Chartered Accountant Finance: [aaykarbhavan] Judgments and Information [1 Attachment]

Assessee  cannot be denied credit for TDS on the ground of Form 26AS mismatch because he  is not at fault. Non-grant of TDS credit causes harassment, inconvenience &  makes the assessee feel cheated. Dept to pay interest + costs of Rs. 25,000
The assessee filed a return in  which he claimed a refund of Rs. 2.32 lakhs on account of excess TDS by the  Government department. The return was processed by the Central Processing  Centre (CPC) of the Income-tax Department at Bangalore and a refund of only  Rs.43,740 was issued. No intimation was given to the assessee as to why the  balance amount of Rs.1.88,630 was not refundable. The assessee filed an  application u/s 154 for rectification of the mistake and asked for refund of  the balance amount. As there was no response from the department despite  several reminders, the assessee filed a writ petition in the High Court. HELD  by the High Court allowing the Petition:
(i) The difficulty faced by the  tax payers relating to credit of TDS was considered by the Delhi High Court in Court On its Own Motion vs. CIT 352 ITR 273 and the  CBDT was directed to issue directions with regard to giving credit of unmatched  and mismatched TDS certificates. Pursuant thereto, the CBDT issued Instruction No.5 of 2013 dated 8.7.2013 directing  that where the assessee approaches the AO with requisite details and  particulars in the form of TDS certificate as evidence against any mismatch  amount the AO would verify whether or not the deductor had made payment of the  TDS in the government account and, in the event, the payment had been made,  credit of the same would be given to the assessee.
(ii) On facts, no effort has  been made by the AO to verify whether the deductor had made the payment of the  TDS in the government account. On the other hand, the Income-tax department has  shown helplessness in not refunding the amount on the sole ground that the  details of the TDS did not match with the details shown in Form 26AS. There is  a presumption that the deductor has deposited TDS amount in the government  account especially when the deductor is a government department. By denying the  benefit of TDS to the Petitioner because of the fault of the deductor causes  not only harassment and inconvenience, but also makes the assessee feel  cheated. There is no fault on the part of the Petitioner. The fault, if any, lay  with the deductor. The mismatching is not attributable to the assessee. The  department must refund the amount within 3 weeks with interest. The department  must also pay costs of Rs. 25,000 to the Petitioner. 
-- 
  IT : Where there was difference in value of property as mentioned in   sale deed and as confirmed by seller and seller had also filed an   affidavit confirming said facts, differential be treated as unexplained   investment of assessee
■■■
  [2014] 45 taxmann.com 172 (Kerala)
  HIGH COURT OF KERALA
Commissioner of Income-tax, Thrissur
v.
  P. M. Aboobacker*
  DR. MANJULA CHELLUR, CJ. 
AND A.M. SHAFFIQUE, J.
  IT APPEAL NO. 201 OF 2011†
  MARCH  20, 2014 
Section   69B of the Income-tax Act, 1961 - Undisclosed investments (Investment   in immovable property) - Assessment year 2006-07 - Assessee, owner of a   shopping complex, purchased a property from one 'N' - During search   proceeding at premises of 'N', 'N' submitted that he sold property to   assessee at higher price than that reflected in sale deed - Further, he   had filed an affidavit indicating that property was sold for higher   price - On cross examination, he had confirmed his said statements -   Moreover, he had declared income from sale of property and paid tax -   Whether uncontroverted evidence of 'N' showed that assessee had not   declared actual investment made for acquiring said building and thus   addition under section 69B was justified - Held, yes [In favour of   revenue]
  FACTS
 
■   The assessee, owner of a shopping complex, submitted his return of income.
  ■ An   information was obtained during search and seizure operation at   residence of one 'N' that he had sold land to the assessee for higher   price than that mentioned in sale deed. N had also filed his affidavit   confirming said statement. Even on cross-examination, he had confirmed   his said statement.
■   Accordingly, the Assessing Officer treated differential as undisclosed investment.
  ■ The   Commissioner (Appeals) observed that the Assessing Officer had made the   assessment only on the deposition of 'N'. In the absence of any   evidence linking the payments stated to be paid by the assessee, merely   based on the statement of 'N', it could not be stated that the assessee   had received additional consideration.
■   The Tribunal confirmed Commissioner (Appeals) order.
  ■ On further appeal:
HELD
   
  ■ There   is no dispute about the fact that the revenue is liable to prove the   fact that there was undervaluation of the property as shown in the sale   deed and that a higher amount has been paid by the purchaser to the   seller. The question is apparently one of fact. On consideration of the   factual material, the first appellate authority as well as the Tribunal   unanimously held that the evidence was lacking to come to such a   conclusion. The argument of the assessee is that such findings are   perverse as substantial evidence was available on record and the first   appellate authority had relied upon irrelevant consideration to reject   such evidence. Further, the Tribunal did not re-appreciate the evidence,   whereas it has just confirmed the order passed by the first appellate   authority. [Para 11]
■   'N'   had given a statement under section 132(4) stating that he sold the   property for Rs. 7,82,00,000. This is further confirmed by an affidavit   dated 6-11-2008 of 'N', indicating that he had purchased the property   for Rs. 66,20,000 and sold the property for Rs. 78,20,000. When the   assessee requested for cross examination and 'N' was summoned and sworn   statement was recorded on 10-2-2008, he stated the details about the   purchase of property from 'M' for Rs. 66,20,000 and sold the property in   favour of the assessee for Rs. 78,20,000 and the fact that a lesser   amount was shown in the sale deed. During cross examination, he denied   the suggestions made by the assessee and there is nothing to indicate   that 'N' has given a false statement. 'N' has declared the income from   sale of property and has paid tax. [Para 12]
■   The   oral evidence, which is supported by section 132(4)statement and the   affidavit of 'N', which is uncontroverted even during cross examination,   can be treated as sufficient evidence to show that the property has   been sold for Rs. 78,20,000/-. The first appellate authority had gone a   little further and had indicated that the revenue has not adduced any   further evidence to show that 'N' had paid Rs. 66,20,000 to 'M' for   purchasing the property and the assessee has paid the differential   amount to 'N'. Apparently, these are all instances where the parties do   not maintain any records and they deal in undisclosed amounts.   Therefore, the evidence made available by the revenue is a probable   evidence. It is relevant to note that if at all the assessee wanted to   disprove the evidence given by 'N', the assessee could have proved   otherwise by giving some evidence to show the market value of the land   in the locality. [Para 12]
■   No   such evidence is adduced by the assessee. Therefore, this was a case in   which the revenue has to prove the existence of a fact that   undervaluation was made by the assessee and that the assessee has paid   more amounts for purchase of property amounting to Rs. 54,20,000/-. When   that fact is proved, the burden shifts to the assessee to prove   otherwise. He had an opportunity to cross examine the witness and there   was nothing on record to indicate that the witness had spoken a false   story. Under these circumstances, even in the absence of any other   material produced by the revenue, the uncontroverted evidence of 'N' was   in favour of coming to a finding that the assessee had not declared the   actual investment made for acquiring the said building. The findings of   the appellate authority as well as the Tribunal to the aforesaid extent   are perverse. [Para 12]
  CASES REFERRED TO
 
  K.P. Varghese v. ITO [1981] 131 ITR 597/7 Taxman 13 (para 2) and CIT v. P.V. Kalyanasundaram[2007] 294 ITR 49/164 Taxman 78 (SC) (para 2) and CIT v. Medical Trust Hospital [2008] 173 Taxman 384 (Ker.) (para 3).
P.K.R Menon and Jose Joseph for the Appellant. P. Balakrishnan for the Respondent.
  JUDGMENT
 
  A.M. Shaffique, J - This appeal is filed by the Revenue against   the order passed by the Income-tax Appellate Tribunal, Cochin Bench in   ITA No. 267/Coch/2009 with reference to the assessment year 2006-07.
  2. The facts involved in the above case would disclose that the   assessee, owner of a shopping complex, submitted his return of income   for the assessment year on 15.11.2007. The assessing officer, while   making the assessment under Section 143(3), had completed the assessment   determining the total income at Rs. 1,05,85,935/-. While determining   the said amount as the income, the Assessing Officer included an amount   of Rs. 54,20,000/- as undisclosed investment. This was based on an   information obtained during search and seizure operation at the   residence of Mr. P.A. Noushad. He had given information stating that he   had sold 19.5 cents of land to the assessee. He also disclosed that   though the price mentioned in the sale deed was only Rs. 24,00,000/-, he   had actually paid Rs. 78,20,200/-. He had also stated that he purchased   the said property from one Mrs. M.S. Mariamma Kurian for Rs.   66,20,000/-, though the price mentioned in the said sale deed was only   Rs. 21,75,000/-. It is based on this factual situation that the return   of the assessee was finalised. The assessee preferred an appeal before   the Commissioner of Income-tax (Appeals), who allowed the appeal   deleting the said addition. The revenue carried the matter before the   Tribunal and the Tribunal dismissed the appeal based on the judgments of   the Supreme Court in K.P. Varghese v. ITO [1981] 131 ITR 597/7 Taxman 13 and CIT v. P.V. Kalyanasundaram [2007] 294 ITR 49/164 Taxman 78 (SC).
3. While impugning the aforesaid orders of the appellate authorities, the revenue relies upon the decision inCIT v. Medical Trust Hospital [2008] 173 Taxman 384 (Ker.) to   contend that subsequent retraction of the statement has to be ignored   when the said person had declared the higher value in his return of   income and paid tax thereon. The revenue has raised the following   substantial questions of law:
  "1.   Whether, on the facts and in the circumstances of the case and the   receipt of on money having been admitted by the assessee in the sworn   statement, the examination in cross, the affidavit, the tax return —
  (i)   the Tribunal is right in law and fact in relying on the consideration shown in the sale deed;
  (ii)   the Tribunal is right in law and fact in interfering with the assessment   order and are not the reliance on the sale deed and the interference   with the assessment order perverse and against law and logic.
  2.   Whether, on the facts and in the circumstances of the case and considering the distinguishing features,
(i)   the Tribunal is right in law and fact in relying on the decisions of the Hon'ble Supreme Court in Varghese (131 ITR 597) and Kalyanasundaram (204 ITR 49)?
(ii)   should not the Tribunal have relied on the decision of the Hon'ble Kerala High Court reported in 220 CTR 166."
4. Heard learned standing counsel appearing for the Department and the learned counsel appearing for the assessee.
5. It is the main argument of the appellant that the judgment of the Supreme Court in K.P. Varghese's case (supra) has no application to the facts and circumstances involved in the case.
6. In K.P. Varghese's case,   the issue involved was whether understatement of consideration in   transfer of property is a necessary condition for attracting the   applicability of sub-section (2) of Section 52 of the Income-tax Act,   1961. Sub-section (2) indicated that if in the opinion of the Income-tax   Officer, fair and market value of a capital asset transferred by an   assessee as on the date of transfer exceeds the full value of the   consideration declared by the assessee in respect of transfer of such   capital asset by an amount of not less than 15% of the value so   declared, the full value of the consideration for such capital asset   shall, with the previous approval of the Inspecting Assistant   Commissioner, be taken to be its fair market value on the date of its   transfer. The Supreme Court held that if the revenue seeks to bring a   case within sub-section (2), it must show not only that the fair market   value of the capital asset as on the date of transfer exceeds the full   value of the consideration declared by the assessee for not less than   15% of the value so declared but also that the consideration has been   understated and the assessee has actually received more than what is   declared by him. It is also held that these conditions have to be   satisfied and the burden of proving satisfaction of such two conditions   vests on the revenue. It is not enough that the revenue established any   one of the conditions.
7. In P.V. Kalyanasundaram's case (supra),   the issue involved was the finding regarding valuation of a property.   Being a question of fact, the Supreme Court held that to ascertain the   actual sale price of the property, the contradictory statement made by a   person or the loose sheets recovered in the course of search could be   relied upon. Such issues being questions of fact cannot be gone into as a   substantial question of law.
8. In   the case on hand, the revenue strongly relies upon the evidence   available before the Assessing Officer to prove the actual value of land   purchased by the assessee from Sri. Noushad. An affidavit is filed as   Annexure B, which is part of the record of the Assessing Officer in   which Mr. Noushad has, in categoric terms, stated that he purchased the   aforesaid property for Rs. 66,20,000/- and he sold the said property to   the assessee for Rs. 78,20,000/-. That apart, during search, he had   given a statement under Section 132(4) on the same terms. Further, the   assessee requested for cross examining the aforesaid Noushad and his   sworn statement was recorded by the Assessing Officer and he was cross   examined by the assessee. The witness spoke in accordance with the   statement he had given earlier and confirmed the said earlier statement   regarding the actual transaction. Though he was cross examined, nothing   was brought out to suggest otherwise. Further, Mr. Noushad has declared   the income and had paid tax on the amount received by him for sale of   property at the price mentioned by him in the statement. The first   appellant. authority observed that the Assessing Officer had made the   assessment only on the deposition of Mr. Noushad and other   circumstantial evidence gathered by him. The statement of payments   annexed to the deposition made by Mr. Noushad shows only cash   withdrawals from his bank account and in no way it has been correlated   to Mrs. Mariamma. There is no acknowledgement by Mrs. Mariamma in regard   to the fact that she had received Rs.66,20,000/-. In the absence of any   evidence linking the payments stated to be paid by the appellant,   merely based on the statement of Mr. Noushad, it cannot be stated that   the assessee has received additional consideration. It is found that   when it is the duty of the revenue to prove beyond doubt that additional   consideration has exchanged hands, in the absence of any material and   evidence, such a decision cannot be taken on mere assumption or   probabilities. Hence, it was found that the assessing officer has failed   to establish that additional consideration has been paid by the   assessee.
9. The   Tribunal confirmed the opinion that the decision of the Supreme Court   squarely applies to the facts of the case and therefore confirmed the   order passed by the first appellate authority.
10. The learned standing counsel relies upon the judgment of this Court in Medical Trust Hospital (supra).   That was a case where the question involved was whether a retracted   statement can be taken into consideration for the purpose of adducing   evidence regarding the value of property. In the said case, in a   statement under Section 132(4) before the inspecting officers, purchaser   stated that he had reported Rs. 41 lakhs being the differential price   which, according to him, was paid to the assessee for purchase of land   and building over and above the value declared in the sale document and   paid tax thereon. Subsequently, he gave a statement contrary to his   earlier stand. It is held that when the person who gave the statement   under Section 132(4) declares the income and pays tax thereon, it is a   reconfirmation of that statement. But, subsequently, even if he goes   back from the earlier statement while cross examination, the Assessing   Officer was justified in rejecting the evidence given by the purchaser   in cross examination. It is further found that the Tribunal and the   first appellate authority went wrong in relying upon the statement in   cross examination and in accepting the case of the respondent that the   building was sold for the price declared in the document.
11. There   is no dispute about the fact that the revenue is liable to prove the   fact that there was undervaluation of the property as shown in the sale   deed and that a higher amount has been paid by the purchaser to the   seller. The question is apparently one of fact. On consideration of the   factual materials, the first appellate authority as well as the Tribunal   unanimously held that the evidence was lacking to come to such a   conclusion. The argument of the appellant is that such findings are   perverse as substantial evidence was available on record and the first   appellate authority had relied upon irrelevant consideration to reject   such evidence. Further, the Tribunal did not re-appreciate the evidence,   whereas it has just confirmed the order passed by the first appellate   authority.
12. On a perusal of the evidence available on record, the following facts are clear:
(1)   That   Mr. Noushad has given a statement under Section 132(4) of the   Income-tax Act stating that he sold the property for Rs. 7,82,00,000/- .
(2)   This   is further confirmed by an affidavit dated 6.11.2008 of Mr. Noushad,   indicating that he had purchased the property for Rs. 66,20,000/-and   sold the property for Rs. 78,20,000/-.
(3)   When   the assessee requested for cross examination and Mr. Noushad was   summoned and sworn statement was recorded on 10.2.2008, he stated the   details about the purchase of property from Smt. Mariamma Kurian for Rs.   66.20,000/- and sold the property in favour of the assessee for Rs.   78,20,000/- and the fact that a lesser amount was shown in the sale   deed.
(4)   During   cross examination, he denied the suggestions made by the assessee and   there is nothing to indicate that Mr. Noushad has given a false   statement.
(5)   Mr. Noushad has declared the income from sale of property and has paid tax.
  When these materials are available, can it be said that the revenue has   not proved their case? We are of the view that the oral evidence, which   is supported by Section 132(4) statement and the affidavit of Mr.   Noushad, which is uncontroverted even during cross examination, can be   treated as sufficient evidence to show that the property has been sold   for Rs. 78,20,000/-. The first appellate authority had gone a little   further and had indicated that the revenue has not adduced any further   evidence to show that Mr. Noushad had paid Rs. 66,20,000/- to Smt.   Mariamma Kurian for purchasing the property and the assessee has paid   the differential amount to Mr. Noushad. Apparently, these are all   instances where the parties do not maintain any records and they deal in   undisclosed amounts. This Court in Medical Trust Hospital's case had   occasion to observe that it is a notorious fact that on account of the   high stamp duty prevalent in the State undervaluation is a normal course   adopted by the parties to avoid stamp duty and huge expenditure on   transfer of property. Therefore, the evidence made available by the   Revenue is a probable evidence. It is relevant to note that if at all   the assessee wanted to disprove the evidence given by Mr. Noushad, the   assessee could have proved otherwise by giving some evidence to show the   market value of the land in the locality. No such evidence is adduced   by the assessee. Therefore, this was a case in which the revenue has to   prove the existence of a fact that undervaluation was made by the   assessee and that the assessee has paid more amounts for purchase of   property amounting to Rs. 54,20,000/-. When that fact is proved, the   burden shifts to the assessee to prove otherwise. He had an opportunity   to cross examine the witness and there was nothing on record to indicate   that the witness had spoken a false story. Under these circumstances,   we are of the opinion that even in the absence of any other material   produced by the revenue, the uncontroverted evidence of Mr. Noushad was   in favour of coming to a finding that the assessee has not declared the   actual investment made for acquiring the said building. The findings of   the appellate authority as well as the Tribunal to the aforesaid extent   are perverse and therefore it gives rise to a substantial question of   law as stated in the memorandum of appeal.
In   the result, the appeal is allowed, the questions of law are found in   favour of the Department and we set aside the orders passed by the   Commissioner of Income-tax (Appeal) and the Tribunal and confirm the   order passed by the Assessing Officer.
POOJA
  
