2012 (8) TMI 609 - HC - Income Tax

Deduction under section 80-I of the Act - computer data processing services and sale of computer stationery Held that - Activity undertaken by the assessee can be termed as industrial undertaking engaged in the business of manufacture within the meaning of section 80-I of the Act

Summary

Issues:
1. Failure to formulate substantial question of law while admitting the appeal under section 260A of the Income-tax Act, 1961.
2. Determination of whether the activities of the assessee qualify as an industrial undertaking for claiming deduction under section 80-I of the Act.

Issue 1: Failure to Formulate Substantial Question of Law:
The High Court noted that while admitting the appeal, no substantial question of law was formulated as required under section 260A of the Income-tax Act, 1961. This led the Court to reexamine the matter to ensure compliance with the provisions of sub-sections (3) and (4) of the Act. The Court emphasized the obligation of the High Court to formulate substantial questions of law when admitting an appeal. Consequently, the Court proceeded to hear the matter again to identify and formulate the substantial questions of law involved in the appeal, providing the respondent with an opportunity to be heard. The Court framed two substantial questions of law related to the entitlement of the assessee to claim deduction under section 80-I of the Act and whether the activities of the assessee could be considered as an industrial undertaking under the same section.

Issue 2: Qualification of Activities as Industrial Undertaking:
The respondent, engaged in computer data processing services and the sale of computer stationery, claimed to be involved in manufacturing activities qualifying as an industrial undertaking under section 80-I of the Act. The Assessing Officer initially ruled against the assessee, but the Commissioner of Income-tax (Appeals) and the Tribunal favored the assessee, leading to the Revenue filing an appeal. The High Court examined the issue in light of previous decisions by various High Courts and the Supreme Court. It noted that activities involving technical and industrial consultancy, as well as data processing using computers, were considered as processing of goods and amounted to manufacturing, falling within the definition of an industrial undertaking under section 80-I. The Court cited precedents where similar activities were held to qualify as industrial undertakings. Consequently, the High Court upheld the decisions of the lower authorities in favor of the assessee, concluding that the activities were indeed in the nature of manufacture and constituted an industrial undertaking eligible for benefits under section 80-I of the Act.

In conclusion, the High Court dismissed the appeal, finding no merit in the arguments presented by the Revenue. The Court affirmed the decisions of the lower authorities, emphasizing that the activities of the assessee qualified as an industrial undertaking for the purpose of claiming deductions under section 80-I of the Income-tax Act, 1961. The Court highlighted the settled legal position established by previous judgments, both at the High Court level and affirmed by the Supreme Court, supporting the classification of such activities as manufacturing and falling within the scope of industrial undertakings.