Commissioner Of Income Tax Circle, Tirunelveli v. M/S.vetrivel Minerals, Keeraikaranthattu, Tisayanvilai, Tirunelveli

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED: 21.07.2020CORAM: THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAMandTHE HONOURABLE MRS.JUSTICE V.BHAVANI SUBBAROYAN Tax Case Appeal No.605 of 2018 Commissioner of Income TaxCircle,Tirunelveli.. Appellant/ Appellantversus M/s.Vetrivel Minerals,Keeraikaranthattu,Tisayanvilai,Tirunelveli .. Respondent/ Respondent Tax Case Appeal filed under Section 260A of the IncomeTax Act, 1961, against the order made in ITA No.706/Mds/2017dated 20.09.2017 passed by the Income Tax Appellate Tribunal,'A' Bench, Chennai, for the Assessment Year 2013-14 Againstthe order made in ITA.NO.0068/2016-17 dated 07.12.2016 passedby the commissioner of Income Tax Appeals-III,Madurai for theAssessment Year 2013-2014, and against the order made inPAN/GIR NO.AAHFV2400H dated 30.03.2016 Passed by theAssistant commissioner of Income Tax circle I, Tiruneveli 627011, for the Assessment Year 2013-2014. For Appellant: Ms.S.Premalatha Senior Standing Counsel For Respondent : M/s.S.RajamakeshJUDGMENT T.S.SIVAGNANAM, J. This appeal by the revenue filed under Section 260A of theIncome Tax Act, 1961 (the 'Act' for brevity), is directedagainst the order dated 20.09.2017 in ITA No.706/Mds/2017 onthe file of the Income Tax Appellate Tribunal, Chennai, 'A'Bench, for the Assessment Year 2013-14. 2. The Tax Case Appeal was admitted on 24.08.2018 on thefollowing Substantial Questions of Law."(a) Whether the Tribunal was rightin holding that the assessee is eligiblefor deduction U/s.10AA of the Income-taxAct 1961, even though the assessee is notcarrying on any manufacturing at its SEZhttps://hcservices.ecourts.gov.in/hcservices/Unit? (b) Whether the Tribunal was right in holding that the assessee is carrying onmanufacturing activity even though a newproduct having a distinctive name,character or use was not brought intoexistence at its SEZ Unit by the assesseeas per Special Economic Zone Act 2005?" 3. We have heard Mrs.Premalatha, learned standing counselfor the appellant/revenue and Mr.S.Raj Makesh, learned counselappearing for the respondent / assessee. 4. The assessee filed their return of income for theAssessment Year under consideration 2013-14 on 27.09.2013,admitting total income of Rs.3,16,61,350/-. The assessmentwas selected for scrutiny by issuance of notice under Section143[2] dated 02.09.2014 and the Assessing Officer rejected theclaim of the assessee, who claimed deduction under Section10AA of the Act, on the ground that the raw material and thefinished product are one and the same and there was nomanufacturing activity having taken place in the SEZ unit ofthe assessee. 5. The assessee filed an appeal before the Commissioner ofIncome Tax (Appeals)-III, Madurai, (the CIT(A), for brevity).The appeal was allowed by an order dated 07.12.2016, allegingthat the processes carried out by the assessee in their SEZunit, results in a new product having a different name,character or use, as per the definition of "manufacture", asdefined under Section 2(r) of the Special Economic Zone Act,2005 [the 'SEZ Act', for brevity]. 6. The revenue filed an appeal before the tribunal and bythe impugned order, the appeal was dismissed. 7. After elaborately hearing the learned counsels for theparties, we find that the entire issue involved in the instantcase is fully factual and in our considered view, no questionof Law much less any Substantial Question of Law, arises forconsideration. We support such conclusion with the followingreasons. 6. The revenue filed an appeal before the tribunal and bythe impugned order, the appeal was dismissed. 7. After elaborately hearing the learned counsels for theparties, we find that the entire issue involved in the instantcase is fully factual and in our considered view, no questionof Law much less any Substantial Question of Law, arises forconsideration. We support such conclusion with the followingreasons. 