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Income Tax Appellate Tribunal, DELHI BENCH “F” NEW DELHI
Before: SHRI AMIT SHUKLA & SHRI ANADEE NATH MISHRA
PER AMIT SHUKLA, J.M.: The aforesaid appeal has been filed by the assessee against the impugned order dated 19.03.2015, passed by Ld. Commissioner of Income Tax (Appeals)-XIII, New Delhi for the quantum of assessment passed u/s.143(3) for the Assessment Year 2010-11. In the grounds of appeal
, the assessee has raised the following ground: - “1.That the order dated 19.03.2015 passed u/s.250(6) of the Income Tax Act, 1961 by the ld. CIT(A)
13. New Delhi is against law and facts on the file in as much as he was not justified in upholding the addition of the Assessing Officer in disallowing a sum of Rs.22,18,091/- claimed u/s.80IC of the Income Tax Act, 1961 on the ground that the appellant firm is not at all producing or manufacturing any article or thing eligible for claiming deduction u/s.80IC of the Income Tax Act, 1961.”
2. At the outset, ld. counsel for the assessee submitted that the same reasoning the disallowance u/s.80IC was made by the Assessing Officer in the earlier years, which issue had come up for consideration before this Tribunal in the Assessment Years 2006-07 to 2009-10, wherein the assessee’s claim for deduction u/s.80IC has been allowed after detailed discussion. Thus, the issue involved is squarely covered in favour of the assessee.
3. On the other hand, learned DR has strongly relied upon the order of the ld. CIT(A).
From the perusal of the impugned order and the order of the Tribunal right from the Assessment Years 2006-07 to 2009-10 passed vide order dated 30.05.2018, it is seen that the Assessing Officer has noted exactly the same facts as was there in the earlier years which for the sake of ready reference are as under; “3. The facts in brief are that the assessee-firm is engaged in the business of manufacturing of plastic packaging materials since 1998 at its unit located in Baddi, Himachal Pradesh. Since its manufacturing facility was located in Baddi Industrial area which was notified by the Ministry of Commerce & Industry, vide notification dated 7th January, 2003, therefore, assessee was eligible for making a claim u/s 80IC for its manufacturing activity. It was also registered with the Central Excise Department and has been filed CENVAT return and also return under the VAT Tax Act,
before Himachal Pradesh Authorities. In the assessment order, it has been noted by the Assessing Officer that team of Income tax official has visited the assessee’s premises and godowns where the business activities of the assessee was being carried out. On inspection the said team observed that no manufacturing activity is done by the assessee firm. Statement of employee, Shri Girish Chander and Shri Masood Ali Beg, Production/Quality Manager was recorded on oath relevant extract of which has been incorporated in the impugned assessment order. From the said statement, he observed that the assessee is only engaged in packaging for M/s. Gillette India Ltd. and it is only doing a job work. Thus, he held that assessee is not engaged in any manufacturing activity, and therefore, deduction u/s.80IC is not applicable. In response to show cause notice, the assessee has explained the entire process of manufacturing and the agreement between the assessee and the M/s. Gillette India Ltd. and how such packaging involves mechanical process. However, the Assessing Officer rejected the assessee’s contention that it is not any kind of manufacturing activity.”
4.1 In the earlier years, ld. CIT(A) had noted that this issue was inquired in detailed by the ld. CIT(A) in the Assessment Year 2005-06, wherein the detailed inquiry was made through AO and remand report was sought for and after detailed discussion and on the basis of remand report assessee’s claim for deduction u/s.80IC was allowed. Following the same precedence and discussion, the ld. CIT(A) in all the years had allowed the assessee’s claim. However, in this year, the ld. CIT(A) has simply held that the assessee is not producing any new product and hence it cannot be said that manufacturing of article or thing is done to avail the benefit of Section 80IC.
