2015 (7) TMI 903 - AT - Income Tax

Eligibility for deduction u/s. 80 IC - whether milk is an item of production eligible for deduction? - CIT(A) allowed claim - Held that - The word production includes within its purview the word manufacture and also other activities. In view of above decision of Hon ble Supreme Court in the case of Tara Agencies (2007 (7) TMI 4 - SUPREME COURT OF INDIA ), we hold that Milk is an article or thing which can be produced by the assessee and, therefore, we fully concur with the views taken by the Commissioner of Income Tax (Appeals) in holding that Milk is an article or thing mentioned in Part-A of Fourteenth Schedule of the Act, and that the profit derived from production of milk is eligible for deduction u/s. 80IC of the Act. - Decided in favour of assessee.

Summary

Issues:
Challenge to CIT(A) order regarding eligibility of milk as a deductible item under section 80IC of the Income Tax Act, 1961.

Analysis:

1. The Revenue challenged the CIT(A) order regarding the eligibility of milk as a deductible item under section 80IC of the Income Tax Act, 1961. The appellant claimed deduction for profit derived from the business of producing milk and milk-based products. The Assessing Officer rejected the claim, stating that milk, mawa, and cream were not eligible items for deduction under section 80IC as they were not specified in the Fourteenth Schedule. The net profit derived from the sale of these items was restricted for deduction.

2. On appeal, the CIT(A) held that milk is indeed an article mentioned in the Fourteenth Schedule of the Income Tax Act, 1961, making it eligible for deduction under section 80IC subject to the conditions laid down. The CIT(A) directed the Assessing Officer to recompute the deduction accordingly. The CIT(A) analyzed the Schedule and concluded that milk is specifically listed as an article or thing eligible for deduction.

3. The Tribunal considered the arguments from both sides. The appellant's counsel emphasized that milk is expressly specified in the Fourteenth Schedule, and interpreting it otherwise would render the word "milk" redundant. Referring to a Supreme Court decision, the Tribunal noted that the term "production" includes activities like milching a cow to obtain milk, even without applying a process to raw material. A previous ITAT decision also supported the broad interpretation of "production."

4. Based on the Supreme Court's interpretation of "production" and the previous ITAT decision, the Tribunal upheld the CIT(A) order, affirming that milk is an article or thing eligible for deduction under section 80IC. The Tribunal agreed that milk can be produced by the assessee and qualifies for the deduction. Consequently, the Revenue's appeal was dismissed, and the CIT(A) order was upheld.

In conclusion, the Tribunal's decision clarified that milk is considered an eligible item for deduction under section 80IC of the Income Tax Act, 1961, based on the specific listing in the Fourteenth Schedule. The judgment emphasized the broad interpretation of "production" to include activities like obtaining milk from natural elements, supporting the eligibility of milk as a deductible item.