The Commissioner Of Income Taxchennai v. M/S.light Alloy Products Ltd

CoramThe Honourable Mr.Justice R.SUDHAKARandThe Honourable Mr.Justice R.KARUPPIAH Tax Case (Appeal) Nos.1028 to 1030 of 2014& M.P.Nos.1 and 1 of 2014 The Commissioner of Income TaxChennai. .... Appellant in the all T.Cs -vs- M/s.Light Alloy Products Ltd.,67, Chamiers Road,Chennai - 600 028. ...Respondent in the all T.Cs APPEALs filed under Section 260 A of the Income Tax Actagainst the order dated 01.08.2011 made in I.T.A.Nos.893to895/Mds/2011 on the file of the Income Tax Appellate Tribunal,Chennai "A" Bench for the assessment years 2002-03, 2003-04 and2004-05. Against the order of the Commissioner of Income Tax(Appeals)-III), Chennai dated 25/2/2011 and made in ITA.Nos.241/09-10 680/08-09 and 240/09-10 respectively against theassessment order of the Assistant Commissioner of Income-Tax,Company circle -II(4) Chennai -34 dated 31/12/08, 30/11/09 and30/11/09 respectively for the Assessment year 2003-04, 2002-03 and2004-05 respectively. The above Tax Case (Appeals) are filed by the Revenue asagainst the order of the Income Tax Appellate Tribunal raising thefollowing substantial question of law: "Whether on the facts and in the circumstances of https://hcservices.ecourts.gov.in/hcservices/ the case, the Income Tax Appellate Tribunal was right inholding that the deduction under Section 80IB on profitsderived from industrial undertaking on job work contractis to be allowed?" 2. The brief facts of the case are as follows:The assessee is engaged in the manufacture of automotivecomponents made of aluminium castings. The assessee filed returnof income for the respective assessment years claiming deductionunder Section 80IB of the Income Tax Act on the works contract.The assessment was completed at the first instance and later itwas reopened. Subsequently, after issuance of notice, theassessment was completed by the Assessing Officer denying theclaim of deduction under Section 80IB and determined the totalincome by making additions. 3. Aggrieved by the said addition, the assessee preferredappeals before the Commissioner of Income Tax (Appeals)challenging the denial of deduction under Section 80IB of theIncome Tax Act and also on other grounds. The Commissioner ofIncome Tax (Appeals), while dismissing the appeal on othergrounds, allowed the appeal with regard to the claim of deductionunder Section 80IA, holding as follows: "I have carefully considered the facts of thecase and the various submissions made by the Ld.AR. I have also gone through the decisions reliedon by the AO and AR. After considering the factsof the case and the precedents, I am of theconsidered opinion that the claim of the appellanthas to be allowed. The perusal of the evidencesfurnished by the appellant reveal that theappellant has obtained requisite power connectionfrom Tamilnadu Electricity Board for themanufacturing activities. The High Tension load isawarded for manufacturing activities only. Fromthe photographs produced and the flow chartsfurnished it is very clear that the finishedproduct of the appellant is distinct and differentfrom the raw materials used. The appellant hasalso submitted that the goods are dispatched onpayment of excise duty after the completion ofmanufacturing operations. The payment of exciseduty will arise only on manufactured products whichgoes to prove that the appellant is engaged inmanufacturing activity. Further, it has also beensubmitted by the appellant that the manufacturingprocess is done directly under the control andsupervision of the appellant's employees. Theappellant has also furnished a flow chart of operating personnel with regard to its operationsfrom which it is observed that all the staffincluding its supervisory staff are employees ofthe appellant. The Hon'ble jurisdictional HighCourt in the case of Taj Fire Works (supra) hadclearly held that an assessee who is engaged on jobwork basis and who satisfies the test ofmanufacture by producing a new material which isdifferent from the raw material is entitled tospecial deduction under section 80HH and 80I. Theappellant has filed evidences in the form of flowcharts, photographs of the various stages ofmanufacture, raw material used and final productswhich confirm the fact that the end product isdistinct from the raw material used. In view ofthe above, and following various judicialprecedents, I hold that the appellant is entitledto deduction under section 80IB. The AO is,therefore, directed to allow the deduction undersection 80IB in computing the total income. Thisground of appeal is allowed." 4. Aggrieved by the said order of the Commissioner of IncomeTax (Appeals), the Revenue filed appeals before the Tribunal,which dismissed the same confirming the order of the Commissionerof Income Tax (Appeals). 5. As against the order of the Tribunal, the Revenue pursuedthe matter before this Court by filing the above appeals. 6. Heard Mr.T.R.Senthil Kumar, learned Standing Counselappearing for the Revenue and perused the materials placed beforethis Court. 