4.2 First of all, we find that such an observation of the ld. CIT(A) is wholly untenable because once in the earlier years right from the Assessment Years 2005-06 to 2009-10 it has been accepted that assessee is involved in manufacturing and same products are manufactured in this year also, i.e., plastic packaging materials, then without any change in facts the claim of deduction u/s.80IC cannot be disallowed that article manufactured by the assessee does not amount to manufacturing. We find that the Tribunal had dealt and discussed this issue after observing and holding as under: - 8. We have heard the rival submissions, perused the relevant materials and findings given in the impugned orders as well as material referred to at the time of hearing, the assessee firm had undertaken a substantial expansion in the Assessment Year 2005- 06 and in that year the issue for claim of deduction u/s.80IC had come up for consideration. From the perusal of the order of ld. CIT(A) for the Assessment Year 2005-06, we find that the machine which were added in Assessment Year 2005-06 for the purpose of manufacturing of packaging material and doing the job work were as under: Machinery 1. Box Strapping Machine 2. Cutting Machine 3. Drilling Machine 4. Forming Machine 5. Pad Printing Machine 6. Sharing Machine
Taping Machine 8. Welding Machine The Assessing Officer had denied the deduction in that year on the ground that the new machineries purchased by the assessee were less than 50% as required u/s.80IC. However, rebutting the said observation of the Assessing Officer, the assessee had filed the entire details based on which the remand report was submitted by the Assessing Officer which reads as under:- In this connection, it is submitted that in proceedings u/s. 250(4), the assessee has produced books of accounts and vouchers which were examined on test check basis. The books of accounts were found to be commensurate with figures of Profit & Loss accounts enclosed with the return of income for assessment year 2005-06. The assessee was also asked to lead evidence in favour of the submission made before your honour in the appellate proceedings. During the proceedings u/s .250(4) the assessee substantiated its claim by filing the bills of plant and machinery along with details of certificate of expansion issued by National Research & Technology consortium Parwanoo. It has also filed approval of Revised Capacity issued by G.M. Distt. Industrial Centre, Solan. The assessee has also stated that the expansion of plant and machinery took place in the F. Y 2003-04 and 2004-05 from where it can be seen that the plant and machinery has increased from the initial plant and machinery of the concern when the deduction u/s 80 IB was claimed. The assessee has so produced bills of other plant and machinery purchased during the assessment year 2005- 06 after consideration of which the plant and machinery appears to be increased by more than 50% during the assessment year 2005- 06 itself, the machinery added during the year includes machine (Elevator) stacker worth Rs.2,15,280/- and electronic weighing scale of Rs.6,900/- which is used in the manufacturing process
whose purchase bills have been filed now and examined. Thus, from the aforesaid facts the assessee has filed evidences regarding the substantial expansion of plant and machinery which can be considered at the appellate stage in view of the evidences filed during the appeal and examined u/s 250(4) of the IT Act. Submitted for further consideration in appellate proceedings".
Based on this remand report and other material facts on record, ld. CIT (A) had given a favourable finding in the following manner: - “7. I have considered the order of the learned Assessing Officer and the remand report submitted by him. The submissions made by the learned AR have also been taken into consideration. It is recapitulated that the matter had been referred to the ld. Assessing Officer under sub section (4) of section 250. In the report dated 19.05.2009, after making suitable enquiries and examining the books of accounts and supporting documents, the ld. Assessing Officer has concluded that the enhancement in the plant and machinery has been more than 50% in the year under consideration. In such circumstances, and after a positive finding by the Assessing Officer, I am of the considered opinion that since the assessee has met this crucial condition, based on examination of the books, the deduction u/s.80IC needs to be allowed. ”
Thus, the initial claim of 80IC has been allowed after due inquiry and examination of facts on record and such allowability of deduction has attained finality, because as stated by the learned counsel no appeal has been filed by the Revenue against the said order dated 17.11.2009. Whence it has been accepted that assessee firm has been carrying out manufacturing activities and its claim of deduction u/s.80IC has been allowed, then in the subsequent year such a claim cannot be disallowed.
