2011 (2) TMI 109 - HC - Income Tax

Deduction u/s 80IB - The respondent/assessee company claims that it is engaged in the activity of manufacturing of paper corrugated boxes and on that basis claimed deduction under Section 80IB of the Income-tax Act, on the profits derived in its business -Held that such an activity of transforming the plain corrugated sheets into a different product of boxes, though to gain space for transportation, such boxes are kept in a folded position, one cannot say that the boxes continue to retain its original characteristics of corrugated sheets - Decided in the favour of the assessee

Summary

Issues:
- Interpretation of Section 80IB of the Income-tax Act regarding deduction eligibility for manufacturing corrugated boxes from kraft sheets.

Analysis:
1. The case involved a dispute regarding the eligibility of a company to claim a deduction under Section 80IB of the Income-tax Act for manufacturing paper corrugated boxes from kraft sheets. The appellant argued that since the corrugated sheet did not lose its original characteristics during the folding process, no manufacturing activity occurred, and thus, the deduction criteria were not met.

2. The Commissioner of Income-tax (Appeals) disagreed with the Assessing Authority and concluded that shaping corrugated sheets into boxes constituted a 'manufacturing activity.' Consequently, the appellant was deemed eligible for the deduction under Section 80IB, with the Commissioner directing the Assessing Officer to verify and grant the appropriate relief.

3. Upholding the Commissioner's decision, the Tribunal also ruled in favor of the respondent/assessee, considering the transformation of plain corrugated sheets into boxes as a manufacturing process. The Tribunal highlighted the respondent's activity of using designing machines to chisel the sheets into various shapes and pin them at folded points to create corrugated boxes.

4. The High Court, in its judgment, concurred with the lower authorities' findings, emphasizing that the process of converting plain corrugated sheets into boxes resulted in a distinct product. The Court noted that even though the boxes were folded for transportation convenience, they no longer retained the original characteristics of corrugated sheets. As such, the Court found no legal basis to challenge the decisions made by the Commissioner and the Tribunal based on the factual evidence presented.

5. Ultimately, the High Court dismissed the appeals, stating that since there was no substantial legal question involved and the decisions were supported by the facts, there was no justification for interference. The Court also rejected the appeals' costs, bringing the case to a close without any additional implications.