S. 80IC Assembling of Tools & Machinery for final product is equal to manufacturing process
The respondent-assessee was engaged in the business of manufacture of health care and surgical items and in the returns filed for Assessment Years 2006-07, 2008-09 and 2009-10 had declared taxable income of Rs.26,25,230/-, Rs.94,90,363/- and Rs.32,18,350/- respectively. The deduction claimed under Section 80-IC of the Act was to the tune of Rs.42,90,162/-, Rs.35,69,594/- and Rs.2,46,13,965/- respectively. The respondent-assessee had set up a manufacturing unit for manufacture of air purifier or air purification systems. The Assessing Officer held that the aforesaid activities would not qualify as „manufacturing activity‟as the respondent-assessee was a mere assembler and did not have requisite tools or machinery.
The finding of the appellate authorities, including the Tribunal is that the product produced and sold by the respondent-assessee was air purification system. For manufacturing the said product, the assessee had purchased parts like base motors, filters, UV lights etc. but the final product produced was entirely different from its constituents or parts. The product manufactured or produced, i.e. the air purifier or air purification system, was completely a new and an entirely different commodity having distinct name, character and use. The respondent-assessee had even filed photographs before the Assessing Officer to support his contentions on the manufacturing activities undertaken. The respondent-assessee had filed a flow chart of the manufacturing process. The manufacturing unit stood registered with District Industries Centre, Roorkee, Pollution Control Department, Commercial Tax Department, Uttaranchal, etc.
The Assessing Officer did not dispute or question the purchases of the parts used for manufacturing as well as the sale consideration received by the respondent-assessee from sale of the air purifiers but did doubt the purchases of the tools and implements required to undertake the manufacturing activities. It is not the case of the Revenue that the air purifiers were not actually manufactured or sold to third parties and there was bogus purchase of parts or transactions for sale of the manufactured The stand of the respondent-assessee was that they had used simple tools and testing equipments like frequency tester, multi meter, VV intensity meter, wires, CFM flow meter, ozone intensity monitor, nuts and bolts, hand drill, screw driver set, plier cutting set, etc. to carry out assembling and manufacturing of the air purifiers.
In view of the aforesaid factual findings, the appeal of revenue is dismissed.
- See more at: http://taxguru.in/income-tax-case-laws/80ic-assembling-tools-machinery-final-product-equal-manufacturing-process.html#sthash.b1DoYVyg.dpuf
In case of disclosure of material facts of during original assessment proceeding, AO cannot issue re-assessment notice u/s 148 of the Act to find nature of same
It is a settled position in law that for reassessment proceedings beyond the period of four years from the end of the relevant assessment year, it is an essential condition that the income chargeable to tax which has allegedly escaped assessment must be occasioned, inter alia, by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment, for that assessment year. Mr Syali, the learned senior counsel, appearing on behalf of the petitioner / assessee submits that in the present case, this pre-condition has not been met, inasmuch as, there has been no failure on the part of the petitioner / assessee to make a full and true disclosure of the material facts necessary for the assessment. He further points out that even in the reasons which have been supplied, it has not been indicated as to which material fact was not fully and truly disclosed by the assessee. He placed reliance on the decision in Haryana Acrylic Manufacturing Company v. Commissioner of Income Tax & Anr : 308 ITR 38(Del) as well as on Microsoft Corporation (I) Pvt. Ltd v. Deputy Commissioner of Income Tax & Anr: 357 ITR 50 (Del) and Bombay Stock Exchange v. Deputy Director of Income Tax: 2014 TIOL 961 - High Court Bombay, W.P.(C) No. 2468/2011. Mr Syali also place reliance on a recent decision of this court in the case of M/s Swarovski India Pvt. Ltd v. Deputy Commissioner of Income Tax, W.P.(C) 1909/2013 decided on 08.08.2014.
Held by High Court
The fact of the matter is that the petitioner, during the original assessment proceedings, had clearly indicated the nature of the royalty payments. The Assessing Officer had specifically asked in his questionnaire as to the nature of the royalty payments and the assessee was asked to justify the same. Upon further information provided by the assessee, the Assessing Officer considered the aspect of royalty payment and also noted the fact that the petitioner had claimed the same as revenue expenditure. In fact, the Assessing Officer disallowed
34,63,07,373/- out of the entire claim of 70,60,25,973/- and made an addition on account thereof.Consequent upon the above discussion, we are of the view that the very condition that the assessee must not have made full and true disclosure of the material facts is not satisfied and therefore, the reopening cannot be permitted. The impugned notice dated 30.03.2009 and all proceedings pursuant thereto including the impugned order dated 11.2009 are set aside. We are making it clear that we have arrived at the above conclusion upon examining the case from the stand point of validity of assumption of jurisdiction under Section 147/148 and have not examined the merits of the matter as to whether the royalty payments were of a revenue or capital nature.
__._,_.___
No comments:
Post a Comment