1. This is an appeal filed by the Department against the order of the learned CIT(A) dt. 1st Dec., 2006 for the asst. yr. 2003-04. The assessee has filed the cross-objection.
2. During the course of hearing, the learned Authorised Representative of the assessee has not pressed the ground No. 1 of the C.O. Hence the same is dismissed as not pressed.
3. The Revenue has taken the solitary ground that the learned CIT(A) erred in holding that the assessee firm is eligible for deduction under s. 80-IB of the Act considering that the assessee was engaged in manufacturing or production activities and consequently erred in directing the AO to allow deduction of Rs. 2,62,47,482 as claimed by the assessee under Section 80-IB of the IT Act.
4. Brief facts of the case are that the assessee derives income from manufacturing and sale of slate and sand stone in the name and style of World Wide Stone at Deoli District Tonk. Its main activity of business is mining of slate and sand stone boulders from its own mines as well as purchasing the same from the market, cutting them into tiles at its factory premises, calibrating and polishing the tiles with a view to make them usable by the end-user and then selling them into market. It is being used mostly outside India as a decorative tiles for the interior and exterior decoration and designing. The assessee treated such activities as a manufacturing activity hence claimed deduction under Section 80-IB of the IT Act, 1961 on its net profit. There is no dispute on the fact that all the other conditions as mentioned under Section 80-IB have been fulfilled by the assessee. The AO however, disallowed the entire claim for the reason detailed in the impugned assessment order. Thus, the only dispute is whether the activities undertaken by the assessee amounted to manufacture or production or not, so as to be entitled to the deduction under Section 80-IB of the IT Act, 1961. The AO noted that the assessee is engaged in mining of slate and sand stone boulders from its mines as well as purchasing them from market and thereafter cutting them into slabs and afterwards into tiles as its factory premises, calibrating and polishing them. The AO heavily relied upon the decision of Hon'ble Rajasthan High Court in the case of CIT v. Lucky Mineral (P) Ltd. and reproduced the same in the assessment order. The AO noted that in the aforesaid case Hon'ble Rajasthan High Court has taken note of the case of Dy. CST v. Pio Food Packers (1980) 46 STC 63, 65 : (1980) Suppl. SCO 174, wherein the Supreme Court considered the meaning of the word "manufacture". He also relied upon Lucky Minmat (P) Ltd. v. CIT which affirmed the above decision of Rajasthan HighCIT v. Vijay Granites (P) Ltd. and 5. As regards reliance of the assessee's on the decision in the case of CIT v. Mysore Minerals Ltd. , the AO found that this decision was based on the earlier decision of Karnataka High Court in the case of CIT v. Mysore Minerals Ltd. . Further the said decision has relied on the earlier decision in the case of Shanker Construction Co. v. CIT . The AO was of the opinion that the decision in the case of the Shanker Construction Co. (supra) of the Hon'ble Karnataka High Court has been distinguished by the Supreme Court in the case of CIT v. N.C. Budharaja & Co.
. Thus AO has taken the view that thus decision in the case of CIT v. Mysore Minerals Ltd. (supra), wherein the extracting of granite and cutting it to various sizes and polishing it amounted to manufacturing or production and is entitled to deduction under Section 80-1, is distinguishable. The AO also observed that though the Hon'ble High Court in the case of CIT v. N.C. Budharaja (supra) has distinguished production from manufacturing and has held the term "production" to be wider than the term "manufacturing", but as per the view of AO, in the case of CIT v. Lucky Mineral (P) Ltd. (supra), the Hon'ble Rajasthan High Court has considered both "manufacture" and "production" and has held that the business activity of the assessee is not in the nature of manufacturing and production.
6. The AO further referred to the decision in the case of CIT v. Gem India manufacturing Co. , wherein cutting and polishing of the diamonds was not held to be manufacture or production of article or thing.
7. Regarding reliance placed by the assessee on the decision of the Hon'ble Supreme Court in the case of CIT v. Sesa Goa Ltd. , the AO observed that in that case, the issue involved was whether the extraction and processing of iron ore amounted to "production" and Hon'ble Court has held that this amounted to "production". Though the AO has himself further observed that vide this judgment Hon'ble Supreme Court has also disposed of the appeal in the case of CIT v. Mysore Minerals Ltd. (supra) decided by Hon'ble Karnataka High Court and has held that deduction under Section 80-1 is allowable in this case but the AO did not accept the decision of the Hon'ble Supreme Court in the ease of CIT v. Mysore Minerals Ltd. (supra) on the ground that main thrust of their Lordships was to consider whether extraction of iron ore is production and manufacturing or not.
8. The AO did not accept the decision in the case of Asstt. CTO v.Girrota Silica Udhyog (1994) 93 STC 118 (Raj) decided in the context of Sales-tax Act, wherein the graded silica prepared from boulders excavated from mines was held to be manufacturing, mainly on the ground that the process involved is quite complex and different from the process involved in the assessees' case. The decision in the case of CIT v. Best Chem & Limestone Industries (P) Ltd. was not considered by the AO on the ground that in the case of Lucky Minerals (P) Ltd. (supra), the Hon'ble Court has itself distinguished the case.