8. The Assessing Officer denied the benefit of thededuction claimed by the assessee on the grounds that what wasimported by the assessee and what was exported are the sameproduct and therefore, there was no manufacturing activitydone by the assessee to be eligible to claim deduction. Infact, an Inspector from the department had visited the factoryto acquaint himself with the process adopted by the assesseein their SEZ Unit. This fact has been recorded by theAssessing Officer in the order of assessment dated 30.03.2016.But, the Assessing Officer, chose to refer to the 'Gate Pass'issued by the Government wherein the description of the goods,https://hcservices.ecourts.gov.in/hcservices/is shown as 'Tailings rich in ilemnite'. Further the Assessing Officer opined that a minor activity of sieving toseparate dust particles only is carried out in the SEZ unitsand hence, it does not amount to manufacturing. 9. Before the CIT(A), the assessee had explained in detailabout the process adopted by them. A certificate has beengiven by the Assistant Development Officer dated 28.03.2013,certifying that the assessee's unit has commenced productionon 29.02.2012. Further, the assessee has stated that theexport invoice was submitted to the Assessing Officer duringthe assessment procedure. However, the same was ignored andwas not taken into consideration. 10. The CIT(A) after considering the factual positionaccepted the submission of the assessee that the semi finishedmaterial purchased by the assessee is not marketable andusable in the industry, as what is purchased by the assesseeincludes silicon, sand and waste, which cannot be marketed assuch, unless the waste materials are removed. The flow chart,which was produced by the assessee before the AssessingOfficer, was referred to CIT(A) and he came to the conclusionthat the Assessing Officer was himself mislead by thenomenclature used in the Gate Pass. After considering thefactual materials, the CIT(A) concluded that the process doneby the assessee would qualify as 'manufacture', under the SEZAct. 11. The Revenue carried the matter by way of appeal to thetribunal and the tribunal once again re-appreciated thefactual position and found that there is a process of'manufacture' as defined under the SEZ Act, which takes placein the SEZ unit and also pointed out that the AssessingOfficer himself has accepted that the assessee's unit,processed the raw materials by removing 10 to 20% impurities.Cost comparison of the semi finished product with that of theraw material was also referred to and it was also pointed outthat the Assessing Officer could not establish that theassessee has suppressed the purchase cost of semi-finishedgoods in order to claim higher deduction under Section 10AA ofthe Act. Furthermore, the certificate issued by the AssistantDevelopment Officer was accepted on the ground that therevenue could not prove the same to be not genuine.Therefore, the tribunal sustained the factual finding recordedby the CIT(A). 12. Thus, in our considered view, the entire factualmatrix has not only been analyzed by the CIT(A), but, also bythe tribunal. Therefore, we are convinced to observe that noquestion of Law much less any Substantial Question of Lawarises for consideration in this appeal. Accordingly the TaxCase Appeal fails and the same is dismissed. No Costs. Sd/- Assistant Registrar(CS) https://hcservices.ecourts.gov.in/hcservices/ //True Copy// Sub Assistant Registrar ars. To, 12. Thus, in our considered view, the entire factualmatrix has not only been analyzed by the CIT(A), but, also bythe tribunal. Therefore, we are convinced to observe that noquestion of Law much less any Substantial Question of Lawarises for consideration in this appeal. Accordingly the TaxCase Appeal fails and the same is dismissed. No Costs. Sd/- Assistant Registrar(CS) https://hcservices.ecourts.gov.in/hcservices/ //True Copy// Sub Assistant Registrar ars. To, 1.THE INCOME TAX APPELLATE TRIBUNAL, 'A' BENCH, CHENNAI 2. THE COMMISSIONER OF INCOME TAX APPEALS-III,MADURAI. 3. THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE I,TIRUNEVELI 627 011.TIRUNEVELI 627 011. A.SK(12/10/2020) TCA No.605 of 2018