2011 (1) TMI 421 - HC - Income Tax

Deduction u/s 80IB - the different parts procured by the respondent - assessee by themselves cannot be treated as a Wind Mill. Those different parts bear distinctive names and when assembled together, thereafter it gets transformed into an ultimate product which is commercially known as a Wind Mill - such an activity amount to manufacture as well as production of a thing or article as set out in Section 80IB(2)(iii) of the Income Tax Act - Accordingly decided in the favour of the assessee

Summary

Issues:
Interpretation of "manufacture" under Section 80IB of the Income Tax Act for Wind Mill assembly.

Analysis:
The High Court of Madras considered the appeal regarding the eligibility of an assessee company for deduction under Section 80IB of the Income Tax Act, specifically focusing on whether assembling different parts of Wind Mills constitutes "manufacture" as per the law. The appellant argued that mere procurement and assembly of parts do not qualify as "manufacture" as required by Section 80IB(2)(iii). However, the Tribunal rejected this argument, leading to the current appeal.

The Court referred to a recent Supreme Court decision in India Cine Agencies v. CIT to establish the test for determining "manufacture." The test requires the emergence of new goods with distinctive characteristics, name, and use to qualify as "manufacture." Additionally, the Court cited CIT v. Sesa Goa Ltd. to explain the meaning of "production," emphasizing the creation of new goods through processes, including by-products and intermediate products.

Applying the Supreme Court's test to the case at hand, the Court concluded that the assembly of different parts into a Wind Mill results in a new commercial commodity with its distinct characteristics, name, and use. Therefore, the activity qualifies as both "manufacture" and "production" under Section 80IB(2)(iii), allowing the respondent assessee to claim the deduction. The Court upheld the Tribunal's decision, finding no substantial question of law to warrant entertaining the appeal.

In the final judgment, the Court dismissed the appeal, affirming the Tribunal's decision in favor of the respondent assessee without imposing any costs.