2008 (8) TMI 131 - HC - Income Tax

Industrial undertaking special deduction - converting jumbo rolls into marketable small sizes - Tribunal was right in law in holding that the appellant was not entitled to deduction under section 80-IB of the Income-tax Act, 1961, on the ground that conversion of jumbo rolls into salable packets/rolls of standard size was not manufacture or production of article or thing

Summary

Issues:
- Entitlement to deduction under section 80-IB of the Income-tax Act, 1961 for conversion of jumbo rolls into salable packets/rolls of standard size.

Analysis:
1. The appeals were filed by the assessee against the order of the Income-tax Appellate Tribunal, Madras "A" Bench, regarding the entitlement to deduction under section 80-IB of the Income-tax Act, 1961. The core question was whether the conversion of jumbo rolls into salable packets/rolls of standard size constituted manufacture or production of an article or thing.

2. The assessee, a company not substantially owned by the public, was involved in converting jumbo rolls of various materials into commercially saleable packets/rolls of standard size. The Assessing Officer disallowed the deduction claim, citing the Supreme Court decision in CIT v. Relish Foods [1999] 237 ITR 59 (SC) as a precedent. The Commissioner of Income-tax (Appeals) upheld the disallowance, leading the assessee to appeal to the Income-tax Appellate Tribunal.

3. The High Court noted that a similar issue had been addressed in the assessee's previous case, CIT v. Computer Graphics Ltd. [2006] 285 ITR 84 (Mad), where it was held that converting jumbo rolls into marketable small sizes did not constitute manufacturing activity, thus denying the benefit of section 80I-B. Additionally, the court referred to the decision in India Cine Agencies v. CIT [2003] 261 ITR 491, which further supported the denial of the benefit claimed by the assessee.

4. Given the precedents and the lack of merit in the appeals, the High Court dismissed the appeals and the connected Miscellaneous Petition. The court affirmed that the conversion activity did not qualify as manufacturing under section 80-IB, as established in previous judgments, thereby upholding the decision against the assessee.

This detailed analysis of the judgment provides a comprehensive overview of the issues involved and the court's reasoning behind dismissing the appeals regarding the entitlement to deduction under section 80-IB of the Income-tax Act, 1961 for the conversion activities carried out by the assessee.