  *In favour of revenue.
  
  †Arising out of order of Tribunal in IT Appeal No. 267 (Coch) of 2009.
Service Tax
Web hosting service received by appellant from foreign service provider is used by appellant for marketing of his products - prima facie same   has to be treated as Support Service of business or commerce and cannot   be classified as Information Technology Service - Pre-deposit ordered:   CESTAT
THE appellant   have entered into agreements with various Telecom service Providers,   such as, Bharti Airtel Ltd. etc. for supplying the content including   user generated contents which enable the mobile phone subscribers   receive advertisements, ring tones, general information like cricket   scores etc. by the way of SMS. The Department was of the view that this   service provided by the appellant to various telecom service providers   during the period from 01/5/06 to 31/05/07 is "business support   service". The demand raised is of Rs.53,02,577/-.
  IT : Where transformer oil had been purchased by assessee from market   and centrifuging i.e., processing had been done by centrifugal machine   in order to make it usable in transformer and no articles or things had   emerged from said processing, assessee was not entitled to benefits of   100 per cent deduction under section 80-IA
■■■
  [2014] 45 taxmann.com 171 (Allahabad)
  HIGH COURT OF ALLAHABAD
Commissioner of Income-tax
v.
  S.K. Transformer (P.) Ltd.*
ASHOK BHUSHAN AND MAHESH CHANDRA TRIPATHI, JJ.
IT APPEAL NO. 343 OF 2005†
MARCH  26, 2014 
  Section 80-IA of the Income-tax Act, 1961 - Deductions - Profits and   gains from Industrial undertakings, etc., after certain   dates/infrastructure undertakings (Manufacture) - Assessment year   1997-98 - Assessee, a private limited company, was repairing and   manufacturing transformers - It claimed 100 per cent deduction in   respect of transformer oil, scrap and labour charges for sale of scrap -   Transformer oil had been purchased by assessee from market and   centrifuging i.e., processing, had been done by centrifugal machine in   order to make it usable in transformer - In substance, no new articles   or things had emerged from said processing, but only some special   processing or treatment had been given to transformer oil through a   particular method and, thus, it was a sort of processing only and could   not be termed as manufacture of centrifuged transformer oil - Whether   since there was no change in substance and no new article had come out,   assessee was not entitled deduction under section 80-IA - Held, yes   [Paras 26 and 27] [In favour of revenue]
  FACTS
 
■   The   assessee, a private limited company, was repairing and manufacturing   transformers. It claimed deduction under section 80-IA in respect of   transformer oil, scrap and labour charges for sale of scrap.
■   The   Assessing Officer noticed that company had been engaged in repairing of   old transformer and it did not manufacture new transformer.
■   The   assessee submitted that company had been manufacturing aluminium HT/LT   Leg Coils which were used in old burnt transformers and on the basis of   the said manufacturing, the assessee had claimed 100 per cent deduction   under section 80-IA(2)(iv)(c).
■   The   Assessing Officer had held that assessee had not manufactured or   produced transformer oil and scrap, rather had purchased the T/oil from   market and only centrifuging i.e., processing had been done, but no new   article or thing had been produced/manufactured. Finally, the Assessing   Officer had turned down the plea of the assessee of 100 per cent   deduction under section 80-IA.
■   On appeal, the Commissioner (Appeals) held that the assessee was entitled for the benefits under section 80-IA.
■   On   second appeal, the Tribunal allowed deduction under section 80-IA on   transformer oil, which was not sold, but was a part of assembly of   transformer, and disallowed deduction under section 80-IA on scrap and   the labour charges for the sale of scrap.
■   On further appeal:
  HELD
 
■   As   per the provision of section 80-IA, the same would be applicable to a   company, which manufacture or produce any article or things. In the   present case, the assessee company perform work in the nature of   business for repairing and manufacturing of transformer. It has also   been contended by the assessee that the company has been manufacturing   aluminium HT/LT Leg Coils, which were used in old burnt transformers and   in this regard, it had also submitted in detail before the assessing   authority. The company did not manufacture or produce transformer oil   and scrap, rather it has purchased the T/Oil from the market and only   centrifuging has been done and no new article or things has been   produced/manufactured, only processing has been done. In the processing   scrap, it had obtained from old/burnt Transformers Coils, which were   made of aluminium wires of different amperes. It also appeared from the   record that the scrap has not been manufactured/produced. Certain more   small parts have been purchased and have been used in manufacture of new   HT/LT Leg Coils. It also appears that the assessee has purchased the   transformer oil from the market and after centrifuging the transformer   oil by centrifugal machine, the centrifuged transformer oil has been   made useful in old/burnt transformer. It is a sort of processing only   and cannot be termed as manufacture of centrifuged transformer oil.   [Para 19]
■   It   is apparent that the assessee did indulge in processing activities, but   no manufacture or production of new articles or things is involved in   this processing. [Para 20]
■   The assessee has also taken a stand that the word 'manufacture' and 'produce' has been defined in clauses (iii) and (vi) of Explanation to section 10-A(8) and clauses (iii) & (iv) of Explanation to   section 10-B(7), while discussing the deductions under the said   sections in relation to the 'Newly established Industrial Undertakings   in Free Trade Zones' and 'newly established 100 per cent Export Oriented   Undertakings' respectively. On this analogy, it has been argued that   processing of articles or things done by assessee should be treated as   'Manufacture' of new article or thing. [Para 21]
■   The Explanations of   both the above sections begin with the opening limb 'For the purpose of   this section' and, therefore, it cannot be reasonably construed that   this inclusive definition of 'Manufacture' or 'Produce' as enuciated and   elaborated in sections 10A and 10B is applicable to provisions of   section 80-I or section 80-IA because these words have been defined with   a particular purpose or with reference to the limited/particular   context, i.e., free trade zone and 100 per cent Export Oriented   Undertakings. Although prima facie, there appears to be a   discrimination yet this is a reasonable/discrimination because it is   well within the competence of the legislature to define a word for   specific purposes or object or section and not for general connotation   wherever these words occur in the IT Act. Had this been the intention or   object of the legislature/Parliament, the word 'Manufacture' world also   have been defined in section 80-I or 80-IA in the same manner or a   reference must have been made in section 10-A or 10-B because these   sections are on the statute for the last 7-8 years or even some more   years with certain new charges. [Para 22]
■   The   Commissioner as well as Tribunal have given much emphasis on processing   and held that the assessee, industrial undertaking does processing of   goods and entitled for benefit under section 80-IA, just to appreciate   the processing, it would be appropriate to place few more meanings of   the processing even though the processing has not been defined in the   Act.
■   On   bare perusal of literal meaning of processing, it is clear that by   means of continuous and regular action or succession of action taking   place or carried on in a definite manner and leading to the   accomplishment of some result, then only some benefits could be   conferred in favour of the assessee. [Para 26]
■   From   the aforementioned facts and circumstances of the case, it is clear   that definition of 'processing' would not be applicable in the present   case, especially in the background that the transformer oil had been   purchased by the assessee from market and centrifuging had been done by   centrifugal machine in order to make it usable in Transformer, but in   substance no new articles or things has emerged from the said   processing, only some special processing or treatment had been given to   transformer oil through a particular method. Therefore, it cannot be   construed that due to this transformation or activity there was change   in the substance and new article had come out. [Para 27]
■   Therefore,   in the aforementioned facts and circumstance, it is clear that the   assessee did not indulge in any manufacturing activities or producing   any new articles or things and, accordingly, the assessee was not   entitled to the benefits of 100 per cent deduction under section   80-IA(2)(iv)(c). [Para 28]
  CASES REFERRED TO
 
  Tamil Nadu State Transport Corpn. Ltd. v. CIT [2001] 252 ITR 883/118 Taxman 771 (SC) (para 6),CIT v. Relish Foods [1999] 237 ITR 59/103 Taxman 392 (SC) (para 7), Sterling Foods v. State of Karnataka [1986] 63 STC 239 (SC) (para 8) and CIT v. Venkateswara Hatcheries (P.)   Ltd. [1999] 237 ITR 174/103 Taxman 503 (SC) (para 23).
S. Chopra and B. Agrawal for the Appellant. S.P. Kesharwani for the Respondent.
  ORDER
 
