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2012 (11) TMI 231 - AT - Income TaxDeduction u/s. 80IB - disallowance as activity cannot be considered to be manufacturing - Held that - The business of assessee relates to cutting and polishing of marbles stone who procures rough marble blocks, which is first cut or chiseled using a hammer and a chisel. Thereafter the block is cut into the form of slabs. Thereafter, these slabs are placed under a polishing machine to make the surfaces smooth. Then edges of the tiles are cut using saw blades, therefore, for this purpose the assessee is entitled to deduction under section 80IB following the judgment in the case of ITO vs. Arihant Tiles and Marbles Pvt. Ltd. 2007 (5) TMI 132 - HIGH COURT, RAJASTHAN . As in earlier year the matter was restored to the file of A.O. for the verification of calculation. In the current year also the A.O. had disallowed the deduction u/s. 80IB at initial point and had not checked the calculation of deduction - restore the matter to the file of AO with a direction to verify the working of calculation and allow the deduction.
Issues:
- Disallowance of deduction u/s. 80IB of Rs. 23,24,717 Analysis: 1. The appeal was filed by the Revenue against the order of CIT (A), Valsad for the assessment year 2006-07, specifically challenging the disallowance of deduction u/s. 80IB amounting to Rs. 23,24,717. 2. The assessee, a firm engaged in cutting and polishing marble stones, claimed the deduction u/s. 80IB in its return of income. The Assessing Officer (A.O.) disallowed the claim, stating that the activities performed by the assessee did not qualify as "manufacture" under u/s. 80IB. The A.O. referred to the process involving cutting, chiseling, polishing, and cutting edges of rough stone slabs as activities not meeting the criteria for the deduction. 3. The CIT (A) disagreed with the A.O. and allowed the deduction u/s. 80IB, citing relevant case laws to support the assessee's eligibility. The Revenue, aggrieved by the CIT (A)'s decision, appealed to the ITAT, Ahmedabad. 4. During the appeal before the ITAT, the Revenue argued that the assessee did not fulfill all conditions necessary for claiming deduction u/s. 80IB as the activity did not constitute manufacturing. The Revenue supported the A.O.'s decision to disallow the deduction. 5. In response, the assessee's representative contended that the issue had been favorably decided in the assessee's own case for A.Y. 2005-06 by the Hon'ble Tribunal. The representative presented the relevant order to support the claim. 6. The ITAT referred to the decision of the Co-ordinate Bench in the assessee's previous cases for A.Y. 2003-04 and 2004-05, where it was held that the assessee was engaged in manufacturing activities and thus entitled to deduction u/s. 80IB. The ITAT directed the A.O. to verify the calculation of the deduction and allow it in accordance with the law. 7. Given the similarity of facts with previous years and in line with the earlier decisions, the ITAT ruled that the assessee's activities constituted manufacturing, entitling them to claim deduction u/s. 80IB. The ITAT directed the A.O. to verify the calculation and allow the deduction accordingly, similar to the previous cases. 8. Consequently, the ITAT partly allowed the Revenue's appeal for statistical purposes, instructing the A.O. to verify the calculation of the deduction u/s. 80IB and grant it to the assessee as per the law.
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