Commissioner of Income-tax Circle, Tirunelveli v. Vetrivel Minerals
[Citation -2020-LL-0721-12]

Citation 2020-LL-0721-12
Appellant Name Commissioner of Income-tax Circle, Tirunelveli
Respondent Name Vetrivel Minerals
Court HIGH COURT OF MADRAS
Relevant Act Income-tax
Date of Order 21/07/2020
Assessment Year 2013-14
Judgment View Judgment
Keyword Tags substantial question of law • manufacturing activity • special economic zone • semi-finished goods • higher deduction • factual finding • factual matrix • sez units • benefit of deduction • process of manufacture
Bot Summary: The Assessing Officer denied the benefit of the deduction claimed by the assessee on the grounds that what was imported by the assessee and what was exported are the same product and therefore, there was no manufacturing activity done by the assessee to be eligible to claim deduction. A certificate has been given by the Assistant Development Officer dated 28.03.2013, certifying that the assessee's unit has commenced production on 29.02.2012. Further, the assessee has stated that the export invoice was submitted to the Assessing Officer during the assessment procedure. The CIT(A) after considering the factual position accepted the submission of the assessee that the semi finished material purchased by the assessee is not marketable and usable in the industry, as what is purchased by the assessee includes silicon, sand and waste, which cannot be marketed as such, unless the waste materials are removed. The flow chart, which was produced by the assessee before the Assessing Officer, was referred to CIT(A) and he came to the conclusion that the Assessing Officer was himself mislead by the nomenclature used in the Gate Pass. The Revenue carried the matter by way of appeal to the tribunal and the tribunal once again re-appreciated the factual position and found that there is a process of 'manufacture' as defined under the SEZ Act, which takes place in the SEZ unit and also pointed out that the Assessing Officer himself has accepted that the assessee's unit, processed the raw materials by removing 10 to 20 impurities. Cost comparison of the semi finished product with that of the raw material was also referred to and it was also pointed out that the Assessing Officer could not establish that the assessee has suppressed the purchase cost of semi-finished goods in order to claim higher deduction under Section 10AA of the Act.


TCA No.605 of 2018 IN HIGH COURT OF JUDICATURE AT MADRAS DATED: 21.07.2020 CORAM: HONOURABLE MR.JUSTICE T.S.SIVAGNANAM and HONOURABLE MRS.JUSTICE V.BHAVANI SUBBAROYAN Tax Case Appeal No.605 of 2018 Commissioner of Income Tax Circle, Tirunelveli .. Appellant versus M/s.Vetrivel Minerals, Keeraikaranthattu, Tisayanvilai, Tirunelveli .. Respondent Tax Case Appeal filed under Section 260A of Income Tax Act, 1961, against order made in ITA No.706/Mds/2017 dated 20.09.2017 passed by Income Tax Appellate Tribunal, 'A' Bench, Chennai, for Assessment Year 2013-14. For Appellant : Mr.G.Baskar For Respondent : Mrs.R.Hemalatha Senior Standing Counsel http://www.judis.nic.in Page 1 of 8 TCA No.605 of 2018 JUDGMENT T.S.SIVAGNANAM, J. This appeal by revenue filed under Section 260A of Income Tax Act, 1961 (the 'Act' for brevity), is directed against order dated 20.09.2017 in ITA No.706/Mds/2017 on file of Income Tax Appellate Tribunal, Chennai, 'A' Bench, for Assessment Year 2013- 14. 2. Tax Case Appeal was admitted on 24.08.2018 on following Substantial Questions of Law. "(a) Whether Tribunal was right in holding that assessee is eligible for deduction U/s.10AA of Income-tax Act 1961, even though assessee is not carrying on any manufacturing at its SEZ Unit? (b) Whether Tribunal was right in holding that assessee is carrying on manufacturing activity even though new product having distinctive name, character or use was not brought into existence at its SEZ Unit by assessee as per Special Economic Zone Act 2005?" http://www.judis.nic.in Page 2 of 8 TCA No.605 of 2018 3. We have heard Mrs.Premalatha, learned standing counsel for appellant/revenue and Mr.S.Raj Makesh, learned counsel appearing for respondent / assessee. 4. assessee filed their return of income for Assessment Year under consideration 2013-14 on 27.09.2013, admitting total income of Rs.3,16,61,350/-. assessment was selected for scrutiny by issuance of notice under Section 143[2] dated 02.09.2014 and Assessing Officer rejected claim of assessee, who claimed deduction under Section 10AA of Act, on ground that raw material and finished product are one and same and there was no manufacturing activity having taken place in SEZ unit of assessee. 