Case Law Details
DCIT Vs M/s Dynamic Transmission Limited (ITAT Delhi)
With regard to addition of Rs. 63,66,574/- on account of job work charges u/s. 80IC of the I.T. Act, 1961 is concerned, we note that the AO has observed that deduction u/s. 80IC is available only in respect of articles or things manufactured by itself in its specified industrial unit. As per AO the job work charges are not allowable as these are not income received from articles or things manufactured or produced in its eligible unit.
But the AO has not disputed that job work charges were received from articles or things manufactured or produced in its eligible unit. However, we find considerable cogency in the contention raised by the Ld. AR of the assesse that the nature of job work done and also process done for completing such job work.
Further as per the cost sheet, delivery challans and bills raised for job work charges, a distinct and new object was created. The word ‘manufacture’ is of much wider connotation and would include any process as a result of which a different commodity having distinct name, use and character emerges from the raw material.
Therefore, it cannot be denied that the assessee received job work charges from the manufacturing process through which a new product has emerged from the raw material supplied by its customers. We find considerable cogency in the contention raised by the ld. Counsel of the assessee that the AO in the assessment years 2012-13, 2013- 14 & 2014-15 in assessee’s own case has allowed the deduction under Chapter VIA u/s. 80-IC and also the ITAT, ‘H’ Bench, New Delhi vide its order dated 27.3.2015 passed in the case of ITO vs. Zeon Lifessciences Ltd. for the assessment year 2006-07 held that the assessee job work charges have to be treated as manufacturing activity, and it is not envisaged u/s. 80-IC to maintain separate books of account for manufacturing on his own account and for job work.
Keeping in view of the facts and circumstances of the case as explained above and in view of the rule of consistency and following the decision of the ITAT, as aforesaid, we are of the considered view that the job work charges amounting to Res. 63,66,574/- as received from the assessee’s eligible unit is eligible for computing deduction u/s. 80IC of the I.T. Act, 1961. Therefore, the AO was rightly directed to re-compute the deduction u/s. 80IC of the Act by the Ld. CIT(A), which does not need any interference on our part, hence we uphold the same and reject the ground raised by the Revenue.
FULL TEXT OF THE ITAT ORDER IS AS FOLLOWS:-
The Revenue has filed this Appeal against the impugned Order dated 15.1.2015 of the Ld. CIT(A), Rohtak relevant to assessment year 2011-12.
2. The ground raised in this Appeal read as under:-
“On facts and in the circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs. 63,66,574/- made by the AO on account of disallowance of claim of deduction u/s. 80IC as the Ld. CIT(A) has not appreciated the facts explained in the assessment order passed by the AO that the assessee is eligible for deduction u/s. 80IC only with respect to articles or things manufactured in its specified industrial unit and not in respect of job work done outside the specified unit.”
3. The brief facts of the case are that the assessee filed its e-return of income on 30.9.2011 at Rs. 1,40,29,660/-, claiming therein deduction of Rs. 74,04,479/- under section 80IC of the Income Tax Act, 1961. The case was picked up for scrutiny and a statutory notice u/s. 143(2) of the I.T. Act was issued on 11.9.2012 and thereafter a notice u/s. 142(1) alongwith a detailed questionnaire was issued by the ACIT, Circle, Rohtak on 17.9.2013 and another notice u/s. 143(2) of the Act was issued on 29.10.2013 and in response thereto the A.R. of the assessee attended the proceedings. The assessee company is engaged in the business of manufacturing of Precision turned parts and gears from bright bars and forging etc. and also doing job work for the same. The return of income for assessment year under consideration was filed at the income of Rs. 1,40,29,660/- after claiming deduction of Rs. 74,04,479/-u/s. 80IC of the I.T. Act, 1961. The AO made the additions of Rs. 68,84,141/- towards the income of the assessee by disallowing deduction of Rs. 63,66,574/- claimed u/s. 80IC of the I.T. Act, 1961 being the job work income not allowable and Rs. 5,17,567/- loss of earlier year and completed the assessment at Rs. 2,09,13,800/- u/s. 143(3) of the Act vide order dated 07.3.2014. Against the aforesaid assessment order, assessee appealed before the Ld. CIT(A), Rohtak, who vide his impugned order dated 15.01.2015 has allowed the appeal of the assessee by deleting the additions in dispute. Aggrieved with the order of the Ld. CIT(A), the Revenue is in appeal before the Tribunal.