9. The arguments of the assessee that the decision in the case of Lucky Minerals (P) Ltd. (supra) was given with reference to Section 80HH, as it stood in the statutory book upto 31st March, 1990. In Sub-section (10) of Section 80HH, it was further provided that nothing contained in section shall apply to any undertaking engaged in mining. It was in this context of Section 80HH that the Hon'ble High Court held that the activity of extraction of lime stone and marble boulders and cutting them into slabs does not amount to manufacturing because these activities are nothing, but carrying out or extension of the mining activity. Accordingly, as per the assessee, the said decision is not directly applicable in the case of assessee wherein deduction under Section 80-IB has been claimed, though this will be certainly a guiding decision, the AO however did not accept the argument of the assessee on this point, considering that there is no difference in the language of both the sections in as far as word 'production' or 'manufacturing' is concerned. The AO has discussed the decision cited by assessee at pp. 1 to 19 and has distinguished them. He also relied upon the decisions in the cases of CIT v. Sterling Foods (Goa) engaged in extracting state and sand stone from mines and cutting and sizing the same before selling them in the market, yet the fact is that the slate/sand stone remains the same and there is no change in commodity finally. Thus, the AO held that broadly in view of decision of Hon'ble Supreme Court in the case of Lucky Minmat (P) Ltd. v. CIT (supra), wherein decision of Rajasthan High Court in the case of CIT v.Lucky Mineral (P) Ltd. (supra) is upheld, the activity of the assessee does not amount to manufacturing or production. In the crux, he finally held that the assessee's business activity cannot be termed as manufacturing and production qualifying the deduction under Section 80-IB and hence the deduction claimed by the assessee was disallowed in its entirety. Thus, the assessee was held not entitled to deduction under Section 80-IB.10. In the first appeal, the learned CIT(A) after discussing the entire legal and factual position in a great detail, held as under: Considering these facts and circumstances and the legal position on the above issue under consideration, it is held that it will be more appropriate to apply the case of CIT v. Mysore Minerals Ltd. which has been affirmed by the Hon'ble SupremeCIT v. Sesa Goa Ltd. of the discussion made hereinabove. This decision of CIT v. Mysore Minerals Ltd. (supra) of Hon'ble High Court was later on reaffirmed in the subsequent decision in the same case reported as Dy. CIT v. Mysore Minerals Ltd. . Accordingly, the activity of the assessee is held to be eligible for deduction under Section 80-IB as it is considered that the assessee is engaged in manufacturing or production and at worst even if it is presumed to be not engaged in manufacturing then it is held to be at least engaged in production of article or thing and thus qualifying for deduction under Section 80-IB.11. The learned Departmental Representative heavily relied upon the findings recorded in the assessment order and vehemently supported the AO's conclusion that the assessee was not entitled to the deduction under Section 80-IB. As regards reliance of the assessee on the decision in the case of CIT v. Mysore Minerals Ltd. (supra), he contended that this decision was based on the earlier decision of Karnataka High Court in the case of CIT v. Mysore Minerals Ltd. (supra). Further the said decision has relied on the earlier decision in the case of Shanker. Construction Co. v. CIT (supra). The AO was of the opinion that the decision in the case of the Shanker Construction Co. (supra) of the, Hon'ble Karnataka High Court has been distinguished by the Supreme Court in the case of CIT v. N.C. Budharqja & Co.
(supra). Thus AO has taken the view that thus decision in the case of CIT v. Mysore Minerals Ltd. (supra), wherein the extracting of granite and cutting it to various sizes and polishing it amounted to manufacturing or production and is entitled to deduction under Section 80-1, is distinguishable. The AO has also observed that though the Hon'ble High Court in the case of CIT v. N.C. Budharaja (supra) has distinguished production from manufacturing and has held the term "production" to be wider than the term "manufacturing", but as per the view of AO, in the case of CIT v. Lucky Mineral (P) Ltd. (supra), the Hon'ble Rajasthan High Court has considered both "manufacture" and "production" and has held that the business activity of the assessee is not in the nature of manufacturing and production. He also placed reliance on the case of CIT v. Vijay Granites (P) Ltd. (supra) and various other decisions cited by the AO.12. The learned Counsel for the assessee Sh. Mahendra Gargieya, advocate, at the very outset submitted that the present matter is directly covered by a recent decision of Hon'ble Rajasthan High Court in the case of Arihant Tiles & Marbles (P) Ltd v. ITO (2007) 211 CTR (Raj) 169 in DB IT Appeal Nos. 82, 83 of 2006 dt. 30th May, 2007 wherein the facts and circumstances and the controversy, are exactly the same as in the present matter. It has been held that conversion of marble block into slates and tiles amounts to manufacturing of thing or article within the meaning of Section 80-IA/80-IB of the IT Act and assessee is entitled to claim deduction thereunder. He further submitted that the same has been recently followed by the Tribunal Jodhpur Bench in ease of Jagdish Chandra Bhambhani v. AO in ITA No.243/Jd/2005 dt. 17th July, 2007. It was submitted that the assessee made a claim of deduction under Section 80-IB of the Act. The assessee treated such activities as a manufacturing activity hence claimed deduction under Section 80-IB of the IT Act, 1961 on its net profit. It is being used mostly outside India as a decorative tiles for the interior decoration and designing. There is no dispute on the fact that all the other conditions as mentioned under Section 80-IB have been fulfilled by the assessee. It was further submitted that in order to make the sand/slate stone into usable condition, further process is required to convert them into a tile, which has a separate and distinct commercial identity in the market than its original form. For that purpose, sand/slate stone boulders so acquired, are being processed and converted into tiles of different size, colour, design, quality, thickness and on the basis of some other technical specifications, according to the specific needs of the end customer or in the standard sizes commonly sold in the market under various brand names viz of Fossil, Rajgreen, Rajgreen vintage, Silver Grey Polished, Silver Grey Gauzed, Dcoli Green Polished., Deoli Green Gauze, Buff Brown, Grey, Mint, Autumn Brown Mosaic Rounds Circles i.e. Rajgreen Circle and Modak Circle. The tiles so manufactured and processed need finishing and polishing. To give finish and to make polish on the sand/slate stone sometimes specific adhesives and chemicals are being used to coat the surface and to make it hard on the top. The pricing of these sand/slate stone tiles varies according to the quality and extent of sand/slate processed. The processing of sand/slate tiles requires skilled manpower, electric power, high-tech machinery, adhesives and chemicals, etc. The entire processes done with a view to make the commodity in hand usable by the end-user/consumer cannot consume raw sand/slate boulders unless some further processing is done thereon. The sand/slate boulders excavated from the mines are being consumed only by the undertaking engaged in the processing and manufacturing of sand/slate tiles as raw material and therefore, have limited and restricted market whereas processed sand/slate such as sand/slate tiles have very wide and ready market, both branded and unbranded. The tiles made from the raw sand/slate are normally used by the civil construction industry as construction material for laying floors, platform, etc. both in the residential houses as well as in the commercial buildings. For a better appreciation and for a greater detail with regard to the activities being carried out by the assessee, our attention was drawn towards a detailed note on manufacturing process of slate/sand stone by M/s E.G.Associates Engineering, Architects & Planners Jaipur together with a flow chart, showing the various steps involved in the manufacturing process (paper book pp. 24-25). This was supported by a project profile for SSI on glass ceramics products published by the Development Commr.
(SSI)' the Ministry of SSI, Government of India, New Delhi (paper book 26-33). He also referred to certain photographs (paper book 34-41 and at paper book 69-74), which were in the sequence of the various steps being carried out by the assessee for a better understanding and appreciation. He further submitted that thus, what comes out is altogether a totally new and distinct entity i.e. new article or new product than what it was originally at the time of mining purchases by the assessee. Needless to say that because of highly skilled and specialized work on the sand stone, the price of such product multiply many times more than what it was at the time of mere mining. He submitted that the Act nowhere defines these two terms, hence for our purpose, we have to look for some cases, as decided by the Hon'ble Courts for a judicial guideline. He therefore referred to the case of Dy. CST v. Pio Food Packers (supra), the Supreme Court considered the meaning of the word "manufacture" with reference to several decisions.