5. assessee filed appeal before Commissioner of Income Tax (Appeals)-III, Madurai, (the CIT(A), for brevity). appeal was allowed by order dated 07.12.2016, alleging that processes carried out by assessee in their SEZ unit, results in new product having different name, character or use, as per definition of "manufacture", as defined under Section 2(r) of Special Economic Zone Act, 2005 [the 'SEZ Act', for brevity]. http://www.judis.nic.in Page 3 of 8 TCA No.605 of 2018 6. revenue filed appeal before tribunal and by impugned order, appeal was dismissed. 7. After elaborately hearing learned counsels for parties, we find that entire issue involved in instant case is fully factual and in our considered view, no question of Law much less any Substantial Question of Law, arises for consideration. We support such conclusion with following reasons. 8. Assessing Officer denied benefit of deduction claimed by assessee on grounds that what was imported by assessee and what was exported are same product and therefore, there was no manufacturing activity done by assessee to be eligible to claim deduction. In fact, Inspector from department had visited factory to acquaint himself with process adopted by assessee in their SEZ Unit. This fact has been recorded by Assessing Officer in order of assessment dated 30.03.2016. But, Assessing Officer, chose to refer to 'Gate Pass' issued by Government wherein description of goods, is shown as 'Tailings rich in ilemnite'. Further Assessing Officer opined that minor activity of sieving to separate http://www.judis.nic.in Page 4 of 8 TCA No.605 of 2018 dust particles only is carried out in SEZ units and hence, it does not amount to manufacturing. 9. Before CIT(A), assessee had explained in detail about process adopted by them. certificate has been given by Assistant Development Officer dated 28.03.2013, certifying that assessee's unit has commenced production on 29.02.2012. Further, assessee has stated that export invoice was submitted to Assessing Officer during assessment procedure. However, same was ignored and was not taken into consideration. 10. CIT(A) after considering factual position accepted submission of assessee that semi finished material purchased by assessee is not marketable and usable in industry, as what is purchased by assessee includes silicon, sand and waste, which cannot be marketed as such, unless waste materials are removed. flow chart, which was produced by assessee before Assessing Officer, was referred to CIT(A) and he came to conclusion that Assessing Officer was himself mislead by nomenclature used in Gate Pass. After considering factual materials, CIT(A) concluded that http://www.judis.nic.in Page 5 of 8 TCA No.605 of 2018 process done by assessee would qualify as 'manufacture', under SEZ Act. 11. Revenue carried matter by way of appeal to tribunal and tribunal once again re-appreciated factual position and found that there is process of 'manufacture' as defined under SEZ Act, which takes place in SEZ unit and also pointed out that Assessing Officer himself has accepted that assessee's unit, processed raw materials by removing 10 to 20% impurities. Cost comparison of semi finished product with that of raw material was also referred to and it was also pointed out that Assessing Officer could not establish that assessee has suppressed purchase cost of semi-finished goods in order to claim higher deduction under Section 10AA of Act. Furthermore, certificate issued by Assistant Development Officer was accepted on ground that revenue could not prove same to be not genuine. Therefore, tribunal sustained factual finding recorded by CIT(A). 12. Thus, in our considered view, entire factual matrix has not only been analyzed by CIT(A), but, also by tribunal. Therefore, http://www.judis.nic.in Page 6 of 8 TCA No.605 of 2018 we are convinced to observe that no question of Law much less any Substantial Question of Law arises for consideration in this appeal. Accordingly Tax Case Appeal fails and same is dismissed. No Costs. [T.S.S., J.] [V.B.S., J.] 21.07.2020 Index : Yes/No Internet : Yes Speaking/Non-speaking order. ars http://www.judis.nic.in Page 7 of 8 TCA No.605 of 2018 T.S.SIVAGNANAM, J. AND V.BHAVANI SUBBAROYAN, J. ars TCA No.605 of 2018 21.07.2020 http://www.judis.nic.in Page 8 of 8 Commissioner of Income-tax Circle, Tirunelveli v. Vetrivel Mineral
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