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

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ITA/21/2013HC RajasthanRJHC01058320201324 January 20186 pages
AI SummaryDismissed

What did the High Court hold?

The High Court, in agreement with the Tribunal, held that the activity of converting Zircon Sand into Zircon Powder constitutes manufacture or production. The Court relied on the observations made by the Hon'ble Supreme Court in para 23 of the Arihant Tiles and Marbles (P) Ltd. case (2010) 320 ITR 79 (SC). This judgment highlighted the revenue consequences and the recognition of such activities as manufacture by various government authorities, including excise duty payments. The Court found that the Tribunal's view, describing the assessee's activity as a manufacturing process, was well-reasoned. Consequently, all issues were answered in favour of the assessee and against the department. The appeals were dismissed, affirming the relief granted by the Tribunal regarding the deduction under Section 80IB. The judgment does not explicitly mention any issue left undecided.

What were the facts?

These appeals by the Commissioner of Income Tax, Udaipur, challenge the orders of the Income Tax Appellate Tribunal (ITAT) which had dismissed the department's appeals and upheld the orders of the CIT (Appeals). The assessee is M/s Tirupati Microtech Pvt. Ltd. The appeals pertain to various assessment years, though not explicitly stated for each appeal. The core dispute revolves around the eligibility of the assessee for deduction under Section 80IB of the Income Tax Act, 1961, specifically concerning the process of converting Zircon Sand into Zircon Powder. The Assessing Officer (AO) denied the deduction, considering the process not to be manufacturing, while the ITAT and CIT (Appeals) allowed it. One appeal also raises an issue regarding the inclusion of other income in the calculation of deduction.

What were the issues?

1. Whether on the facts and circumstances of the case, the Tribunal is 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? (Question of law) 2. Whether on the facts and circumstances of the case, the Tribunal was justified in allowing relief in respect of the non-inclusion of other income for the purpose of calculation of deduction under Section 80IB, ignoring the fact that other income does not form part of the profit derived from an industrial undertaking? (Question of law) 3. Whether the Tribunal was justified in ignoring the statement of a lender admitting to have provided an accommodation entry instead of an actual amount, and consequently arriving at a perverse conclusion? (Question of mixed law and fact) Assessee's Contentions: The assessee, through its counsel, relied on the Supreme Court decision in Income Tax Officer, Udaipur vs. Arihant Tiles and Marbles (P) Ltd. (2010) 320 ITR 79 (SC), which held that similar activities constitute manufacture or production and are eligible for deduction under Section 80IA. The assessee also relied on Government Circular No. 556/52/2000-CX dated 30.10.2000, which considered the zircon sand process as a process liable for excise duty. Revenue's Contentions: The Revenue, through its counsel, contended that the AO had rightly assessed that the process undertaken by the assessee is not manufacturing and therefore, the benefit of Section 80IB is not allowable. The AO relied on judgments reported in 246 ITR 230 (SC) and 255 ITR 178 (SC). The judgment does not record specific arguments from the revenue on the issue of other income or accommodation entries.

Which sections of the Income-tax Act were involved?

Section 80IB,Section 80IA

AI-generated summary — verify with the full judgment below

HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR D.B. Income Tax Appeal No. 20 / 2013 Commissioner of Income Tax, Udaipur ----Appellant Versus M/s Tirupati Microtech Pvt. Ltd. 1604/1610, Village - Thoor, District Udaipur (Raj.) ----Respondent D.B. Income Tax Appeal No. 23 / 2013 Commissioner of Income Tax, Udaipur ----Appellant Versus M/s Tirupati Microtech Pvt. Ltd. 1604/1610, Village - Thoor, District Udaipur (Raj.) ----Respondent D.B. Income Tax Appeal No. 24 / 2013 Commissioner of Income Tax, Udaipur ----Appellant Versus M/s Tirupati Microtech Pvt. Ltd. 1604/1610, Village - Thoor, District Udaipur (Raj.) ----Respondent D.B. Income Tax Appeal No. 51 / 2008 Commissioner of Income Tax, Udaipur ----Appellant Versus M/s Tirupati Microtech Pvt. Ltd. 1604/1610, Village Thoor, Udaipur ----Respondent D.B. Income Tax Appeal No. 40 / 2008 Commissioner of Income Tax, Udaipur. ----Appellant Versus M/s Tirupati Microtech Pvt. Ltd. 1604/1610, Village Thoor, Udaipur. (Uploaded on 08/08/2023 at 10:19:20 AM) (Downloaded on 28/10/2026 at 12:19:49 AM) (2 of 6)