He further referred to the case of Union of India v. Delhi Gloth & General Mills (1977) ELT (J) 199 where it was observed that manufacture implies a change, but every change in the raw material is not manufacture although every change of an article is the result of treatment, labour or manipulation. In order to make a change amount to "manufacture" something more is necessary and that something more is such transformation of a production as brings into existence a new and different article having distinct name, character or use. He also referred to the case of Empire Industries Ltd. v. Union of India . It is not necessary that one should absolutely make out a new thing. It is the transformation of one matter into something else which would amount to manufacture. It is a question of degree that something else is a different commercial commodity having its distinct character, use and name and commercially known as such. In other words, if by application of labour and skill the commodity is transformed to the extent that it is commercially known differently, it will suffice to say that manufacture has taken place. The moment there is a transformation into a new commodity having its own character, use and name whether as a result of one process or several processes, "manufacture" has taken place. He also referred to Asstt. CTO v.Girrota Silica Udhyog (supra) wherein it was held that various procedures adopted being boulders are excavated from the mines, they are graded, the stones and impurities are removed, the process of screening and graded adopted, different sizes of silica sand is taken out. The same is used for different industries like tiles, ceramic, glass etc. Hon'ble High Court held that the above act was manufacturing in the context of Sales-tax Act. He further referred to the case of CIT v. Best Chem & Limestone Industries (P) Ltd. (supra) which held that "manufacture" involves the bringing into existence of a new product which may have a physical or chemical composition and is understood differently in common and commercial parlance. He submitted that the applying the above judicial test, on the facts of the present case, there is absolutely no doubt that the conditions mentioned therein stand duly fulfilled inasmuch as after carrying out all the steps as enumerated hereinabove, what comes out is a totally new product, which certainly do have a different physical composition. Moreover, the same is fully understood in the commercial parlance, by an altogether different name by the buyers, having its distinct character, use and name viz. Fossil, Rajgreen, Rajgreen no no Vintage, Silver Grey Polished, Silver Grey Gauzed, Deoli Green Pol., Deoli Green Gau, Buff Brown, Grey, Mint, Autumn Brown (depending upon the use of the products). Needless to say that because of highly skilled and specialized work on the sand stone, the price of such product multiplies many times than what it was at the time of mere mining.
Whereas the cost to the assessee at the time of mere mining and thereafter but before the manufacturing and production activity of the blocks of sand stone stands @ Rs. 1,500 to 2,000 per MT only whereas after doing all these activities, the final product is rated around Rs. 300 to 400 per sq. mtr. Thus, in the commercial parlance the final product is understood totally differently, by altogether a different name and value. The ratio laid down in the aforesaid cases, thus fully supports the case in hand. The aforesaid facts clearly reveal that the judgment of the Supreme Court in the case of Lucky Minerals (supra) does not in any way support the invalid and unjust action on the part of the AO of denying deduction under Section 80-IA/80-IB to the assessee.
13. With regard to the contentions of the AO and supported by the learned Departmental Representative that the assessee wrongly relied upon the decision in case of Mysore Minerals Ltd. (supra) [affirmed by the Hon'ble apex Court in the case of Sesa Goa Ltd. (supra)], inasmuch as in the case of Mysore Minerals (supra), the Hon'ble Court placed reliance on various earlier decisions reported in (1994) 205 ITR 461 (Kar) (supra), (1991) 94 CTR (Kar) 155 : (1991) 189 ITR 463 (Kar) (supra) and those decisions have already been considered in the case of N.C. Budharaja (supra), he submitted that such non-consideration of the Mysore Minerals' case (supra) by the AO is based on wrong appreciation of facts. In fact, as has been elaborately mentioned by the learned Authorised Representative of the assessee, the issue before the Hon'ble Supreme Court in the case of CIT v. N.C. Budharaja & Co. (supra), was whether the construction of dam can be considered to be manufacturing or production of article or thing. In the case of Shanker Construction (supra) also, the firm was engaged in the construction of dam. It was in this context that the Hon'ble Supreme Court held that the dam cannot be considered to be an article or thing. Thus, the construction of dam cannot be treated within the ambit of manufacturing or production of article or thing. Thus it is clear that the decision of Shankar Construction (supra) was distinguished by the Supreme Court in the case of CIT v. N.C. Budharaja & Co. (supra) in the context that dam cannot be regarded as article or thing. Accordingly not placing reliance on the decision in the case of CIT v. Mysore Minerals Ltd. (supra) by the AO on the aforesaid ground is not justified.
14. The learned Authorised Representative thereafter contended that by decisions in the cases of Lucky Mineral (supra) and Lucky Minmat (supra) are not exactly applicable on the facts of the present case. He drew our attention towards Section 80HH(10) which prohibited mining to be a manufacturing production. He also drew our attention towards the decision of Arihant Tiles (supra) on this aspect. He thereafter relied upon the various decisions i.e. Ujagar Prints v. Union of India and CITSouth Bihar Sugar Mills v. Union of India (1978) ELT (J) 3. He also contended that the term production is wider in scope than the term manufacturer and took support of CIT v. N.C. Budharaja & Co. and Anr.
(supra). He also cited CIT v. Abdul Ahad Najar , CIT v. Sesa Goa Ltd.CIT v. Sesa Goa Ltd. (supra). Thus, even assuming the activities of the assessee are not treated as manufacturing, the same in any case has to be treated as production. He also contended that the different agencies under the different laws have treated the assessee a manufacturing unit. He further contended that in asst. yr. 2002-03 also on similar facts, similar claim made by the assessee is allowed by the Revenue and there is no allegation of change in the subjected year. He also advocated for a liberal interpretation of an incentive provision, placing reliance on Bajaj Tempo Ltd. v. CIT as also various decision on this aspect. Thereafter, he dealt with various case law cited by the assessment order and submitted that none of them in controversy in hand. He further submitted that the relevant incentive provisions are capable of more than one interpretation, the view which is favourable to the assessee should be adopted in view of judgment of the apex Court in various cases, such as in the case of CIT v.Vegetable Products Ltd. . Lastly the learned Authorised Representative strongly relied upon the order of the learned CIT(A), who rightly allowed the deduction claimed under Section 80-IB and the written submissions filed before him (paper book 75-95).
