2012 (4) TMI 223 - HC - Income Tax

Validity of revisionary powers exercised by CIT u/s 263 assessee claimed deduction u/s 80-IC in respect of income derived from assembly of colour TV which was claimed to be manufacturing activity - CIT dis-allowed deduction on ground that no manufacturing activity is carried on Held that - Tribunal while holding that exercise of revisionary jurisdiction by the Commissioner was not called for, upheld the view that producing of TV sets by purchasing items like cabinet, chassis, IC picture tube could be held to be manufacturing. Moreover, High Court in various cases have held that when a new and different article emerges having distinctive name, character and use, the process could be held to be manufacturing - order of the Tribunal cannot be held to be erroneous Decided in favor of assessee.

Issues Involved:
1. Interpretation of manufacturing activity under section 80-IC of the Income-tax Act, 1961.
2. Jurisdiction of the Commissioner under section 263 of the Act.
3. Entitlement to deduction under section 80-IC of the Income-tax Act, 1961.

Analysis:

Issue 1: Interpretation of Manufacturing Activity under Section 80-IC:
The appeal involved a dispute regarding the deduction claimed under section 80-IC for income derived from the assembly of color TVs. The Assessing Officer allowed the claim, but the Commissioner set aside the order, stating that assembling components into TVs did not amount to manufacturing as no new article emerged. The Tribunal, however, upheld the plea of the assessee, citing a previous order in a similar case and holding that assembling TVs constituted manufacturing activity. The Tribunal also noted that the exercise of revisional jurisdiction by the Commissioner was unwarranted. The Tribunal's decision was supported by the judgments of other High Courts, emphasizing that when a new and distinct article emerges, the process could be considered manufacturing. As no contrary view was presented, the Tribunal's decision was deemed correct, and no substantial question of law arose in this regard.

Issue 2: Jurisdiction of the Commissioner under Section 263:
The Commissioner exercised jurisdiction under section 263 to set aside the Assessing Officer's order allowing the deduction claim. The Tribunal, however, held that this exercise of revisional power was not justified in this case, especially when there were two possible views on the matter. The Tribunal's decision was based on the principle that revisional jurisdiction should not be invoked in cases where multiple interpretations are plausible. The Tribunal's stance was further supported by the lack of challenge to a previous decision by the Revenue regarding a similar issue. Consequently, the Tribunal's ruling on the Commissioner's jurisdiction under section 263 was upheld.

Issue 3: Entitlement to Deduction under Section 80-IC:
The main contention revolved around whether the assessee was entitled to claim a deduction under section 80-IC for the manufacturing activity of assembling color TVs. The Revenue argued that the activities of purchasing components and assembling products did not amount to manufacturing. However, the Tribunal, supported by decisions from other High Courts, held that the process of producing TV sets by purchasing various components could indeed be considered manufacturing. As the Tribunal's decision was consistent with previous rulings and no contradictory perspective was presented, the deduction claim under section 80-IC was deemed valid, leading to the dismissal of the appeal.

In conclusion, the High Court dismissed the appeal by the Revenue, upholding the Tribunal's decision regarding the interpretation of manufacturing activity under section 80-IC, the jurisdiction of the Commissioner under section 263, and the entitlement to deduction under the Income-tax Act, 1961.

← Previous Next →