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TMI Blog2002 (6) TMI 163X X X X Extracts X X X X X X X X Extracts X X X X ..... gs, the assessee submitted that it was purchasing MS rounds and MS wire from market on its own, which was given to outside fabricators for converting into pedal axles and pedal rods on payment of labour charges. Thereafter, finished components of pedal axles and pedal rods were sent to another fabricator for heat treatment of nickleplating. The assessee also purchased some more components i.e., pedal rubber, pedal cup, pedal cap, steel balls, washers etc. and thereafter all the components got manufactured and purchased are fed to power-driven machines, which tighten all the components resulting in production of complete bicycle pedal. It was, thus submitted that the assessee was manufacturing cycle pedals and as such was entitled to deduction under section 80-I. However, the Assessing Officer was of the view that the assessee was not, itself, engaged in the manufacture or production of any article or thing as it got such manufacturing done from outside and therefore, the assessee was not entitled to deduction under section 80-I. Accordingly, the Assessing Officer disallowed the claim of the assessee. 3. Aggrieved the assessee impugned the disallowance in appeal before the CIT(A). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,100 each and in the bill no sales-tax has been charged in respect of the sale and there was no evidence to show that these machines were new which was an essential condition for claiming deduction under section 80-I. In these circumstances, I am of the opinion that no industrial unit had been set up which would be entitled to deduction under section 80-I. Before I conclude this part of the order it may be mentioned that initial year for claiming deduction was 1986-87 and the appellant did not claim deduction in that year and neither it was claimed in the assessment year 1987-88, 1988-89 or 1989-90 and the claim was made only in this assessment year. Hence the claim of deduction under section 80-I cannot be accepted and the appeal stands dismissed." The assessee is aggrieved with the order of CIT(A). Hence this appeal before us. 4. Ld. counsel for the assessee reiterated the submissions which were made before the lower authorities. He submitted that the assessee was engaged in the business of manufacturing of articles or things. He submitted that the assessee was purchasing MS wire and MS rounds from market and thereafter it got the material converted into pedal axles and pedal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... power or employs 20 or more workers in a manufacturing process carried on without the aid of power." The Assessing Officer has not raised any objection to other conditions stipulated in section 80-1. The only objection raised by the Assessing Officer for disallowing assessee's claim is that the assessee was not, itself, engaged in the manufacture or production of any article or thing as these activities were got done from outsiders. Thus the Assessing Officer admitted that the assessee otherwise fulfils all the conditions except that it does not manufacture or produce articles or things on its own. In other words he accepts that the assessee fulfils all the remaining conditions. As mentioned above the assessee purchased the raw material in the form of MS wire, MS rounds from market, got it converted into pedal axles and pedal rods through some outside fabricators on payment of labour charges, finished components of pedal axles and pedal rods were then sent to other fabricators for treatment and nickle plating and thereafter the assessee purchased other components in the form of pedal rubber, pedal cup etc. and all these components were fed to power driven machines for tightening ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Hon'ble High Court has held that the assessee was carrying on manufacturing and also processing of that goods and therefore, the assessee was entitled to be taxed at a concessional rate as an industrial undertaking. Similar issue came up for consideration by the Hon'ble Bombay High Court in the case of CIT v. Neo Pharma (P.) Ltd. [1982] 137 ITR 879 where the assessee company was engaged in the job of manufacturing and processing pharmaceuticals. The assessee entered into an agreement with another company to make available to assessee plant, a machinery and services of staff of other company to carry on its manufacturing activities. Manufacturing licence was held by the assessee. Items manufactured by other company were under the direct supervision of assessee's own quality control and raw material and packing materials were supplied by the assessee. The assessee paid service and hire charges to the other company. In the light of these facts, Bombay High Court held that the assessee was engaged in the business of manufacturing pharmaceuticals even though the plant and machinery employed for the purpose belonged to the outside party and therefore, the assessee was held to be an ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duction under section 80-I. Such operations can be got done from outside agencies on payment of labour/service charges. In fact certificate issued by the Punjab Government and placed at page 1 of paper book shows that assessee was registered as a Small Scale Industrial Unit and the trading account placed at page 9 of the paper book shows assessee's sales of Rs. 45.98 lakhs for the assessment year under reference. Since the assessee is engaged in the business of manufacturing cycle pedals, the assessee would be entitled to deduction under section 80-I even though part of such operations were got done from outsiders. In fact the CIT(A) has misdirected himself in taking into account the facts which were not the subject matter of the dispute before the Assessing Officer. The facts like the value of machinery of power-driven machines owned by the assessee or the total area of space occupied by the assessee are not the material factors for deciding the issue whether the assessee is an industrial undertaking or not in view of the reasons discussed above. In any case, the assessee has produced evidence in the form of an affidavit of a partner placed at page I of the paper book that the mac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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