2015 (3) TMI 536 - HC - Income Tax

Entitlement to deduction under Section 80IB - assessee does not manufacture any goods by itself, but gets the same manufactured by others on job work basis - CIT(Appeals) following assessee's own case in respect of the earlier assessment year, partly allowed the appeals - Held that - Revenue fairly stated that the issue involved in this case is squarely covered by a decision of this Court in the case of The Commissioner of Income Tax, Coimbatore vs. M/s. Elgi Ultra Industries Limited, Coimbatore 2012 (8) TMI 809 - MADRAS HIGH COURT wherein held even though the assessee had not employed its own employees, yet, the fact is that at every stage the assessee had extracted control over the job work as though they were employees of the assessee. Given the fact that the dyes and the materials were given by the assessee to the job workers, who had merely bestowed their labours, no hesitation in accepting the case of the assessee that it qualify for relief under Section 80IA thus answering the question in favour of the assessee - Decided against revenue.

Summary

Issues:
1. Deduction under Section 80IB for an assessee not manufacturing goods but getting them manufactured by others on job work basis.
2. Eligibility for deduction under Section 80IB for an assessee only involved in washing, pressing, and packing processes.
3. Claiming to be an industrial undertaking when work is done by a job worker.

Analysis:

Issue 1:
The Revenue appealed against the Income Tax Appellate Tribunal's order allowing deduction under Section 80IB for an assessee who did not manufacture goods but got them manufactured by others on a job work basis. The High Court noted that the assessee was engaged in the manufacture and sale of readymade garments. The Assessing Officer had denied the benefit claimed under Sections 80IA/80IB during assessment. The Commissioner of Income Tax (Appeals) partly allowed the appeals, leading to further appeals by both the Assessee and the Revenue before the Income Tax Appellate Tribunal. The Tribunal ruled in favor of the assessee, prompting the Revenue to file the present Tax Case Appeals raising questions of law.

Issue 2:
Regarding the eligibility for deduction under Section 80IB for an assessee involved in washing, pressing, and packing processes, the High Court observed that the Revenue's appeal was based on a decision involving M/s. Elgi Ultra Industries Limited. The Tribunal's decision in the present case aligned with the earlier Tribunal's order related to M/s. Elgi Ultra Industries Limited, which the Revenue had challenged previously. The High Court referenced its decision in the case of The Commissioner of Income Tax, Coimbatore vs. M/s. Elgi Ultra Industries Limited, where it ruled in favor of the assessee. Consequently, the questions of law raised in the present case were answered in favor of the assessee, resulting in the dismissal of both Tax Case Appeals.

Issue 3:
The issue of an assessee claiming to be an industrial undertaking while work was done by a job worker was addressed by the High Court in light of its previous decision in the case involving M/s. Elgi Ultra Industries Limited. The Court reiterated that the questions of law raised in the present case were answered in favor of the assessee based on its earlier ruling. Therefore, both Tax Case Appeals were dismissed, with no costs imposed.

By aligning with its previous decisions and considering the nature of the assessee's operations, the High Court upheld the Tribunal's rulings in favor of the assessee, emphasizing the eligibility for deductions under Section 80IB despite the specific circumstances of the manufacturing processes involved.