Coming to the observation and the facts as noted in the impugned assessment order, we find that the Assessing Officer has heavily relied upon the statements of two of the employees of the assessee firm wherein they have stated that they are doing the job work of packaging of loose products in boxes for which they are being paid job charges from M/s. Gillette India Ltd. and apart from that they have also said that raw material are also available by M/s. Gillette India Ltd. which the assessee firm is packing them. Based on these statements, Assessing Officer has come to the conclusion that assessee is not involved in the manufacturing of packaging; therefore, assessee is not eligible for deduction u/s.80IC. Before the Assessing Officer, the assessee had stated the process of packaging and repackaging is a complicated technical process which involves control of thermal and pneumatic power specified time regulation and it is not merely packaging of a product in a boxes. From the perusal of a note and the activities carried out and the chart showing process of manufacturing, it is seen that assessee has explained the manufacturing activity in the following manner: - “The firm is primarily into manufacturing and production of plastic thermoformed materials. It is done with use of various types of plastic material/sheets as base, formed and shaped into specific designs and shapes as per the requirements of various customers and their usage. The process is carried out by use of specific dies and moulds as per the customer design performed on different conversion machines by use of thermal, pneumatic and hydraulic technology with specified time, temperature pressure and vacuum regulation. A detailed process charted is drawn out and enclosed. Further we are also into making of tools, dyes and moulds for various such operations including forming, sealing, cutting, etc. We also fabricate and provide various machines for carrying out similar operations. This includes our working on a full-fledged tool room
operation for which we have numerous working machines We also upgrade and recondition such machines and sell.
List of different types of RAW MATERIALS used for making Tools, Dies, Moulds & Machines are like aluminium, epoxy's, wooden blocks and sheets, MDF sheets, different type of rubber sheets (natural and synthetic), marking pins, etc. All types of electrical, electronic, pneumatics, hydraulics and other types of instruments, articles, parts, accessories and consumables required for the above machines, including heaters, motors, cables, air blowing and lighting accessories. Each die needs different activities to be done and no specific process can be defined.
We have also entered into a one stop operation of such activities on behalf of our customers whereby we pack their products or carryout their activity of installation as per their requirement to complement our above productions. In this case, where most of the customers have taken a single bill for complete production and also separate bills for providing material and separate bill for execution of packaging Also, off late there have been such operations, where the materials were provided by the customer or their approved vendors and we only did the technical operation of handling their material and converting it into a sellable proposition.”
Besides this, the assessee has also given the details of the raw material purchased, product flow chart and the entire process of packing of articles. From the further perusal of the record, it is seen that assessee has shown turnover from various activities in the following manner: -
S. No. Particulars Amount Amount (in Rs.) (in Rs.) (a) Manufacture of packaging material 1,36,58,621/- (b) (i) Packaging of goods on job work 63,43,995 basis
(b)(ii) Sale of packing material with job 18,31,202 81,75,197 work (c) Manufacture of dies/moulds 6,53,000 Total 2,24,86,818
Apart from that, it is undisputed fact that assessee firm has been categorized under the Central Excise Tariff Act as a manufacturer, because it manufactures dyes and moulds for making and designing the packaging materials. It has also granted approval from District Industries Center, Solan. All those details of approval, certificates and notification issued in the case of the assessee have been placed in the paper book. The entire facts and material which has been placed before the Assessing Officer has not been rebutted and Assessing Officer has tried to draw inference that mere packaging does not amount to manufacturing. If assessee is making packaging material as per the requirement of the product with the aid and help of various kinds of machines as incorporated above and it is also registered as manufacturer under the various laws, then such a general inference based on statement of employees cannot be given much credence. Thus, we do not find any substantial merits in the grounds raised by the Revenue that assessee is not engaged in the manufacturing of packaging material, therefore, the finding of ld. CIT(A) is uphold and the grounds raised by the Revenue is dismissed.
Since exactly similar ground has been raised in the Assessment Years 2006-07, 2007-08 & 2008-09, wherein similar claim of deduction has been denied after reopening the case u/s.147, therefore, our finding given will apply here mutatis mutandis. Accordingly, we uphold the order of the ld. CIT (A) in allowing the deduction u/s.80IC.”
Thus, on identical facts, co-ordinate Bench of ITAT, Delhi has accepted the claim of assessee u/s.80 IC of IT Act, vide order dated 30.05.2018 in and in ITA Nos. 5151, 5152, 5153/Del/2015 for Assessment Years 2009-10, 2006-07, 2007-08 and 2008-09 respectively, in which Ld. Judicial Member was also a party. Respectfully following this precedent the assessee’s claim u/s.80IC for this year (Assessment Year 2010-11) is also hereby accepted because no distinguishable facts have been brought to notice by learned Departmental Representative. Accordingly, this appeal of the assessee is allowed.
In the result, the appeal of the assessee is allowed. Order pronounced in the open Court 30th October, 2018.