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Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI
Before: SHRI A.MOHAN ALANKAMONY & SHRI DUVVURU RL REDDY
आदेश / O R D E R
Per A. Mohan Alankamony, AM:-
The appeal by the assessee is directed against the order passed by the learned Commissioner of Income Tax (Appeals)-6, Chennai, dated 28.07.2016 in for the assessment year 2009-10 passed U/s.250(6) r.w.s. 143(3) r.w.s. 263 of the Act.
The assessee has raised several grounds in its appeal however the crux of the issues is that the Ld.CIT(A) has confirmed
Ld.AO who had denied exemption U/s.10B of the Act to the assessee by holding that processing of garnet bearing river sand is not a manufacturing activity.
The brief facts of the case are that the assessee is a private limited company engaged in the business of exporting garnet sand, filed its return of income for the assessment year 2009-10 on 25.09.2009 admitting total income of Rs.74,74,790/-. Initially the return was processed U/s.143(1) of the Act and subsequently the case was selected for scrutiny under CASS. Finally assessment order was passed U/s. 143(3) r.w.s. 263 of the Act on 17.02.2015 wherein the Ld.AO disallowed the claim of exemption U/s.10B of the Act by holding that processing of the garnet bearing river sand is not a manufacturing activity. The claim of the assessee was that it is an exporter of garnet sand which is a distinct item compared from the raw material viz., river sand from which it is extracted. The assessee had explained that it is a specialized process by which garnet bearing sand is processed and finally shaped by machines to make it a distinguishable commercial product. However the Ld.AO was of the view that processing sand is not a manufacturing process because there was no transformation of the raw materials into a new distinct product.
The Ld.AO further opined that the assessee had been carrying the activity of mining garnet sand particles of uniform sizes which are packed and exported. Further relying in the decision of the Hon’ble Apex Court in the case M/s. Lucky Minmat Pvt. Ltd., Vs. CIT reported in 9 SCC 669, wherein it was held that even the activity of cutting and sizing of marble blocks after excavation would not fall under the ambit of manufacturing activity, the Ld.AO disallowed the claim of exemption U/s.10B of the Act, to the assessee.
On appeal, the Ld.CIT(A) confirmed the order of the Ld.AO by observing as under: “7. The matter is considered. The appellant company in its submission has placed strong emphasis on the fact that is processes involve machining. I have gone through the flow chart submitted by the appellant of the series of activities involved in making the garnets ready for sale/export. The processes primarily include isolation of the garnets from sand through various separating mechanisms, such as “Mesh Mechanical Wet Screen”, “cross flow separation”, etc. and sorting them into uniform/similar size and shape. It does not result in transformation of the object into a new or distinct object. Nor does it bring into existence a new object with a different chemical composition or integral structure. Hence, I have no hesitation in holding that even though machining may be used in appellants’ work flow, the defining yardstick is “transformation” of an object or “bringing into existence a new object” is absent. Neither of these mandatory requirement of section 2(29BA) is being satisfied by the appellant company. Hence, I do not find any reason to interfere with the findings of the Assessing Officer.
With regard to the information under RTI being submitted by the appellant, I am of the opinion that it does not hold any persuasive value for me. On detailed examination of the processes of the appellant company, I am convinced that it does not amount to manufacture within the meaning of section 2(29BA) of the Act.
The appellant company has placed reliance on the order of my predecessor CIT(Appeals)(supra). The Department preferred appeal against the order. The ld. Chennai Tribunal in its order in 1105 & 1106/Mds/2015 dated 20.01.2016 has remitted the issue back to the Assessing Officer for denovo consideration. Hence the order of CIT(Appeals) relied upon by the appellant does not stand today.”
Before us the Ld.AR reiterated the arguments made before the Ld.Revenue Authorities whileas the Ld.DR argued in support of the orders of the Ld.Revenue Authorities.
We have heard the rival submissions and carefully perused the materials on record. The assessee has relied in the decision of the 1) Chennai Bench of the Tribunal in in the case ACIT vs. M/s. Vetrivel Minerals, 2) ITAT Special Bench, Koltata in ITA No.1189/Kol/2008 in the case Tea Promoters (India) Pvt. Ltd., and the decision of the Hon’ble Supreme Court in the case Ashirwat Ispat Udyog & Ors. Vs. State Level Committee & Ors., vide order dated 03.11.1998, for treating the processing of garnet river sand as manufacturing activity. These decisions are not considered by the lower authorities or brought to their knowledge. Further the Chennai Bench of the Tribunal in its order dated 20.01.2016 in ITA No.1104, 1105 & 1106/Mds/2015 has remitted back the issue to the file of Ld.AO for de-nova
consideration. Further, since the detailed process undertaken by the assessee is not vividly explained before us, we are unable to decide whether the activity performed by the assessee is a manufacturing activity or otherwise. Therefore in the interest of justice, following the decision of the Tribunal cited herein above, we hereby remit the matter back to the file of Ld.AO for de-nova consideration with direction to examine those decision cited by the assessee and thereafter decide the issue in accordance with law and merit.
In the result, the appeal of the assessee is allowed for statistical purposes as indicated herein above.
Order pronounced on the 05th June, 2018 at Chennai.