7. The short issue that arises for consideration in thisappeal is whether sub-section (13) of Section 80IA of the IncomeTax Act can be made applicable in respect of a claim made by theassessee in terms of Section 80IB of the Income Tax Act. 8. The respondent/assessee in this case claimed certainbenefits under Section 80IB of the Income Tax Act. The Departmentdenied the same on the ground that the nature of activity is jobwork and therefore, Explanation to sub-section (13) of Section80IA would operate in respect of such a claim. The Commissionerof Income Tax (Appeals) as well as the Tribunal accepted the pleaof the assessee and came to the conclusion that sub-section (13)of Section 80IA, which is relatable to enterprises falling undersub-section (4) of Section 80IA, was not applicable in a case ofclaim under Section 80IB of the Income Tax Act. 9. Assuming for a moment that certain clauses of Section 80IAwas made applicable by virtue of sub-section(13) of Section 80IB,we find that the said provision is applicable only in respect ofsub-section (5) and sub-sections (7) to (12) of Section 80IA andnot in relation to sub-sections (4) and (13) of Section 80IA.Therefore, there cannot be any controversy on this issue, as theclaim of the respondent/assessee does not fall under Explanationto sub-section (13) of Section 80IA of the Income Tax Act. 10. For better clarity, Section 80IA(13) and Section 80IB(13) read as follows:Deductions in respect of profits and gains fromindustrial undertakings or enterprises engaged ininfrastructure development, etc. 80-IA. (1) Where the gross total income of an assesseeincludes any profits and gains derived by an undertakingor an enterprise from any business referred to in sub-section (4) (such business being hereinafter referred toas the eligible business), there shall, in accordancewith and subject to the provisions of this section, beallowed, in computing the total income of the assessee,a deduction of an amount equal to hundred per cent ofthe profits and gains derived from such business for tenconsecutive assessment years. 10. For better clarity, Section 80IA(13) and Section 80IB(13) read as follows:Deductions in respect of profits and gains fromindustrial undertakings or enterprises engaged ininfrastructure development, etc. 80-IA. (1) Where the gross total income of an assesseeincludes any profits and gains derived by an undertakingor an enterprise from any business referred to in sub-section (4) (such business being hereinafter referred toas the eligible business), there shall, in accordancewith and subject to the provisions of this section, beallowed, in computing the total income of the assessee,a deduction of an amount equal to hundred per cent ofthe profits and gains derived from such business for tenconsecutive assessment years. .........(13) Nothing contained in this section shall apply toany Special Economic Zones notified on or after the 1stday of April, 2005 in accordance with the schemereferred to in sub-clause (iii) of clause (c) of sub-section (4).Explanation.—For the removal of doubts, it is herebydeclared that nothing contained in this section shallapply to a person who executes a works contract enteredinto with the undertaking or enterprise, as the case maybe. Deduction in respect of profits and gains from certainindustrial undertakings other than infrastructuredevelopment undertakings. 80-IB. (1) Where the gross total income of an assesseeincludes any profits and gains derived from any businessreferred to in sub-sections (3) to 41[(11), (11A) and(11B)] (such business being hereinafter referred to asthe eligible business), there shall, in accordance with andsubject to the provisions of this section, be allowed,in computing the total income of the assessee, adeduction from such profits and gains of an amount equalto such percentage and for such number of assessmentyears as specified in this section ....... (13) The provisions contained in sub-section (5) andsub-sections (7) to (12) of section 80-IA shall, so faras may be, apply to the eligible business under thissection" 11. A plain reading of the above-said provision makes itclear that the provisions contained in sub-section (5) and sub-sections (7) to (12) of Section 80-IA alone are applicable and notsub-section (4) or (13) of Section 80-IA of the Income Tax Act. 12. We, therefore, hold that no question of law arises forconsideration in these appeals. Accordingly, the above Tax Case(Appeals) stand dismissed. No costs. Consequently, M.P.Nos.1 and1 of 2015 are also dismissed. Sd/- Asst.Registrar /true copy/ Sub Asst. Registrar slTo 1. The Income Tax Appellate Tribunal, Chennai "A" Bench 2. The Commissioner of Income Tax (Appeals), III, Chennai.3. The Income Tax Officer (OSD), Company Circle II(4), Chennai.4. The Assistant Registrar,Income Tax Appellate Tribunal, Rajaji Bhavan, IV, Floor, BesantNagar, Chennai. +1 CC to Mr.T.R.Senthil Kumar, Advocate Sr.13772 CO-KSJths : 20.03.2015 T.C.(A) Nos.1028 to 1030 of 2014& M.P.Nos.1 and 1 of 2014