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2015 (8) TMI 37 - AT - Income TaxDisallowance of the deduction claimed u/s 80IC - CIT(A) allowed claim - Held that - CIT(A) who has deleted the entire addition made by the Assessing Officer on the ground that the predecessor CIT(A) had on merits found out for assessment year 2008-09 that the assessee company is eligible for deduction under Section 80-IC of the Act. Nowhere in the impugned order we find any observation or finding of the learned CIT(A) commenting on the validity of the reopening of the assessment proceedings under Section 147/148 of the Act. Since the ground does not arise from the impugned order, we are unable to state whether the said ground can survive. The ld CIT(A) rightly observed that it is well settled that every change or process cannot be termed as manufacture or production. Well known test applied for determining whether a process amounted to production/manufacture are that a new and distinct commercial product emerges. Commonly accepted meaning given to the word manufacture as held in the judgements by the Hon ble supreme court is when a new and different article emerges having distinctive name, character and use. After applying the tests laid down in the different judgements and taking guidance from the definition of manufacture in the act, having noted the process involved, the learned CIT(A) rightly held that the assessee company is entitled to deduction u/s 80-IC of the Act. The Assessing Officer has not made any comments with regard to the certificates given by the Government of India, Ministry of Commerce and Industries, and Excise Authorities of the State has not commented upon adversely by the AO. Just because survey team has reported that only 20 people were working in the unit cannot brush aside the evidence that has been placed on record. Taking into consideration the corroborative evidence, we concur with the view of the learned CIT(A) and we find no infirmity in the same. - Decided in favour of assessee. Reopening of assessment - Held that - CIT(A) who has deleted the entire addition made by the Assessing Officer on the ground that the predecessor CIT(A) had on merits found out for assessment year 2008-09 that the assessee company is eligible for deduction under Section 80-IC of the Act. Nowhere in the impugned order we find any observation or finding of the learned CIT(A) commenting on the validity of the reopening of the assessment proceedings under Section 147/148 of the Act. Since the ground does not arise from the impugned order, we are unable to state whether the said ground can survive.We are constrained to note that the learned CIT(A) has not adjudicated on the reopening made by the AO under Section 147/148. He has deleted the addition made on the ground that his predecessor CIT(A) in chair had deleted the same on merits. Therefore, we do not find any merits in the grounds raised before us. In any case since, we have already up held the finding and decision of the Ld CIT(A) for assessment year 2008-09, that the assessee company s Rudrapur Unit is engaged in manufacturing and is therefore eligible for deduction under Section 80-IC of the Act, so we uphold the orders of the learned CIT(A) and dismiss the grounds raised by the Revenue - Decided in favour of assessee.
Issues Involved:
1. Disallowance of deduction under Section 80IC of the Income-tax Act, 1961. 2. Validity of reopening assessment proceedings under Section 147/148 of the Income-tax Act, 1961. Detailed Analysis: 1. Disallowance of Deduction under Section 80IC: Background: The Revenue appealed against the CIT(A)'s decision to allow the deduction under Section 80IC for the assessment years 2006-07, 2007-08, 2009-10, and 2008-09. The Revenue argued that the CIT(A) ignored the facts gathered during a survey under Section 133A, which indicated that no manufacturing activity was carried out at the Rudrapur unit, thus disqualifying it from the deduction under Section 80IC. Findings: - The AO based his findings on the survey reports dated 17.02.2010 and 15.03.2010, which suggested that the Rudrapur unit was merely assembling parts manufactured at Faridabad and did not engage in any manufacturing activity. - The assessee provided extensive documentation, including Excise Registration Certificates, DIC Registration, Sales Tax Registration, Attendance Registers, Salary Sheets, Contractors' Bills, Process Flow Charts, and Bills of Materials, to substantiate the claim that the Rudrapur unit was indeed engaged in manufacturing activities. - The CIT(A) considered these documents and concluded that the Rudrapur unit qualified for the deduction under Section 80IC, as it was engaged in manufacturing activities as defined under Section 2(29BA) of the Act. Legal Precedents: - The judgment referred to various precedents to define "manufacture" and "produce," emphasizing that a new and distinct commercial product must emerge from the process. - The CIT(A) observed that the process carried out by the assessee at Rudrapur resulted in the production of a new product, thus qualifying as manufacturing. Conclusion: The Tribunal upheld the CIT(A)'s decision, noting that the AO had not adequately considered the substantial evidence provided by the assessee. The Tribunal found no infirmity in the CIT(A)'s order and dismissed the Revenue's appeal. 2. Validity of Reopening Assessment Proceedings under Section 147/148: Background: The Revenue challenged the CIT(A)'s decision to quash the reopening of assessment proceedings under Section 147/148 for the assessment years 2006-07, 2007-08, and 2009-10. The reopening was based on the survey report indicating that the Rudrapur unit was not engaged in manufacturing activities, leading to an alleged escapement of income. Findings: - The CIT(A) deleted the entire addition made by the AO on the ground that the predecessor CIT(A) had already found on merits for the assessment year 2008-09 that the assessee was eligible for deduction under Section 80IC. - The Tribunal noted that the CIT(A) did not specifically comment on the validity of the reopening under Section 147/148 in the impugned order. Conclusion: The Tribunal found no merit in the Revenue's grounds regarding the reopening of assessments, as the CIT(A) had not adjudicated on this issue. Additionally, since the Tribunal upheld the CIT(A)'s decision for the assessment year 2008-09, confirming the eligibility of the Rudrapur unit for deduction under Section 80IC, it dismissed the Revenue's appeals for the assessment years 2006-07, 2007-08, and 2009-10. Final Decision: All the appeals of the Revenue were dismissed, and the decision was pronounced in the open court on 29th May 2015.
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