2013 (6) TMI 731 - AT - Income Tax

Deduction u/s 80IC - Manufacture - Held that - Unable to uphold the finding of the Assessing Officer that no manufacturing activity has been carried out by the appellant. In my opinion the appellant has furnished adequate evidence of fabrication and assembly of the steel structure for the steel project of M/s. Dharampal Premchand Ltd. at Agartala. The evidences relied on by the Assessing Officer namely the few numbers of regular employees and the deserted appearance of the factory shed have been satisfactorily explained by the appellant. There can be no reasonable doubt that the appellant manufactured trusses columns gantries etc. in its factory and transported these articles to the project site of M/s. Dharmapal Premchand where these articles were erected by fastening bolts on the civil work already completed by M/s. Dharampal Premchand. The appellant has carried out customised fabrication of the steel structure as per drawings provided by the contractee. The appellant has been granted registration/approval from various regulatory and Government authorities and has paid excise duty on the articles manufactured by it. For all the above stated reasons it is held the appellant is entitled to the deduction u/s 80IC in respect of its manufacturing activities

Summary

Issues:
1. Whether the assessee is engaged in manufacturing activity and eligible for deduction u/s 80 IC of the Act.
2. Whether the activity of the assessee constitutes fabrication or manufacturing.
3. Applicability of case laws in determining the nature of the assessee's activity.

Issue 1:
The primary issue in this case is whether the assessee is engaged in manufacturing activity and therefore eligible for deduction under section 80 IC of the Income Tax Act. The Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) had differing opinions on this matter. The AO relied on specific judgments to support the denial of the claim, while the CIT(A) examined various evidence provided by the assessee to support the claim of manufacturing activity.

Issue 2:
Another key issue is determining whether the activity of the assessee constitutes fabrication or manufacturing. The Ld.D.R. argued that the assessee was engaged in fabrication work and construction of superstructures, contending that this did not qualify as manufacturing or production of an article or thing. The Ld.Counsel for the assessee, on the other hand, emphasized the definition of 'manufacture' under the Act and provided case law to support the contention that the assessee's activities indeed amounted to manufacturing.

Issue 3:
The third issue involves the applicability of specific case laws in determining the nature of the assessee's activity. The CIT(A) referred to judgments such as CIT vs. Northern Aromatics Ltd. and CIT vs. Beehive Engineering Co. to support the decision that the assessee's activities should be considered as manufacturing. The Tribunal also considered case laws like CIT vs. Alcam Engineering P.Ltd. and CIT vs. Impel Forge & Allied Industries Ltd. to uphold the CIT(A)'s order.

In the detailed analysis, it is evident that the Tribunal upheld the CIT(A)'s order, emphasizing that the assessee's activities constituted manufacturing based on the evidence provided. The Tribunal considered the nature of the work undertaken by the assessee, including fabrication, welding, drilling, and assembly of steel structures, as well as the registration with various regulatory authorities and payment of excise duty. The Tribunal also dismissed the arguments raised by the Revenue regarding the nature of the factory being constructed and the number of employees, stating that these were not grounds on which the AO had denied the claim. The decision was in line with relevant case laws and findings of fact, leading to the dismissal of the Revenue's appeals.