2017 (1) TMI 940 - AT - Income Tax

Claim of benefit under section 80IB - whether the activity carried out of production of Manganese Dioxide falls in the definition of manufacturing activity or not? - whether the assessee had started manufacturing activity/production on or before 31.03.2004 to claim benefit under section 80IB? - Held that - From the activity carried out by the assessee, it reveals that it coverts the raw Manganese Ores into powder by removing the silicon there from and hence an entirely new product comes into existence. Thus in the light of the decision of the Hon ble Supreme Court in the case of Lucky Minmat Pvt. Ltd. (2000 (8) TMI 6 - SUPREME Court ) and also in the light of the Notification dated 09.05.12, the activity carried out by the assessee can be safely said to be manufacturing activity. The department has not come with a specific stand that on which date the assessee has actually commenced the production. The department has only found fault with the date mentioned in the certificate (form 10CCB) regarding which the assessee has successfully explained that it was due to an inadvertent mistake on the part of Chartered Accountant. The correct and rectified certificate has been produced. Even it is not the case of the Revenue that the activity has commenced months later or in any subsequent year. There is a difference of only one day. The assessee from the evidences on the file has showed that since the date of limitation for claiming deduction was approaching, the assessee somehow, has been able to commence its manufacturing activity prior to 01.04.04 even though under some odd circumstances. The assessee has produced the relevant evidences like purchase of raw material, sales, use of electricity through generator set etc. Under these circumstances it can be safely said that the assessee has proved that the manufacturing activity commenced prior to 01.04.04. - Decided in favour of assessee

Summary

Issues Involved:
- Whether the activity of production of Manganese Dioxide by the assessee falls under the definition of manufacturing activity.
- Whether the assessee had commenced manufacturing activity before 31.03.2004 to claim benefits under section 80IB of the Income Tax Act.

Analysis:

Issue 1: Manufacturing Activity Definition
The Tribunal analyzed the nature of the activity carried out by the assessee, which involved converting raw Manganese Ores into powder by removing silicon, resulting in a new product. Referring to a government notification and a Supreme Court decision, the Tribunal concluded that the activity constituted a manufacturing process as it transformed the raw material into a different product with altered characteristics and usage. The Tribunal held that the production of Manganese Dioxide by the assessee qualified as a manufacturing activity.

Issue 2: Commencement of Manufacturing Activity
Regarding the commencement date of the manufacturing activity, the assessee clarified that the date mentioned in the Chartered Accountant's certificate was an inadvertent mistake and provided evidence that the activity had started before 01.04.2004. The assessee submitted various documents, including audit reports, machinery purchase bills, and sales records, to support the claim that manufacturing had begun prior to the specified date. The Tribunal noted that the Revenue did not dispute the actual commencement date of production and acknowledged the efforts made by the assessee to start operations before the deadline. Considering the evidence presented, the Tribunal found that the manufacturing activity had indeed commenced before 01.04.2004.

Conclusion
Based on the detailed analysis and evidence provided, the Tribunal allowed the appeals of the assessee for the relevant assessment years, affirming that the production of Manganese Dioxide constituted manufacturing activity and that the manufacturing process had commenced before the specified date. The cross objection of the Revenue for one assessment year and the appeal of the Revenue for another assessment year were dismissed.