4. Ld. DR relied upon the Order of the AO and reiterated the contentions raised in the grounds of appeal. He stated that the job work income of Rs. 63,66,574/-, credited in the profit and loss account of the assessee’s eligible unit, can be considered to have been derived from the industrial activity of the assessee’s eligible unit, yet the same cannot be considered as ‘income received for articles or things manufactured or produced in its eligible unit.”, hence, the addition in dispute was rightly made by the AO, which does not need any interference.
5. On the other hand, Ld. A.R. of the assessee relied upon the order of the ld. CIT(A) and stated that he has passed a well reasoned order which does not need any interference. During the hearing, Ld. Counsel of the assessee has filed the copies of the assessment orders for the assessment years 2012-13, 2013-14 & 2014-15 in assessee’s own case wherein the deduction u/s. 80IC was allowed as well as decision of the ITAT, ‘H’ Bench, New Delhi dated 27.3.2015 in the case of ITO vs. Zeon Lifessciences Ltd. wherein it was held that the assessee job work charges have to be treated as manufacturing activity, and it is not envisaged u/s. 80-IC to maintain separate books of account for manufacturing on his own account and for job work. In view of above, he requested that order of the Ld. CIT(A) may be upheld and appeal of the Revenue may be dismissed.
6. We have heard both the parties and perused the records, especially the order of the Ld. CIT(A). With regard to addition of Rs. 63,66,574/- on account of job work charges u/s. 80IC of the I.T. Act, 1961 is concerned, we note that the AO has observed that deduction u/s. 80IC is available only in respect of articles or things manufactured by itself in its specified industrial unit. As per AO the job work charges are not allowable as these are not income received from articles or things manufactured or produced in its eligible unit. But the AO has not disputed that job work charges were received from articles or things manufactured or produced in its eligible unit. However, we find considerable cogency in the contention raised by the Ld. AR of the assesse that the nature of job work done and also process done for completing such job work. Further as per the cost sheet, delivery challans and bills raised for job work charges, a distinct and new object was created. The word ‘manufacture’ is of much wider connotation and would include any process as a result of which a different commodity having distinct name, use and character emerges from the raw material. Therefore, it cannot be denied that the assessee received job work charges from the manufacturing process through which a new product has emerged from the raw material supplied by its customers. We find considerable cogency in the contention raised by the ld. Counsel of the assessee that the AO in the assessment years 2012-13, 2013-14 & 2014-15 in assessee’s own case has allowed the deduction under Chapter VIA u/s. 80-IC and also the ITAT, ‘H’ Bench, New Delhi vide its order dated 27.3.2015 passed in the case of ITO vs. Zeon Lifessciences Ltd. for the assessment year 2006-07 held that the assessee job work charges have to be treated as manufacturing activity, and it is not envisaged u/s. 80-IC to maintain separate books of account for manufacturing on his own account and for job work. Keeping in view of the facts and circumstances of the case as explained above and in view of the rule of consistency and following the decision of the ITAT, as aforesaid, we are of the considered view that the job work charges amounting to Res. 63,66,574/- as received from the assessee’s eligible unit is eligible for computing deduction u/s. 80IC of the I.T. Act, 1961. Therefore, the AO was rightly directed to re-compute the deduction u/s. 80IC of the Act by the Ld. CIT(A), which does not need any interference on our part, hence we uphold the same and reject the ground raised by the Revenue.
7. In the result, the appeal filed by the Revenue stands dismissed.
Order pronounced on 12/04/2018.