  M.C. Tripathi, J. - Heard Sri Shambhu Chopra, learned counsel for   the appellant and Sri Nitin Kesharwani, learned counsel appearing for   the assessee.
  2. This appeal under section 260(A) of the Income Tax Act, 1961   (herein after called the Act, 1961) has been filed against the judgement   and order dated 28.05.2005 passed by the Income Tax Appellant Tribunal,   S.M.C. Bench, Allahabad (herein after called the Tribunal) in   I.T.A.No.390/ALLD/03, for the assessment year 1997-98.
3. The   assessing officer by assessment order dated 02.06.1999 rejected the   claim of the assessee claiming 100% deduction under Section   80IA(2)(iv)(c) of the I.T. Act, 1961.
4. The   assessee filed an appeal before the Commissioner of Income Tax   (Appeals), which was decided by the Commissioner on 23.05.2003, allowing   the assessee's appeal with following observation:—
"The   definition of the word Industrial Undertaking to which Section 80IA   applies, includes 'processing of goods' also. Therefore, I hold that   even processing of goods can be considered alongwith manufacture or   production of goods while allowing deduction in respect of profits of   the industrial undertaking u/s 80IA of the I.T. Act, 61. Therefore, I   direct the A.O. to allow deduction with reference to the entire profits   assessed in the assessment order."
5. Aggrieved   with the order dated 23.05.2003 the Revenue had filed an appeal before   the Income Tax Appellate Tribunal, S.M.C. Bench, Allahabad. The Tribunal   vide judgement and order dated 28.05.2005 had partly allowed the   appeal, with following observation:—
"I   have considered the rival submissions. I have seen the calculation of   deduction u/s. 80IA of the Act. I find that deduction u/s. 80IA has been   claimed on the transformer oil, scrap as well as the labour charges for   the sale of scrap. I agree that the transformer oil as such was not   sold, but was a part of assembly of transformer and therefore, deduction   u/s. 80IA is allowable on it. But certainly, no deduction u/s. 80IA of   the Act is allowable on scrap and the labour charges for the sale of   scrap. I, therefore, direct the A.O. to allow deduction u/s. 80IA on the   transformer oil and withdraw the deduction u/s. 80IA of the Act on the   scrap and the labour charges for sale of scrap. The grounds of appeal   directed by the Revenue are partly allowed."
Against which the appellant filed an appeal before this Hon'ble Court, which was admitted on the following question of law:—
  "1.   Whether on the facts and circumstances of the case, is the Tribunal   legally correct in its view that the assessee's business is an   industrial undertaking within the meaning of Section 80IA of the I.T.   Act, 1961.
2.   Whether   on the facts and circumstances of the case, was the ITAT legally   correct in holding that the assessee was legally entitled to the claim   U/s 80IA on transformer oil."
6. Sri   Shambhu Chopra, learned counsel for the Revenue has submitted that in   present facts and circumstances of the case the tribunal has erred and   wrongly interpreted Section 80IA(2)(iv)(c) of the I.T. Act, 1961 and the   assessee company was, infact, not indulging in any activities or   producing/manufacturing the articles and no new product has come out   from their processing work, infact, it only repair the transformers and   as per the provisions of the section 80IA(2)(iv)(c) of the I.T. Act   1961, while confirming the benefit of 100% deduction, the company must   manufacture new product and while processing, manufacturing or   producting new things, articles or product may come out.
He has also cited the judgement of Hon'ble Apex Court, Tamil Nadu State Transport Corporation Ltd. v.CIT [2001] 252 ITR 883.   By which he has contended that the tyre retreading does not amount to   new production and as per the Hon'ble Apex Court, no benefit can be   conferred under section 80 HH of the I.T. Act, 1961.
The relevant portion is quoted below:—
  "From the decision of the High Court (see (1999) 239 ITR 375)   to the effect (I) that for the purposes of the relief under section   80HH of the Income-tax Act, 1961, there has to be production which   brings into existence a new article; and (ii) that when a tyre wears   out, its life might be renewed by retreading but a different and   distinct commodity cannot be said to have come into existence as a   result of retreading, and, therefore, the business of retreading of   tyres did not amount to production of a new article entitling the   assessee to the relief under sections 80J and 80HH, appeals were   preferred by the assessee to the Supreme Court. The Supreme Court   dismissed the appeals.
Decision of the Madras High Court in CIT v. Madurai Pandian Engineering Corporation Ltd.[1999] 239 ITR 375 affirmed.
Civil Appeals Nos. 4383 and 4384 of 1999.
  Appeals by Special leave from the judgment and order dated March 2,   1998, of the Madras High Court in T.C. Nos. 1820 and 1821 of 1986. The   judgment of the High Court is reported as CIT v.Madurai Pandian Engineering Corporation Ltd. [1999] 239 ITR 375(Mad.).
R. Venkataraman, Senior Advocate (V. Prabhakar and Ms. Revathy Raghavan, Advocates, with him), for the appellant.
Dr.   V. Gauri Shankar, Senior Advocate (Rajiv Tyagi, B. V. Balaram Das and   Ms. Sushma Suri, Advocates, with him), for the respondent.
ORDER
  We have heard learned counsel for the appellant. There is no merit in the appeals. The civil appeals are dismissed with costs."
  7. Sri Shambhu Chopra, learned counsel for the Revenue has also placed reliance in the judgement of Hon'ble Apex Court, Aspinwall & Co. Ltd. v. CIT [2001] 251 ITR 323/118 Taxman 771.   By the said judgement he has tried to place the process of   manufacturing coffee beans from the raw berries amount to manufacturing   activities and coffee beans produced from berries for distinct   activities and for new commodities and the assessee is rightly held to   be entitled the benefit under Section 32A of the Act. He has also placed   that the word "manufacture" has not been defined in the Income-tax Act.   In the absence of a definition, the word "manufacture" has to be given a   meaning as is understood in common parlance. It is also contended that   it is to be understood as meaning the production of articles for use   from raw or prepared materials by giving such materials new forms,   qualities or combinations whether by hand labour or machines. If the   change made in the article results in a new and different article, then   it would amount to manufacturing activity.
The relevant portion of the judgement is being quoted below:—
  'The Tribunal held that in this process assessee was involved in the   activity of manufacturing the coffee beans from the raw material plucked   from the plant.
  The High Court accepted the factual matrix but in conclusion as to   whether it amounts to manufacturing activity differed with the Tribunal   and held (page 930):
  "We find that all the nine stages of the process do not show any kind of   change or a commercially different commodity is not seen to be passing   through the various stages of the process. It cannot be ignored that in   common parlance, 'coffee' means, coffee powder, a beverage consumed as   either a hot or cold drink. At no stage, this colour combination between   manufacture and production has its manifestation".
The relevant portion of Section 32A is reproduced below:
  32A. (1) In respect of a ship or an aircraft or machinery or plant   specified in sub-section (2), which is owned by the assessee and is   wholly used for the purposes of the business carried on by him, there   shall, in accordance with and subject to the provisions of this section,   be allowed a deduction, in respect of the previous year in which the   ship or aircraft was acquired or the machinery or plant was installed   or, if the ship, aircraft, machinery or plant is first put to use in the   immediately succeeding previous year, then, in respect of that previous   year, of a sum by way of investment allowance equal to twenty-five per   cent of the actual cost of the ship, aircraft, machinery or plant to the   assessee:
Provided that no deduction shall be allowed under this section in respect of -........
(2) The ship or aircraft or machinery or plant referred to in sub-section (1) shall be the following, namely:-...........
(iii)   in any other industrial undertaking for the purposes of business of   construction, manufacture or production of any article or thing, not   being an article or thing specified in the list in the Eleventh   Schedule.).
The   short point for consideration is whether the High Court was right in   coming to the conclusion that the assessee was not involved in any   manufacturing or production activity in the process of curing the   coffee.
The   word "manufacture" has not been defined in the Act. In the absence of a   definition of the word "manufacture" it has to be given a meaning as is   understood in common parlance. It is to be understood as meaning the   production of articles for use from raw or prepared materials by giving   such materials new forms, qualities or combinations whether by hand   labour or machines. If the change made in the article results in a new   and different article then it would amount to a manufacturing activity.
This Court while determining as to what would amount to a manufacturing activity held in DeputyCommissioner of Sales Tax v. M/s. Pio Food Packers,   1980 Supp. SCC 174: that the test for determination whether manufacture   can be said to have taken place is whether the commodity which is   subjected to the process of manufacture can no longer be regarded as the   original commodity, but is recognized in the trade as a new and   distinct commodity. It was observed (page 65):
"Commonly,   manufacture is the end result of one or more processes through which   the original commodity is made to pass. The nature and extent of   processing may vary from one case to another, and indeed there may be   several stages of processing and perhaps a different kind of processing   at each stage. With each process suffered, the original commodity   experiences a change. But it is only when the change, or a series of   changes, take the commodity to the point where commercially it can no   longer be regarded as the original commodity but instead is recognized   as a new and distinct article that a manufacture can be said to take   place".
Adverting   to facts of the present case, the assessee after plucking or receiving   the raw coffee berries makes it undergo nine processes to give it the   shape of coffee beans. The net product is absolutely different and   separate from the input. The change made in the article results in a new   and different article which is recognized in the trade as a new and   distinct commodity. The coffee beans have an independent identity   distinct from raw material from which it was manufactured. A distinct   change comes about in the finished product.
The   submission of the learned counsel for the Revenue that the assessee was   doing only the processing work and was not involved in the manufacture   and producing of a new article cannot be accepted. The process is a   manufacturing process when it brings out a complete transformation in   the original article so as to produce a commercially different article   or commodity. That process itself may consist of several processes. The   different processes are integrally connected which results in the   production of a commercially different article. If a commercially   different article or commodity results after processing then it would be   a manufacturing activity. The assessee after processing the raw berries   converts them into coffee beans which is commercially different   commodity. Conversion of the raw berry into coffee beans would be a   manufacturing activity.
For   the reasons stated above, we are of the opinion that the High Court was   wrong in its opinion that the processing of the raw berries into coffee   beans ready for consumption would not be a manufacturing activity   disentitling the assessee to the investment allowance provided under   Section 32A of the Act.
Accordingly,   the appeals are allowed with costs. The impugned order/judgment of the   High Court is set aside and that of the Tribunal is restored. The   question of law is answered in the affirmative i.e. in favour of the   assessee and against the revenue.'
He has also placed reliance in the judgement of Hon'ble Apex Court in the case of CIT v. Relish Foods[1999] 237 ITR 59/103 Taxman 392.
The relevant portion of the judgment is being quoted below:—
  "The only question with which we are concerned in this appeal by the   Revenue, relating to the Assessment Year 1977-78, reads thus : "Whether,   on the facts and in the circumstances of the case :—
(i)   the assessee's business involves 'production' ?
  (ii)   the assessee is entitled to exemption under Section 80HH of the 1.T. Act, 1961?"
  The assessee claimed the allowance under Section 80HH of the Income-Tax   Act, 1961, on the ground that it was an industrial undertaking that   manufactured/produced articles. It would appear from the judgment of the   Tribunal that the assessee bought shrimps, peeled them and froze them.   There is no other material on the record which indicates what was done   by the assessee and how it was done. The Income-Tax Officer negatived   the claim. The Commissioner of Income-Tax (Appeals) and the Tribunal   upheld the claim.
From   the order of the Tribunal the question aforementioned was referred to   the High Court for its opinion. The High Court held that buying and   processing of shrimps involved production and, therefore, the assessee   was entitled to the allowance that it claimed. It followed its judgment   in Commissioner of Income-Tax v. Marwe II Sea. Foods [1987] 166 I.T.R. 624 (Ker.)
We find from the judgment of the Kerala High Court in the case of Marwell Sea Foods (supra)   that Marwell Sea Foods had placed before the taxing authorities a   detailed description of the process by which prawns were prepared for   export and that the appellate authorities had understood the various   stages through which the prawns passed as processes involving production   or manufacture. The High Court was of the view that the Tribunal having   affirmed the finding of the A.A.C., it should be extremely slow to   doubt the correctness of the finding unless it was perverse.
As   has been pointed out, there is upon the record before us no detailed   description of what the assessee does to the shrimps it buys, other than   the bald statement that it peels and freezes them. We cannot accept the   statement at the Bar that the process to which the assessee puts the   shrimps is the process that Marwell Sea Foods used in regard to its   prawns.
Apart therefrom, there is the judgment of this Court in Sterling Foods v. The State of Karnataka and   Another, [1986] 63 S.T.C. 239, where it has been held that processed or   frozen shrimps and prawns are commercially regarded as the same   commodity as raw shrimps and prawns. When raw shrimps and prawns are   subjected to the process of cutting of heads and tails, peeling,   deveining, cleaning and freezing they do not cease to be shrimps and   prawns and become other distinct commodities. There is no essential   difference between raw shrimps and prawns and processed or frozen   shrimps and prawns. In common parlance they remain known as shrimps and   prawns. This judgment in Sterling Foods(supra) has been rightly applied by the Bombay High Court, in the case of CIT v. Sterling Foods (Goa) [1995] 213 ITR 851,   to a claim under Section 80HH of the Income-Tax Act and it has been   held that the activity of processing of prawns is not an activity of   manufacture or production.
We are of the view that the judgment of this Court aforementioned in Sterling Foods (supra)   is apposite to the question that we have to decide and, upon the   material that is before us, we must reverse the view taken by the High   Court in the judgment under appeal.
Learned   counsel for the assessee submitted that the matter should be remanded   to the appropriate authority to enable the assessee to lay before it   evidence in detail of what the purchased shrimps were subjected to. We   think it is far too late in the day for the assessee to do that in   relation to the assessment year with which we are concerned.
The   appeal is, therefore, allowed. The judgment and order under appeal is   set aside to the extent it deals with the said question. The said   question is answered in the negative in relation to both its parts and   in favour of the Revenue.
No order as to costs."
