The Commissioner of Income TaxChennai v. M/s. Aicam Engineering Pvt. Ltd.

IN THE HIGH COURT OF JUDICATURE AT MADRASDATE :: 07..12..2010CORAM :THE HON'BLE MR. JUSTICE F.M. IBRAHIM KALIFULLAANDTHE HON'BLE MR. JUSTICE N.KIRUBAKARANTAX CASE (APPEAL) NOS: 601 TO 603 OF 2010The Commissioner of Income TaxChennai. ... Appellant in all the appeals-vs-M/s. Aicam Engineering Pvt. Ltd.No: 5, Prof. Subramaniam StreetKilpauk Chennai. ... Respondent in all the appeals Tax Case Appeals under Section 260 – A of the Income Tax Act1961 against the order of the Income Tax Appellate Tribunal, "A"Bench, Chennai, dated 21.08.2009 passed in I.T.A. No: 44 to46/Mds/2009 for the assessment years1986 – 1987,1994 – 1995 and 1995– 1996 respectively against the order of the Commissioner of IncomeTax (Appeals) III Chennai dated 09.09.2008 passed in ITA.Nos.861, 871& 872/06-07/AIII against the assessment order of the AssistantCommissioner of Income Tax, Company Circle I(1) Chennai 34 inPA/GIR.No.AAACA5464B/AX5-003.For appellant : Mr. K. Subramaniam Standing counsel for I.T. Dept.For respondent : Mr. V.S. JayakumarJ U D G M E N T( Judgment of the Court was deliveredby F.M. Ibrahim Kalifulla, J. )The Revenue has come forward with these appeals and thesubstantial questions of law framed are as under : "1. Whether on the facts and circumstances of thecase, the Appellate Tribunal was right in law in holdingthat the assessee company for the assessment years 1986-87,1994-95 and 1995-96 is entitled to relief u/s.32A and 801Awhen the assessee company merely does the work of erection https://hcservices.ecourts.gov.in/hcservices/ of steel plant which does not involve manufacturingprocess?2. Whether on the facts and circumstances of the case,the Appellate Tribunal was right in law in following thecase of ITO vs. K.S.Venkatraman and Co. (243 ITR 377), whenin the assessee's own case for the assessment year 1983-84the Hon'ble jurisdictional High Court in T.C.No.753 of 1991dated 26.08.2002 has held that the assessee's activitywould not amount to 'manufacture'?"2. The issues centers around the question whether therespondent assessee is entitled for the benefits unders Section 32 Aand 80IA of the Income Tax Act, 1961, hereinafter referred to as theAct, on the footing that it is involved in the manufacture ofarticles and things. Section 32 A of the Act inter alia stipulatesthat in order to avail the benefit of Investment Allowance, theassessee should own a plant or an industrial undertaking for thepurpose of business of construction, manufacture or production of anyarticle or thing, not being an article or thing specified in the listin the Eleventh Schedule. Similarly, under Section 80IA of the Act,as it stood at the relevant point of time, sub clause 12 (b)stipulates that for the purpose of that sub section an industrialundertaking shall have the meaning assigned to it in the Explanationto Section 33B. Explanation to Section 33 B defines an "IndustrialUndertaking" to mean, " any undertaking which is mainly engaged inthe business among other things in the manufactur or processing ofthings". Therefore, the relevant criteria to be applied for theassessee to claim the Investment Allowance under Section 32 A and thededuction provided under Section 80IA of the Act was to show that itis an Industrial Undertaking engaged in the manufacture of articlesor thing or things. In fact, the present assessment order came to bepassed pursuant to a remittal order of this Court passed in thedecision reported in 274 (2005) I.T.R. 521 ( Commissioner of IncomeTax -vs- Aicam Engineering Pvt. Ltd. ) as well as the directions ofthe Hon'ble Income Tax Appellate Tribunal to the assessing authorityto extend an opportunity of hearing to the respondent assessee tosubstantiate the claim of Investment Allowance under Section 32A anddeduction under Section 80IA of the Act. It is pursuant to theabove referred to remand order that the assessing authoritydetermined the issue and held that the respondent assessee is acontracting firm and cannot therefore be held to be an industrialundertaking enganged in the manufacturing activity. However, theC.I.T. Appeals as well as the Tribunal held that as part of itscontractual operations, the respondent assessee is also involved inmanufacture of articles and things and, therefore, it would qualifyfor relief under Section 32 A and Section 80 IA of the Income TaxAct. 3. We heard Mr.K. Subramaniam, learned Standing counselappearing for the Revenue and Mr.V.S. Jayakumar, learned counsel https://hcservices.ecourts.gov.in/hcservices/ appearing for the assessee. 