----Respondent D.B. Income Tax Appeal No. 21 / 2013 Commissioner of Income Tax, Udaipur ----Appellant Versus M/s Tirupati Microtech Pvt. Ltd. 1604/1610, Village - Thoor, District :- Udaipur (Raj.) ----Respondent D.B. Income Tax Appeal No. 144 / 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.KK Bissa. For Respondent(s) : Mr.Sanjay Jhanwar. _____________________________________________________ HON'BLE MR. JUSTICE K. S. JHAVERI HON'BLE DR. JUSTICE PUSHPENDRA SINGH BHATI Judgment / Order 24/01/2018 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 :- (Uploaded on 08/08/2023 at 10:19:20 AM) (Downloaded on 28/10/2026 at 12:19:49 AM) (3 of 6)

ITA 20/2013 1. Whether on the facts and 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, amounts to manufacture or production eligible for deduction under Section 801 B(3)(ii) ignoring the cases of Dy. Commissioner of Sales Tax and others Vs. Bheraghat Minerals Industries 247 ITR 230 and Sacs Eagles 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 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 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, amounts to manufacture or production eligible for deduction under Section 801 B(3)(ii) ignoring the cases of Dy. Commissioner of Sales Tax and others Vs. Bheraghat Minerals Industries 247 ITR 230 and Sacs Eagles 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 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 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, amounts to manufacture or production eligible for deduction under section 801B(3)(ii) ignoring the cases of Dy. Commissioner of Sales Tax and other Vs. Bheraghat Minerals Industries 247 ITR 230 and Sacs Eagles Chicory Vs. CIT, reported in 255 ITR 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 of the case as well as in the law, the tribunal is justified in holding (Uploaded on 08/08/2023 at 10:19:20 AM) (Downloaded on 28/10/2026 at 12:19:49 AM) (4 of 6)

that conversion of Zircon Sand into Zircon Powder is irreversible and, therefore, amounts to manufacture or production eligible for deduction under section 801B(ii) ignoring the cases of Dy. Commissioner of Sales Tax and others Vs. Bheraghat Minerals Industries 246 ITR 230 and Sacs Eagles Chicory Vs. CIT, reported in 255 ITR 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 801B ignoring the fact that other income does not form the part of profit derived from an industrial undertaking? ITA 40/2008 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, amounts to manufacture or production eligible for deduction under Section 801(3)(ii) ignoring the cases of Dy. Commissioner of Sales Tax and others Vs. Bheraghat Minerals industries 246 ITR 230 and Sacs Eagles Chicory Vs. CIT, reported in 255 ITR 178 (SC)? ITA 21/2013 1. Whether on the facts and 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, amounts to manufacture or production eligible for deduction under Section 801B (3)(ii) ignoring the cases of Dy. Commissioner of Sales Tax and others Vs. Bheraghat Minerals Industries 247 ITR 230 and Sacs Eagles 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 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, amounts to manufacture or production eligible for deduction under Section 801B(3) (ii) ignoring the cases of Dy. Commissioner of Sales Tax & Ors. Vs. Bheraghat Minerals Industries 246 ITR 230 and Sacs Eagles Chicory Vs. (Uploaded on 08/08/2023 at 10:19:20 AM) (Downloaded on 28/10/2026 at 12:19:49 AM) (5 of 6)

CIT, reported in 255 ITR 178 (SC)? 3. Learned counsel for the appellant has taken us to the order of the CIT (Appeals) and Tribunal and contended that the A.O. has rightly assessed that the process undertaken by the assessee is not manufacturing and, therefore, the benefit of Section 80IB is not allowable to the assessee. While considering the case, the A.O. relied on the judgments reported in 246 ITR 230 (SC) (Dy. Commissioner of Sales Tax and others. vs. Bherhaghat Minerals Industries) and 255 ITR 178 (SC) (Sacs Eagles Chicory vs. CIT). 4. However, learned counsel for the respondent has relied upon the decision of the Hon'ble Supreme Court in (2010) 320 ITR 79 (SC) (Income Tax Officer, Udaipur. vs. Arihant Tiles and Marbles (P) Ltd. wherein in para 23, it has been observed 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 manufacture or production and, therefore, they would be entitled to the benefit of Section 80IA of the Income Tax Act, 1961." 4.1 He also relied on Government Circular No.556/52/2000-CX dated 30.10.2000 wherein zircon sand process was considered (Uploaded on 08/08/2023 at 10:19:20 AM) (Downloaded on 28/10/2026 at 12:19:49 AM) (6 of 6)

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.

(DR. PUSHPENDRA SINGH BHATI)J. (K. S. JHAVERI)J. S.Phophaliya/- Powered by TCPDF (www.tcpdf.org) Powered by TCPDF (www.tcpdf.org) (Uploaded on 08/08/2023 at 10:19:20 AM) (Downloaded on 28/10/2026 at 12:19:49 AM)

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