15. We have carefully considered the facts of the case, rival contentions of the parties with reference to the material available from record in the light of the judicial pronouncements available.
Although large number of authorities have been cited by the AO and the assessee both, yet we have the benefit of the recent decision in the case of Arihant Tiles & Marbles (P) Ltd. v. ITO (supra) dt. 30th May, 2007, wherein, broadly the controversies is the same as in hand before us.
16. Before proceeding further, we deal with one of the contentions raised by the learned Departmental Representative that the Hon'ble High Court in that case was concerned with the commodity marble, whereas in the case in hand, the commodity involved was. sand stone or slate: stone. However, we are not impressed by such contention made on behalf of the Revenue inasmuch as the ratio propounded in the said case, which we are going to discuss hereinafter, fully and equally applies on the facts of the case in hand as well. The learned Authorised Representative also drew our attention to the case of Grassland Industries in ITA Nos. 504, 106/Jp/2006 dt. 30th Nov., 2007, decided by this Bench, which was a case related to sand stone/slate stone, wherein this Bench has already applied the ratio laid down in the case of Arihant Tiles (supra). We therefore, do not find any merit in the contention of the learned CIT-Departmental Representative and hence proceed further.
17. The facts in the case of Arihant Tiles (supra) were that the assessee, was engaged in activity of sawing of marble blocks into slabs and tiles and marketing then in indigenous as well as foreign' market.
The assessee in that case, was not engaged in winning the marble blocks as a mineral but purchased the blocks from the market. However, the Hon'ble Court also observed in para 8 that their Lordships were concerned with marble blocks, a mineral which is won through mining activity and then applying the process as usable for any purpose unless it is brought to usable conditions. After referring to the principle propounded by the Hon'ble Supreme Court in the cases of Kores India Ltd. v. CCE and Saraswati Sugar Mills v. Haryana State Board (1992) 1 SSC 418 in paras 13,23, and 24, the Hon'ble High Court held that: The principle aptly applies to present case. Here also, the original commodity namely marble block could riot be used for building purposes as such until it is cut into different sizes to be used as building material. It is only by the process of cutting the marble block into slabs and tiles that it is made marketable. The marble block cannot be used for the same purpose as the marble slab or tile can be used and after the marble block has been cut into different sizes, the end product by putting it simultaneously cannot be used as a block.
On parity of reasoning, this principle can be extended to the facts of present case. Marble block as a mineral produced from earth by itself is not usable for any purpose, thereafter, to make it usable, various processes which could be applied to bring it to that stage would amount to manufacturing. After it has been brought to that stage, further processing is merely for the purpose of making its marketability easy or smooth would not amount to manufacturing process.
In the facts and circumstances of the case, conversion of marble blocks into slabs and tiles amount to, manufacture of thing or article within the meaning of Section 80-IA/80-IB of the IT Act and assessee is entitled to claim deduction thereunder.
18. In the case of Dy. CST v. Pio Food Packers (supra); the Supreme Court considered the meaning of the Word "manufacture'' with reference to several decisions and stated the test in the following words: There are several criteria for determining whether a commodity is consumed in the manufacture of another. The generally prevalent test is whether the article produced is regarded in the trade, by those who deal in it, as distinct in identity from the commodity involved in its manufacture. 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 recognized as a new and distinct article that a manufacture can be said to take place. Where there is no essential difference in identity between the original commodity and the processed article it is not possible to say that one commodity has been consumed in the manufacture of another.
Although it has undergone a degree of processing, it must be regarded as still retaining its original identity.
19. The Hon'ble Supreme Court had spoken almost in the same words in the case of Union of India v. Delhi Cloth & General Mills (supra) where it was observed that manufacture implies a change, but every change in the raw material is not manufacture although, every change of, an article is the result of treatment, labour or manipulation. In order to make a change amount to "manufacture" something more is necessary and that something more is such transformation of a production as brings into existence a new and different article having distinct name, character or use.
20. In the case of Asstt CTO v. Girrota Silica Udhyog (supra), it was held that various procedure adopted being boulders are excavated, from the mines, they are graded, the stones and impurities are removed, the process of screening and graded adopted, different sizes of silica sand are taken out. The same is used, for different industries like tiles, ceramic, glass etc. Hon'ble High Court held that the above act was manufacturing in the context of Sales-tax Act.
21. Coming to the facts of the case, it is seen that the slate stone and sand stone blocks/boulders of random shape and size are excavated from the mines or are procured from other mine owners by the assessee.
These stones blocks/boulders of random shapes and sizes are splitted into the slabs of random shape and size. These slabs are converted/cut into tiles of specific shape and size, which may be different in each case (e.g. 6"*6*12* 12,12*24,24*24 and so on). The thickness of these tiles ranges between 10 MM to 20 MM, which are given to the persons who are masters of slicing the slabs/pieces. After the slicing, calibration of the stone is done for maintaining equal thickness throughout the length and breath by diamond calibrating machines. These tiles are finally polished individual tiles/slabs, same is fed to edge cutting machine with double blade to parallel cutting of the two edges. The edge polishing may also be done. Sometimes, for providing special shape, tumbling and vibrating machines are also used. For preparing mutual medallions, boarders, handicraft articles further process is undertaken. Sometimes specific adhesive and chemicals are also used to coat the surface and to make it hard on the top so that it becomes scratchless. These tiles of different size, colour, design, quality and thickness are sold under the different brand names for e.g. Fossil, Rajgeer, Rajgreen Vintage, Silver Grey Polished etc. It is seen that it was the sand stone/slate excavated from the mines in the form of boulder which was used as raw material and it was consumed by the assessee firm. The finished products are mainly tiles also murals, medallion etc. In our opinion, certainly, these finished products are having separate and distinct commercial identity in the market in comparison to the original raw material, which was sand stone boulders, excavated from the mines. Though the various brand names under which these finished products are sold, as stated by the assessee, will not have much relevance in the context of deciding as to what is being sold as finished product, but nevertheless it is clear that the finished product is certainly a separate and distinct commercial identity in the market and named as sand stone tiles/slate tiles. The word sand stone or slate has been used as prefix before the word tile/slabs to signify the origin and the material constituting the tile and also to distinguish and differentiate these tiles or another material like 'marble tiles'.
22. Applying the above judicial test on the facts of the present case, we have got absolutely no doubt in our mind that the conditions/tests laid therein stand duly fulfilled inasmuch as after carrying out all the steps as enumerated hereinabove, what comes out is a totally new product, which certainly do have a different physical composition.
