Matter remitted to the Tribunal to consider properly the issue of whether the products were purchased for testing and, therefore, whether the activity of the assessee using those products in the machine amounts to “manufacture” and whether the relevant year can be considered to be an initial assessment year, as held by MumHC in Teracom Ltd v ACIT — In favour of: Others; Tax Appeal No 4 of 2011.

Teracom Ltd. v ACIT

High Court of Bombay

Tax Appeal No. 4 of 2011

S.A. Bobde and F.M. Reis, JJ

Decided on: 21 July 2011

Counsel appeared:

S.R. Rivankar, Adv. for the appellant

Asha Dessai, Adv. for the respondent

Judgment

S.A. Bobde, J

1. Heard. Admit.

2. Heard finally by consent.

3. Shri Rivankar, learned Counsel for the appellant submitted that the Tribunal has not

properly considered the question of initial assessment year as defined under section 80-IB

sub-section 14(c) of the Income Tax Act and as defined in that section the Tribunal has failed

to appreciate that the term "begins to manufacture or produce articles or things" has been

interpreted to mean the manufacture or production for the purpose of commerce and not for

the purpose of testing. According to the learned Counsel, the Tribunal has not properly

appreciated this issue and has passed its conclusion on irrelevant material such as admission

of the appellant that the appellant had resold the products and paid sales tax on it. In the

submission of the learned Counsel for the appellant, admission that the appellant paid sales

tax on the products which were resold cannot lead to interpretation that they were not

purchased for testing when in fact they were so purchased for testing. We find that the

judgment of the Tribunal does not consider the question whether the products were purchased

for testing and, therefore, whether the activity of the assessee of using that products in the

machine amounts to manufacture and whether the relevant year can be considered to be initial

Assessment Year properly.

4. In this view of the matter, we set aside the order of the Tribunal and remand the matter

back to the Tribunal for fresh consideration in accordance with law. By way of interim

protection, we direct that no coercive action shall be taken against the appellant in respect of

the notices in question for a period of four weeks from today. All the issues are left open.

Appeal stands disposed of accordingly. No order as to costs.