2022 (12) TMI 543 - AT - Income Tax

Deduction u/s 80IC/80IE - manufacturing activity - Claim denied as assessee is not manufacturing/producing gases and is merely refuelling gases - HELD THAT - From perusal of the above finding of ld. CIT(A) given in the order u/s 250 of the Act as well as u/s 154 of the Act allowing the assessee s claim for deduction u/s 80IC/80IE of the Act for the units located at Sivasagar, North Lakhimpur and Duliajan, we note that ld. CIT(A) has followed the ratio laid down in the case of Hindustan Petroleum Corpn. Ltd. 2017 (8) TMI 197 - SUPREME COURT and has analysed the details and the process carried out by the assessee of converting the liquid oxygen into oxygen in gaseous form and also observing that bulk LPGs is received in the bottling plants located at respective units and then unloading in the spheres/bullets through LPG compressors having variable levels of pressure for suction, unloading and vapour recovery and thereafter refilling/bottling of the LPG in cylinders and then conversion of the same in gaseous form for the industrial and medical consumers and after analysing this process ld. CIT(A) has rightly arrived to the conclusion that the assessee is engaged in the production activity and thus, eligible for deduction u/s 80IC/80IE of the Act. Since ld. D/R has failed to controvert these facts and the applicability of the ratio laid down in Hindustan Petroleum Corpn. Ltd. (supra) by placing any other binding precedence in its favour and since all other necessary requirements as provided u/s 80IC/80IE of the Act have been complied, we fail to find any infirmity in the finding of ld. CIT(A) and thus, all the grounds of appeal raised by the Revenue are dismissed.

Summary

Issues Involved:
1. Eligibility for deduction under Section 80IC/80IE of the Income Tax Act, 1961.
2. Determination of whether the conversion of oxygen in its liquid form into gaseous form qualifies as "production."
3. Admissibility of additional evidence without remand report from the Assessing Officer (AO) under Rule 46A of the Income Tax Rules, 1962.
4. Rectification of apparent errors under Section 154 of the Income Tax Act, 1961.

Detailed Analysis:

1. Eligibility for Deduction under Section 80IC/80IE:
The primary issue revolves around the eligibility of the assessee for deductions under Sections 80IC and 80IE of the Income Tax Act, 1961, for its units located at Sivasagar, North Lakhimpur, and Duliajan. The Revenue's contention was that the assessee's activities did not qualify as "manufacture" or "production," thus making them ineligible for the deductions claimed.

2. Conversion of Liquid Oxygen to Gaseous Form as "Production":
The Tribunal examined whether the activity of converting liquid oxygen into gaseous form constitutes "production." The CIT(A) relied on the Supreme Court's ruling in CIT vs. Hindustan Petroleum Corpn. Ltd., which held that bottling of LPG amounts to production. The CIT(A) observed that the assessee's process involves a complex technical procedure similar to that in the Hindustan Petroleum case, thereby qualifying as "production." The Tribunal upheld this view, noting that the process includes:
- Unloading liquid oxygen into a vacuum insulated static tank.
- Pumping liquid oxygen through a cryogenic pump to a vaporizer.
- Converting liquid oxygen into gaseous form in the vaporizer.
- Filling oxygen cylinders with the gaseous form.

3. Admissibility of Additional Evidence:
The Revenue argued that the CIT(A) admitted additional evidence without calling for a remand report from the AO, violating Rule 46A of the Income Tax Rules, 1962. The Tribunal did not find merit in this argument, as the CIT(A) had provided a detailed analysis and justified the acceptance of additional evidence based on the complexity and technical nature of the assessee's operations.

4. Rectification under Section 154:
For the assessment years 2013-14 and 2014-15, the assessee filed applications under Section 154, pointing out apparent errors in the CIT(A)'s orders. The CIT(A) acknowledged these errors and rectified the orders, incorporating additional observations about the production process and affirming the eligibility for deductions under Sections 80IC/80IE. The Tribunal found no infirmity in these rectifications, noting that the CIT(A) had followed due process and provided a comprehensive explanation for the changes.

Conclusion:
The Tribunal dismissed all the appeals filed by the Revenue, affirming the CIT(A)'s decision to allow the assessee's claims for deductions under Sections 80IC and 80IE. The Tribunal upheld that the conversion of liquid oxygen into gaseous form qualifies as "production," making the assessee eligible for the claimed deductions. Additionally, the Tribunal found no procedural lapses in the CIT(A)'s acceptance of additional evidence and rectification of apparent errors.