2013 (5) TMI 802 - AT - Income Tax

Entitlement to deduction under section 80P(2)(a)(iii) - Whether a Co-operative Society, engaged in the business of manufacture and sale of sugar out of the sugarcane grown by its member, can be denied deduction u/s 80P(2)(a)(iii) on the ground that proceedings involves use of power? - Held that - In view of the said ratio laid down in CIT Vs. Ramco International (2008 (12) TMI 413 - Punjab and Haryana High Court), we are of the view that the claim of deduction made by the assessee under section 80P(2)(a)(iii) of the Act is to be considered in the present facts and circumstances of the case, even though the assessee had raised said claim by way of letter dated 15.12.2004 and had not furnished any revised return of income. The assessee had raised the issue before the CIT (Appeals) and even before us. Further the issue on merits had been decided in favour of the assessee by the Full Bench of the Hon ble Punjab & Haryana High Court (supra). Further the appeals filed by the assessee against the earlier appeals dismissed by the Division Bench of the Hon ble Punjab & Haryana High Court were decided by the Hon ble Apex Court in Morinda Co-op. Sugar Mills & Ors. Vs. CIT, Chandigarh 2012 (9) TMI 847 - SUPREME COURT and it was held that the claim of the assessee whether the process undertaken by it was manufacturing or not, it had to be tested on the principle laid down in the case of CIT Vs. Oracle Software India Ltd. 2010 (1) TMI 9 - SUPREME COURT OF INDIA (SC) wherein held the terms manufacture implies a change, but every change is not a manufacture, despite the fact that every change in an article is the result of a treatment of labour and manipulation. However, this test of manufacture needs to be seen in the context of the above process. If an operation/process renders a commodity or article fit for use for which it is otherwise not fit, the operation/process falls within the meaning of the word manufacture . The Hon ble Supreme Court in assessee s own case thus held that The above test has to be applied and adjudicated on case to case basis. It depends on the type of product which ultimately emerges from a given operation. In our view, this aspect has not been examined by the Courts below. The matter was set aside to the file of the CIT (Appeals) with directions to decide and ascertain whether the operation undertaken by the assessee was or was not manufacture. In view of our admitting the claim of the assessee vis- -vis deduction under section 80P(2)(a)(iii) of the Act and follow ing the ratio laid down by the Hon ble Supreme Court in assessee s own case, we remit the present issue also back to the file of the CIT (Appeals) to decide the issue in line with the directions of the Hon ble Apex Court. Decided in favour of assessee for statistical purposes.

Summary

Issues:
Claim of deduction under section 80P(2)(a)(iii) of the Income Tax Act.

Analysis:
The appellant, a cooperative society engaged in processing sugarcane, filed an appeal against the Commissioner of Income Tax (A)'s order disallowing the deduction claimed under section 80P(2)(a)(iii) of the Act. The appellant's main ground of appeal was that the claimed deduction was denied based on a previous decision by the Punjab and Haryana High Court. The Assessing Officer rejected the claim as it was made through a letter and not in the return of income. The CIT (Appeals) upheld the Assessing Officer's decision, stating that the claim should have been made through a revised return. However, the appellant argued that the claim should have been entertained at the appellate stage, citing relevant case laws.

The Tribunal noted that the appellant, a cooperative society of farmers running sugar mills, had previously been denied the deduction under section 80P(2)(a)(iii) in earlier years. During the assessment proceedings for the relevant year, the appellant made the deduction claim through a letter, which was rejected by the Assessing Officer for not being in a revised return. The CIT (Appeals) acknowledged that the issue had been settled in favor of the appellant by the High Court but rejected the claim due to the lack of a revised return. The appellant contended that the claim was also made before the CIT (Appeals) and should have been considered based on settled law.

The Tribunal referred to a High Court judgment allowing a deduction claim made during assessment proceedings without a revised return. Following this precedent, the Tribunal held that the appellant's claim should be considered despite not being in a revised return. The Tribunal also considered a Supreme Court decision regarding the definition of "manufacture" in the context of the appellant's operations. Based on this, the Tribunal remitted the issue back to the CIT (Appeals) for further examination in line with the Supreme Court's directions. Ultimately, the Tribunal allowed the appeal for statistical purposes.

In conclusion, the Tribunal's decision favored the appellant's claim for deduction under section 80P(2)(a)(iii) of the Income Tax Act, emphasizing the applicability of relevant legal precedents and the need for a thorough examination of the manufacturing process in question.