2013 (12) TMI 837 - HC - Income Tax

Deduction under Section 80HH and 80I - process of texturising of yarn - manufacturing activity or not - Held that - applying the ratio/law laid down by Hon ble the Supreme Court in the case of Yashasvi Yarn Ltd. (2012 (9) TMI 480 - SUPREME COURT) and in the case of Emptee Poly-Yarn P. Ltd. (2010 (1) TMI 18 - SUPREME COURT OF INDIA), the question formulated/raised in the present Tax Appeals is answered in favour of the assessee and consequently the impugned common order is hereby quashed and set aside and it is held that the assessee shall be entitled to the deduction under Section 80HH and 80I of the Income Tax Act by holding that the process of twisting and texturising of partially oriented yarn amounts to manufacture in terms of Section 80IA of the Income Tax Act. - Decided in favor of assessee.

Summary

Issues:
- Interpretation of whether the process of texturising yarn constitutes manufacturing for deduction under Sections 80HH and 80I of the Income Tax Act.

Analysis:
The judgment by the High Court of Gujarat involved two appeals arising from a common judgment by the Income Tax Appellate Tribunal (ITAT) concerning the same assessee but different Assessment Years. The central question in both appeals was whether the ITAT was correct in holding that the process of texturising yarn does not qualify as manufacturing or producing an article for claiming deductions under Sections 80HH and 80I of the Income Tax Act.

During the proceedings, the appellant's counsel argued that previous Supreme Court decisions supported the view that texturising partially oriented yarn constitutes manufacturing under Section 80IA of the Income Tax Act. Specifically, reference was made to the cases of Commissioner of Income Tax Vs. Emptee Poly-Yarn P. Ltd. and Commissioner of Income Tax Vs. Yashasvi Yarn Ltd. The revenue's counsel, on the other hand, could not provide any contradictory decisions to challenge this interpretation.

After considering the arguments and relying on the Supreme Court precedents mentioned, the High Court held in favor of the assessee. The court concluded that the process of twisting and texturising partially oriented yarn does amount to manufacturing under Section 80IA of the Income Tax Act. Consequently, the impugned order was set aside, and the assessee was deemed eligible for deductions under Sections 80HH and 80I of the Income Tax Act.

In the final decision, the High Court allowed the Tax Appeals in favor of the assessee, without imposing any costs. The judgment emphasized the application of established legal principles and Supreme Court interpretations to determine the eligibility of the assessee for tax deductions based on the manufacturing process of texturising yarn.