The Commissioner Of Income Tax , Chennai v. P.damodaran

IN THE HIGH COURT OF JUDICATURE AT MADRAS Coram : THE HONOURABLE MR.JUSTICE P.D.DINAKARAN THE HONOURABLE MR.JUSTICE P.P.S.JANARTHANA RAJA The Commissioner of Income Tax ,Chennai. Vs ..Appellant in boththe cases. P.Damodaran, ..Respondent in boththe cases. Appeals under Section 260A of the Income Tax Act, 1961against the order of the Income Tax Appellate Tribunal, Madras,'B' Bench in I.T.A. Nos.1809 and 1810/Mds/2000 for the assessmentyears 1995-96 and 1997-98. (ITA.No.127/2000-2001 and 128/2001-2001 respectively dated 28.8.2000 on the file of the Commissionerof Income-Tax (Appeals) V, Chennai-34, against GIR NO.35235-Ddated 28.3.2000, 30.3.2000 on the file of the Income-Tax Officer,City Ward III (2), Chennai-6.) For Appellant : Mrs.Pushya Sitaraman Senior Standing Counsel for Income-Tax Department. JUDGMENT (Judgment of the Court was delivered by P.P.S.Janarthana Raja, J.) The present appeals are filed under Section 260A of theIncome Tax Act, 1961 by the Revenue, in I.T.A. Nos.1809 and1810/Mds/2000, passed by the Income Tax Appellate Tribunal,Madras, 'B' Bench raising the following substantial question oflaw. https://hcservices.ecourts.gov.in/hcservices/ "Whether in the facts and circumstances of thecase, the Tribunal was right in upholding theassessee's claim for deduction u/s 80IA, whenhe himself had given a sworn statement to thecentral excise authorities that he did nothave any activity of manufacture in the saidpremises?" 2.The facts leading to the above question of law are asunder: i)The assessee had claimed deduction under Section 80IA(2)(iv)(c) of the Income Tax Act for manufacturing cable joining kitused in the telecommunication industry at Pondicherry, which is anindustrially backward area. The assessment order originallypassed for the Assessment Year 1995-96, was set aside by theCommissioner of Income Tax (Appeals) with a clear direction to theAssessing Officer to examine the claim of the assessee withevidence in support of the return filed by him. The AssessingOfficer thereafter passed an assessment order under Section 143(3)of the Income Tax Act, read with 250 on 30.03.2000. For theassessment year 1997-98, the Assessing Officer completed theassessment under Section 143(3) of the Act. The Assessing Officerrejected the assessee's claim for deduction under Section 80IA(2)(iv)(c) relying upon the results of proceedings taken by theCentral Excise authorities against the assessee, by holding thatthe assessee did not carry on any manufacturing or productionactivities, but was indulging in stock transfer and in raisingsales invoices from Pondicherry. Finally, the Assessing Officerheld that the assessee was not able to establish that anymanufacturing activity had been commenced for claiming deductionunder Section 80IA of the Act. ii)Aggrieved by the order of the Assessing Officer, theassessee filed an appeal before the Commissioner of Income Tax(Appeals), and claimed that the Assessing Officer rejected hisclaim without any independent enquiry and also ignored the realfact that the assessee had indulged in manufacturing activity atPondicherry, and was therefore entitled for relief under Section80-IA. After hearing the arguments, the Commissioner of IncomeTax (Appeals) came to the conclusion that the Assessing Officer,on his own, had not made on-the-spot enquiry so as toensure the real facts and correctness of the assessee's claim thathe had carried on manufacturing activity of cable joining kits atPondicherry. The C.I.T. (A) further found that even after theassessment had been set aside for the Assessment Year 1995-96 witha direction to examine the claim of the assessee under Section80IA denovo, no such enquiries were made by the Assessing Officer. The C.I.T. (A) finally held that the assessee is entitled torelief under Section 80IA of the Act. The C.I.T. (A) finally held that the assessee is entitled torelief under Section 80IA of the Act. iii) Aggrieved by the order of the C.I.T. (A), the Revenuefiled an appeal before the Income Tax Appellate Tribunal. TheIncome Tax Appellate Tribunal dismissed the appeal filed by theRevenue and confirmed the order of the C.I.T (A). The standingcounsel appearing for the Revenue submitted that the Tribunal waswrong in allowing the deduction under Section 80IA of the Act andfailed to appreciate that the assessee himself had admitted in thestatement dated 12.12.1996 before the Assistant Commissioner ofCentral Excise (Anti Evation), Trichy, that the premises was usedonly as godown for packing goods in carton boxes containing thecable joining materials. He also further submitted that theTribunal had not appreciated the statement recorded on 11.06.1997that the assessee had admitted that he was engaged only in tradingactivity of buying and selling. 3.We heard the arguments of the counsel. The assessee hadclaimed that he had started his factory at Pondicherry wheremanufacturing activity was done, whereas the stand of the Revenuewas that, at Pondicherry, no manufacturing activity was carried onother than using the premises for correspondence and fordespatching the goods by the assessee. The Tribunal had given afinding that the Assessing Officer had not made any enquiry tofind out whether the assessee had carried out any manufacturingactivity at Pondicherry, even after the matter was remanded backto his file. Similarly, there was nothing to suggest that theCentral Excise Authorities ever visited the assessee's factory tofind out the verasity of his claim that the manufacturingactivities were being carried out at his factory premises atPondicherry. Also, it is found that the Central Exciseauthorities visited only the office premises of the assessee andexamined certain documents. Hence, we find no justification inrejecting the assessee's claim for deduction under Section 80IAmerely relying on the observation of the Central Exciseauthorities. Further, it was a factual finding by theauthorities below that the machineries installed in the premisesand the raw materials utilised by the assessee, suggest that therewas a production of article or thing for the purpose of using thesame in the telecommunication industry. When the factual findingitself is that the asessee manufactured telephone cables joiningkits, the assessee is entitled for benefit available underSection 80IA of the Act. 4.In view of the foregoing conclusions, we find no errorin the order of the Income Tax Appellate Tribunal and hence nosubstantial question of law arises for consideration of thisCourt. Hence, the above tax cases are dismissed. No costs.Consequently, the connected TCMP No.26 of 2006 is closed. Sd/Asst.Registrar /true copy/ Sub Asst.Registrar km To 1.The Assistant Registrar, Income Tax Appellate Tribunal,Rajaji Bhavan III Floor, Besant Nagar, Chennai-90. 2.The Commissioner of Income Tax, Chennai. 3.The Commissioner of Income Tax (Appeals) V, Chennai-34. 4.The Income Tax Officer, City Ward-III (2) Chennai-6. one cc to Mrs.Pushya Sitaraman, Senior Standing Counsel forIncome Tax Department (SR.No.5112) Tax Case (Appeal) Nos.24 & 25 of 2006 sky/1/3