Moreover, the same is fully understood in the commercial parlance, by an altogether different name by the buyers. A simple piece of sand/slate stone, which otherwise was known as stone hitherto, prior to all exercises thereupon, is thereafter recognized as different commercial commodity, having its distinct character, use and name. The original commodity namely stone block could not be used for building purposes as such until it is cut into different sizes to be used as building material. It is only by the process of cutting the stone block into slabs and tiles that it is made marketable. The stone block cannot be used for the same purpose as the stone slab or tile can be used. The sand/slate block produced from earth by itself is not usable for any purpose. Therefore, to make it usable, various processes which could be applied to bring it to that stage would amount to manufacturing.
Needless to say that because of highly skilled and specialized work on the sand stone, the price of such product multiplies many times more than what it was at the time of mere mining. Whereas the cost to the assessee at the time of mere mining and thereafter but before the manufacturing and production activity, of the blocks of sand stone stands @ Rs. 1,500 to 2,000 per MT only whereas after doing all these activities, the final product is rated around Rs. 300 to 400 per sq.
mtr. Thus in the commercial parlance the final product is understood totally differently, by altogether a different name and value. The ratio laid down in the aforesaid cases, thus fully supports the case in hand. The learned Authorised Representative also rightly relied upon the decision in CIT v. Best Chem & Limestone Industries (P) Ltd. (supra), wherein the issue before the Hon'ble Court was as to whether an assessee engaged in conversion of limestone by crushing into Rodi or lime dust is entitled to investment allowance under Section 32A. The Court, after referring the decision in CIT v. Bikaner Gypsum Ltd. , held that process of conversion of limestone by crushing into Rodi or lime dust amounts to manufacture and therefore, assessee was entitled to investment allowance. Once the Hon'ble Rajasthan High Court has treated even the conversion of the mineral into the form of radium powder to be a manufacturing process, the present case stands on a much stronger footing and has to be held a manufacturing/production. However the AO (at p. 12 vide paras 1.13 and 1.1,4), tried to distinguish the decision of Best Chem (supra), stating that the said case has already been considered in the case of Lucky Mineral (supra). However, the AO has not at all alleged or provided any reason to differentiate the facts in the case of Best Chem (supra) from the facts of the case in hand. On the contrary, the facts in case of Best Chem (supra), which relate to the case of limestone, are nearer to the case of sand stone/slate stone. The AO and the learned Departmental Representative heavily relied upon the decisions of CIT v. Lucky Minerals (P) Ltd.Lucky Minmet (P) Ltd. v. CIT (supra).
However, those decisions are distinguishable and not applicable for the facts of the present case. Firstly the assessment involved in the case was for asst. yr. 1978-79 and the Hon'ble High Court was concerned with the meaning of the word "manufacture" in the context of language of Section 80HH. Sub-section (10) provided that "nothing contained in this section shall apply in relation to any undertaking engaged in mining".
Thus, deduction was available to any Industrial undertaking engaged in manufacturing or producing of any articles other than the activity relating to mining. Further, the Hon'ble Rajasthan High Court also in the case of Arihant Tiles (supra) noticed the above decision and dealt with the same as under:Lucky Minmat (P) Ltd. v. CIT (supra) and Which has also been pressed into service by learned Counsel for the Revenue. This judgment affirmed the decision of Rajasthan High Court, wherein the High Court has held that mining of limestone and marble block and thereafter cutting sizing the same before it is sold in the marked was riot a manufacturing activity by distinguished the earlier judgment in CIT v. Best Chem & Limestone Industries (P) Ltd. (supra) in which the business of extracting limestone and its sale either as converted into lime Rodi or lime dust were held to be manufacturing activity.
The only argument before the Supreme Court was that the High Court judgment in the Case of Best Chem (supra) had wrongly been distinguished. That contention has been rejected by the Supreme Court.
It is apparent that the aforesaid judgment is founded on the ground that the commodity in Best Chem's (supra) being differing than what was in the case in hand, the judgment was rightly distinguished. The Supreme Court was not examining the issue about the fact, whether the business of mining of limestone and marble blocks, thereafter cutting and sizing the same before it is sold in market is manufacturing or production, as the case may be. Apparently, the earlier decision of the Supreme, Court in Chowgule & Co. (P) Ltd. v. Union of India and Ors. (supra) in which the activity of mining was held to result in: production of goods, and the later judgment of Supreme Court in CIT v. Sesa Goa Ltd. (supra) with the equal strength of Judges constituting the Bench had taken different views by examining the issue directly and in the process of affirming the aforementioned judgment of Karnataka High Court; in Mysore Mineral's case (supra), wherein, the activity of converting marble block which is not usable as such, into slabs and polishing them and making it marketable commodity was held to be manufacturing activity.
We also concur with the view of the learned CIT(A) that the Hon'ble Rajasthan High Court in the case of Lucky Mineral (supra), was concerned with the interpretation of the term manufacture only. The Hon'ble Court in (1996) 134 CTR (Raj) 541 : (1997) 226 ITR 245 (Raj) (supra), at p. 249 observed that "the meaning of the word 'manufacture', in the context of language of Section 80HH is 'therefore; required to be construed in the popular sense in which it is commonly understood by the people". The learned CIT(A) further rightly concluded in para 5.4.3 and further held that even upto the stage of Supreme Court, the controversy was confined to the interpretation of the word manufacture. Thus, those decisions are clearly distinguishable.
23. Another aspect is also worth consideration that the term production is wider than the term manufacture. Hon'ble Supreme Court in CIT v.N.C. Budharaja & Co. and Anr. (supra) explained as to what constitutes "production" as below: The word 'production' has a wider connotation than the word 'manufacture'. While every manufacture can be characterized 'as production, every production need not amount to manufacture. The word 'production' or 'produce', when used in juxtaposition with the word 'manufacture' takes in bringing into existence new goods by a process, which may or may not amount to manufacture, It also takes in all the bye-products, intermediate products and residual products which emerge in the course of manufacture of goods.CIT v. Sesa Goa Ltd. (supra) is an important judgment explaining the wide scope of the expression "produce" and "production" and "production of minerals" as compared to the narrow meaning of word manufacture, wherein it is held that the extraction of iron ore and the various processes which it undergoes, until it is sold, though do not amount to manufacture but would be covered with in the expression "production". Relying upon the judgment of the apex Court in the case of N.C. Budharaja (supra), it was held that the word "production" or "produce", when used in juxtaposition with the word manufacture takes in bringing into existence new goods by a process, which may or may not amount to manufacture. Thus, production has very wide scope as compared to manufacturing. This judgment of Sesa Goa (supra) stands affirmed in CIT v. Sesa Goa Ltd. (supra). The Hon'ble Rajasthan High Court also in the case of Arihant Tiles (supra) took note of the abovestated decision thus, as under: There is substance in the contention of learned Counsel for the respondents that expression 'production' has a wider connotation than the expression 'manufacture' and, therefore, the question whether any activity falls within the ambit of Section 80-IA/80-IB, the examination from the point of view of only manufacturer is not the final test. The essential distinction between expressions 'manufacture' and 'production' had received attention of the judicial pronouncement from time to time.