  8. The Hon'ble Apex Court while considering special deduction under section 80HH in Sterling Foods v.State of Karnataka [1986] 63 S.T.C. 239, has observed as follows:—
  "...where it has been held that processed or frozen shrimps and prawns   are commercially regarded as the same commodity as raw shrimps and   prawns. When raw shrimps and prawns are subjected to the process of   cutting of heads and tails, peeling, deveining, cleaning and freezing   they do not cease to be shrimps and prawns and become other distinct   commodities. There is no essential difference between raw shrimps and   prawns and processed or frozen shrimps and prawns. In common parlance   they remain known as shrimps and prawns. This judgment in Sterling Foods (supra) has been rightly applied by the Bombay High Court, in the case of CIT v. Sterling Foods (Goa) [1995] 213 ITR 851,   to a claim under Section 80HH of the Income-Tax Act and it has been   held that the activity of processing of prawns is not an activity of   manufacture or production..."
9. On   the other hand, Nitin Kesharwani, learned counsel for the assessee has   refuted the argument advanced by the Sri Shambhu Chopra and submitted   that assessee company is, infact, manufacturer of aluminium HT/LT Leg   Coils and is entitled for all the benefits as per the provisions under   section 80IA(2)(iv)(c) of the Act, 1961 and contended that changing of   transformer oil into centrifuge transformer oil through C. K. Machine   amounts to processing of goods and industrial undertaking is mainly   engaged in manufacture and production of goods and as per the section   80IA(12)(b), industrial under taking shall have the meaning assigned to   it in the explanation under section 32B. The explanation of section 32B   states as under:—
'In   this section, "industrial undertaking" means any undertaking which is   mainly engaged in the business of generation or distribution of   electricity or any other form of power or in the construction of ships   or in the manufacture or processing of goods or in mining.'
10. Sri   Nitin Kesharwani, learned counsel appearing for the assessee has   contended that Commissioner has rightly held that the definition of the   word Industrial Undertaking to which section 80IA applies, includes   'processing of goods' also and rightly held that the processing of goods   can be considered alongwith manufacture or production of goods while   allowing deduction in respect of profits of the industrial undertaking   under section 80IA of the I.T. Act, 1961 and the same has rightly   appreciated by the Tribunal and the Revenue has no case and the   assessing officer had wrongly interpreted the provisions of section 80IA   of the I.T. Act while not according 100% benefit to the assessee.
11. We have heard the rival submissions of the parties and perused the record.
  12. Brief facts of the case arise out of the present appeal are as follows:-
  The assessee is a Private Ltd. Company and same is repairing and   manufacturing transformers. The business as its first transaction   started taking place since 03.11.1994. The assessee return of income   showing as nil was filed on 30.11.1997 by claiming 100% deduction under   section 80 IA (2)(iv) (c) of the I.T. Act, 1961. The Deputy Commissioner   of Income Tax Circle-I, Gorakhpur had completed the assessment under   section 143(3) of the I.T. Act 1961 on an income of Rs. 3,72,156/-   against the nil income. The assessing officer stated that company had   been engaged in repairing of old transformer and it did not manufacture   new transformer, the assessee had wrongly and incorrectly mentioned in   column 3 and part 4 of the income tax return that its nature of business   or profession of "repairing and manufacturing of transformer".
13. The   assessee had put his case before the assessment officer that the   company has been manufacturing aluminium HT/LT Leg Coils which are used   in old burnt transformers and on the basis of the said manufacturing the   assessee had claimed 100% deduction under section 80IA(2)(iv)(c) of the   I.T. Act, 1961.
14. The   Deputy Commissioner of Income Tax, the assessing officer, had   considered the case of the assessee and held that assessee has not   manufactured or produced transformer oil and scrap, rather has purchased   the T/oil from market and only centrifuging has been done, but no new   article or thing has been produced/manufactured, only processing has   been done. The scrap has been obtained from the old/burnt transformer   coils, which were made of aluminium wires of different amperes. It does   show that the scrap has not been manufactured/produced. Certain more   small part has been purchased and have been used in manufacturing   aluminium HT/LT Leg Coils.
15. Finally,   the assessing officer had turned down the plea of the assessee of 100%   deduction under section 80IA of the I.T. Act, 1961 on Rs.10,87,156/-and   had treated that the assessee had concealed the income and furnished   inaccurate particulars of its total income, whereas the assessee itself   has mentioned in part-IV of the return in column 3 that nature of   business or profession is "Repairing and Manufacturing of Transformers",   whereas it only repairs the old transformer and does not manufacture   it.
16. The   assessee filed an appeal before the Commissioner, which was decided in   favour of the assessee vide order dated 23.05.2003 and held that the   assessee was entitled for the benefits under section 80IA of the I.T.   Act, 1961, which includes "processing of goods also" and held that the   processing of goods can been considered alongwith manufacture or   production of goods, while allowing deduction in respect of profit of   industrial undertaking under section 80IA of the Act, 1961 had allowed   the deduction to the entire profit assessed in the assessment order.
17. The   Revenue had filed I.T.A.No.390/ALLD/03 before the Tribunal and the   Tribunal also taking the same view as taken by the Commissioner has   allowed the appeal in part and held that deduction under section 80-IA   was allowed to the transformer oil, as such was not sale, but was a part   of assembly of transformer, therefore, the same, was under the purview   of section 80IA disallowed deduction under section 80IA of the Act 1961   on scrap and the labour charges for the sale of scrap.
18. We   have heard the rival submissions advanced by both the learned counsels   just to appreciate the correct facts. It is necessary to reproduce the   provisions of section 80IA (2)(iv)(c) of the Act, 1961, as applicable at   relevant point of time, which is as under:—
"in   the case of an industrial undertaking located in such industrially   backward district as the Central Government may, having regard to the   prescribed guidelines, by notification in the official Gazette, Specify   in this behalf, (as an industrially backward district of Category or an   Industrially backward district of Category B and) it begins to   manufacture or produce articles or things or to operate its cold storage   plant or plants at any time during the period beginning on the Ist day   of October, 1994 and ending on the 31st day of March, (2000)"
19. As   per the provision of the section 80IA of the Act, 1961, the same would   be applicable to a company, which manufacture or produce any article or   things. In the present matter, the assessee company perform work in the   nature of business for repairing and manufacturing of transformer. It   has also been contended by the assessee that the company has been   manufacturing aluminium HT/LT Leg Coils, which were used in old burnt   transformers and in this regard, it had also submitted in detail before   the assessing authority. The company did not manufacture or produce   transformer oil and scrap, rather it has purchased the T/Oil from the   market and only centrifuging has been done and no new article or things   has been produced/manufactured, only processing has been done. In the   processing scrap, it had obtained from old/burnt Transformers Coils,   which were made of aluminium wires of different amperes. It also   appeared from the record that the scrap has not been   manufactured/produced. Certain more small parts have been purchased and   have been used in manufacture of new HT/LT Leg Coils. It also appears   that the assessee has purchased the transformer oil from the market and   after centrifuging the transformer oil by centrifugal machine, the   centrifuged transformer oil has been made useful in old/burnt   transformer. It is a sort of processing only and can not be turned as   manufacture of centrifuged transformer oil. To appreciate the   controversy it is necessary to elaborate the meanings of centrifuge and   processing.
Centrifuge means, "fly, tend to fly off from Centere, interalia, body to fly off."
Processing means, "to subject some special process or treatment, to subject especially raw material to a process of manufacture."
20. It   is apparent that the assessee did indulge in processing activities, but   no manufacture or production of new articles or things is involved in   this processing.
21. The   assessee has also taken a stand that the word 'manufacture' and   'produce' has been defined in clause (iii) and (vi) of Expl. below   Section 10-A(8) and clause (iii) & (iv) of Expl. Below Section   10-B(7) of the I.T. Act, while discussing the deductions under the said   sections in relation to the "Newly established Industrial Undertakings   in Free Trade Zones" and "newly established 100% Export Oriented   Undertakings" respectively. On this analogy, it has been argued that   processing of articles or things done by assessee should be treated as   "Manufacture" of new article or thing. Let us examine the inclusive   definition of manufacture.
'"Manufacture" includes any:—
(a)   Process, OR
  (b)   assembling or
(c)   recording of programme on any disc, take perforated madia or other information storage device;
 **  ****
  "Produce" in relation to any article or thing referred to in clause (I)   of sub-section (2) includes production of computer programmes.'
  22. The explanation of both the above sections begins with the   opending limb "For the purpose of this section" and, therefore, it can   not be reasonably construed that this inclusive definition of   "Manufacture" or "Produce" as enuciated and elaborated in Section 10-A   and 10-B of the I.T. Act is applicable to provisions of section 80-I or   section 80-IA because these words have been defined with a particular   purpose or with reference to the limited/particular context i.e. free   trade Zone and 100% Export Oriented Undertakings. Although prima-facie,   there appears to be a discrimination yet this is a   reasonable/discrimination because it is well within the competence of   the legislature to define a word for specific purposes or object or   section and not for general connotation where ever these words occur in   the I.T. Act. Had this been the intention or object of the   legislature/Parliament, the word "Manufacture" world also have been   defined in section 80-I or 80IA in the same manner or a reference must   have been made in section 10-A or 10-B of the I.T. Act because these   sections are on the stature for the last 7-8 years or even some more   years with certain new charges.
23. The Hon'ble Apex Court has also considered the same dispute in the case of CIT v. Venkateswara Hatcheries (P.) Ltd. [1999] 237 ITR 174/103 Taxman 503,   wherein the words "Manufacture" or "Production" "article or thing" used   in Sections 80-HH, 80-HHA, 80-I and 80-J have been elaborated   interpretted/defined/discussed. Some of the relevant lines of the said   Judgement are quoted below:—
'The   presumption, says Craies "that the same words are used in the same   meaning is however very slight, and it is proper" if sufficient reason   can be assigned to construe a word in one part of an Act in a different   Sense from that which it bears in another part of an Act."..............
But   the presumption is not of much weight. The same word may be used in   different senses in the same Statute, and even in the same section."
Since   the word "Manufacture" and "produce" has not been defined in section   80-IA and there is no specific mention in it that the definition of   these words as given in Section 10-A and 10-B will apply to section   80-IA, the Dictionary Meaning and understanding of common parlence has   been taken/contrued to be the logical/reasonable   meaning/interpretation/definition.
20.   Now I turn to discuss the exact definition/meaning of "Manufacture" and   processing by way of giving some citation of the Hon'ble Supreme Court   detailed below:-
21. In south Bihar Sugar Mills Ltd. v. VOI AIR   1968 SC 922, the Hon'ble Supreme Court has held that when any Act does   not define a word used in that Act the ordinary Dictionary meaning,   should be taken.
22.   In concise Oxford Dictionary (Sixth Edition) at P. 665, Manufacture,   has been defined as under: "Manufacture "(Noun)- making of articles by   physical labour or machinery especially on large scale;
"Manufacture" (Verb)-bring (Material) into from fit for use; produce (articles) by labour esp. by machinery on large scale.
23. In CIT v. Tax Locomotive and Engg. Co. [1968] 68 ITR 325,   assembling of automotive bus or truck chassis from component parts, so   as to convert into an automobile has been held to amount to manufacture.
24.   Blending of different kinds of ore possessing different chemicals and   physical composition, in order to produce ore of a particular   specification has not been considered/held as a "Manufacture" operation   because commercially no new and distinct commodity from the original ore   of different specification has been produced/manufactured although the   entire activity of the assessees was brodly divisible into seven   different operations; such as dressing, washing, ore handling, screening   and blending it etc. SeeChowgule and Co. (P) Ltd. v. UOI-AIR 1981 SC 1014.
25.   Galvanizing of metals was held as an act or process of galvinizing or   coating iron or steel with zink to protect it from rust. CIT Hindustan Metal Refining Works (P) Ltd. [1981] 128 ITR 472 (Cal).'
24. The   Commissioner as well as learned Tribunal have given much emphasis on   processing and held that the assessee, industrial undertaking does   processing of goods and entitled for benefit under section 80IA, just to   appreciate the processing, it would be appropriate to place few more   meanings of the processing even though the processing has not been   defined in the Act. According to Webster Dictionary; it defines   'process' as - "Process" means subject to some special process or   treatment, to subject, especially, raw material to a process of   manufacture,
28-2 In Webster Third New International Dictionary process means,
  "To subject to a particular method, system or technique or preparation,   handling or other treatment to effect a particular result put through a   special process.
  28-3 Oxford Dictionary,
It defines 'process' as :
  A continuous and regular action or succession of action taking place or   carried on in a definite manner and leading to the accomplishment of   some result."
  25. Bare perusal of literal meaning of processing, it is clear   that by means of continuous and regular action or succession of action   taking place or carried on in a definite manner and leading to the   accomplishment of some result then only some benefits could be conferred   in favour of the assessee.
26. From   the aforementioned facts and circumstances of the case, it is clear   that definition of processing would not be applicable in the present   case, especially in the background that the transformer oil has been   purchased by the assessee from market and centrifuging had been done by   centrifugal machine in order to make it usable in Transformer, but in   substance no new substance or articles or things has been emerged from   the said processing, only some special processing or treatment had been   given to transformer oil through a particular method. Therefore, it can   not be construed that due to this transformation or activity there was   change in the substance and new substance or article had come out.
27. Therefore,   in the aforementioned facts and circumstance, it is clear that the   assessee did not indulge in any manufacturing activities or producing   any new articles or things and, accordingly, the assessee is not   entitled to the benefits of 100% deduction under section 80IA(2)(iv)(c)   of the Act, 1961.
28. Thus, we answer both the question in favour of the Revenue and against the Assessee.
  The appeal is allowed.
The judgement and order of the Tribunal dated 28.05.2005 is hereby set-aside.
POOJA
  
