Case Law Details

Case Name : Commissioner of Income Tax- II Vs Jaydeep Cotton Fibers Pvt Ltd (Gujarat High Court at Ahmedabad)
Appeal Number : Tax Appeal No. 1062 of 2011
Date of Judgement/Order : 24/09/2012
Related Assessment Year :
Courts : All High Courts (3699) Gujarat High Court (312)

The nature of processing of loose cotton into cotton bales after sprinkling water and mechanically pressing the same is similar to processing camphor powder into camphor cubes. Loose cotton in bulk quantity with lighter density is as a result of pressing converted into cotton bales and to that limited extent it certainly undergoes a change. In view of the Supreme Court having approved the view taken by the Calcutta High Court in the aforesaid case, our task is made easy. There can be no doubt that if camphor powder pressed into cubes can can be said to have undergone some sort of processing, loose cotton too can be said to have been processed when mechanically pressed and converted into cotton bales. We are, therefore, of the opinion that the Tribunal was right in coming to the conclusion that the assessee- company falls within the definition of an industrial company because it processes cotton into cotton bales.

HIGH COURT OF GUJARAT AT AHMEDABAD
TAX APPEAL No. 1062 of 2011

COMMISSIONER OF INCOME TAX
Versus
JAYDEEP COTTON FIBERS PVT LTD

CORAM : HONORABLE MR. JUSTICE AKIL KURESHI

and

HONORABLE MS . JUSTICE HARSHA DEVANI

Date : 24/09/2012

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ORAL ORDER

(Per : HONORABLE MR. JUSTICE AKIL KURESHI)

1) Revenue is in appeal against the judgment of the Income Tax Appellate Tribunal (hereafter to be referred to as “the Tribunal”) dated 31.3.2011 raising following substantial question for our consideration:-

“Whether the Appellate Tribunal is right in law and on facts in deleting the dis allowance of claim of deduction under section 80IB of the Act?”

2) The respondent- assessee claimed deduction under section 80IB of the Income Tax Act, 1961 for the assessment year 2006-07. The Assessing Officer, while framing scrutiny assessment, denied such claim on the ground that the assessee was not engaged in the manufacturing activity. We may record that this was the only ground, on which such benefit was withheld.

3) Assessee carried the order of the assessment in appeal before the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals), by the appellate order, allowed the appeal with respect to such claim. The Appellate Commissioner was of the opinion that, in view of the decision of the Gujarat High Court in the case of Commissioner of Income-Tax, Gujarat-I Vs. Lakhtar Cotton Press Co. (Pvt.) Ltd., reported in 142 ITR 503 and later decision in the case of CIT Vs. The Fatesinhji Ginning & Pressing Mfg. Co. Ltd., reported in 238 ITR 148, the assessee was entitled to deduction under section 80IB of the Act.

4) Revenue carried such appellate order before the Tribunal. The Tribunal, by the impugned order, relying on the assessee’s own case pertaining to earlier assessment years, rejected the Revenue’s appeal.

5) Counsel for the Revenue Shri Pranav G. Desai stated that in the earlier years, the Revenue did not carry the matter in appeal looking to low tax effect. In the present appeal, however, the tax effect was higher than the minimum prescribed limit. We have, therefore, heard the counsel on merits.

6) From the perusal of the orders on record, it clearly emerges that the sole ground on which the claim of the assessee was declined by the Assessing Officer was that, according to him, the assessee was not engaged in the manufacturing activity. From the record, we also notice that the assessee was engaged in the business of ginning and pressing of cotton. The Assessing Officer was of the opinion that such activity did not produce any article or thing and, therefore, amounts to manufacturing activity. Precisely, this issue came up for consideration before this Court in the case of Commissioner of IncomeTax, GujaratI Vs. Lakhtar Cotton Press Co. (Pvt.) Ltd. (Supra). The Division Bench upheld the view of the Tribunal, making following observations:-

“The nature of processing of loose cotton into cotton bales after sprinkling water and mechanically pressing the same is similar to processing camphor powder into camphor cubes. Loose cotton in bulk quantity with lighter density is as a result of pressing converted into cotton bales and to that limited extent it certainly undergoes a change. In view of the Supreme Court having approved the view taken by the Calcutta High Court in the aforesaid case, our task is made easy. There can be no doubt that if camphor powder pressed into cubes can can be said to have undergone some sort of processing, loose cotton too can be said to have been processed when mechanically pressed and converted into cotton bales. We are, therefore, of the opinion that the Tribunal was right in coming to the conclusion that the assessee- company falls within the definition of an “industrial company” because it processes cotton into cotton bales. We, therefore, answer the question framed for out opinion in the affirmative. Both these references are answered accordingly with no order as to costs.”

7) The issue being similar, we do not find that any question of law arises in the present tax appeal. The same is, therefore, dismissed.

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0 responses to “S. 80IB Ginning and pressing of cotton amounts to manufacturing activity”

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