Ita/24/2012 Of Deputy Commissioner Of Income Tax, Nainital v. Barin Ghosh, C.j. (Oral

IN THE HIGH COURT OF UTTARAKHAND AT NAINITAL Income Tax Appeal No. 24 of 2012 Deputy Commissioner of Income Tax, Nainital. ………Appellant. Versus M/s Natural Fragrances, F-3, Industrial Estate, Bhimtal (Nainital) ……….Respondent [ Mr. Hari Mohan Bhatia, Advocate for the appellant. Mr. C.S. Aggarwal, Senior Advocate assisted by Mr. P.R. Mullick, Advocate for the respondent. Coram : Hon’ble Barin Ghosh, C. J.Hon’ble U.C. Dhyani, J. Barin Ghosh, C.J. (Oral) This appeal was filed, as claimed by the learned counsel for the assessee, by the Deputy Commissioner of Income Tax and as contended by the learned counsel for the appellant, by the Commissioner of Income Tax. Learned counsel for the appellant submitted that there was an inadvertent error on his part and, accordingly, the word “Deputy” was used as a prefix to Commissioner of Income Tax and this mistake occurred, inasmuch as, Sri Abhishek Kumar, Income Tax Inspector, who was authorized to affirm the affidavit in support of the appeal, was working in the office of Deputy Commissioner. Learned counsel for the respondent submitted that it could not be said to be a mistake, and that, the appeal was not by an incompetent authority. However, we give credence to the submission made by the counsel for the appellant, who has taken upon himself that it was his mistake, which has caused the word “Deputy” to be used as prefix to Commissioner. An application has been filed for removing the said mistake. We allow the amendment application (CLMA No. 12177 of 2012) and, thereby, the mistake is removed and the prefix “Deputy” is removed from “Commissioner of Income Tax”. 2. Before the Tribunal, the question was, whether the respondent assessee is involved in manufacturing activities in Uttarakhand from its industrial unit situate therein? The Assessing Officer found that the assessee is involved in manufacture and sale of fragrance. The Assessing Officer found that in order to complete the said manufacturing activity, respondent assessee is required to procure flowers, which he does within the State of Uttar Pradesh. The Assessing Officer found that instead of bringing the flowers, thus purchased, on the basis of job work, assessee extracts the oil contents from the flowers at Uttar Pradesh and, thereafter, such oil is brought in the factory of the respondent assessee situate in Uttarakhand and with the help of the extracted oil, the essence is manufactured. The Assessing Officer felt that in the whole process, the most important part of the manufacturing activity is undertaken in the State of Uttar Pradesh and the minimal in the State of Uttarakhand and, as a result, respondent assessee is not entitled to the benefit of Section 80IC of the Income Tax Act, 1961. 3. There is no dispute that at the request of the Assessing Officer, respondent assessee produced before the Assessing Officer a flow-chart showing steps taken by the respondent assessee for producing the end product, which it sells. The flow-chart, thus produced, was not disputed by the Assessing Officer. On the other hand, he himself, on the basis of the flow-chart itself, came to the conclusion that the largest manufacturing activity takes place outside the State of Uttarakhand. A look at the flow-chart will clearly demonstrate that the basic ingredient for manufacturing the ultimate product sold by the assessee is distilled oil. There is no dispute that this distilled oil is obtained by the assessee from the State of Uttar Pradesh. At the same time, there is no dispute that the assessee does not purport to sell the distilled oil by purporting to show that the same is manufactured in its factory at Uttarakhand. There is no dispute that with the distilled oil, thus procured, many a things are required to be mixed. Then, those are to be processed, first by roasting and, then, by mixing with proportionate amount of water. The product, then available, is then required to be steamed distilled and the vapours are made to condense. The condensed vapour is absorbed in the oil and the process requires repetition for the purpose of reaching perfection. That, at its industrial unit situate within the State of Uttarakhand, assessee undertakes those steps to obtain the product it sells, is not disputed in the appeal. A look at the flow-chart would amply demonstrate that the distilled oil obtained by the assessee from Uttar Pradesh does not remain distilled oil at the time it sells its saleable product after carrying out the manufacturing activity shown in the flow-chart; the same becomes a different product. The distilled oil, which is used as a raw material in the processing unit of the assessee situate in Uttarakhand, is available in the market. To that, there is no dispute. Instead of buying the same from the market, assessee gets the same processed in the State of Uttar Pradesh. Because he has done so, the distilled oil, thus used by him as a raw material in the industrial unit at Uttarakhand, will not become a part of the manufacturing activity of the assessee in the State of Uttarakhand. This having been concluded, we find no scope of interference. The appeal fails and the same is dismissed. (U.C. Dhyani, J.) (Barin Ghosh, C.J.) 24.12.2012 24.12.2012 Rathour