  *In favour of revenue.
  †Arising out of order of Tribunal in IT Appeal No. 390/All./03 dated 28-5-2005.

  CST & VAT : Where assessee purchased cars from manufacturer and sold   same to local customers at sale price which included cost of warranty   and further it supplied spare parts to customers free of cost covered by   warranty and returned defective parts to manufacturer and thereupon   manufacturer issued credit notes to assessee reimbursing it for cost of   parts so supplied, consideration paid by manufacturer to assessee by way   of credit notes represented sale price of spare parts which were   replaced and was liable to tax
■■■
  [2014] 45 taxmann.com 81 (Karnataka)
  HIGH COURT OF KARNATAKA
State of Karnataka
v.
  Cauvery Motors (P.) Ltd.*
N. KUMAR AND B. MANOHAR, JJ.
S.T.R.P. NOS. 130 OF 2010 & 4 & 5 OF 2011†
  S.T.A. NO. 30 OF 2010
APRIL  24, 2013 
  Section 2(1)(t) of the Karnataka Sales Tax Act, 1957 - Sale - Sale price   - Assessment years 2001-02 to 2003-04 - Assessee purchased cars from   manufacturer and sold same to local customers at sale price which   included cost of warranty - Warranty was meant to provide free   replacement of parts to customers if found to involve manufacturing   defect within warranty coverage - Assessee supplied spare parts to   customers free of cost covered by warranty and returned defective parts   to manufacturer - Thereupon manufacturer issued credit notes to assessee   reimbursing it for cost of parts - In returns filed for assessment   years 2001-02 to 2003-04, assessee claimed deduction of amounts for   which credit notes were received from manufacturer - Whether   consideration paid by manufacturer to assessee by way of credit notes   represented sale price of spare parts which were replaced and was liable   to tax - Held, yes [Para 7] [In favour of revenue]
  FACTS
 
  ■   The   assessee was a registered dealer under the provisions of the Karnataka   Sales Tax Act, 1957. It was an authorised dealer of Ford, who was the   manufacturer of different models of four wheeler motor vehicles. The   said manufacturer sold cars to the assessee in the course of inter-State   trade or commerce. In turn the assessee sold the cars so purchased from   the manufacturer to local customers at sale price which included cost   of warranty. The warranty was meant to provide free replacement of parts   to customers if found to involve manufacturing defect within the   warranty coverage.  
■   The   assessee supplied the spare parts to the customers free of cost and   after such replacement returned the defective parts to the manufacturer.   The assessee also raised debit notes on the manufacturer. On receipt of   the debit notes, the manufacturer issued credit notes to the assessee   reimbursing it for the cost of the parts supplied to customers free of   cost and the cost of labour. In the returns filed for the assessment   years 2001-02 to 2003-04, the assessee claimed deduction of the amounts   for which credit notes were received from the manufacturer.  
■   The Assessing Authority allowed the deduction claimed by the assessee.
  ■   Subsequently the Revisional Authority revised the assessment orders and   levied sales tax on the consideration paid by the manufacturer to the   assessee by way of credit notes.
  ■   The Tribunal held that there was no sale involved within the definition   under section 2(1)(t) in the transactions of free supply of parts by the   assessee to customers covered by warranty and in the credit notes   issued by the manufacturer to the assessee towards reimbursement of the   cost of the parts so supplied to customers. It, therefore, set aside the   order of the Revisional Authority.  
■   On appeal to High Court:
  HELD
 
  ■   In   the instant case, the customers have purchased the motor vehicles from   the manufacturer through the assessee. The sale price includes the price   of warranty. The assessee has supplied spare parts, replaced defective   parts and returned the defective parts to the manufacturer. Along with   the defective parts, the assessee has raised debit notes in the name of   the manufacturer. Thereafter the manufacturer has raised credit notes.   In other words, the manufacturer has paid the assessee the price of the   spare parts, which were replaced. If the said spare parts had been   purchased in the open market, both of them have to pay sales tax.  
■   Therefore, in view of the law laid down by the Apex Court in the case of Mohd. Ekram Khan & Sons v.CTT [2004]   136 STC 515 the consideration paid by the manufacturer to the assessee   by way of credit notes represents the sale price of the spare parts   which are replaced and is liable to tax. In that view of the matter, the   impugned order passed by the Tribunal was liable to be set aside. [Para   7]  
CASE REVIEW
   
Mohd. Ekram Khan & Sons v. Commissioner of Trade Tax [2004] 136 STC 515 (SC) (para 7) followed.
  CASES REFERRED TO
 
  Mohd. Ekram Khan & Sons v. Commissioner of Trade Tax [2004] 136 STC 515 (SC) (para 2), Dy. CIT (Spl.) v. Prerana Motors (P) Ltd. [STRP. 69 of 2004, dated 19-10-2005] (para 6) and CTO v. Marudhara Motors [S.B. Civil Sales Tax Revision No. 118 of 2008, dated 16-3-2009] (para 6).
Smt. S. Sujatha for the Petitioner. Rabhinathan and M. Thirumalesh for the Respondent.
  ORDER
 
  N. Kumar, J. - The State has preferred this revision petition   against the order passed by the Tribunal, which has held that there was   no sale involved within the definition in Section 2(1)(t) of the   Karnataka Sales Tax Act, 1957 in the transactions of free supply of   parts by the appellant to customers covered by warranty and in the   credit notes issued by the manufacturer in favour of the Assessee   towards reimbursement of the cost of the parts so supplied to those   persons.
2. The   Assessee is an authorized dealer of M/s.Ford India Ltd., who is the   manufacturer of different models of Ford four wheeler motor vehicles,   having its principal place of business and registered office in   Chengalpet, Tamil Nadu. The said Manufacturer sold Ford model four   wheeler motor vehicles to the assessee in the course of inter-State   trade or commerce against C- Forms. The assessee is also a registered   dealer under the provisions of the Karnataka Sales Tax Act. In turn, the   assessee sold the cars so purchased from the manufacturers to local   customers at sale price which includes cost of warranty. The warranty   was meant to provide free replacement of parts to customers if found to   involve manufacturing defect within the warranty coverage. The warranty   coverage was for a period of 24 months or up to travel distance of   40,000 kms. from the date of sale to customers. The assessee supplied   the defective parts to the. customers free of cost and after such   replacement returned the defective part to the Manufacturer. The   assessee also raised debit notes on the manufacturer. On receipt of the   debit notes, the manufacturer will carry out scrutiny and if found   acceptable, it would issue credit notes to the assessee. The credit   notes are issued reimbursing the assessee for the cost of the parts   supplied to customers free of cost and the cost of labour. The assessee   claimed deduction of the amounts for which credit notes were received   from the manufacturer. The Assessing Authority passed assessment orders   for three years i.e., 2001-02, 2002-03 and 2003-04 and allowed the   deductions claimed by the assessee. Subsequent to the judgment of the   Apex Court in the case of Mohd. Ekram Khan & Sons v. Commissioner of Trade Tax [2004]   136 STC 515, the Assessing Authority initiated reassessment proceedings   by issue of a notice under Section 12A of the Act. The assessee filed   objections to the proposed re-assessment and produced the documentary   evidence. Thereafter, a detailed order came to be passed confirming the   assessment orders and the re -assessment proceedings were dropped.
3. The   Revisional Authority issued notices under Section 21(2) of the   Karnataka Sales Tax Act asking the assessee to show cause why it should   not be treated as a sale price and taxable turn over in respect of   which, he had claimed deductions. After hearing the assessee, orders   were passed allowing the revision petition and reviewing the sales tax   for the spare parts supplied during the warranty period. Aggrieved by   the said order, the assessee preferred an appeal to the Karnataka   Appellate Tribunal. The Tribunal after considering the statutory   provisions, judgment of the Apex Court and also the judgment of the   Rajasthan High Court held that there was no Sale' involved within the   definition under Section 2(1)(t) of the KST Act in the transactions of   free supply of parts by the assessee to customers covered by warranty   and in the credit notes issued by the manufacturer to the appellant   towards reimbursement of the cost of the parts so supplied to customers.   Accordingly, appeals were allowed, revisional orders were set-aside and   the assessment order passed by the Assessing Authority was restored.   Aggrieved by the said order, the Revenue is in revision.
4. We have heard the learned counsel appearing for the parties.
  5. The Apex Court in the case of Mohd. Ekram Khan & Sons (supra) held as under:
  "The only question involved in these appeals is whether the amount   received by the assessee for supply of parts to the customers as a part   of the warranty agreement was liable to tax."
  The above question was answered as under:
"Though   the decision in Geo Motor's case (2001) 122 STA 285 (Ker) and Prem   Motor's case (1986) 61 STC 244 (MP), support the stand of the assessee,   we find that basic issue as to the nature of the transaction between the   assessee and the manufacturer was lost sight of. As noted above, in a   case manufacturer may have purchased from the open market parts for the   purpose of replacement of the defective parts. For such transactions, it   would have paid taxes. The position is not different because the   assessee had supplied the parts and had received the price. The   categorical factual finding recorded by the taxing authorities and the   High Court is that the assessee had received the payment of the price   for the parts supplied to customers. That being so, the transaction was   subject to levy of tax as has been rightly held by the High Court. The   decisions in Geo Motor's case [2001] 122 STC 285 (Ker) and Prem Motor's case [1986] 61 STC 244 (MP) stand overruled."
6. Following the said judgment, a Division Bench of this Court in the case of Dy. CIT (Spl.) v. Prerana Motors (P) Ltd.,   decided on in 19th October 2005 [STRP 69 of 2004, dated 19-10-2005]   held that the supply of parts to the customers against the credit note   of the manufacturer is liable to tax under the Act. However, the High   Court of Rajasthan in the case of CTO v. Marudhara Motors [S.B. Civil Sales Tax Revision No. 118 of 2008, dated 16-3-2009] has taken a contrary stand. The Apex Court in Mohd. Ekram Khan's case (supra)   has held that the whole object behind the warranty is that the   consumer, who has to make a heavy investment for the vehicle should be   assured of a proper performance of the vehicle in a trouble free manner   for reasonable length of time. Therefore, entire cost of warranty was to   be borne by the manufacturer. The manufacturer may have purchased parts   from the open market for the purpose of replacing the defective parts.   For such transactions it would have paid tax. The position is not   different because the assessee had supplied the parts and had received   the prices. That being so, the transaction was subject to levy of tax.
7. In   the instant case, customers have purchased the Motor Vehicles from the   Manufacturers through the assessee. The sale price includes the price of   warranty. The assessee has supplied spare parts, replaced defective   parts and returned the defective parts to the manufacturer. Along with   the defective parts, the assessee has raised a debit note in the name of   the manufacturer. Thereafter the manufacturer has raised a credit note.   In other words, the manufacturer has paid the assessee the price of the   spare parts, which were replaced. If the said spare parts had been   purchased in the open market, both of them have to pay sales tax.   Therefore, in view of the law laid down by the Apex Court in Mohd. Ekram   Khan's case the consideration paid by the manufacturer to the assessee   by way of a credit note represents the sale price of the spare parts   which are replaced and is liable to tax. In that view of the matter, the   impugned order passed by the Tribunal is liable to be set-aside. Hence,   we pass the following order:
  (a)   Revision is allowed.
(b)   The impugned order passed by the Tribunal is hereby set-aside.
  (c)   The order passed by the Revisional Authority is restored to file in its original.
  8. In STA 30/2010, the assessee has challenged the order passed   by the Additional Commissioner of Commercial Taxes under Section   22(A)(1) of the KST Act, 1957 levying sales tax on the spare parts,   which are supplied to the customer for replacing of the defective parts   during the warranty period. In view of what we have stated above, the   said levy of tax is justified and therefore, no case for interference in   the said order is made out. However, it was contended that the   Additional Commissioner was not justified in imposing penalty. Here, we   find some substance.
9. Earlier,   when the assessment orders were passed, the understanding of the   Department was no sales tax was payable in respect of the spare parts   supplied to the customers for replacing of the defective parts during   the warranty period. It is only after the judgment of the Apex Court in   Mohd. Ekram Khan's case, the tax was levied on such spare parts. Under   those circumstances, we are of the view that the Additional Commissioner   was not justified in imposing penalty for non-payment of tax. In that   view of the matter, that portion of the order imposing penalty is liable   to be quashed. Hence, we pass the following order:
  (a)   Sales Tax Appeal is partly allowed.
(b)   Levy of tax and interest is upheld.
  (c)   Levy of penalty is set-aside.
Parties to bear their own cost.
SKJ
*In favour of revenue.
  †Revision arising out of order of Tribunal in STA No. 383/2006, dated 4-11-2009.