The distinction between manufacture and production was noticed and explained by the Supreme Court in CIT v. N.C. Budharaja & Co. and Anr. Etc.
activities falling within the ambit of manufacture result in production but converse is not; true.
Thus, even assuming that the activities of the assessee are not treated as manufacturing, the same in any case have to be treated as production.
24. The learned Authorised Representative drew our attention towards the case of Suraj Marble (P) Ltd. and Patwari Marbles (P) Ltd. in ITA Nos. 512, 513 & 514/Jp/2003 & 452 and 453/Jp/2003,. order dt. 18th Aug., 2006 [reported at (2006) 104 TTJ (Jp) 192--Ed.], wherein this Bench followed the said decision of Sesa Goa (supra) in place of the aforesaid two decisions of Lucky Minerals (supra) and Lucky Minmets (supra) and held that the lower authorities were not justified in denying the claimed deduction under Section 80-IA.25. Further, we find that different Government agencies under different laws treated the assessee a manufacturing unit viz the District Industrial Central, Tonk, The Department of SSI, Agro and Rural Industries, of Ministry of Industries, Central Government of India, New Delhi and the Sales-tax Department, who also registered the assessee in the status of a manufacturer (paper book pp. 21-22). We also find Chapter 25 of Central Excise Tariff, wherein in Pr. 6 it has been stated that "In relation to products of heading 2515 and 2516, the process of cutting or sawing or sizing or polishing or any other process, for converting of stone block into slabs or tiles, shall amount to manufacture and the product of the assessee, is defined under 2516 sand stone" (paper book 18-19). On this aspect we find support from the observations made by Hon'ble High Court in the case of Arihant Marble (supra) in para 22 as under: Interpretation given under Excise Act cannot ipso facto be brought here while interpreting the expression under the IT Act. Apart from that, even under the Central Excise Act, the legislature quickly intervened and inserted in Chapter XXV Note 6 declaring that process of cutting, sawing, sizing or polishing or any other process of converting blocks into slabs and tiles shall amount to manufacture.
Thus, the activity of cutting marble blocks into slabs under the Central Excise Act too now is governed by statutory provisions, and amounts to manufacturing. It is thus clear that for the purpose of Sections 80-IA and 80-IB, process of cutting and sawing or sizing or polishing of marble blocks into slabs and tiles which results in making raw marble usable amounts to manufacture. Apart from the wining of marble block from mines itself amounts to production.
26. We also find that in asst. yr. 2002-03 also, the assessee made a claim under Section 80-IB on exactly same facts and circumstances and the Department accepted such a claim. The assessment stood completed, though under Section 143(1), however the statutory period for the issuance of a notice under Section 143(2), having already expired, the assessment so made attained finality and is binding upon the Revenue.
There is no allegation of any change in the facts and circumstances of the case from the past and no other reason has been shown, hence, the AO could not have departed from the settled position in the past.
27. We also find substance in the contention of the learned Authorised Representative Mr. Mahendra Gargieya, that liberal interpretation is required for incentive provision. While interpreting taxing statutes, the Supreme Court in Bajaj Tempo Ltd. v. CIT (supra) held as under at p. 189: A provision in a taxing statute granting incentives for promoting growth and development should be construed liberally; and since a provision for promoting economic growth has to be interpreted liberally, the restriction on it too has to be construed so as to advance the objective of the provision and not to frustrate it.
The Hon'ble Courts always presume that the legislature inserted every part of a statute for a purpose and the legislative intention is that every part of the statute should have effect. These presumptions will have to be made in the case of rule-making authority as decided in J.K.Cotton Spinning & Weaving Mills Co. Ltd. v. State of Uttar Pradesh . Thus, it is of universal application that efforts should be made to give meaning to each and every word used by the legislature-Mohammed Ali Khan v. CWT . Therefore, the use of word production in Section 80-IB is not purposeless/ meaningless and has to be given full effect.
28. The AO has cited various other decisions. However we are satisfied that none of them is near to the controversy in hand and more particularly, the learned Authorised Representative in its written submission has already dealt with each and every case cited by the AO.However some discussion on the allegation of the AO as regards the case of Mysore Minerals Ltd. (supra) is essential. The learned Departmental Representative has also heavily relied upon this aspect, as stated earlier. Similarly, the facts of the another case viz., CIT v. Vijay Granites (P) Ltd. (supra) relied on by the AO are that (as mentioned in the reported judgment) "the assessee is a company engaged in the business of raising granites from mines, polishing them and exporting them outside India. The assessee apart from doing mining, also purchases granite blocks and after subjecting these blocks to further processing exports the polished granites. Thus, the facts of this case are also different and than that of the assessee.
29. Therefore, fully satisfied the activities carried on by the assessee were manufacturing or production and hence entitled to deduction under Section 80-IB of the Act. The AO is therefore, directed to allow the same as claimed. Thus the solitary ground of the Revenue is dismissed.
30. In the cross-objection No. 2 filed by the assessee, the following ground has been taken: The learned CIT(A) has erred in refusing even to admit the; additional ground of appeal relating to the alternate claim made by the assessee of allowing the benefit of deduction under Section 80HHC.31. The brief facts of the case are that during the course of appellate proceedings, before the learned CIT(A), the assessee requested for admission of an additional ground of appeal to allow the claim of deduction under Section 80HHC of the Act. It was submitted that vide ground of appeal 4, a prayer for allowance of deduction was made and in view of Section 250(5) technically, it was not an additional ground of appeal. It was submitted that since the assessee filed nil return of income claiming deduction of the entire income @ 100 per cent under Section 80-IB, the assessee was advised and therefore, it was under the impression that no separate deduction under other provisions of the Act is required to be claimed separately. Although the assessee being an exporter was also equally entitled to get a deduction @ 50 per cent under Section 80HHC on export profits. In any case, the AO was within the knowledge of such entitlement and therefore, was duty-bound. Hence he should have invited the attention of the assessee towards this deduction.
