2014 (1) TMI 340 - AT - Income Tax

Whether the assessee is engaged in the manufacture of a production of an article so as to be eligible for deduction u/s 80IB - Held that - In Notification No. SO 627 (E) dated 04.08.1999 the Central Government has recognised poultry and cattle feed industry, to be an eligible industry u/s 80 IB (4) - Once the Central Government notified the poultry feed industry u/s 80 IB (4) then there is a tacit admission that it is engaged in manufacture or production of an article - Once the Central Govt. accepted in principle that poultry feed is an eligible industry u/s 80IB(4); then the very same industry cannot be considered as non manufacturing industry under sub sections (3) and (5) of Sec 801B - Following assessee s own case for A.Y. 2007-08 - The assessee is engaged in manufacturing of poultry feeds and that the assessee is engaged in the manufacture or production of an article - The assessee s eligible undertaking itself was independently carrying out the complete activity i.e. from mixing, grinding till the pelletisation - The raw materials once consumed cannot be reconverted into the same position - Its utility gets changed - The prime raw materials such as, maize, soya oil, rice bran, etc. can no more be regarded to be the rice bran, soya oil, maize - Decided against Revenue.

Summary

Issues Involved:
1. Whether the assessee is engaged in the manufacture or production of an article, making it eligible for deduction under section 80IB of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Eligibility for Deduction under Section 80IB:
The primary issue in this appeal is whether the assessee qualifies for a deduction under section 80IB of the Income Tax Act, which pertains to the manufacture or production of an article. The Revenue contended that the assessee's product did not result in a new product with a different chemical composition or structure.

Tribunal's Decision:
The Tribunal noted that this issue had already been addressed in the assessee's favor in previous years (A.Yrs. 2007-08 and 2008-09) by the Coordinate Bench. Specifically, in ITA No. 2227/Kol/2010 dated 20th March 2013, the Tribunal had ruled that the assessee was indeed engaged in the manufacture of poultry feed, which is considered a distinct product from its raw materials.

CIT(A)'s Observations:
The CIT(A) had allowed the deduction by relying on prior ITAT decisions in similar cases involving the assessee's sister concerns, Amrit Feeds Ltd. and Amrit Hatcheries Pvt. Ltd. The CIT(A) concluded that the assessee's production process involved significant mechanical, chemical, and electrical processes, resulting in a distinct product known as poultry feed, which is recognized in trade and commerce as separate from its raw materials.

Scientific and Technical Considerations:
The CIT(A) also addressed the AO's (Assessing Officer's) concerns regarding the chemical composition changes during the production process. The CIT(A) found that the AO's conclusions lacked scientific backing and were not supported by empirical data. The CIT(A) emphasized that the production process did involve chemical changes, and the final product (poultry feed) was distinct and non-toxic, adhering to scientific standards.

Tribunal's Affirmation:
The Tribunal upheld the CIT(A)'s decision, reaffirming that the assessee's activity qualifies as manufacturing. The Tribunal referenced its own previous rulings and other judicial precedents, including the Bangalore Bench's decision in Komrala Feeds vs. DCIT, which supported the view that producing poultry feed constitutes manufacturing.

Legislative Intent and Incentive Provisions:
The Tribunal highlighted that section 80IB is an incentive provision aimed at promoting industrial growth in backward areas. It cited the Supreme Court's opinion in Bajaj Tempo Ltd vs. CIT, which advocated for a liberal interpretation of such provisions to advance economic development. The Tribunal noted that the Central Government had recognized poultry feed manufacturing as eligible for deductions under section 80IB(4), reinforcing the view that it constitutes manufacturing.

Conclusion:
Given the consistent judicial findings and the legislative intent, the Tribunal confirmed the CIT(A)'s order, allowing the assessee's claim for deduction under section 80IB. The Revenue's appeal was dismissed.

Final Order:
The appeal of the Revenue was dismissed, and the Tribunal pronounced the order in the open court on 17.12.2013.