  Service Tax : Fees collected by a Municipal Corporation for granting   written permission for conducting business of advertisement agency was a   part of functions imposed on Corporation under legislation and is not   liable to service tax
■■■
  [2014] 45 taxmann.com 165 (New Delhi - CESTAT)
  CESTAT/CEGAT/CCE, NEW DELHI BENCH
Nagar Nigam, Agra
v.
  Commissioner (ADJ.), Kanpur*
JUSTICE G. RAGHURAM, PRESIDENT
  AND SAHAB SINGH, TECHNICAL MEMBER
  STAY ORDER NO. 58684/2013-CUS.(DB) 
APPLICATION NO. ST/STAY/57456/2013 
APPEAL NO. ST/56897/2013
  AUGUST  5, 2013 
Section   65(105)(zzzm) of the Finance Act, 1994 - Taxable services - Sale of   Advertising Space or Time Services - Stay Order - Period from 1-5-2006   to 31-3-2011 - Department levied service tax on collections from   providing spaces for advertisement - Assessee argued that : (a) it is an   authority created under Municipal Corporation Act and had only   collected statutory fee/tax under said Act; (b) substantial portion of   spaces used for advertisements were belonging to private parties and not   assessee; (c) there was no justification for invoking extended period   of limitation; and (d) entire exercise was Revenue neutral, as service   recipient could avail input credit - HELD : At stay stage, Tribunal was   not inclined to go into question of limitation - Fees collected by a   Municipal Corporation for granting written permission for conducting   business of advertisement agency was a part of functions imposed on   Corporation under legislation - Where such fees is collected in respect   of advertisements put up on premises/space not belonging to the   Corporation, levy of Service Tax would be impermissible since property   is not owned by assessee - In view of fact that a majority liability was   relatable to private properties and not liable to service tax,   pre-deposit of 20 per cent was only ordered [Paras 3 to 6] [In favour of   assessee]
  CASE REVIEW
 
  Selvel Media Services (P.) Ltd. v. Municipal Corpn. of City of Ahmedabad - [2010] 30 VST 653 (Guj.) (para 3) relied on.
CASES REFERRED TO
   
Selvel Media Services (P.) Ltd. v. Municipal Corpn. of City of Ahmedabad [2010] 30 VST 653 (para 3).
A.K. Batra for the Appellant. Govind Dixit for the Respondent.
  ORDER
 
  G. Raghuram, President - The assessee has preferred this appeal   against the adjudication order dated 31-12-2012. whereby Service Tax of   Rs. 56,74,946/- has been for having provided the taxable - "Sale of   Space or time for Advertisement" Service, during 1-5-2006 to 31-3-2011.   As apparent from the show cause notice; the assessee's response thereto;   and the adjudication order, the assessee claimed immunity to tax on   several grounds including that it is an authority created under the U.P.   Municipal Corporations Act, 1959; that it had provided no taxable   service to the Municipal Corporation but had only collected tax for the   Corporation under the provisions of the 1959 Act; and that a substantial   portion of the spaces used for the advertisements were spaces belonging   to private parties and therefore do not fall within the definition of   the taxable service as spelt in Section 65(105)(zzzm) of the Finance   Act, 1994, since neither the Corporation nor the assessee could have   sold those spaces, in respect of which advertisements are said to have   been made; and that there is no justification for invoking the extended   period of limitation since there was no wilful suppression or   non-remittance of tax with an intent to evade remittance of tax by   contravention of the provisions of the Act. It was also contended that   in any event the issue would be Revenue neutral, since even if Service   Tax was paid the service recipient could have availed the benefit of   input credit.
2. At   the present stage we are not inclined to go into the issue of   limitation or the justification for invocation of the extended period of   limitation.
3. We notice that a learned Division Bench of the Gujarat High Court in Selvel Media Services (P.) Ltd. v.Municipal Corpn. of City of Ahmedabad [2010]   30 VST 653 has clearly ruled that fees collected by a Municipal   Corporation for granting written permission for conducting the business   of advertisement agency, being part of functions imposed on the   Corporation under legislation; and where such fees is collected in   respect of advertisements put up on premises/space not belonging to the   Corporation levy of Service Tax under Section 65(105)(zzzm), would be   impermissible since the property is not owned by the Corporation. In   this view of the matter, prima facie, the levy of Service Tax to   the extent advertisements by the assessee were in respect of spaces not   owned by the Municipal Corporation, would not be liable to Service Tax.
4. Neither   the adjudication order nor the show cause notice clearly indicates the   proportion between private spaces on which advertisements were made by   the assessee and the spaces belonging to the Agra Municipal Corporation.   It was however contended before the adjudicating authority that a   majority of the liability is relatable to private properties in respect   of which the Agra Municipal Corporation exercises jurisdiction to levy   advertisement fee under the provisions of the 1959 Act.
5. In   the aforesaid circumstances and in the absence of any indication as to   the quantum of Service Tax relatable to properties belonging to the Agra   Municipal Corporation, we consider it appropriate to grant waiver of   pre-deposit and stay of all further proceedings pursuant to the   adjudication order dated 31-12-2012, on condition that the petitioner   remits Rs. 13 lakhs (approximately 20 per cent of the tax component),   within eight weeks from today and reports compliance by 15-10-2013. In   default of either deposit or reporting compliance as stipulated, there   shall occur a failure of pre-deposit and the appeal would consequently   stand rejected for failure of pre-deposit.
6. Ld.   counsel for the appellant is present in the Court, has noted this order   and undertakes to communicate to the appellant, the obligations under   the order.
VINEET
  
  *In favour of assessee

  Cenvat Credit : Rail/PSC (pre-stressed concrete) sleepers classifiable   under Tariff Heading 6807 are not eligible for credit as 'capital goods'
  ■■■
[2014] 45 taxmann.com 194 (New Delhi - CESTAT)
CESTAT, NEW DELHI BENCH
Steel Authority of India Ltd.
  v.
Commissioner of Central Excise & Service Tax, Raipur*
D.N. PANDA, JUDICIAL MEMBER 
  AND MANMOHAN SINGH, TECHNICAL MEMBER
  STAY ORDER NO. 56663/2013-EX(DB) 
APPLICATION NO. E/STAY/55529/2013 
APPEAL NO. E/55418/2013
  MARCH  5, 2013 
Rule   2(a) of the Cenvat Credit Rules, 2004 - Cenvat Credit - Capital Goods -   Stay order - Assessee took credit of 'rail' used for movement of goods   within factory - Department denied said credit holding that it was not   covered by definition of capital goods - HELD : Only Chapter Headings   6804 and 6805 of Excise Tariff are included in definition of capital   goods, whereas PSC (pre-stressed concrete) sleepers is classified under   Chapter Heading 6807 - Therefore, rail used by assessee is not covered   under definition of capital goods - Assessee was directed to make   pre-deposit [Para 1] [In favour of revenue]
  EDITOR'S NOTE
 
  Under present law, these will be eligible as 'input' under Rule 2(k) of   CENVAT Credit Rules, 2004, as all goods used within factory (except   capital goods) are eligible for credit as capital goods.
  
Hemant Bajaj for the Appellant. Sanjay Jain for the Respondent.
  ORDER
 
  Manmohan Singh, Technical Member - Issue raised by learned   counsel is whether Cenvat credit is available on rail used in the   factory and has been utilized further for movement of goods within the   factory as capital goods. In this regard we have examined the definition   of capital goods which reads as under :
'"Capital goods" means :—
  (A) the following goods, namely :—
  (i)   all goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter 90,   [heading 6805, grinding wheels and the like, and parts thereof falling   under heading 6804] of the First Schedule to the Excise Tariff Act;
  (ii)   pollution control equipment;
  (iii)   components, spares and accessories of the goods specified at (i) and (ii);
  (iv)   moulds and dies, jigs and fixtures;
(v)   refractories and refractory materials;
  (vi)   tubes and pipes and fittings thereof;
(vii)   storage tank, and
  (viii)   motor vehicles other than those falling under Tariff Headings 8702,   8703, 8704, 8711 and their chassis but including dumpers and tippers,
  used —
(1)   in the factory of the manufacturer of the final products, but does not   include any equipment or appliance used in an office; or
(1A)   outside the factory of the manufacturer of the final products for   generation of electricity for captive use within the factory; or
(2) for providing output service;'
  From the perusal of above definition it is very clear that rail track   material does not fall within definition of capital goods. Only Chapter   Headings 6804 and 6805 of Chapter 68, have been included in the   definition, whereas PSC sleepers is classified under Chapter Heading   6807. Therefore, rail used by the appellant is not covered under the   definition of capital goods. In view of this, assessee has failed to   prove its case to be fit for waiver of pre-deposit. Therefore, appellant   is directed to deposit Rs. 50 lakhs within 6 weeks from today and make   compliance on 17th May, 2013.
VINEET
  
  *In favour of revenue.

  -- 
Regards,
Pawan Singla , LLB
M. No. 9825829075Rule 12 of Income Tax Rules wef 01.04.2014 – Filing of Audit Reports & ITR Posted In Income Tax | Articles | 2 Comments »
       
