IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 06/02/2006
Coram
THE HON'BLE MR.JUSTICE P.D.DINAKARAN
AND
THE HON'BLE MR.JUSTICE P.P.S.JANARTHANA RAJA
Tax Case (Appeal) No.24 of 2006
& Tax Case (Appeal) No.25 of 2006
The Commissioner of Income Tax ,
Chennai. ..Appellant
-Vs-
P.Damodaran,
Madurai ..Respondent
Appeals under Section 260A of the Income Tax Act, 1961 against the
order of the Income Tax Appellate Tribunal, Madras, 'B' Bench in I.T.
A. Nos.1809 and 1810/Mds/2000 for the assessment years 1995-96 and 199
7-98.
!For Appellant : Mrs.Pushya Sitaraman
^For Respondent : ---
:JUDGMENT
(Judgment of the Court was delivered by P.P.S.Janarthana Raja, J.)
The present appeals are filed under Section 260A of the Income
Tax Act, 1961 by the Revenue, in I.T.A. Nos.1809 and 1810/Mds/2000,
passed by the Income Tax Appellate Tribunal, Madras, ‘B’ Bench raising
the following substantial question of law.
“Whether in the facts and circumstances of the case, the Tribunal was
right in upholding the assessee’s claim for deduction u/s 80IA, when
he himself had given a sworn statement to the central excise
authorities that he did not have any activity of manufacture in the
said premises?”
2. The facts leading to the above question of law are as under:
i) The assessee had claimed deduction under Section
80IA(2)(iv)(c) of the Income Tax Act for manufacturing cable joining
kit used in the telecommunication industry at Pondicherry, which is an
industrially backward area. The assessment order originally passed
for the Assessment Year 1995-96, was set aside by the Commissioner of
Income Tax ( Appeals) with a clear direction to the Assessing Officer
to examine the claim of the assessee with evidence in support of the
return filed by him. The Assessing Officer thereafter passed an
assessment order under Section 143(3) of the Income Tax Act, read with
250 on 30.03.20 00. For the assessment year 1997-98, the Assessing
Officer completed the assessment under Section 143(3) of the Act. The
Assessing Officer rejected the assessee’s claim for deduction under
Section 80IA(2)(iv)(c) relying upon the results of proceedings taken
by the Central Excise authorities against the assessee, by holding
that the assessee did not carry on any manufacturing or production
activities, but was indulging in stock transfer and in raising sales
invoices from Pondicherry. Finally, the Assessing Officer held that
the assessee was not able to establish that any manufacturing activity
had been commenced for claiming deduction under Section 80IA of the
Act.
ii) Aggrieved by the order of the Assessing Officer, the
assessee filed an appeal before the Commissioner of Income Tax
(Appeals), and claimed that the Assessing Officer rejected his claim
without any independent enquiry and also ignored the real fact that
the assessee had indulged in manufacturing activity at Pondicherry,
and was therefore entitled for relief under Section 80-IA. After
hearing the arguments, the Commissioner of Income Tax (Appeals) came
to the conclusion that the Assessing Officer, on his own, had not made
on-thespot enquiry so as to ensure the real facts and correctness of
the assessee’s claim that he had carried on manufacturing activity of
cable joining kits at Pondicherry. The C.I.T. (A) further found that
even after the assessment had been set aside for the Assessment Year
1995-9 6 with a direction to examine the claim of the assessee under
Section 80IA denovo, no such enquiries were made by the Assessing
Officer. The C.I.T. (A) finally held that the assessee is entitled
to relief under Section 80IA of the Act.
iii) Aggrieved by the order of the C.I.T. (A), the Revenue filed
an appeal before the Income Tax Appellate Tribunal. The Income Tax
Appellate Tribunal dismissed the appeal filed by the Revenue and
confirmed the order of the C.I.T (A). The standing counsel appearing
for the Revenue submitted that the Tribunal was wrong in allowing the
deduction under Section 80IA of the Act and failed to appreciate that
the assessee himself had admitted in the statement dated 12.12.1996
before the Assistant Commissioner of Central Excise (Anti Evation),
Trichy, that the premises was used only as godown for packing goods in
carton boxes containing the cable joining materials. He also further
submitted that the Tribunal had not appreciated the statement recorded
on 11.06.1997 that the assessee had admitted that he was engaged only
in trading activity of buying and selling.
3. We heard the arguments of the counsel. The assessee had
claimed that he had started his factory at Pondicherry where
manufacturing activity was done, whereas the stand of the Revenue was
that, at Pondicherry, no manufacturing activity was carried on other
than using the premises for correspondence and for despatching the
goods by the assessee. The Tribunal had given a finding that the
Assessing Officer had not made any enquiry to find out whether the
assessee had carried out any manufacturing activity at Pondicherry,
even after the matter was remanded back to his file. Similarly, there
was nothing to suggest that the Central Excise Authorities ever
visited the assessee’s factory to find out the verasity of his claim
that the manufacturing activities were being carried out at his
factory premises at Pondicherry. Also, it is found that the Central
Excise authorities visited only the office premises of the assessee
and examined certain documents. Hence, we find no justification in
rejecting the assessee’s claim for deduction under Section 80IA merely
relying on the observation of the Central Excise authorities.
Further, it was a factual finding by the authorities below that the
machineries installed in the premises and the raw materials utilised
by the assessee, suggest that there was a production of article or
thing for the purpose of using the same in the telecommunication
industry. When the factual finding itself is that the asessee
manufactured telephone cables joining kits, the assessee is entitled
for benefit available under Section 80IA of the Act.
4. In view of the foregoing conclusions, we find no error in
the order of the Income Tax Appellate Tribunal and hence no
substantial question of law arises for consideration of this Court.
Hence, the above tax cases are dismissed. No costs. Consequently,
the connected TCMP No.26 of 2006 is closed.
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