(Prayer: Appeal filed under Section 260A of the Income-Tax Act, 1961 against the order of the Income Tax Appellate Tribunal Madras ‘D’ Bench, Chennai dated 07.12.2007 in ITA No.733/Mds/2007.)

Dr. Anita Sumanth, J.

1. This is an appeal filed by the assessee challenging the order of the Income Tax Appellate Tribunal (in short ‘ITAT’/’Tribunal’) dated 07.12.2007 passed under the provisions of the Income Tax Act, 1961 (in short ‘Act’) for assessment year (AY) 2003-04. (To be noted, that the order of the Tribunal contains a typographical error, in that AY is mentioned as 2001-02, where it ought to have been mentioned as 2003-04).

2. The substantial questions of law admitted on 28.03.2008 are as follows:

                   1) Is the Tribunal right in thinking that assembling and bring into shape a new produce viz. Wind operated electricity generators (wind mill) does not amoung to manufacturing?

                   2) Has not the Tribunal abdicated its jurisdiction by not considering the question if the assessee had employed more than 10 workers and used power in its activity on the assumption that assembling a wind mill is not manufacturing and therefore, the question of employment requiring number of employees is merely academic?

3. The assessee had claimed deduction under Section 80 IB in respect of its unit located at Pondicherry, engaged in the assembly, erection and installation of wind operated electricity generators onsite, at the location of the customers.

4. A series of assessment orders and orders of this court where this very issue has been considered have been placed before us. We find that the first year when this issyue was considered was 2001-02. It appears, that there was a survey in the premises of the assessee on 05.01.2006 and a statement was recorded from one Mr.Mani to the effect that he was the sole permanent employee of the assessee at Pondicherry. The order of assessment for AY 2003-04, however, records the position that the appellant had furnished a list of 24 employees, working either at the office of the appellant company itself or in the work sites in Bangalore.

5. The assessment came to be completed under scrutiny on 10.03.2006 denying the relief claimed, on two grounds. Firstly, the Assessing Officer was of the view that the work of assembly, commissioning and installation of the generators did not amount to manufacture, which is a mandatory facet of deduction under Section 80IB of the Act. Secondly, he was of the view that, being a company using power for its operations, it ought to have employed a minimum of 10 persons, as against which there was only one permanent employee of the company.

6. The matter travelled in appeal before the Commissioner of Income Tax (Appeals) (in short ‘CIT(A)’), who, by his order dated 18.12.2006 confirmed the order of assessment, as against which, an appeal was filed before the Tribunal.

7. The Tribunal, confirmed the conclusion of the Assessing Officer to the effect that the purpose of commencing operations in Pondicherry was merely to claim a relief that the appellant was not entitled to. The Tribunal notes that no work was carried on in Pondicherry and hence the requirement of Section 80IB was not satisfied by the appellant. The Tribunal was also of the view that mere assembly, erection and commissioning of wind energy electricity generators in the customers’ place could not be construed as ‘manufacture’.

8. The first order passed by this Court is for AY 2005-06 in T.C.(A) No.1164 of 2010, wherein the substantial question of law raised by the assessee is as follows:

                   ‘Whether on the facts and in the circumstances of the case, the Income-Tax Appellate Tribunal was right in law in holding that, the assessee company is eligible for deduction under Section 80IB of the Income-tax Act, 1961, eventhough the assessee company assembled different parts of the Wind Mills together, it does not undergo any process which has a new distinct article?’

9. The appeal was decided on 10.01.2011 and after a detailed discussion, and citing judgments of the Supreme Court in India Cine Agencies V. CIT(308 ITR 98 (SC)), CIT V. Sesa Goa Ltd. (271 ITR 331 (SC)), CIT V. Venkateswara Hatcheries (P) Ltd. ( 153 CTR (SC) 105) and CIT V. N.C.Budharaja & Co. (114 CTR (SC) 420) the Court held that the assembly, commissioning and installation of wind operated electricity generators would amount to ‘manufacture’. It was hence concluded that no question of law, much less, a substantial question of law, arose in the facts and circumstances of the case.

10. The aforesaid order for AY 2005-06 came to be followed by this Court for AY 2001-02 in T.C.(A) No.1365 of 2010 by order dated 14.02.2011, involving the identical question of law. These orders have become final and hence, substantial question of law No.1 is answered in favour of the assessee and adverse to the revenue.

11. As far as the second substantial question of law is concerned, it was not raised for adjudication in the earlier assessment years. The Tribunal has, in common order dated 27.11.2009 for AYs 2001-02, 2002-03 and 2006-07, carefully studied the statement of Mr.Mani concluding that it was merely to the effect that he was the only one permanent employee at the factory (See paragraph 18, internal page 13 of the Tribunal’s order). This does not lead to the inference that there are no other employees, including contract employees.

12. Hence, the Tribunal concluded that it is impossible for the appellant to carry out the activity of assembly, commissioning and installation with only one employee. There are clear findings of fact by the Tribunal to the effect that the assessee employed more than 10 employees based on the wage registers and other documents that were produced before it.

13. In the present case as well, the Assessing Authority has recorded that a list of 24 employees had been furnished before him. In our considered view, it is not necessary that all the 24 persons sit only in Pondicherry. Evidently, some would be deputed to the field, onsite, for installation and commissioning. In fact, this position has been accepted by the Assessing Officer in order of assessment dated 23.12.2010 for AY 2008-09, wherein the Officer records that during the previous year, i.e., for AY 2007-08, the assessee had 11 permanent employees and 14 contract labourers. He notes that these workers operate machines like EOT Crane, welding machine, grinding machine, drilling machine and electrical spanner, used for the commissioning and installation of the wind operated electricity generators.

14. In light of the discussion as above, the second substantial question of law is also answered in favour of the assessee and adverse to the revenue.

15. This Tax Case (Appeal) is allowed. No costs.