2015 (11) TMI 1134 - AT - Income Tax

Deduction u/s 80IC - manufacturing and sale of nutritional food supplements, agro products and veterinary feed supplements, etc. - assessee is merely mixes various ingredients, required for final products, with the help of machineries and the final product/finish product is filled in pouches - Held that - Analyzing the processing activity done by the assessee, we find that the resultant end product is commercially known differently in the trading world, therefore, certainly it can be said that the activity of the assessee amounts to manufacture, consequently, entitled to deduction u/s 80IC of the Act, because, mixing various ingredients in a specified manner and the net result come into nutritional food supplement, agro products and veterinary food supplement amounts, which is used by the public at large for different purposes and is commercially known differently, therefore, it amounts to manufacturing. The resultant end product is outcome of combination of efforts with the help of men and machine using homogenizer. Likewise, Aloevera juice is extracted from the aloevera leaves with the help of machines and men and the end product is aloevera juice, which is outcome of various processes, therefore, whole activity of the assessee routs through various processes, thus, certainly amounts to manufacturing. The case of the assessee further find support from the decision in the case of Ramit Kumar Sharma vs DIT (IT) (2009 (1) TMI 12 - AUTHORITY FOR ADVANCE RULINGS ) wherein the assessee intend to start a tractor manufacturing industry in the state of Himachal Pradesh, wherein, the primary job was to provide, milling, tooling and grinding of surface of rear cover etc, which are important part of tractor, it was held that the activities amounts to manufacture or production of an article difference from raw castings, thus, entitled to deduction u/s 80IC of the Act. As mentioned earlier in Mrs. Delna Rustom Boyce (2009 (10) TMI 23 - AUTHORITY FOR ADVANCE RULINGS) processing, packaging and packing of fruits and vegetables were held to be eligible for deduction u/s 80IB of the Act, therefore, it can be concluded that the end product is commercially known differently, therefore, the assessee is involved in manufacturing - Decided in favour of assessee.

Summary

Issues Involved:
1. Eligibility for deduction under Section 80IC of the Income Tax Act, 1961.
2. Whether the activities carried out by the assessee constitute "manufacturing".
3. Whether the enterprise was formed by splitting up or reconstruction of an existing business.

Issue-wise Detailed Analysis:

1. Eligibility for Deduction under Section 80IC of the Income Tax Act, 1961:

The Revenue's primary contention was that the assessee did not fulfill the conditions stipulated in Section 80IC of the Income Tax Act, 1961, which led to the disallowance of the claimed deduction. The assessee claimed a deduction of Rs. 2,55,90,230/- for profits earned from manufacturing activities. The Assessing Officer disallowed the deduction on the grounds that there was no manufacturing activity and that the enterprise was formed by splitting up or reconstructing an existing business.

2. Whether the Activities Carried Out by the Assessee Constitute "Manufacturing":

The Tribunal analyzed the detailed manufacturing processes of various products such as Naturamore Protein supplement, Gayatri's Aloevera Juice, Herbomineral powder for pets, Biofit Bio-95 adjuvant, and Biofit cattle feed concentrate. The processes involved blending, heating, homogenizing, sieving, and packaging. The Tribunal concluded that the end products were commercially different from the raw materials used, indicating a manufacturing activity. The Tribunal referenced several judicial pronouncements supporting the view that similar processes amounted to manufacturing, including cases like R.M. Chemicals Pvt. Ltd., Ms. Delna Rushtam Boyce, and CIT vs. Emptee Poly Yarn (P.) Ltd.

3. Whether the Enterprise was Formed by Splitting Up or Reconstruction of an Existing Business:

The Revenue argued that the new enterprise was not genuinely new and was formed by splitting up or reconstructing an existing business. However, the Tribunal noted that the earlier unit was closed in 2006, assets were scrapped, and a new unit was set up in Himachal Pradesh with new machinery and staff. The Tribunal found no evidence from the Revenue to support the claim that old machinery was used. Therefore, the Tribunal concluded that the new unit was indeed a new enterprise and not formed by splitting up or reconstructing an existing business.

Conclusion:

The Tribunal dismissed the Revenue's appeals, affirming that the assessee's activities constituted manufacturing and that the new enterprise was not formed by splitting up or reconstructing an existing business. Consequently, the assessee was entitled to the deduction under Section 80IC of the Income Tax Act, 1961. The Tribunal's decision was based on a thorough analysis of the manufacturing processes, relevant judicial precedents, and the factual matrix of the case.