CA Sandeep Kanoi
CBDT has amended Rule 12 of Income Tax Rules 1962 vide its Notification No. 24/2014, Dated: April 1, 2014 and made   amendments in respect of filing of ITR by Trusts, Partnership firms and   furnishing of Audit Report under section 11(2)(a) by trusts for   accumulation of Income. The Notification has also Notified SAHAJ (ITR-1), ITR-2, SUGAM (ITR-4S) , ITR-V FOR Assessment Year 2014-15. 
CBDT Further amended Rule 12 of Income Tax Rules 1962 vide its Notification No. 28/2014, Dated- 30th day of May, 2014   by which it amended sub rule 2 and provided that An assessee required   to furnish a report of audit specified under section 10AA, section 44DA,   section 50B or section 115VW of the Act, shall furnish the said report   of audit  and the return of Income electronically for AY 2014-15 and   onwards.
We have compiled here the Rule 12 based on the amendments vide Notification No. 24/2014, Dated: April 1, 2014  and Notification No. 28/2014, Dated- 30th day of May, 2014 for ready reference of our readers. 
[Return of income and return of fringe benefits.
12. (1) The return of   income required to be furnished under sub-section (1) or sub-section (3)   or sub-section (4A) or sub-section (4B) or sub-section (4C) or   sub-section (4D) of section 139 or clause (i) of sub-section (1)   of section 142 or sub-section (1) of section 148 or section 153A   relating to the assessment year commencing [on the 1st day of April, [2014]] shall,—
[(a)         in the case of a   person being an individual where the total income includes income   chargeable to income-tax, under the head,—
(i)           "Salaries" or income in the nature of family pension as defined in the Explanation to clause (iia) of section 57; or
(ii)          "Income from house property", where assessee does not own more than one house property and does not have any brought forward loss under the head; or
(iii)         "Income from other sources", except winnings from lottery or income from race horses, [and does not have any loss under the head]
               be in Form [SAHAJ] (ITR-1) and be verified in the manner indicated therein:]
               [Provided that the provisions of this clause shall not apply to a person who,—
(I)           is a resident, other than not ordinarily resident in India within the meaning of sub-section (6) of section 6 and has,—
(i)           assets (including financial interest in any entity) located outside India; or
(ii)          signing authority in any account located outside India;
(II)         has claimed any relief of tax under section 90 or 90A or deduction of tax under section 91; or
(III)        has income not chargeable to tax, exceeding five thousand rupees. ]
(b)          in the case of a person being an individual [not being an individual to whom clause (a)   applies] or a Hindu undivided family where the total income does not   include any income chargeable to income-tax under the head "Profits or   gains of business or profession", be in Form No. ITR-2 and be verified   in the manner indicated therein;
(c)          in the case of a person being an individual or a Hindu undivided family who   is a partner in a firm and where income chargeable to income-tax under   the head "Profits or gains of business or profession" does not include   any income except the income by way of any interest, salary, bonus,   commission or remuneration, by whatever name called, due to, or received   by him from such firm, be in Form No. ITR-3 and be verified in the   manner indicated therein;
(ca)   in the case of a person being an individual or a Hindu undivided family deriving business income and such income is computed in accordance with special provisions referred to in section 44AD and section 44AE of the Act for computation of business income, be in Form SUGAM (ITR-4S) and be verified in the manner indicated therein:
[Provided that the provisions of this clause shall not apply to a person who,—
(I)           is a resident, other than not ordinarily resident in India within the meaning of sub-section (6) of section 6 and has,—
(i)           assets (including financial interest in any entity) located outside India; or
(ii)          signing authority in any account located outside India;
(II)          has claimed any relief of tax under section 90 or 90A or deduction of tax under section 91; or
(III)        has income not chargeable to tax, exceeding five thousand rupees. ]
(d)          in the case of a   person being an individual or a Hindu undivided family other than the   individual or Hindu undivided family referred to in clause (a) or clause (b) or clause (c) [or clause (ca)] and   deriving income from a proprietory business or profession, be in Form   No. ITR-4 and be verified in the manner indicated therein;
(e)          in the case of a   person not being an individual or a Hindu undivided family or a company   or a person to which clause (g) applies, be in Form No. ITR-5 and be verified in the manner indicated therein;
(f)           in the case of a company not being a company to which clause (g) applies, be in Form No. ITR-6 and be verified in the manner indicated therein;
(g)          in the case of a   person including a company whether or not registered under section 25 of   the Companies Act, 1956 (1 of 1956), required to file a return under   sub-section (4A) or sub-section (4B) or sub-section (4C) or sub-section   (4D) of section 139, be in Form No. ITR-7 and be verified in the manner   indicated therein;
(h)          [***]
  (2) The return of   income required to be furnished in Form SAHAJ (ITR-1) or Form No. ITR-2   or Form No. ITR-3 or Form SUGAM (ITR-4S) or Form No. ITR-4 or Form No.   ITR-5 or Form No. ITR-6 [or Form No. ITR-7] shall not be   accompanied by a statement showing the computation of the tax payable on   the basis of the return, or proof of the tax, if any, claimed to have   been deducted or collected at source or the advance tax or tax on   self-assessment, if any, claimed to have been paid or any document or   copy of any account or form or report of audit required to be attached   with the return of income under any of the provisions of the Act: ]
 [Provided that where an assessee is required to furnish a report of audit specified under sub-clause (iv), (v), (vi) or (via)   of clause (23C) of section 10, section 10A, section 10AA, clause (b) of   sub-section (1) of section 12A, section 44AB, section 44DA, section   50B, section 80-IA, section 80-IB, section 80-IC, section 80-ID, section   80JJAA, section 80LA, section 92E, section 115JB or section 115VW or to give a notice under clause (a) of sub-section (2) of section 11 of the Act, he shall furnish the same electronically.]
(3) The return of income referred to in sub-rule (1) may be furnished in any of the following manners, namely:—
(i)           furnishing the return in a paper form;
(ii)          furnishing the return electronically under digital signature;
(iii)         transmitting the   data in the return electronically and thereafter submitting the   verification of the return in Form ITR-V;
(iv)         furnishing a bar-coded return in a paper form:
Provided that—
 [ (a)        [ a person, other than a company and a person required to furnish the return in Form ITR-7 ]   if his or its total income, or the total income in respect of which he   is or it is assessable under the Act during the previous year, exceed [five lakh rupees], shall furnish the return for the assessment year [2013-14] and subsequent assessment years in the manner specified in clause (ii) or clause (iii);
(aa)          an individual or a Hindu undivided family, being a resident, [ other than not ordinarily resident in India within the meaning of sub-section (6) of section 6 ] having   assets (including financial interest in any entity) located outside   India or signing authority in any account located outside India and   required to furnish the return in Form ITR-2 or ITR-3 or ITR-4, as the   case may be, shall furnish the return for assessment year 2012-13 and subsequent assessment years in the manner specified in clause (ii) or clause (iii);
 (aaa)      a firm   required to furnish the return in Form ITR-5 or an individual or Hindu   Undivided Family (HUF) required to furnish the return in Form ITR-4 and   to whom provisions of section 44AB are applicable, shall furnish the   return for assessment year 2011-12 and subsequent assessment years in   the manner specified in clause (ii);
 (aab) a person claiming any relief of tax under section 90 or 90A or deduction of tax under section 91 of the Act, other than a person to whom clause (aaa) or clause (ab)   is applicable, shall furnish the return for assessment year 2013-14 and   subsequent assessment years in the manner specified in clause (ii) or clause (iii);
(aac) a person required to furnish   the return in Form ITR-5, other than a firm to which clause (aaa) is   applicable, shall furnish the return for the assessment year 2014-15 and   subsequent assessment years in the manner specified in clause (ii) or   clause (iii);
 [ Provided further that a   person who is required to furnish any report of audit referred to in   proviso to sub-rule (2) electronically, other than a person to whom   clause (aaa) or clause (ab) of the first proviso is applicable, shall   furnish the return, in Form as applicable to him, in the manner   specified in clause (ii) or clause (iii). ]
(ab)        a company required to   furnish the return in Form ITR-6 shall furnish the return for   assessment year 2010-11 and subsequent assessment years in the manner   specified in clause (ii);
(b)            a person   required to furnish the return in Form ITR-7 shall furnish the return   for assessment year 2014-15 and subsequent assessment years,-
    (A) in case it is furnished under sub-section (4B) of section 139, in the manner specified in clause (ii);
    (B) in other cases, in the manner specified in clause (i) or clause (ii) or clause (iii)
(4) The   Director-General of Income-tax (Systems) shall specify the procedures,   formats and standards for ensuring secure capture and transmission of   data and shall also be responsible for evolving and implementing   appropriate security, archival and retrieval policies in relation to   furnishing the returns in the manners specified in clauses (ii), (iii) and (iv) of sub-rule (3). [and the report of audit or notice in the manner specified in proviso to sub-rule (2)]
(5) Where a return of income relates to the assessment year commencing on the 1st day of April,[2013] or any earlier assessment year, it shall be furnished in the appropriate form as applicable in that assessment year.]
   - See more at:   http://taxguru.in/income-tax/rule-12-income-tax-rules-wef-01042014-related-filing-audit-reports-itr.html#sthash.Xq1Le6w6.dpuf
Retrospective change if needed must invariably favour taxpayer – FICCI Posted In Income Tax | News | 1 Comment »
       
FICCI meets FM, making some  pre-budget suggestions
New Delhi, 1 June, 2014: In a discussion with the new Finance Minister Mr Arun Jaitley, FICCI inter­alia suggested   supplementing the remarkable flurry of actions by the new Leadership,   with positive articulation in the policy space in the run up to the   Budget. This will curtail conjecture while laying foundations for   delivery. "To support the forward looking development and delivery oriented agenda of the new government, a non-adversarial, conducive and fair tax regulatory environment is the need of the hour.   We must show that India values and welcomes capital,and supports it   byclear and credible policies. Enterprise and administration must both   stand assured that decisions and actions in good faith will be respected and protected", said Mr. Sidharth Birla, President, FICCI.
Mr. Birla said, "The   Government could ideally declare as policy that retrospective action   shall not be resorted to, save in rarest of cases, but never for   creating a fresh onus or liability for a previous period. In fairness,   retrospective change if needed must invariably favour the taxpayer."
Also citing concerns related to taxation of capital, Mr. Birla stated, "Provisions which effectively deem   portions of capital to be in the nature of income are serious   deterrents to genuine transactions, while keeping the door open for   aberrant behaviour. Fishing expeditions harm business atmosphere and   reputations. Rapid disposal of cases and enquiries is essential, unless   there is clear evidence of wrongdoing."
Other key suggestions made by FICCI are: 
-  Implementation of a comprehensive Goods and Services Tax (GST) in 2015
- Changes can be examined in laws to aggressively widen tax base, simplify laws, rationalize exemptions,conducive tax environment with litigation moderated and only as exception
-  Review relevance of a Direct Tax Code (DTC); most changes already incorporated in law
-  Review GAAR; freedom from CFC-coverage to legal Indian holdings and structures abroad
-  Possible steps on illegal assets abroad through tax net
-  Rebated income tax periods for small start-up businesses, in essence individually owned
-  Suggested START (= Sartup Rebated Tax) introduction in line with other Asian examples
Source-           FICCI MEDIA DIVISION
   - See more at:   http://taxguru.in/income-tax/retrospective-change-needed-invariably-favour-taxpayer-ficci.html#sthash.3eCW7bIL.dpuf
Exemption U/s. 10(23-C) (iiiad) even when the assessee had not claimed any exemption under the Section in assessment proceedings Posted In Income Tax Case Laws | Judiciary | No Comments »
       
It has been submitted on behalf of the   revenue that the Tribunal granted the benefit of Section 10(23-C)(iiiad)   without such a claim being made before the assessing officer or the   CIT(A).
Held – The assessee trust has taken   various steps, including the construction of building and getting the   necessary permission and sanction for running the school; so as to bring   the school into "existence" during the year, although the school have   separate running classes from next year onwards. More then sufficient   details and evidences have been   brought on record in support of this contention as well. This is an   admitted fact that total receipts of the assessee would remain below Rs.   1 Crore even if the donations of Rs. 49,99,000/- are added as receipt   in the nature of income of the assessee society. So I hold that the assessee trust is entitled for exemption u/s 10(23C)(iiiad).
HIGH COURT OF JUDICATURE AT ALLAHABAD
  Chief Justice's Court
  INCOME TAX APPEAL No. – 100 of 2014
  Commissioner Of Income Tax
   Vs.
   Om Sarla Babu Educational Trust
  Counsel for the Appellant:- Dhananjay Awasthi
  Counsel for respondent:- Vishwjit
  Hon'ble Dr. Dhananjaya Yeshwant Chandrachud,Chief Justice
ORDER
  Hon'ble Dilip Gupta,J.
This appeal by the revenue under Section 260-A of the Income Tax Act,   1961 arises from the decision of the ITAT; the assessment year being   A.Y. 2009-10. The revenue has raised the following question of law:
"Whether the ITAT erred in law in granting exemption U/s. 10(23-C) (iiiad) even when the assessee had not claimed any exemption under the Section in assessment proceedings."
The order of the Tribunal indicates that the appeal   was by the revenue and in support of the appeal, the departmental    representative appeared. The departmental representative, as the   Tribunal recorded, fairly accepted that the issue was covered by the   order of the Tribunal dated 29 November 2013 which was pertaining to   A.Y. 2009-10. This order of the Tribunal had also been confirmed by the Division   Bench of this Court while dismissing the appeal filed by the revenue   (Income Tax Appeal Defective No. 38 of 2014) on 1 May 2014. The order of   the Tribunal proceeded on a concession that the matter was covered.
However, it has been submitted on behalf   of the revenue that the Tribunal granted the benefit of Section   10(23-C)(iiiad) without such a claim being made before the assessing   officer or the CIT(A).
On the other hand, learned counsel appearing on behalf of the   assessee has strongly contested the correctness of the submission by   referring to the order passed by the CIT(A) where a specific claim under   Section 10(23C) (iiiad) was raised.
We have duly perused the order of the   CIT(A) as well as the order of the Tribunal. The order of the CIT(A)   would indicate that in the supplementary submission which was filed on   26 February 2013, the assessee had specifically raised the issue of   Section 10(23C) (iiiad) and had placed on record the relevant and   material facts including the objects of the trust, the allotment   of land, the structure of a school building and the commencement of a   school. The CIT(A) specifically dealt with this issue and observed as   follows:
"Without prejudice   to above, the appellant's additional ground regarding its entitlement   for exemption u/s 10(23C)(iiiad) goes; the same also is found valid and   allowable. The assessee trust has taken various steps, including the   construction of building and getting the necessary permission and   sanction for running the school; so as to bring the school into   "existence" during the year, although the school have separate running   classes from next year onwards. More then sufficient details and   evidences have been brought on record in support of this contention as   well. This is an admitted fact that total receipts of the assessee would   remain below Rs. 1 Crore even if the donations of Rs. 49,99,000/- are   added as receipt in the nature of income of the assessee society. So I   hold that the assessee trust is entitled for exemption u/s   10(23C)(iiiad)."
In this background, it would not be a fair   comment on the order of the Tribunal to submit that the Tribunal   allowed the claim under Section 10(23C)(iiiad) without such a claim   having been raised before the CIT(A).
As a matter of fact, such a claim was   raised before the CIT(A) together with relevant factual material. The   claim was duly adjudicated upon and the CIT(A) furnished adequate   grounds for holding the assessee to be eligible to the exemption under   Section 10(23C)(iiiad).
It is in this background that a   concession was made before the Tribunal on behalf of the revenue that   the said issue was covered by another decision of the Tribunal in the   case of the assessee itself, though for another institution. No attempt   has been made on behalf of the revenue to distinguish the judgement of   this Court dated 1 May 2014 in the earlier appeal filed by the revenue.
Consequently, we do not find any merit   in the appeal. The appeal does not raise any substantial question of law   and it is, accordingly, dismissed. There shall be no order as to costs.
Order Date :- 27.5.2014
  RK (Dilip Gupta,J.) (Dr.D.Y.Chandrachud,C.J.)
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Wednesday, June 4, 2014

[aaykarbhavan] Judgments and Information [1 Attachment]

Rule 12 of Income Tax Rules wef 01.04.2014 – Filing of Audit Reports & ITR

Retrospective change if needed must invariably favour taxpayer – FICCI

Exemption U/s. 10(23-C) (iiiad) even when the assessee had not claimed any exemption under the Section in assessment proceedings

