COMMISSIONER OF INCOME TAX Vs. MITESH IMPEX

JUDGEMENT

(1.) This group of appeals involves similar questions of law in substantially similar factual background. Since these appeals were admitted at different points of time, it is possible that questions framed in some of the appeals may have been slightly differently worded. In order to achieve uniformity for the purpose of all these appeals to answer common questions of law, we adopt following questions of law, which were framed in Tax Appeal No. 2562 of 2009 while admitting the appeal. For the purpose of all the appeals, therefore such questions shall be answered which are as follows:-

(2.) We would refer to facts arising in Tax Appeal No. 2562 of 2009. It would be convenient to deal with Questions No. (1) and (2) together. First question pertains to Revenue's objection to the assessee's deduction under section 10B of the Income Tax Act, 1961 ("the Act" for short) on the ground that the activity carried on by the assessee did not amount to manufacturing activity. The assessee being a 100% Export Oriented Unit ("EOU" for short) had sold part of its goods to units situated in Domestic Tariff Area ("DTA" for short), which were also EOUs and claimed deduction qua such profits also under section 10B of the Act. The Revenue contends that in any case such sales by the assessee in DTA would not qualify for deduction under section 10B of the Act. This has given rise to the second question noted above.

(3.) The respondent assessee is a 100% EOU and is engaged in the activity of segregation and processing of metal scrap of various natures. Out of such separate segregated scrap, part of it would be used by the assessee for manufacture of iron ingots. Some parts of the scrap would be reprocessed and resold. With respect to the details of such processing activities carried on by the assessee in order to ascertain whether such activity would amount to manufacture, we would advert at a later stage. The assessing officer, however, believed that such activity would not amount to manufacture barring the process by which the assessee produced ingots. To that extent, the assessing officer granted deduction under section 10B of the Act, since admittedly the assessee complied with other conditions for grant of the claim. However for the rest of the profit the assessing officer rejected the assessee's claim by his order of assessment dated 31.3.2006 for the assessment year 2003-04. He also held that the assessee's sales to DTA areas are not export sale. Deduction under section 80IB of the Act would not be available on such sales.