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2014 (11) TMI 371 - AT - Income TaxDeduction u/s 80IB - Business of manufacturing of LED based products Major manufacturing activity is done by the Job Worker - Further processing done by the assessee - Held that - The Assessee is a small-scale industrial undertaking having Permanent Registration No.30325068/Sl dated 18.08.1997 and obtained Excise Licence having R. C. No.20/M/8/C/9 Cal- E/97 dated 06.06.1997 which has presently been changed to AABCB2719DXM001 following the decision in Ujagar Prints Vs. Union of India 1989 (1) TMI 122 - SUPREME Court - monitoring and soldering of raw materials/components on Circuit Board as performed by Job Worker is only one part of the manufacturing activities has not resulted towards emergence of any product which has commercial identity and is excisable - It was not considered by the AO that had such work performed by Job Worker resulted into emergence of a product having commercial identity, then such work would have attracted the Excise Act - assessee is a small-scale industrial undertaking and is engaged in the business of manufacturing of any article or thing - All conditions laid down in Section 80-IB of the Act stands satisfied - Central Excise authorities recognizes the assessee as manufacturer and is collecting Excise Duty from the Assessee for manufacture of excisable goods. The Central Excise Authorities recognizes assessee as manufacturer and is collecting Excise Duty for manufacture of excisable goods for carrying out the operation of fitting, mounting and soldering of raw materials/components at the factory of the Job Worker under close supervision and monitoring by the employees of the assessee, further processing, burning and testing shall be carried out at the factory of the assessee, whereby and whereto a product will emerge which is having distinct Identity in the commercial world assessee is eligible for deduction u/s 80-IB Decided in favour of assessee.
Issues Involved:
1. Disallowance of deduction claimed under section 80IB of the Income-tax Act, 1961. Issue-Wise Detailed Analysis: 1. Disallowance of Deduction Claimed Under Section 80IB of the Income-tax Act, 1961: The primary issue in this appeal is the disallowance of the deduction claimed by the assessee under section 80IB of the Income-tax Act, 1961. The assessee, a company engaged in the manufacturing of LED-based products, claimed this deduction for the Assessment Year 2004-05. The deduction was disallowed by the Assessing Officer (AO) and subsequently confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)]. Facts and Background: The assessee company is a Small Scale Industrial Undertaking with registration and excise details provided. The company claimed to manufacture LED-based products, including Aviation signaling, Warning, Traffic Lights, Push Buttons, Selector Switch, lamp Holders, LED Modules/Lamps/Indicators, and LED based heavy-duty line testers. The manufacturing process involves intricate electrical engineering, customer-specific designs, and multiple stages of production, including sub-assembly and soldering by job workers under the supervision of the assessee's employees. Assessment Officer's (AO) Reasoning: The AO disallowed the deduction on the premise that the same issue was examined and disallowed for the AY 2002-03. The AO argued that the assessee was only preparing designs and getting the products manufactured by its sister concern. The AO concluded that the activities of designing, testing, and packing do not constitute manufacturing, thus disqualifying the assessee from claiming the deduction under section 80IB. CIT(A)'s Confirmation: The CIT(A) upheld the AO's decision, stating that the appellant and its sister concern were engaged in similar activities from the same premises. The CIT(A) reasoned that if one sister concern was already allowed the deduction under section 80IB, the appellant company could not be entitled to the same deduction. This led to the confirmation of the disallowance. Tribunal's Analysis and Decision: The Tribunal examined the detailed manufacturing process provided by the assessee, which included twelve stages from drawing and designing of circuits to various testing operations ensuring quality control. The Tribunal noted that the assessee was recognized as a manufacturer by the Central Excise authorities and was paying excise duty on the manufactured goods. The Tribunal referred to the Supreme Court's decision in the case of Ujagar Prints Vs. Union of India (1989) 179 ITR 317 (SC), which established that processes resulting in a commercially different commodity with its own identity and price structure constitute manufacturing. The Tribunal found that the assessee's activities met this criterion, as the final products had a distinct commercial identity and were excisable. Conclusion: Based on the facts and the legal precedent set by the Supreme Court, the Tribunal concluded that the assessee was indeed engaged in manufacturing activities and was eligible for the deduction under section 80IB of the Act. The appeal of the assessee was allowed, and the disallowance of the deduction was overturned. Final Order: The appeal of the assessee is allowed, and the order was pronounced in the open court on 13.8.2014.
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