32. The learned CIT(A), however rejected the additional ground and such a claim on the plea that the assessee neither made any claim in the return of income nor the fact that the assessee was entitled, to the deduction under Section 80HHC was mentioned. The legal requirements like filing audit report under Section 80HHC was also not fulfilled.
Moreover, the sale proceeds from the exports were also required to be received within the stipulated time, however admittedly no such details were furnished along with the return of income. The reliance placed by the assessee on a CBDT circular is devoid of any merit as firstly the assessee cannot be said to be ignorant as was advised by tax expert and secondly, the circular was in relation to such claim of rebate or relief, which is apparent from the record and is otherwise legally allowable, which was not the case here. Further placing reliance on the decision in the case of Goetze (India) Ltd. v. CIT , and rejected the claim.
33. The learned Departmental Representative strongly relied upon the order of the learned CIT(A) and prayed not to admit such a claim, made before the CIT(A) for the first time under Section 80HHC.34. On the other hand, the learned Authorised Representative for the assessee Mr. Mahendra Gargieya, vehemently argued that in this case return of income was filed declaring nil income on 2nd Dec., 2003, which was originally processed under Section 143(1) on 10th Feb., 2004; The assessee is having 100 per cent export sale and derives income from the mining, manufacturing and production and sales of slates and sand stones under the name and style of M/s World Wide Stone at Deoli, District Tonk. The assessee having been situated in a backward area, made a claim of deduction of the entire business income of the undertaking @ 100 per cent under Section 80-IB of the Act. Being a 100 per cent export unit, the assessee was also entitled to the deduction @ 50 per cent under Section 80HHC, on the profit from export and therefore, the assessee complies with all the necessary conditions viz.
obtaining an audit report under Section 80HHC of the Act on 28th Oct., 2003, on exporting the permissible items/merchandise and the assessee was also able to receive the sale proceeds from such exports, within the stipulated period. However, he further submitted that since the assessee was able to get 100 per cent deduction under Section 80-IB of the Act, while preparing the computation, it did not make a separate claim under Section 80HHC of the Act. The assessee was advised and therefore remained under the impression that once deduction of the entire business income is already to be allowed under Section 80-IB, there was no necessity of making a separate claim of deduction under Section 80HHC in the computation of total income. Rather such a claim may weaken its case under Section 80-IB, In any case, however the basic fact that the assessee was an exporter, was well known to the AO. The AO was also aware of the fact! that the assessee did comply with all the requirements in law to allow the deduction under Section 80HHC of the Act, except the fact of obtaining an audit report by the assessee under Section 80HHC of the Act. It is submitted that complete books of account consisting of financial as well as quantitative records and other supporting bills, vouchers and subsidiary records were produced before the AO time and again, which fact has been admitted by the AO also at p. 1 para 1 of the impugned order. The required details were also filed during the course of assessment proceedings and the matter was discussed. He also drew our attention towards P&L a/c at paper book 50 wherein there is a mention of "FOB", paper book 51 and thereafter paper book 58, where the nature of the business was mentioned as exporter in the TAR. He also drew our attention towards written submission submitted to the AO. In other words, it cannot be denied that the AO was aware of the basic fact that the assessee was an exporter and in any case was entitled to a deduction under Section 80HHC. It is further submitted that Deoli is a small town in Tonk District which is an undeveloped and backward area, mainly dominated by Mohmden community. The humble assessee was not aware of the technicalities and complexities of the fax laws. No doubt, the assessee was assisted by the services of a chartered accountant yet a bona fide confusion prevailed over that once the assessee is entitled to the claim of deduction of entire business income of the undertaking under Section 80-IB, it was not further required to pursue the claim under Section 80HHC, to which otherwise, the assessee was duly and fully entitled to Moreover in asst. yr. 2002-03 also similar claim under Section 80-IB only was made and no claim under Section 80HHC was made.
It is under this background that neither the assessee nor the learned Authorised Representative could make a specific claim of deduction under Section 80HHC of the Act. Therefore such a failure was not willful or unreasonable. It is further submitted that the settled legal proposition is that the powers of the first appellate authority are very vide and co-terminus with those of the AO and what AO can do, he can do and what AO fails to do, that also he can do in view of decision in CIT v. Kanpur Coal Syndicate . Sections 251 and 252 of the Act have also been worded keeping the same spirit, as also Rule 46A. Section 250(4) empowers the CIT(A) to make further inquiries on its own or to direct the AO to make further inquiry and to report him.
In Jute Corporation of India Ltd. v. CIT it was held that an appellate authority has all the plenary powers which the subordinate authority may have in the matter. There is no good reason to justify curtailment of the powers of the AAC in entertaining an additional ground raised by the assessee in seeking modification of the order of assessment passed by the ITO. However the learned CIT(A) neither referred to the decision of Jute Corporation (supra) nor distinguished the same and being a binding precedent, the learned CIT(A) was obliged to follow the same. He further submitted that otherwise also the AO was duty-bound to have drawn the attention of the assessee to make a claim under s. 80HHC. Our attention was drawn towards a very old circular dt. 11th April, 1955. He also relied upon Chokshi Metal Refinery v. CIT and in particular our attention was drawn to the observations made by the Hon'ble High Court at p. 71 of the Report, which was followed in Dy. CIT v. Suprint Textile (2006) 100 TTJ (Jp) 352 : 34 Tax World 25 (Jp). The learned AO, therefore was supposed to have advised the assessee in this regard, which he has not done. He also submitted that the said circular does not say that the details must be available, on record and then only, the AO should discharge his duties. He further submitted that even an audit report under Section 80HHC was filed before the learned CIT(A).
It was further submitted that the various Courts have held that filing of an audit report along with the return is not mandatory and can be filed later also to get deduction under Section 80HHC. He referred the cases of CIT v. Gupta Fabs following CIT v. PunjabCIT v.Magnum Export (P) Ltd. existence of the audit report to make a claim for deduction under Section 80HHC is mandatory although the time of furnishing thereof is not mandatory. Audit report furnished even before the Tribunal, in that case was held permissible and the appeal of the Revenue was dismissed.
Further it has been held that filing of the audit reports even at the appellate stage is permissible in the cases of CIT v. Jayant Patel dealing with Section 80J(6A) and CIT v. Shahzadanand Charily Trust , while dealing with Section 12A(b).
