Commissioner of Income Tax vs Fateh Granite (P) Ltd.

The appeal is in respect of asst. yr. 2001-02. In respect of amount claimed u/s 10B of the IT Act, the AO was pleased to hold that for granting of deduction u/s 10B, there must be an approved 100 per cent export oriented undertaking. On facts, the AO held that the assessee was unable to show the bank realisation certificate for the export sales. In the appeal preferred by the assessee before the CIT(A) on this issue, CIT(A) remanded the matter back to the AO to verify the claim of the assessee and to allow deduction to the extent related to export sale proceeds received in convertible foreign exchange in India within time-limit prescribed in sub Section 10B of the Act. On the matter being remanded back to the AO, the AO by revised order dt. 1st May, 2006 allowed the claim of the assessee u/s 10B of the Act.

Revenue aggrieved by the order of the CIT(A) directing the AO to allow deduction in terms of Section 10B of the Act read with proviso thereof preferred an appeal to the learned Tribunal and relied on the judgment of the Rajasthan High Court in the case of Arihant Tiles and Marbles Pvt. Ltd. Vs. Income Tax Officer, and dismissed the appeal preferred by the Revenue. Revenue is in appeal against the said order and the questions have been formulated for the determination of this Court.

The Tribunal noted the contentions advanced by the parties. The CIT in exercise of his powers u/s 264 of the IT Act had allowed the said deduction. The AO thereafter for the asst. yr. 2002-03 had also allowed deduction. In spite of these orders, the AO in respect of the asst. yr. 2003-04 has disallowed the same. The learned Tribunal noted that though concept of res judicata is not applicable to the fiscal statute, the doctrine of consistency as contended is squarely applicable to the facts of the present case. In other words, it held that as Revenue for the previous assessment year has accepted the claim of the assessee, it would not be open to Revenue unless there is change of facts or change of law to take a different view, more so, after the order passed by the CIT.

Though in the memo of appeal three questions have been framed, in our opinion, the question which is relevant would be as set out in para 5.1(a) which reads as under:

Whether in view of the facts and circumstances of the case and in law the cutting, polishing and sizing of granites amounted to either manufacturing or processing and accordingly, the assessee was entitled for deduction u/s 10B of the IT Act?

The submission made on behalf of the Revenue was based on the view taken by the Rajasthan High Court in the case of Commissioner of Income Tax Vs. Lucky Mineral Pvt. Ltd., which considered the expression "manufacture" u/s 80HH. The view taken by the Rajasthan High Court was approved by the Supreme Court in the case of Lucky Minmat Pvt. Ltd. v. C.I.T., (2000) 245 ITR 830 (SC) .

The language used in Section 10B is "manufacture or production". This language is similar to the language used in Section 80-IB. The Supreme Court in Commissioner of Income Tax Vs. Sesa Goa Ltd., had an occasion to consider the expression "production". The Rajasthan High Court in Arihant Tiles & Marbles (P) Ltd. v. ITO (supra) for the purpose of Section 80-IB was pleased to hold that the activity namely sawing of marble blocks and subsequent activities of cutting and polishing, will fall within the meaning of the expression "production" and therefore, assessee was entitled to benefit u/s 80-IB.

The expression "manufacture" or "production" are different expressions and the word "production" has a wider meaning as explained by the apex Court in Sesa Goa Ltd. (supra). In our opinion, the word "production" u/s 10B considering similar expression in Section 80IB will have to be given this wider meaning. Considering that the expressions are not defined in the Act but the expressions are used in the same Act. The only difference between Section 80-IB and Section 10B is that Section 10B is applicable to a 100 per cent EOU, whereas Section 80-IB can be in respect of any unit. In our opinion, therefore, the expression "production" will have the same meaning as in Sesa Goa Ltd. (supra) and consequently, the question framed is devoid of merits.

On behalf of the Revenue the learned Counsel sought to contend that they had also raised an issue that the assessee had not complied with the other predicates to avail the benefit of Section 10B. We do not find such an issue was raised before the Tribunal. The question in appeal to this Court must arise from the order of the Tribunal. In these circumstances, in our opinion, the oral submissions sought to be advanced cannot be sustained.

On behalf of the assessee, the learned Counsel had drawn our attention to the judgment of the Gujarat High Court in the case of Saurashtra Cement and Chemical Industries Ltd. Vs. Commissioner of Income Tax, Gujarat-V, to contend that once the Revenue had allowed the relief for the previous assessment year, it was not open to disturb the relief for the subsequent years without disturbing the relief granted in the initial year. Our attention is also invited to the judgment of this Court in the case of Commissioner of Income Tax Vs. Paul Brothers, wherein Court was considering the issue for the asst. yr. 1981-82. This Court took a view that for the purpose of Section 80HH or Section 80J, there is ho provision for withdrawal of deduction for the subsequent year for breach of certain conditions, unless the relief granted for the earlier year 1981-82 was withdrawn. For the reasons set out earlier, we need not consider this aspect.

We find no merit in this appeal and accordingly, the same is dismissed.