M/S TERACOM LIMITED vs. ASSISTANT COMMISSIONER OF INCOME TAX

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TXA/4/2011HC BombayHCBM05002277201121 July 2011Author: S.A. BOBDE,F. M. REIS3 pages
AI SummaryRemanded

What did the High Court hold?

The High Court found that the Tribunal's judgment did not adequately address the crucial question of whether the products were purchased for testing. Consequently, it also failed to determine whether the assessee's activity of using these products in machinery constituted manufacture, and whether the relevant year could be considered the initial assessment year. Due to these omissions, the High Court set aside the order of the Tribunal. The matter was remanded back to the Tribunal for a fresh consideration in accordance with the law. All issues were left open for reconsideration. The Court directed that no coercive action would be taken against the appellant for a period of four weeks.

What were the facts?

The appellant, M/s Teracom Limited, is challenging an order passed by the Income Tax Appellate Tribunal (ITAT). The dispute pertains to the initial assessment year as defined under Section 80IB(14)(c) of the Income Tax Act. The appellant argues that the ITAT misinterpreted the phrase "begins to manufacture or produce articles or things," contending it should refer to production for commerce, not for testing. The appellant claims the Tribunal relied on irrelevant material, such as the appellant's admission of reselling products and paying sales tax, to conclude that the products were not purchased for testing. The High Court notes that the Tribunal's judgment does not explicitly address whether the products were purchased for testing and if their use in machinery constituted manufacture, nor whether the relevant year was the initial assessment year.

What were the issues?

1. Whether the Tribunal properly considered the definition of the initial assessment year under Section 80IB(14)(c) of the Income Tax Act? (Question of law) 2. Whether the Tribunal correctly interpreted the phrase "begins to manufacture or produce articles or things" to mean production for commerce rather than for testing? (Question of mixed law and fact) Assessee's contentions: The assessee argued that the Tribunal failed to properly consider the definition of the initial assessment year. They contended that the Tribunal misinterpreted the phrase "begins to manufacture or produce articles or things," asserting that it should be understood as production for commerce, not for testing. The assessee further submitted that the Tribunal relied on irrelevant material, such as the admission of reselling products and paying sales tax, to conclude that the products were not purchased for testing, despite the fact that they were indeed purchased for testing purposes. Revenue's contentions: The judgment does not record any specific contentions made by the revenue.

Which sections of the Income-tax Act were involved?

Section 80IB,Section 80IB(14)(c)

AI-generated summary — verify with the full judgment below

:1: IN THE HIGH COURT OF BOMBAY AT GOA TAX APPEAL NO. 4 OF 2011 M/s Teracom Limited Plot No.249-250, Kundaim Industrial Estate, Kundaim Goa 403 115. … Appellant V e r s u s Assistant Commissioner of Income Tax Circle 2(1), Panaji Goa, having his office at Room No.208, 1st Floor, Aayakar Bhavan, Panaji Goa. 403 001. … Respondent Shri S. R. Rivankar, Advocate for the Appellant. Ms. Asha Dessai, Advocate for the respondent. CORAM : S. A. BOBDE & F. M. REIS, JJ. DATE : 21 st JULY, 2011

. ORAL JUDGMENT ( Per S. A. BOBDE, J) Heard. Admit. 2. Heard finally by consent. 3. Shri Rivankar, learned Counsel for the appellant submitted that the Tribunal has not properly considered the question of initial assessment year as defined under Section

:2: 80IB sub-section 14(c) of the Income Tax Act and as defined in that section the Tribunal has failed to appreciate that the term “begins to manufacture or produce articles or things” has been interpreted to mean the manufacture or production for the purpose of commerce and not for the purpose of testing. According to the learned Counsel, the Tribunal has not properly appreciated this issue and has passed its conclusion on irrelevant material such as admission of the appellant that the appellant had resold the products and paid sales tax on it. In the submission of the learned Counsel for the appellant, admission that the appellant paid sales tax on the products which were resold cannot lead to interpretation that they were not purchased for testing when in fact they were so purchased for testing. We find that the judgment of the Tribunal does not consider the question whether the products were purchased for testing and, therefore, whether the activity of the assessee of using that products in the machine amounts to manufacture and whether the relevant year can be considered to be initial Assessment Year properly. 4. In this view of the matter, we set aside the order of the Tribunal and remand the matter back to the Tribunal for fresh consideration in accordance with law. By way of interim

:3: protection, we direct that no coercive action shall be taken against the appellant in respect of the notices in question for a period of four weeks from today. All the issues are left open. Appeal stands disposed of accordingly. No order as to costs. S. A. BOBDE, J F. M. REIS, J at*

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