the assessee and against the department.

6.

Accordingly, the instant appeals are dismissed.”

4.

In light of the aforequoted judgment, the present appeal is dismissed. The substantial questions of law are answered in favour of the assessee and against the department. (DR. PUSHPENDRA SINGH BHATI)J. (K. S. JHAVERI)J. Skant/-60 Powered by TCPDF (www.tcpdf.org) (Uploaded on 23/06/2023 at 09:37:47 AM) (Downloaded on 28/10/2026 at 12:13:28 AM)

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