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2024 (2) TMI 39 - AT - Income TaxBenefit of deduction u/s 80IC - activities of the assessee constitutes manufacture or not? - activities undertaken by the assessee regarding processing of raw material received from HUL and then feeding the processed raw material to the mother plant of HUL - Whether the commodity which is subjected to the process of manufacture? - HELD THAT - Activities conducted by the assessee constitute manufacture. DR has also argued that HUL vide confirmation dated 21/12/2011 issued during the assessment proceedings for AY 2009-10 submitted that as per the agreement between the assessee and HUL, activities under taken by the assessee constitute C F Services only. As evident from the record that the said confirmation obtained by the AO from HUL was not confronted with the assessee during the assessment proceedings and the document or the person who has issued the said document was not subject to any cross examination or cross verification. On the contrary, the documents produced by the assessee which are approvals granted by various regulatory authorities go to show that the activities conducted by the assessee are in the nature of manufacture. We are of the opinion that the CIT(A) has committed error in confirming the assessment order, accordingly, the assessment order and the order of the CIT(A) are hereby set aside and the A.O. is directed to allow the benefit of 80IC to the assessee. Appeals filed by the assessee are allowed.
Issues Involved:
1. Jurisdiction and validity of the CIT(A)'s order. 2. Eligibility for deduction under Section 80-IC of the Income Tax Act. 3. Interpretation of the nature of activities as 'manufacture' or 'service'. Summary: Jurisdiction and Validity of the CIT(A)'s Order: The appellant contended that the CIT(A)'s order dated 17.12.2014 was erroneous, based on surmises and conjectures, illegal, without jurisdiction, and hence bad in law. The Tribunal did not specifically address this issue in isolation but focused on the substantive matter of eligibility for deduction under Section 80-IC. Eligibility for Deduction under Section 80-IC: The main issue was whether the assessee's activities constituted 'manufacture' under Section 80-IC of the Income Tax Act. The assessee argued that its activities, including processing raw materials, stacking, packaging, and dispatching final products for Hindustan Unilever Limited (HUL), qualified as 'manufacture.' The assessee's facility was registered under the Factories Act, 1948, and approved by the Pollution Control Board. The Tribunal noted that the assessee had made significant capital investment and employed sophisticated machinery and a substantial workforce. Interpretation of Activities as 'Manufacture' or 'Service': The CIT(A) had held that the assessee's activities did not constitute 'manufacture' but were merely service provisions. The Tribunal disagreed, citing various Supreme Court judgments, including Quazi Noorul HHH Petrol Pump and Kores India Ltd v CCE, which recognized similar processes as 'manufacture.' The Tribunal emphasized that the assessee's activities resulted in commercially new goods distinct from the raw materials. The Tribunal also noted that the confirmation letter from HUL stating the activities were C & F Services was not confronted with the assessee during assessment proceedings, violating principles of natural justice. The Tribunal found that the documents produced by the assessee, including approvals from regulatory authorities, supported the claim of manufacturing activities. Conclusion: The Tribunal concluded that the activities conducted by the assessee constituted 'manufacture' and directed the A.O. to allow the benefit of Section 80-IC of the Act to the assessee. The appeals filed by the assessee were allowed, and the orders of the CIT(A) were set aside.
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