Case Law Details
ITO Vs Sudarshan R. Kharbanda (ITAT Mumbai)
If the aforementioned judicial pronouncements and the facts available on record are kept in juxtaposition and analyzed with the assembling of parts done by the assessee, we find that the resultant end product is commercially known differently in the trading world, therefore, certainly it can be said that the activity of the assessee amounts to manufacture, consequently, entitled to deduction u/s 80IC of the Act, because, assembling of various parts in a specified manner and the net results into watches which are used by the public at large for different purposes and is commercially known differently, therefore, it amounts to manufacturing. The resultant end product is outcome of combination of efforts with the help of men and machine. The case of the assessee further find support from the decision in the case of Ramit Kumar Sharma vs DIT (IT) (2009) 309 ITR 344 (AAR-New Delhi) wherein the assessee intend to start a tractor manufacturing industry in the state of Himachal Pradesh, wherein, the primary job was to provide, milling, tooling and grinding of surface of rear cover etc, which are important part of tractor, it was held that the activities amounts to manufacture or production of an article difference from raw castings, thus, entitled to deduction u/s 80IC of the Act. So far as, assembling is concerned, the Ld. counsel for the assessee gave a live demonstration in the court room with respect to the process of assembling, wherein, only some screw were tightened up of already manufactured parts and the end product resulted into a watch. At this stage, the Ld. counsel for the assessee, stated that the assessee is merely screwing up some parts/components, used for manufacturing of the watches. So far as, consumption of electricity is concerned, it was explained that the electricity is used only for light purposes and it is not the case that some machinery used in the process rather broadly the screw drivers are used. The Ld. Counsel also explained that clearance is granted by the check post by the Excise and the VAT department for raw material as well as for finished watches/end product and the sales tax returns and excise returns filed by the assessee for every quarter has been accepted by the receptive Department. The Ld. counsel for the assessee, during hearing before us, also filed the photocopy of the wages register to demonstrate that employees were employed and due wages were paid, therefore, it cannot be said that the assessee is not dong manufacturing activity. Thus, we find no infirmity in the conclusion, of the Ld. Commissioner of Income Tax (Appeal). So far as, carrying forward losses of the unit eligible for 80IC deduction is concerned, the issue has been dealt with in para 2.3.7 of the impugned order in which also, we find no infirmity. Thus, the stand of the Ld. Commissioner of Income Tax (Appeal) is affirmed.
FULL TEXT OF THE ITAT JUDGMENT
The Revenue is aggrieved by the impugned order dated 29/01/2016 of the Ld. First Appellate Authority, Mumbai, allowing the claimed deduction to the tune of Rs.1,98,73,453/- under section 80IC of the Income Tax Act, 1961 (hereinafter the Act) without appreciating that the assessee fail to prove that actually 8,57,826 watches were manufactured in a year with just 13 employees, who are not professionally qualified and just with minimal electric consumption, thus, the assessee has not established that any manufacturing activity was done.
2. During hearing of this appeal, the counsel for the assessee, Shri Harsh Kothari, claimed that the assessee unit is situated at Parwanoo and the raw material, purchased by the assessee was simply assembled without use of sophisticated machinery. Our attention was invited to various pages of the paper book. It was claimed that wage register is also maintained. The Ld. counsel further asserted that manufacturing started on 27/03/2010 and the Ld. Assessing Officer has not disputed the books and purchase of raw materials. Plea was also raised that the assessee also filed sales tax and excise returns, which were accepted by the respective department.
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