2009 (3) TMI 73 - HC - Income Tax

Manufacture - business of making transformer core from CRGO/CRNO Coils - findings of facts, by Tribunal are that after completion of all the processes, CRGO/CRNO coils get converted into transformer core which is the end product which can be used in mfg. of transformer - Tribunal , while recording majority opinion & giving due credence to the opinion of the technical experts of the field, is right in holding that assessee is engaged in manufacturing article and is entitled to deduction u/s 80IB

Summary

Issues Involved:
1. Whether the assessee's activity amounts to manufacturing.
2. Entitlement to deduction under Section 80IB of the Income Tax Act, 1961.
3. Validity of the Tribunal's majority decision when one member dissented.

Issue-wise Detailed Analysis:

1. Whether the assessee's activity amounts to manufacturing:
The primary issue revolves around whether the assessee's process of making transformer cores from CRGO/CRNO coils constitutes manufacturing. The Tribunal, after a detailed site visit and examination of the processes involved, concluded by majority opinion that the activities performed by the assessee do amount to manufacturing. The processes included slitting, shearing, V-notching, punching and holing, annealing, testing of lamination, core stacking, core assembly, testing of assembled core, and packaging and forwarding. The Tribunal found that these processes transform the raw material (CRGO/CRNO coils) into a new product (transformer core) with a distinct name, shape, and use, thereby meeting the criteria for manufacturing.

2. Entitlement to deduction under Section 80IB of the Income Tax Act, 1961:
The assessee claimed deduction under Section 80IB, which was initially disallowed by the Assessing Officer but later upheld by the Commissioner (Appeals) and the Tribunal. The Tribunal's majority opinion, supported by technical experts from SAIL, VJTI, and ERDA, affirmed that the assessee's activities qualify as manufacturing. The experts confirmed that the processes involved result in a new product, commercially recognized as transformer cores, thus fulfilling the conditions for deduction under Section 80IB.

3. Validity of the Tribunal's majority decision when one member dissented:
The Tribunal's decision was challenged on the grounds that one member dissented. The matter was referred to a Third Member under Section 255(4) of the Act, who agreed with the majority view. The Tribunal's majority opinion, supported by technical expert opinions, concluded that the assessee's activities constitute manufacturing. The High Court upheld this decision, noting that the Tribunal had applied the correct tests to determine manufacturing and had given due credence to expert opinions. The Court emphasized that technical opinions should be considered on their merits and should not be summarily discarded without contrary evidence.

Conclusion:
The High Court dismissed the appeal, stating that no substantial question of law was involved. The Court affirmed that the Tribunal had correctly applied the tests for determining manufacturing and had appropriately considered expert opinions. The assessee's activities were deemed to constitute manufacturing, thereby entitling them to the deduction under Section 80IB. The Tribunal's majority decision was upheld despite the dissenting opinion, as it was based on a thorough examination of facts and expert testimonies.