2011 (12) TMI 381 - HC - Income Tax

Deduction u/s. 80IB - Assessing Officer was of the opinion that the assessee s activity cannot be stated to be involving any manufacturing activity - it emerges that the CIT(A) had relied heavily on the decision of Madras High Court in case of India Cine Agencies vs. Commissioner of Income Tax 2002 -TMI - 11960 - MADRAS High Court to uphold that the activities carried on by the assessee would not amount to manufacturing - The Tribunal, by the common impugned judgement allowed the assessee s appeals - Tribunal relying on the decision in case of India Cine Agencies vs. Commissioner of Income Tax (2008 -TMI - 31532 - SUPREME COURT) and in case of Vijay Ship Breaking Corporation vs. Commissioner of Income Tax, Ahmedabad (2008 -TMI - 31137 - SUPREME COURT), held that the activity would amount to manufacturing. - The case of the assessee before the revenue authorities was that at Daman Unit, the assessee carried on activity of slitting of plastic rolls and treating such slitted laminated plastic rolls - Decided in favor of the assessee

Summary

Issues:
- Interpretation of manufacturing activity for deduction under Section 80-IB of the Income Tax Act, 1961
- Claiming deduction for various expenses related to manufacturing activity
- Discrepancy between Assessing Officer's assessment and Tribunal's decision

Analysis:

Interpretation of Manufacturing Activity:
The appeals revolved around whether the assessee was engaged in manufacturing activities, specifically related to the deduction under Section 80-IB of the Income Tax Act, 1961. The Assessing Officer had disallowed the claim, stating that the activity did not involve manufacturing. However, the Commissioner (Appeals) disagreed, allowing the deduction for expenditure incurred at Daman but related to the activity at Pune. The Tribunal, relying on precedents, held that the activity constituted manufacturing, overturning the CIT(A)'s decision. The High Court upheld the Tribunal's decision, noting that the Tribunal correctly considered the reversal of a similar case by the Apex Court, thus allowing the appeal of the assessee.

Claiming Deduction for Expenses:
The issue of claiming deductions for various expenses related to manufacturing activity was also addressed. The CIT(A) had allowed the deduction based on evidence that the expenditure was actually incurred by the assessee. While the High Court noted that the Tribunal should have provided detailed reasons for confirming the CIT(A)'s view, it concluded that the expenditure was allowable based on the evidence presented. Therefore, the High Court declined to remand the issue back to the Tribunal, ultimately dismissing all tax appeals.

Discrepancy in Assessment and Tribunal's Decision:
The Assessing Officer's assessment differed from the Tribunal's decision, leading to the appeals. The Tribunal's judgment favored the assessee, allowing deductions and rejecting the revenue's appeals. The High Court found that the Tribunal's decision was appropriate, considering the reversal of a similar case by the Apex Court. The High Court dismissed all tax appeals, affirming the Tribunal's decision and upholding the allowance of deductions for the assessee.