2015 (3) TMI 219 - AT - Income Tax

Deduction u/s 10B - manufacturing of testing of equipment - Held that - Tribunal in the order 2013 (9) TMI 197 - ITAT DELHI as referred by the Ld. CIT(A) has elaborate referred to the facts and circumstances of the case and has concluded that assessee was engaged in the manufacturing of assembling the plants which are disassembled for exports. Considering these facts, the Tribunal affirmed the Ld. CIT(A) s order. We find that the aforesaid decision of the Tribunal is also applicable in this assessment year - Decided against Revenue.

Summary

Issues:
1. Deduction u/s. 10B of the Act for manufacturing activities.
2. Eligibility of expenses incurred for manufacturing activities.
3. Design and development activities location for deduction u/s. 10B.
4. Erection and commissioning income eligibility for deduction u/s. 10B.
5. Manufacturing outsourced outside SEZ eligibility for deduction u/s. 10B.

Analysis:
1. The appeal concerned the deduction u/s. 10B of the Act for manufacturing activities. The Revenue challenged the allowance of deduction despite the contention that mere testing of equipment does not qualify as manufacturing for the purpose of deduction. The Tribunal referred to the assessee's previous cases and affirmed the Ld. CIT(A)'s decision in favor of the assessee. The Tribunal concluded that the assembling of plants for exports constituted manufacturing activities, and the claim for deduction was allowed based on previous judgments.

2. The eligibility of expenses incurred for manufacturing activities was another issue raised in the appeal. The Revenue argued that the expenses indicated minimal manufacturing activity at the premises. However, the Ld. CIT(A) considered the submissions and past judgments, noting that the appellant company manufactured various components and subassemblies for the finished product, qualifying as manufacturing under u/s. 10B of the Act. The Tribunal upheld the Ld. CIT(A)'s decision, emphasizing the continuity of facts and circumstances from previous years.

3. The location of design and development activities for deduction u/s. 10B was disputed in the appeal. The Revenue contended that activities were carried out at a non-SEZ unit, thus not eligible for deduction. The Ld. CIT(A) and the Tribunal referenced past judgments and found no adverse conclusion as the manufacturing process remained consistent. The Tribunal affirmed the Ld. CIT(A)'s order, allowing the deduction based on the precedent set in previous cases.

4. The eligibility of erection and commissioning income for deduction u/s. 10B was also contested. The Revenue argued that the income related to activities abroad was not eligible. However, the Tribunal, following previous judgments and considering the nature of manufacturing activities, upheld the Ld. CIT(A)'s decision to allow the deduction. The Tribunal found no change in the facts and circumstances warranting a different conclusion.

5. Lastly, the issue of outsourced manufacturing outside the SEZ for deduction u/s. 10B was raised. The Tribunal, guided by past judgments and the nature of the appellant company's activities, dismissed the Revenue's appeal. The Tribunal affirmed the Ld. CIT(A)'s decision to allow the deduction, emphasizing the consistency of the manufacturing process and the eligibility criteria under u/s. 10B of the Act.