DCIT - 4(1), MUMBAI vs. M/S. BALAJI FILAMENTS LTD., MUMBAI

Rival contentions have been heard and record perused. Assessee’s claim deduction u/s.80HHC was reduced by AO by observing that income of the assessee was to be first computed as per provisions of Section 28 after taking into consideration the net results of income and after giving effect to the provisions of set off loss u/s.70&71 and set off of brought forward loss u/s.72 and deduction u/s.32(2) of the I.T.Act in respect of unabsorbed depreciation of the earlier assessment years. By the impugned order CIT(A) restricted the addition u/s.80HHC to the extent of gross total income. Ld. AR placed on record order of the Tribunal assessee’s own case for the assessment year 1999-2000 wherein the Tribunal has dealt with the similar issue and allowed the same in assessee’s favour.

We had gone through the order of the Tribunal, which reads as under :- “12. We have heard both the learned representatives, also perused the relevant material available in the paper book. So far as factual position of the case is concerned, undisputedly, the assessee runs three units. For export oriented unit, books of accounts, records as well as Profit & Loss Account etc. are maintained separately. In such a case, for the purpose of claiming deduction u/s 80 HHC of the Act, the relevant judicial pronouncements have held that u/s 80 HHC, only the profits and turnover of the export division alone have to be taken into consideration and not clubbed profits. In this regard, the case is squarely covered by the findings in the case of M/s. Mandhana Industries Pvt. Ltd. as well as by the Delhi ITAT judgment in the case of CIT vs. Padmini Technologies Ltd.(supra) and in the case of Subhash Chgandan Kathuria vs. DCIT as well. We have also considered the case law cited by the Learned DR in 172 Taxman 347. But in our opinion, it is not applicable qua peculiar facts and circumstances of the instant case. Accordingly, we are of the opinion that the assessee should succeed. Hence, the Assessing Officer is directed to re-compute the deduction and other benefits u/s 80HHC of the Act qua the assessee by taking into consideration the profits and turnover of the export units only after granting adequate opportunity of hearing. Hence, these grounds are allowed for statistical purposes.” As the facts and circumstances during the year under consideration are same, respectfully following the order of the Tribunal, we do not find any infirmity in the order of CIT(A).

Next grievance of the revenue relates to CIT(A)’s action in treating twisting and texturising of yarn is a manufacturing activity, thereby allowing assessee’s claim of deduction u/s.80IB.

The issue under consideration is covered by the decision of Hon’ble Supreme Court in the case of Emptee Poly-Yarn Pvt. Ltd. 320 ITR 665, wherein the Hon’ble Supreme Court held that twisting and texturising of partially oriented yarn is a manufacturing activity, insofar as thermo mechanical process embedded in process brings about structural change in yarn, therefore, makes process manufacture. Respectfully following the decision of Hon’ble Supreme Court, we do not find any infirmity in the order of CIT(A) in treating the twisting and texturising of yarn as manufacturing thereby allowing assessee’s claim of deduction u/s.80IB of the Act.

With regard to ground No.5, it was alleged by ld. AR that this ground does not arise out of the order passed by CIT(A), insofar as provisions of section 80IA(5), 80IA(9) and 80IA(10) of the Act, is not applicable to the case of the assessee.

We have also gone through the order of the CIT(A), wherein none of the provisions have been dealt with. Accordingly, ground No.5 of revenue’s appeal is infructuous.

In the result, appeal of the revenue is dismissed. Order pronounced in the open court on this 27/04/2016. (PAWAN SINGH) (R.C.SHARMA) न्यानयक सदस्य / JUDICIAL MEMBER ऱेखा सदस्य / ACCOUNTANT MEMBER भुंफई Mumbai; ददनांक Dated 27/04/2016 प्र.कु.मभ/pkm, नन.स/ PS आदेश की प्रनिलऱपप अग्रेपषि/Copy of the Order forwarded to : अऩीराथी / The Appellant 1. प्रत्मथी / The Respondent. 2. आमकय आमुक्त(अऩीर) / The CIT(A), Mumbai. 3. आमकय आमुक्त / CIT 4. ववबागीम प्रनतननधध, आमकय अऩीरीम अधधकयण, भुंफई / DR, ITAT, Mumbai 5. गार्ा पाईर / Guard file. 6. आदेशाि सार/ BY ORDER, सत्मावऩत प्रनत //// उप/सहायक पुंजीकार (Asstt.