2010 (11) TMI 976 - AT - Income Tax

Summary

Issues Involved:
1. Eligibility for deduction u/s 80IB of the Income-tax Act.
2. Rejection of the claim that the appellant is a manufacturer.
3. Additional grounds raised by the appellant.

Summary:

Issue 1: Eligibility for Deduction u/s 80IB
The appellant contested the denial of deduction u/s 80IB by the Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)]. The AO disallowed the deduction on the grounds that the appellant did not utilize any power in its unit and was getting job work done from a sister concern, M/s. Nangalwala Chemical Industries. The CIT(A) upheld this decision, stating that the appellant did not furnish credible evidence of manufacturing activities in its own facility and admitted to not having the facility for manufacturing rubber cables during the year under appeal.

Issue 2: Rejection of the Claim that the Appellant is a Manufacturer
The appellant argued that the manufacturing was carried out under its direct supervision and control using the technical know-how of one of its partners. However, the CIT(A) dismissed this claim, noting that the appellant did not provide sufficient evidence to support its arguments and that the literal interpretation of Section 80IB does not permit an artificial definition of manufacturing.

Issue 3: Additional Grounds Raised by the Appellant
The appellant raised additional grounds, contending that PVC/TPR insulated wires and cables were produced in its industrial undertaking using its own machinery and power generated from a diesel generator. The AO and CIT(A) did not doubt the purchase of raw materials or the sale of goods but concluded that the appellant did not undertake any manufacturing activities. The Tribunal found that the complete facts were not evident from the relevant orders and thus set aside the impugned order of the CIT(A). The matter was restored to the CIT(A) for a fresh decision on the claim for deduction u/s 80IB, allowing sufficient opportunity to both parties and permitting independent inquiries if necessary.

Conclusion:
The appeal was allowed for statistical purposes, and the matter was remanded to the CIT(A) for a fresh decision on the claim for deduction u/s 80IB, considering the observations made by the Tribunal. The order was pronounced on 12-11-2010.