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■		The assessee, owner of a shopping complex, submitted his return of income.
■		An information was obtained during search and seizure operation at residence of one 'N' that he had sold land to the assessee for higher price than that mentioned in sale deed. N had also filed his affidavit confirming said statement. Even on cross-examination, he had confirmed his said statement.
■		Accordingly, the Assessing Officer treated differential as undisclosed investment.
■		The Commissioner (Appeals) observed that the Assessing Officer had made the assessment only on the deposition of 'N'. In the absence of any evidence linking the payments stated to be paid by the assessee, merely based on the statement of 'N', it could not be stated that the assessee had received additional consideration.
■		The Tribunal confirmed Commissioner (Appeals) order.
■		On further appeal:

■		There is no dispute about the fact that the revenue is liable to prove the fact that there was undervaluation of the property as shown in the sale deed and that a higher amount has been paid by the purchaser to the seller. The question is apparently one of fact. On consideration of the factual material, the first appellate authority as well as the Tribunal unanimously held that the evidence was lacking to come to such a conclusion. The argument of the assessee is that such findings are perverse as substantial evidence was available on record and the first appellate authority had relied upon irrelevant consideration to reject such evidence. Further, the Tribunal did not re-appreciate the evidence, whereas it has just confirmed the order passed by the first appellate authority. [Para 11]
■		'N' had given a statement under section 132(4) stating that he sold the property for Rs. 7,82,00,000. This is further confirmed by an affidavit dated 6-11-2008 of 'N', indicating that he had purchased the property for Rs. 66,20,000 and sold the property for Rs. 78,20,000. When the assessee requested for cross examination and 'N' was summoned and sworn statement was recorded on 10-2-2008, he stated the details about the purchase of property from 'M' for Rs. 66,20,000 and sold the property in favour of the assessee for Rs. 78,20,000 and the fact that a lesser amount was shown in the sale deed. During cross examination, he denied the suggestions made by the assessee and there is nothing to indicate that 'N' has given a false statement. 'N' has declared the income from sale of property and has paid tax. [Para 12]
■		The oral evidence, which is supported by section 132(4)statement and the affidavit of 'N', which is uncontroverted even during cross examination, can be treated as sufficient evidence to show that the property has been sold for Rs. 78,20,000/-. The first appellate authority had gone a little further and had indicated that the revenue has not adduced any further evidence to show that 'N' had paid Rs. 66,20,000 to 'M' for purchasing the property and the assessee has paid the differential amount to 'N'. Apparently, these are all instances where the parties do not maintain any records and they deal in undisclosed amounts. Therefore, the evidence made available by the revenue is a probable evidence. It is relevant to note that if at all the assessee wanted to disprove the evidence given by 'N', the assessee could have proved otherwise by giving some evidence to show the market value of the land in the locality. [Para 12]
■		No such evidence is adduced by the assessee. Therefore, this was a case in which the revenue has to prove the existence of a fact that undervaluation was made by the assessee and that the assessee has paid more amounts for purchase of property amounting to Rs. 54,20,000/-. When that fact is proved, the burden shifts to the assessee to prove otherwise. He had an opportunity to cross examine the witness and there was nothing on record to indicate that the witness had spoken a false story. Under these circumstances, even in the absence of any other material produced by the revenue, the uncontroverted evidence of 'N' was in favour of coming to a finding that the assessee had not declared the actual investment made for acquiring the said building. The findings of the appellate authority as well as the Tribunal to the aforesaid extent are perverse. [Para 12]

(i)		the Tribunal is right in law and fact in relying on the consideration shown in the sale deed;
(ii)		the Tribunal is right in law and fact in interfering with the assessment order and are not the reliance on the sale deed and the interference with the assessment order perverse and against law and logic.

(i)		the Tribunal is right in law and fact in relying on the decisions of the Hon'ble Supreme Court in Varghese (131 ITR 597) and Kalyanasundaram (204 ITR 49)?
(ii)		should not the Tribunal have relied on the decision of the Hon'ble Kerala High Court reported in 220 CTR 166."

(1)		That Mr. Noushad has given a statement under Section 132(4) of the Income-tax Act stating that he sold the property for Rs. 7,82,00,000/- .
(2)		This is further confirmed by an affidavit dated 6.11.2008 of Mr. Noushad, indicating that he had purchased the property for Rs. 66,20,000/-and sold the property for Rs. 78,20,000/-.
(3)		When the assessee requested for cross examination and Mr. Noushad was summoned and sworn statement was recorded on 10.2.2008, he stated the details about the purchase of property from Smt. Mariamma Kurian for Rs. 66.20,000/- and sold the property in favour of the assessee for Rs. 78,20,000/- and the fact that a lesser amount was shown in the sale deed.
(4)		During cross examination, he denied the suggestions made by the assessee and there is nothing to indicate that Mr. Noushad has given a false statement.
(5)		Mr. Noushad has declared the income from sale of property and has paid tax.

■		The assessee, a private limited company, was repairing and manufacturing transformers. It claimed deduction under section 80-IA in respect of transformer oil, scrap and labour charges for sale of scrap.
■		The Assessing Officer noticed that company had been engaged in repairing of old transformer and it did not manufacture new transformer.
■		The assessee submitted that company had been manufacturing aluminium HT/LT Leg Coils which were used in old burnt transformers and on the basis of the said manufacturing, the assessee had claimed 100 per cent deduction under section 80-IA(2)(iv)(c).
■		The Assessing Officer had held that assessee had not manufactured or produced transformer oil and scrap, rather had purchased the T/oil from market and only centrifuging i.e., processing had been done, but no new article or thing had been produced/manufactured. Finally, the Assessing Officer had turned down the plea of the assessee of 100 per cent deduction under section 80-IA.
■		On appeal, the Commissioner (Appeals) held that the assessee was entitled for the benefits under section 80-IA.
■		On second appeal, the Tribunal allowed deduction under section 80-IA on transformer oil, which was not sold, but was a part of assembly of transformer, and disallowed deduction under section 80-IA on scrap and the labour charges for the sale of scrap.
■		On further appeal:

■		As per the provision of section 80-IA, the same would be applicable to a company, which manufacture or produce any article or things. In the present case, the assessee company perform work in the nature of business for repairing and manufacturing of transformer. It has also been contended by the assessee that the company has been manufacturing aluminium HT/LT Leg Coils, which were used in old burnt transformers and in this regard, it had also submitted in detail before the assessing authority. The company did not manufacture or produce transformer oil and scrap, rather it has purchased the T/Oil from the market and only centrifuging has been done and no new article or things has been produced/manufactured, only processing has been done. In the processing scrap, it had obtained from old/burnt Transformers Coils, which were made of aluminium wires of different amperes. It also appeared from the record that the scrap has not been manufactured/produced. Certain more small parts have been purchased and have been used in manufacture of new HT/LT Leg Coils. It also appears that the assessee has purchased the transformer oil from the market and after centrifuging the transformer oil by centrifugal machine, the centrifuged transformer oil has been made useful in old/burnt transformer. It is a sort of processing only and cannot be termed as manufacture of centrifuged transformer oil. [Para 19]
■		It is apparent that the assessee did indulge in processing activities, but no manufacture or production of new articles or things is involved in this processing. [Para 20]
■		The assessee has also taken a stand that the word 'manufacture' and 'produce' has been defined in clauses (iii) and (vi) of Explanation to section 10-A(8) and clauses (iii) & (iv) of Explanation to section 10-B(7), while discussing the deductions under the said sections in relation to the 'Newly established Industrial Undertakings in Free Trade Zones' and 'newly established 100 per cent Export Oriented Undertakings' respectively. On this analogy, it has been argued that processing of articles or things done by assessee should be treated as 'Manufacture' of new article or thing. [Para 21]
■		The Explanations of both the above sections begin with the opening limb 'For the purpose of this section' and, therefore, it cannot be reasonably construed that this inclusive definition of 'Manufacture' or 'Produce' as enuciated and elaborated in sections 10A and 10B is applicable to provisions of section 80-I or section 80-IA because these words have been defined with a particular purpose or with reference to the limited/particular context, i.e., free trade zone and 100 per cent Export Oriented Undertakings. Although prima facie, there appears to be a discrimination yet this is a reasonable/discrimination because it is well within the competence of the legislature to define a word for specific purposes or object or section and not for general connotation wherever these words occur in the IT Act. Had this been the intention or object of the legislature/Parliament, the word 'Manufacture' world also have been defined in section 80-I or 80-IA in the same manner or a reference must have been made in section 10-A or 10-B because these sections are on the statute for the last 7-8 years or even some more years with certain new charges. [Para 22]
■		The Commissioner as well as Tribunal have given much emphasis on processing and held that the assessee, industrial undertaking does processing of goods and entitled for benefit under section 80-IA, just to appreciate the processing, it would be appropriate to place few more meanings of the processing even though the processing has not been defined in the Act.
■		On bare perusal of literal meaning of processing, it is clear that by means of continuous and regular action or succession of action taking place or carried on in a definite manner and leading to the accomplishment of some result, then only some benefits could be conferred in favour of the assessee. [Para 26]
■		From the aforementioned facts and circumstances of the case, it is clear that definition of 'processing' would not be applicable in the present case, especially in the background that the transformer oil had been purchased by the assessee from market and centrifuging had been done by centrifugal machine in order to make it usable in Transformer, but in substance no new articles or things has emerged from the said processing, only some special processing or treatment had been given to transformer oil through a particular method. Therefore, it cannot be construed that due to this transformation or activity there was change in the substance and new article had come out. [Para 27]
■		Therefore, in the aforementioned facts and circumstance, it is clear that the assessee did not indulge in any manufacturing activities or producing any new articles or things and, accordingly, the assessee was not entitled to the benefits of 100 per cent deduction under section 80-IA(2)(iv)(c). [Para 28]

"1.		Whether on the facts and circumstances of the case, is the Tribunal legally correct in its view that the assessee's business is an industrial undertaking within the meaning of Section 80IA of the I.T. Act, 1961.
2.		Whether on the facts and circumstances of the case, was the ITAT legally correct in holding that the assessee was legally entitled to the claim U/s 80IA on transformer oil."

(i)		the assessee's business involves 'production' ?
(ii)		the assessee is entitled to exemption under Section 80HH of the 1.T. Act, 1961?"

(a)		Process, OR
(b)		assembling or
(c)		recording of programme on any disc, take perforated madia or other information storage device;

■		The assessee was a registered dealer under the provisions of the Karnataka Sales Tax Act, 1957. It was an authorised dealer of Ford, who was the manufacturer of different models of four wheeler motor vehicles. The said manufacturer sold cars to the assessee in the course of inter-State trade or commerce. In turn the assessee sold the cars so purchased from the manufacturer to local customers at sale price which included cost of warranty. The warranty was meant to provide free replacement of parts to customers if found to involve manufacturing defect within the warranty coverage.
■		The assessee supplied the spare parts to the customers free of cost and after such replacement returned the defective parts to the manufacturer. The assessee also raised debit notes on the manufacturer. On receipt of the debit notes, the manufacturer issued credit notes to the assessee reimbursing it for the cost of the parts supplied to customers free of cost and the cost of labour. In the returns filed for the assessment years 2001-02 to 2003-04, the assessee claimed deduction of the amounts for which credit notes were received from the manufacturer.
■		The Assessing Authority allowed the deduction claimed by the assessee.
■		Subsequently the Revisional Authority revised the assessment orders and levied sales tax on the consideration paid by the manufacturer to the assessee by way of credit notes.
■		The Tribunal held that there was no sale involved within the definition under section 2(1)(t) in the transactions of free supply of parts by the assessee to customers covered by warranty and in the credit notes issued by the manufacturer to the assessee towards reimbursement of the cost of the parts so supplied to customers. It, therefore, set aside the order of the Revisional Authority.
■		On appeal to High Court:

■		In the instant case, the customers have purchased the motor vehicles from the manufacturer through the assessee. The sale price includes the price of warranty. The assessee has supplied spare parts, replaced defective parts and returned the defective parts to the manufacturer. Along with the defective parts, the assessee has raised debit notes in the name of the manufacturer. Thereafter the manufacturer has raised credit notes. In other words, the manufacturer has paid the assessee the price of the spare parts, which were replaced. If the said spare parts had been purchased in the open market, both of them have to pay sales tax.
■		Therefore, in view of the law laid down by the Apex Court in the case of Mohd. Ekram Khan & Sons v.CTT [2004] 136 STC 515 the consideration paid by the manufacturer to the assessee by way of credit notes represents the sale price of the spare parts which are replaced and is liable to tax. In that view of the matter, the impugned order passed by the Tribunal was liable to be set aside. [Para 7]

(a)		Revision is allowed.
(b)		The impugned order passed by the Tribunal is hereby set-aside.
(c)		The order passed by the Revisional Authority is restored to file in its original.

(a)		Sales Tax Appeal is partly allowed.
(b)		Levy of tax and interest is upheld.
(c)		Levy of penalty is set-aside.

(i)		all goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter 90, [heading 6805, grinding wheels and the like, and parts thereof falling under heading 6804] of the First Schedule to the Excise Tariff Act;
(ii)		pollution control equipment;
(iii)		components, spares and accessories of the goods specified at (i) and (ii);
(iv)		moulds and dies, jigs and fixtures;
(v)		refractories and refractory materials;
(vi)		tubes and pipes and fittings thereof;
(vii)		storage tank, and
(viii)		motor vehicles other than those falling under Tariff Headings 8702, 8703, 8704, 8711 and their chassis but including dumpers and tippers,