2009 (12) TMI 575 - HC - Income Tax

Disallowance of deduction - Assessee is a supportig manufacturer - The order of the Commissioner issued under section 263 of the Income-tax Act is confirmed by the Tribunal - Based on the Supreme Court in IPCA Laboratory v. Deputy CIT 2004 -TMI - 6141 - SUPREME Court wherein the Supreme Court has clearly held that unless profit is derived by the exporters in respect of the export the supporting manufacturer is not entitled to deduction based on the disclaimer certificate issued which in this case produced by the appellant shows that exports resulted in loss to the exporters Section 80-IA - The claim is not tenable because fish processing is not manufacture or production of an article as held by the Supreme Court in CIT v. Relish Foods 1999 -TMI - 5729 - SUPREME Court - Appeal are dismissed

Summary

Issues:
1. Disallowance of deduction claimed for exemption under section 80HHC of the Income-tax Act, 1961.
2. Assessee's claim for deduction under section 80-IA.

Issue 1: Disallowance of deduction claimed for exemption under section 80HHC of the Income-tax Act, 1961:

The judgment addresses the disallowance of deduction claimed for exemption under section 80HHC of the Income-tax Act, 1961. The assessee, a supporting manufacturer selling marine products to exporters for export, claimed a deduction supported by a disclaimer certificate from the exporters in Form No. 10CCAB. The Assessing Officer initially allowed the claim, but the Commissioner of Income-tax later disallowed it upon finding that the exporters incurred losses. The Tribunal upheld the Commissioner's decision, citing the Supreme Court's ruling in IPCA Laboratory v. Deputy CIT [2004] 266 ITR 521, which states that unless exporters derive profit from the export, the supporting manufacturer cannot claim a deduction based on a disclaimer certificate. The High Court concurred with the Tribunal's decision, emphasizing that the supporting manufacturer is not entitled to the deduction if the exporters incur losses, as evidenced by the disclaimer certificate produced by the appellant. The judgment concludes that there is no basis to interfere with the Tribunal's order, as it aligns with the Supreme Court's precedent.

Issue 2: Assessee's claim for deduction under section 80-IA:

The second issue pertains to the assessee's claim for deduction under section 80-IA. The High Court observed that the claim is not sustainable because fish processing does not qualify as manufacture or production of an article, as established by the Supreme Court in CIT v. Relish Foods [1999] 237 ITR 59. Consequently, the High Court upheld the Appellate Tribunal's decision affirming the Commissioner's order, dismissing the appeals related to this issue. The judgment emphasizes that since fish processing does not meet the criteria for manufacture or production of an article, the assessee's claim for deduction under section 80-IA cannot be allowed.

In summary, the Kerala High Court's judgment addressed two key issues: the disallowance of deduction claimed under section 80HHC and the rejection of the assessee's claim for deduction under section 80-IA. The judgment upheld the decisions of the Tribunal and Commissioner, citing relevant Supreme Court precedents to support its conclusions.