2016 (3) TMI 918 - AT - Income Tax

Disallowance u/s. 80 IB - whether assessee is not engaged in manufacturing activity as required for claiming the deduction u/s 80IB as per AO -Held that - Assembling of different products which are giving rise to a new product and which has become a new name in the market and functiothern will be regarded as manufacturing activity thus liable for 80IB deduction. See Commissioner of Income-tax Versus Jackson Engineers Ltd. 2009 (12) TMI 649 - Delhi High Court - Decided in favour of assessee

Summary

Issues:
1. Disallowance u/s. 80IB of the Income Tax Act, 1961.
2. Disallowance u/s. 10B of the Income Tax Act, 1961.

Issue 1 - Disallowance u/s. 80IB:
The appeal by Revenue and Cross Objection (CO) by the assessee arose from the order of the Commissioner of Income Tax (Appeals)-I, Kolkata regarding disallowance u/s. 80IB of the Act. The Assessing Officer objected to the claim made by the assessee under section 80IB, stating that there was no manufacturing activity carried out by the assessee, which is essential for claiming the deduction. The assessee argued that the assembling of components to create a new product, a Diesel Generating set, constituted manufacturing activity. The Commissioner, after considering the submissions, deleted the disallowance made by the AO. The Tribunal upheld the Commissioner's decision, stating that the assembling process required technical expertise and amounted to manufacturing activity, citing a similar decision by the Hon'ble Delhi High Court. The Tribunal concluded that the activity of assembling different components into a new product qualified as manufacturing, and thus dismissed the Revenue's appeal.

Issue 2 - Disallowance u/s. 10B:
The second issue involved the disallowance of a deduction claimed u/s. 10B of the Act by the assessee. The Assessing Officer disallowed the deduction on the grounds that no manufacturing activity was carried out by the assessee. However, the Commissioner allowed this ground of the assessee. The Tribunal, consistent with its decision on the first issue, dismissed the Revenue's appeal regarding the disallowance u/s. 10B.

In conclusion, the Tribunal dismissed the Revenue's appeal and the assessee's CO became infructuous due to the dismissal of the Revenue's appeal. The Tribunal's decision was based on the finding that the assembling process undertaken by the assessee constituted manufacturing activity, as supported by legal precedents and the distinct nature of the final product created through the assembly process.