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2013 (7) TMI 286 - AT - Income TaxDeduction u/s 80IB - manufacture - profits earned on manufacturing of Engineered Floor Board at industrial unit at Silvasa - Held that - The decisions relied upon by the revenue to disallow the claim are distinguishable on facts as the case of Lucky Matemat (1996 (2) TMI 26 - RAJASTHAN High Court) wherein assessee was mining lime stone and selling it, there was neither any manufacturing activity nor any processing involved. Hence, the case is distinguishable on acts. Also the decision of Gem India 2000 (12) TMI 7 - SUPREME Court also has now been rendered inapplicable because, the legislature has introduced the definition of manufacture in the statute book, which was earlier not there. Though the meaning is for the purposes of section 10B, but explanation 4 introduced from 01.04.2004, it says, for the purpose of this section, Manufacture or produce shall include the cutting and polishing of precious and semi- precious stones . This, in effect has rendered the decision of Gem India ineffective. Since the raw material purchased by the assessee & the finished product marketed by it as brought by the assessee for examination it is found that raw material has under gone a major change and value addition and a distinct marketable product assessee is eligible for the claim of deduction under section 80IB. In favour of assessee.
Issues Involved:
Denial of deduction under section 80HHC of Rs. 12,08,700 on profits earned on manufacturing of Engineered Floor Board at industrial unit at Silvasa. The denial of deduction under section 80IB of Rs. 12,08,700. Analysis: Issue 1: Denial of deduction under section 80HHC: The appeal was filed against the order of CIT(A) confirming the denial of deduction under section 80HHC. The AO denied the deduction as claimed by the assessee, stating that the manufactured material must be different from the raw material for it to be considered manufacturing. The AO relied on various decisions to support the denial of deduction. The CIT(A) upheld the AO's decision, stating that the process carried out by the assessee did not result in a new and distinct product different from the raw material. The CIT(A) found that the activities were more of processing than manufacturing, as the end product did not have a different chemical composition. However, the ITAT disagreed with this assessment. Issue 2: Denial of deduction under section 80IB: The solitary issue was the denial of deduction under section 80IB. The assessee was engaged in the manufacture of Engineered Floor Boards for sports courts. The AO denied the deduction, emphasizing that the processing done by the assessee did not result in a distinct product different from the raw material. The CIT(A) upheld the AO's decision, stating that the activities were processing and not manufacturing. However, the ITAT, after examining the raw material and final product, found that the raw plank underwent a significant change and value addition to become a distinct marketable product. The ITAT held that the assessee was eligible for the deduction under section 80IB and directed the AO to allow the claimed deduction. In conclusion, the ITAT allowed the appeal filed by the assessee, setting aside the CIT(A)'s order and directing the AO to allow the deduction of Rs. 12,08,700 as claimed by the assessee. The ITAT's decision was based on the transformation of the raw material into a distinct marketable product, qualifying the assessee for the deduction under section 80IB.
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