2017 (4) TMI 572 - AT - Income Tax

Deduction u/s.80IC in respect to third party manufacturing done by the assessee - rectification application - Held that - CIT(A) has taken note of the JCIT s order u/s. 144A wherein the JCIT has clearly made a finding that the assessee is engaged in the manufacturing and selling of the products on its own account and is also manufacturing the products as per specification of third party by using its raw material, packing material etc. and is selling finished products to the third parties after charging VAT. This particular fact has been reconfirmed by the Ld. CIT(A) in the impugned 154A proceedings from the AO vide report dated 16.05.2013 wherein the AO has confirmed the finding of the JCIT on this issue. CIT(A) has also taken note of the fact that in the subsequent assessment year i.e, AY 2010-11 the AO himself has given deduction to the assessee for third party manufacture in the assessment order passed u/s. 143(3) of the Act on 30.03.2013. Since the JCIT and AO have confirmed that the claim made by the assessee under the head third party manufacture was indeed executed by the assessee as per the specification of third party, however the goods/products were manufactured by the assessee using its own raw material, packing material etc. and has sold the finished products to such third parties after charging VAT and further, we note that in the subsequent assessment year 2010-11 the AO himself has allowed the claim of the assessee in respect to third party manufacture and held it as qualifying for 80IC deduction, so, we do not find any infirmity in the order passed by the Ld. CIT(A) and, therefore, dismiss the appeal of the revenue.

Summary

Issues Involved:
Appeal against the action of the Ld. CIT(A) in allowing deduction u/s. 80IC of the Act for third party manufacturing.

Analysis:
The appeal was filed by the assessee against the order of the Commissioner of Income Tax (Appeal), challenging the action of the Ld. CIT(A) who did not allow third party manufacturing under section 80IC of the Act. The assessee claimed that manufacturing for third parties, though done as per their specifications, should be considered as done by the assessee itself for the purpose of claiming deduction u/s. 80IC. The Ld. CIT(A) rectified the mistake in the original order and allowed the deduction under 'third party manufacture'. The revenue challenged this action, contending that the manufacturing was done using raw materials supplied by third parties and hence did not qualify for the deduction. However, the Ld. CIT(A) considered the findings of the Joint Commissioner of Income-tax and the Assessing Officer, who confirmed that the manufacturing was indeed done by the assessee using its own raw materials and sold to third parties after charging VAT.

The Ld. CIT(A) noted that in the subsequent assessment year, the Assessing Officer himself allowed the claim for third party manufacture under section 80IC. The Ld. CIT(A) also considered the report from the Assessing Officer confirming the nature of manufacturing done by the assessee. Given these findings and the consistent treatment in the subsequent assessment year, the Ld. CIT(A) dismissed the revenue's appeal, upholding the deduction for third party manufacturing under section 80IC. The Tribunal concurred with the Ld. CIT(A)'s decision, noting that the assessee had used its own raw materials and resources for manufacturing the products for third parties, qualifying for the deduction under section 80IC.

Therefore, the Tribunal dismissed the revenue's appeal, affirming the order passed by the Ld. CIT(A) in allowing the deduction for third party manufacturing under section 80IC of the Income-tax Act, 1961.