Ignoring The Fact That Form 10Ccb Attached With The Assessee'sreturn Of Income Had Mentioned Ay 1993-84 As The Year Of Thecommencement Of Business? v. Penwalt India 196 Itr 813, Wheremanufacturing Includes Also Goods Produced By Outside Parties?

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.1054 OF 2016WITH INCOME TAX APPEAL NO.1044 OF 2016 Pr. Commissioner of Income Tax .. Appellant v/s. M/s. Shah Originals .. Respondent Mr. Arvind Pinto for the appellant Mr. Atul Jasani for the respondent CORAM : AKIL KURESHI & M.S. SANKLECHA, J.J. P.C. DATED : 15[th] JANUARY, 2019 1.These appeals arise out of common background and concernsame assessee. 2.We may note the facts from Income Tax Appeal No.1044 of 2016.This appeal is filed by the Revenue to challenge the judgment of theIncome Tax Appellate Tribunal raising following questions for ourconsideration :- (i)Whether in law and on the facts of the instant case, wasthe Tribunal in error in confirming the orders of the CIT(A) ignoring the fact that Form 10CCB attached with the assessee'sReturn of income had mentioned AY 1993-84 as the year of thecommencement of business? (ii)Whether in law and on the facts of the instant case, wasthe Tribunal correct in the confirmation of the orders of theCIT(A) who, deleted the addition on the basis of the Auditor'saffidavit, while ignoring that the business activity as per thepartnership deed had commenced in the year 1992, whenmachinery for in-house stitching of apparel was in production asper facts of record? (iii)Whether in law and on the facts of the instant case, wasthe Tribunal justified in ignoring the decision of the jurisdictionalHigh Court in CIT Vs. Penwalt India 196 ITR 813, wheremanufacturing includes also goods produced by outside parties? (iv)Whether in law and on the facts of the instant case, wasthe Tribunal justified in confirming the orders of the CIT(A)ignoring the fact that all the firm claimed deduction u/s 80HHCwithout a claim u/s 80IB; thus this claim u/s 80IB for the yearwas to set off the effect of the sunset clause in the case of Section80HHC? 3.The assessment year under consideration is A.Y. 2003-04, inwhich the issue pertains to the initial year of commencement ofassessee's manufacturing activity for the purpose of deduction under Section 80IB of the Income Tax Act, 1961 ("the Act" for short). Theassessee contended that the initial year was A.Y. 1995-96 and thededuction which is available for a period of 10 years beginning with theinitial year, would continue to be available for the assessment yearunder consideration also. The Assessing Officer however, was of theopinion that the assessee's initial year was the year 1992-93 and,therefore, the period of 10 years since then having already expired, theassessee's claim for deduction in the present year, is not allowable. 4.Before the Revenue authorities and the Tribunal, the assesseepointed out that the assessee had purchased the relevant material onlyin the Assessment Year 1995-96. The registration of the unit as a SmallScale Industry was also granted in the year 1995-96. The assesseefurther pointed out that the manufacturing activity had alsocommenced only from such year. The assessee explained an error inthe Audit Report by pointing out that the industrial undertaking had notcommenced the manufacturing activity earlier. Only the partnershipfirm had come into existence. It was pointed out that there is a vitaldifference between commencement of the partnership and thecommencement of the industrial undertaking. 5.These contentions were accepted by the CIT(A) and the Tribunal.The Assessing Officer had relied on a decision of this Court in case ofCommissioner of Income Tax Vs. Penwalt India Ltd. 196 ITR 813 tohold that in case of the assessee, the initial year was 1992-93. 5.These contentions were accepted by the CIT(A) and the Tribunal.The Assessing Officer had relied on a decision of this Court in case ofCommissioner of Income Tax Vs. Penwalt India Ltd. 196 ITR 813 tohold that in case of the assessee, the initial year was 1992-93. 6.As is well known, Section 80IB of the Act grants certaindeduction of profits and gains from certain industrial undertakings.sub-section (3) of Section 80IB of the Act provides that such deductionat the specified rate would be available to such industrial undertakingfor a period of 10 consecutive assessment years, beginning with theinitial assessment year. The term “Initial Assessment Year” has beenexplained insub-section (14) to Section 80IB of the Act inter alia as tomean, in case of an industrial undertaking, the assessment year relevantto the previous year in which the industrial undertaking begins tomanufacture or produce articles or things. It was in this context, thequestion arose before the Assessing Officer. As noted, the CIT(A) andthe Tribunal concurrently came to the conclusion that the initial yearfor assessee was A.Y. 1994-95. This was on the basis of materialproduced by the assessee to establish that it was only in this period thatthe assessee had procured the material and started manufacturing.The registration as an industrial unit was granted only during the said period. We find no perversity in the finding of the Tribunal. 7.The decision of this Court in case of Penwalt India Ltd. (supra)was rendered in entirely different background. It was a case in whichthe assessee had claimed expenditure on scientific research. The Courtheld that the assessee can be said to be engaged in the manufacturingactivity, which is done directly by himself or even in which the assesseeengages the services of somebody else on contract basis. It was foundthat the manufacturing activity carried on behalf of the assessee wasalso under the direct quality control and supervision of the assessee.On such findings, the Court granted the depreciation allowance to theassessee. 8.In the result, both the Appeals are dismissed. (M.S. SANKLECHA, J.) (AKIL KURESHI, J.)