Case Law Details
Smt. Shakuntala Devi Vs CIT (Rajasthan High Court)
In the case of Smt. Shakuntala Devi vs. CIT, the Rajasthan High Court addressed the eligibility of a deduction under Section 80IA of the Income Tax Act for the production of gitti from sandstone blocks. The Assessing Officer had initially rejected the deduction claim, arguing that the appellant’s activity did not qualify as ‘manufacturing’ or ‘production’ based on precedents like Lucky Minmat Pvt. Ltd. vs. CIT. The appellant successfully challenged this decision, with the Commissioner of Income Tax (Appeals) initially siding with them. However, the Income Tax Appellate Tribunal reversed this decision, leading to the present appeal. The High Court reviewed the substantial question of law regarding whether ‘production’ under Section 80IA encompasses activities that do not strictly fit the definition of ‘manufacturing.’ Citing the Supreme Court’s judgment in Arihant Tiles & Marbles P. Limited, which recognized that activities leading to new and distinct commodities constitute production, the Court ruled in favor of the appellant. It concluded that the conversion of blocks into gitti does meet the criteria for ‘production’ and thus qualifies for the deduction. The appeal was allowed, and the substantial question of law was answered in favor of the assessee, affirming the eligibility for the tax benefit.
FULL TEXT OF THE JUDGMENT/ORDER OF RAJASTHAN HIGH COURT
1. This appeal is filed against order of the Income Tax Appellate Tribunal dated 29.08.2008.
2. Brief facts are that the appellant engaged in the business of production of gitti from sand stone blocks. In assessment year 2003-04 deduction under Section 80IA of the Income Tax Act, 1961 (for short ‘the Act’) was claimed. The Assessing Officer rejected the claim vide order dated 28.03.2006 on the ground that activity of the appellant cannot be categorized as ‘manufacturing’ or ‘production’. Reliance was placed upon decision of the Supreme Court in the case of Lucky Minmat Pvt. Ltd. Vs. Commissioner of Income Tax, Jaipur reported in [2000] 245 ITR 830 (SC); and decision of this Court in Commissioner of Income Tax Vs. Lucky Mineral Pvt. Ltd. reported in [1997] 226 ITR 245.
Aggrieved of the order, the petitioner filed an appeal before the Commissioner of Income Tax (Appeals) and succeeded. The appeal filed by the Department was accepted by the tribunal vide order dated 29.08.2008, hence the present appeal.
3. While admitting the appeal on 07.09.2012, following substantial question of law was formulated:-
“i. Whether the expression ‘production’ used under Section 80IB of the Income-tax Act, 1961 in which expressions ‘manufacture’ and ‘production’ both have been used are synonyms with each other or the word ‘production’ has a wider meaning than ‘manufacture’ so as to include within the preview, an activity, which may not amount of ‘manufacture’ but may still amount to ‘production’ as held in the case of Arihant Tiles & Marbles (P) Ltd. Vs. ITO, (2007) 211 CTR (Raj.) 169, following the decision in CIT Vs. Sesa Goa Ltd., (2004) 271 ITR 331 (SC),?”
4. Learned counsel for the appellant relies upon decision of the Supreme Court in the case of Income Tax Officer Vs. Arihant Tiles & Marbles P. Limited reported in [2010] 320 ITR 79 (SC).
5. Learned counsel for the respondent relies upon the decision of this Court in the case of CIT Vs. Lucky Mineral Pvt. Ltd. (supra).
6. The substantial question of law arising in the present appeal is no longer res-integra and has been decided by the Supreme Court in Income Tax Officer Vs. Arihant Tiles & Marbles P. Limited (supra). The relevant portion of the judgment is reproduced below:-
19. Applying the above tests laid down by this Court in N.C. Budharaja & Co.’s case (supra) to the facts of the present cases, we are of the view that blocks converted into polished slabs and tiles after undergoing the process indicated above certainly results in emergence of a new and distinct commodity. The original block does not remain the marble block, it becomes a slab or tile. In the circumstances, not only there is manufacture but also an activity which is something beyond manufacture and which brings a new product into existence and, therefore, on the facts of these cases, we are of the view that the High Court was right in coming to the conclusion that the activity undertaken by the respondents-assessees did constitute manufacture or production in terms of section 80-IA of the Income-tax Act, 1961.
20. Before concluding, we would like to make one observation. If the contention of the Department is to be accepted, namely that the activity undertaken by the respondents herein is not a manufacture, then, it would have serious revenue consequences. As stated above, each of the respondents is paying excise duty, some of the respondents are job workers and the activity undertaken by them has been recognised by various Government Authorities as manufacture. To say that the activity will not amount to manufacture or production under Section 80-IA will have disastrous consequences, particularly in view of the fact that the assessees in all the cases would plead that they were not liable to pay excise duty, sales tax etc. because the activity did not constitute manufacture. Keeping in mind the above factors, we are of the view that in the present cases, the activity undertaken by each of the respondents constitutes manufacture or production and, therefore, they would be entitled to the benefit of section 80-IA of the Income-tax Act, 1961.
7. Before parting, it would be appropriate to mention that the decision relied upon by the learned counsel for the Department was considered in the decision of Income Tax Officer Vs. Arihant Tiles & Marbles P. Limited (supra).
8. In view of the above, the appeal is allowed. The substantial question of law is answered in favour of the assessee.
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