2014 (12) TMI 1423 - AT - Income Tax

Deduction u/s. 80IB(5) - manufacturing activity done by the assessee or not? - HELD THAT - Assessee is engaged in the business of manufacturing of lubricating oil and antistatic conning oil as has been mentioned even in para 3 of the assessment order itself. The entire profit shown in the profit loss account was claimed as deduction u/s. 80IB(5). Without going into much deliberation and the decision in Daman Plastic 2013 (2) TMI 934 - ITAT MUMBAI Assessee is entitled for deduction u/s 80IB of the Act. Even otherwise, a provision in the taxing statute granting incentives for promoting growth and development should be construed liberally. Our view is fortified by the decision in Bajaj Tempo Ltd. 1992 (4) TMI 4 - SUPREME COURT , Impel forge and allied Industries Ltd. 2008 (12) TMI 370 - PUNJAB HARYANA HIGH COURT and CIT vs. Sadhu Forging Ltd we are of the view, that the assessee is entitled for deduction u/s. 80IB. Even otherwise, a provision in the taxing statute granting incentives for promoting growth and development should be construed liberally. Our view is fortified by the decision in Bajaj Tempo Ltd. vs. CIT 1992 (4) TMI 4 - SUPREME COURT AO denied the deduction merely on the ground that the assessee was doing job work for the sister concern, therefore, ultimate product was produced by sister concern - Assessee claimed that identically for A.Ys. 2005-06 and 2006-07, the claim of the assessee was accepted. The assessee has produced emulsifier by using raw material like fatty acids, glycols, vegetable oils, caustic soda, and other additives, consequently, the 'end product' is 'commercially known differently', therefore, in our view, the new article/new product emerged/manufactured, consequently, the assessee is entitled for deduction u/s. 80IB of the Act. Our view is fortified by the decision and the ratio laid down in CIT vs. Vinbros Company 2012 (9) TMI 802 - SC ORDER , CIT vs. Zainab Trading Pvt. Ltd. 2011 (2) TMI 109 - MADRAS HIGH COURT , CIT vs. Esquire Translam Industries 2010 (7) TMI 77 - MADRAS HIGH COURT , Titanor Components Ltd. 2013 (11) TMI 69 - DELHI HIGH COURT , CIT vs. Ambuja Ginning Pressing Oil Company Pvt. Ltd. 2010 (11) TMI 380 - GUJARAT HIGH COURT and Midas Polymer Compounds Pvt. Ltd. 2010 (12) TMI 414 - KERALA HIGH COURT Since, the 'end product' was 'commercially known differently', therefore, it can be said that it was manufacturing activity done by the assessee, therefore, in view of the discussion made hereinabove, we are of the view that assessee is entitled for deduction u/s. 80IB. Appeal of the assessee is allowed.

Summary

Issues:
1. Eligibility for deduction u/s. 80IB of the Act.
2. Manufacturing activity and claim of deduction.

Issue 1: Eligibility for deduction u/s. 80IB of the Act:

The appeal was against the order passed by the ld. CIT(A) for the assessment year 2008-09, challenging the denial of the claim of Rs. 46,23,016/u/s. 801B. The ld. Counsel contended that the assessee is eligible for deduction u/s. 80IB based on previous tribunal decisions and other case laws. On the contrary, the ld. DR argued that there was no manufacturing activity, thus justifying the denial of the deduction.

Issue 2: Manufacturing activity and claim of deduction:

The Tribunal considered the facts where the assessee was engaged in manufacturing lubricating oil and antistatic conning oil. The entire profit claimed as deduction u/s. 80IB(5) was disallowed by the Assessing Officer, leading to an appeal before the ld. CIT(A) and subsequently before the Tribunal. The Tribunal referred to previous orders and case laws, emphasizing that the provision granting incentives should be construed liberally. It was highlighted that the assessee produced a new product by using various raw materials, leading to the emergence of a commercially distinct end product. This manufacturing activity was deemed eligible for deduction u/s. 80IB of the Act, supported by various legal precedents cited in the judgment.

In conclusion, the Tribunal allowed the appeal of the assessee, emphasizing the liberal interpretation of provisions promoting growth and development in tax statutes. The decision was based on the manufacturing activity carried out by the assessee, resulting in the production of a new product, thereby entitling them to the deduction u/s. 80IB of the Act.