Therefore, it was prayed to admit the ground and direct the AO to allow the deduction under Section 80HHC, as claimed.
35. We have carefully considered the facts of the case, the rival contentions and the material available on record in the light of the judicial pronouncements. We are of the view that the entire matter has to be considered firstly, in the light of the pronouncements relating to the powers of the first authority. The learned Authorised Representative of the assessee Mr. Mahendra Gargieya, vehemently argued that in this case return of income was filed declaring nil income on 2nd Dec., 2003, which was originally processed under Section 143(1) on 10th Feb., 2004. The assessee is having 100 per cent export sale and derives income from the mining, manufacturing and production and sales of slates and sand stones under the name and style of M/s World Wide Stone at Deoli, District Tonk. The assessee having been situated in a backward area, made a claim of deduction of the entire business income of the undertaking @ 100 per cent under Section 80-IB of the Act. Being a 100 per cent export unit, the assessee was also entitled to the deduction @ 50 per cent under Section 80HHC, on the profits from export and therefore, the assessee complies with all the necessary conditions viz. obtaining an audit report under Section 80HHC of the Act on 28th Oct., 2003, the exporting the permissible items/merchandise and the assessee was also able to receive the sale proceeds from such exports, within the stipulated period. However, he further submitted that since the assessee was able to get 100 per cent, deduction under Section 80-IB of the Act, while preparing the computation, it did not make a separate claim under s. 80HHC of the Act. The assessee was advised and therefore remained under the impression that once deduction of the entire business income is already allowed under Section 80-IB, there was no necessity of making a separate claim of deduction under Section 80HHC in the computation of total income. Rather such a claim may weaken his case under Section 80-IB. In any case, however the basic fact that the assessee was an exporter, was well known to the AO. The AO was also aware of the fact that the assessee did comply with all the requirements in law to allow the deduction under Section 80HHC of the Act, except the fact of obtaining an audit report by the assessee under Section 80HHC of the Act. It was argued that complete books of account consisting of financial as well as quantitative records and other supporting bills, vouchers and subsidiary records were produced before the AO time and again, which fact has been admitted by the AO also at p. 1 para 1 of the impugned order. The required details were also filed and during the course of assessment proceedings and the matter was discussed. He also drew our attention towards P&L a/c at paper book 50 wherein there is a mention of "FOB", paper book 51 and thereafter paper book 58, where the nature of the business was mentioned as exporter in the TAR. He also drew our attention towards written submission submitted to the AO. In other words, it cannot be denied that the AO was not aware of the basic fact that the assessee was an exporter and in any case was entitled to a deduction under Section 80HHC. It is further submitted that Deoli is a small town in Tonk District which is an undeveloped and backward area, mainly dominated by Mohammedan community. The humble assessee was not aware of the technicalities and complexities of the tax laws. No doubt, the assessee was assisted by the services of a chartered accountant yet a bona fide confusion prevailed over that once the assessee is entitled to the claim of deduction of entire business income of the undertaking under Section 80-IB, it was not further required to pursue the claim under Section 80HHC, to which, otherwise, the assessee was duly and fully entitled to Moreover in asst. yr. 2002-03 also similar claim under Section 80-IB only was made and no claim under Section 80HHC was made. It is under this background that neither the assessee nor the learned Authorised Representative could make a specific claim of deduction under Section 80HHC of the Act. Therefore such a failure appears to be not willful or unreasonable. It was further argued that the settled legal proposition is that the powers of the first appellate authority are very wide and co-terminus with those of the AO and what AO can do, he can do and what AO fails to do, that also he can do in view of decision in Kanpur Coal Syndicate (supra). Sections 251 and 252 of the Act have also been worded keeping the same spirit, as also Rule 4GA. Section 250(4) empowers the CIT(A) to make further inquiries on its own or to direct the AO to make further inquiry and to report him. In Jute Corporation of India Ltd. v. CIT (supra), the Hon'ble Supreme Court held that an appellate authority has all the plenary powers which the subordinate authority may have in the matter. There is no good reason to justify curtailment of the powers of the AAC in entertaining an additional ground raised by the assessee in seeking modification of the order of assessment passed by the ITO. However the learned CIT(A) neither referred to the decision of Jute Corporation (Supra) nor distinguished the same and being a binding precedent, the learned CIT(A) was obliged to follow the same. He further submitted that otherwise also the AO was duty-bound to have drawn the attention of the assessee to make a claim under Section 80HHC, Our attention was drawn towards a very old Circular dt. 11th April, 1955. He also relied upon Choksi Metal Refinery v. CIT (supra) and in particular our attention was drawn to the observations made by the Hon'ble High Court at p. 71 of the Report, which was followed in Dy. CIT v. Suprint Textile (supra). The AO, therefore was supposed to have advised the assessee in this regard, which he has not done. The learned Counsel also argued that the said circular does not say that the details must be available, on record and then only, the AO should discharge his duties. He further argued that even an audit report under Section 80HHC was filed before the learned CIT(A). Various Courts have held that filing of an audit report along with the return is not mandatory and can be filed later also to get deduction under Section 80HHC. He referred to CIT v. Gupta Fabs (supra) following CIT v. Punjab Financial Corporation (supra). Further in the case of Magnum Exports (P) Ltd. (supra) at p. 19 it was held that existence of the audit report to make a claim for deduction under Section 80HHC is mandatory although the time of furnishing thereof is not mandatory. Audit report furnished even before the Tribunal, in that case was held permissible and the appeal of the Revenue was dismissed.
Further it has been held that filing of the audit reports even at the appellate stage is permissible as held in the cases of CIT v. Jayant Patel (supra) dealing with Section 80J(6A) and CIT v. Shahzadanand Charity Trust (supra), while dealing with Section 12A(b). In view of the arguments of the learned Authorised Representative and decisions relied upon and eircumstances and facts of the case, the learned CIT(A) was not justified in refusing to admit the additional ground taken before him. In the interest of justice, the same is admitted. However, the matter has to be examined by the AO. Therefore, we direct the AO to consider the claim in accordance with law but by providing adequate opportunity of being heard to the assessee and to file the necessary documents. In view of the decisions of various Courts of law hereinbefore and circumstances and facts of the case, ground No. 2 of the C.O. of the assessee is allowed for statistical purposes.
36. The ground No. 3 of the assessee is with regard to charging of interest which is mandatory and is consequential in nature.
37. In the result, the appeal of the Revenue in ITA No. 253/Jp/2007 is dismissed and the C.O. of the assessee bearing No. 40/Jp/2007 is partly allowed.