2017 (1) TMI 627 - HC - Income Tax

Deduction u/s 80IC - ITAT considering assessee s business activity as manufacturing instead of assembling Luggage carriers, Wheel Caps etc.- Held that - We find that both the CIT(A) as well as the Tribunal on application of the principle laid down by this and the Apex Court in Union of India and Others vs. J.G. Glass Industries Ltd. & Others 1997 (12) TMI 110 - SUPREME COURT OF INDIA concluded that the processes adopted by the Respondent Assessee to obtain front guard, luggage, carrier, rear gear etc. were manufacturing processes. This concurrent finding of fact is not shown to be perverse. - Decided in favour of assessee

Summary

Issues:
- Challenge to the common order passed by the Income Tax Appellate Tribunal for Assessment Years 2007-08 and 2009-10
- Whether the Tribunal was justified in upholding the order of the CIT(A) allowing deduction u/s 80IC of the Income Tax Act 1961 considering the assessee's business activity as manufacturing instead of assembling auto accessories

Analysis:
The Respondent Assessee, engaged in manufacturing and trading of auto accessories, claimed to manufacture various products and sought the benefit of Section 80IC of the Act. However, the Assessing Officer denied the claim, considering the items as a result of assembling rather than manufacturing. This denial led to an appeal to the CIT(A), which allowed the Assessee's appeal after examining the processes involved in producing the products. The CIT(A) found that the processes resulted in a change in the name, character, and use of raw materials, akin to the decision in Union of India and Others vs. J.G. Glass Industries Ltd. & Others (1998) 2 SCC 32. Consequently, the CIT(A) held the Assessee entitled to the benefit of Section 80IC.

The Revenue, dissatisfied with the CIT(A)'s decision, approached the Tribunal. The Tribunal, applying the test of manufacture from previous court decisions, including CIT vs. Supreme Graphics Creations P. Ltd. & Anr. 276 ITR page 668, upheld the view that the processes amounted to manufacturing, leading to manufactured goods. The Revenue contended that the processes were not manufacturing, citing Indian Hotels Co. Ltd. vs. I.T.O. 245 ITR 538, where processing foodstuff in a hotel was not considered manufacturing. However, the Court differentiated the facts, concluding that the processes adopted by the Assessee were indeed manufacturing processes, in line with the decisions of the CIT(A) and the Tribunal.

The Court found the concurrent factual findings of the CIT(A) and the Tribunal to be reasonable and not perverse. Consequently, the Court held that the proposed question did not raise any substantial question of law and thus dismissed both appeals. No costs were awarded in this matter.