4. At the very outset Mr. Subramaniam relied upon the orderpassed by a Division Bench of this Court dated 26.08.2002 made inT.C. No: 753 of 1991 which is also related to the very same assessee.The questions of law framed thereunder were also mostly relatedto the issue as to whether the respondent assessee was entitled forthe deduction under Sec. 32 A – Investment Allowance and whether itcan be said that the assessee is involved in manufacturing activitynamely manufacutre of an article or thing. The learned standingcounsel then contended that some of the statutory forms submitted bythe respondent assessee itself relates to the contracting firms andnot related to manufacturing establishments. The learned standingcounsel therefore contended that having regard to the stand that therespondent assessee has engaged contract workers for erection ofvarious equipments for different parties, its activities cannot bebrought within the term "Industrial Undertaking" in order to extendthe benefits under Section 32 A and Section 80 IA of the Income TaxAct, 1961. 5. On the above submissions Mr. V.S. Jayakumar learned counselappearing for the respondent assessee contended that a detailed listof manufacturing activities carried on by the respondent assesseehave been furnished before the assessing authority as well as theC.I.T. (Appeals) and that the C.I.T. (Appeals) perused the recordsand then rendered a factual finding that the respondent assessee, inthe course of enforcing its contractual obligations, was involved invery many operations of supply of industrial equipments and,therefore, simply because the respondent assessee was involved in thebusiness of errection of various equipments, the revenue cannotcontend that there was no manufacturing operations carried on by therespondent assessee to deny the benefits of Section 32 A and Section80 IA of the Act. 6. We see some force in the submission of the learned counselappearing for the respondent / assessee. In fact a perusal of thedetails culled out by the Commissioner of Income Tax (Appeals) whilepassing the order dated 09.09.2008 pertaining to the assessment years1986-'87, 1994-'95 and 1995-'96 would disclose the various productsand equipments manufactured and supplied by the respondent assesseeto its customers / end users whcih was running to Rs.2.50 crores toRs.11.81 crores. In fact, in its detailed reply, the respondent /assessee has explained the nature of its operations for its differentprincipals. In one such statement the respondent / assessee hassubmitted that it used to purchase raw materials, manufacture andsupply and errect for various public undertakings several industrialequipments comprising boilers and piping systems, heaters, cranegirders, different steel plant equipment, chemical columns, girdersfor MRTS, power generating equipment for North Madras Refinery,various equipments for refinery maintenance, air pre-hearing system https://hcservices.ecourts.gov.in/hcservices/ for cauvery refinery of MRL and different other mechanical equipmentfor cement plants. The above details furnished by the respondentassessee supported by material documents sufficiently demonstratedbefore both the lower authorities to confirm that the respondentassessee was squarely covered by the expression "IndustrialUndertaking" by virtue of its manufacturing activity in the courseof its business of contract of supply and errection of variousequipments for different public sector undertaking. Suchoverwhelming evidence did weigh with the lower authorities to holdthat the respondent assessee was entitled to the benefits underSection 32 A and Section 80IA of the Income Tax Act, 1961. Havingregard to such detailed consideration of relevant materials by thelower appellate authorities and the Tribunal which had reached afinding of fact as regards teh manufacturing acitivity of therespondent assessee, there is no scope for interference on suchfinding of fact arrived at by the Tribunal. The Tribunal alsofollowed the decision of the Division Bench of this Court rendered inIncome Tax Officer vs. K.S.Venkatraman and Co. Reported in 243 I.T.R.377 while confirming the order made by the C.I.T. (Appeals). Apartfrom the above said detailed discussion and consideration of materialdocuments by the C.I.T. (Appeals), which was confirmed by theTribunal, no other materials were available on record. Though theearlier order dated 26.08.2002 made in T.C. No: 753 of 1991 relatesto the very same assessee, the said decision cannot be applied to thecase on hand. We are, therefore, convinced tha t the order of theTribunal, confirming the order of the C.I.T. (Appeals), is perfectlyin order and the questions of law are answered against the appellant.The tax case appeals fail and the same are dismissed. Sd/Asst.Registrar/true copy/Sub Asst.RegistrargpTo1. The Income Tax Appellate Tribunal, " A " Bench, Chennai.2. The Commissioner of Income Tax, Chennai.1 cc To Mr.K.Subramanian Senior Standing Counsel for IT, SR.87623.1 cc To Mr.V.S.Jayakumar, Advocate, SR.87768.T.C. (A) Nos: 601 to 603 of 2010 KGK(CO)RVL 19.01.2011