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TMI Blog2012 (9) TMI 574X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A)-III, Chennai, but dated 27.1.2012. 2. The sole issue raised in all the years under consideration by the Revenue is that the CIT(A) erred in deleting the disallowance of deduction u/s 80IB of the Act. 3. The DR submitted that the facts and issue involved in all these appeals are similar, therefore, he is arguing all the appeals together. He submitted that the lead year of appeal is assessment year 2005-06 wherein the CIT(A) has allowed the claim of deduction u/s 80IB to the assessee and has followed his order for assessment year 2005-06 in other assessment years. 4. The DR vehemently argued and supported the orders of the Assessing Officer. 5. On the other hand, the A.R of the assessee supported the orders of the CIT(A). 6. We find that in the instant case, the assessee has claimed deduction u/s 80IB of Rs. 19,00,570/- in assessment year 2005-06, Rs. 4,77,302/- in assessment year 2001-02, Rs. 4,26,853/- in assessment year 2002-03, Rs. 2,54,023/- in assessment year 2003-04 and Rs. 5,12,159/- in assessment year 2004-05. The Assessing Officer disallowed the claim of deduction to the assessee for the reason that the assessee is engaged in the manufacture of goods on job ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as) and in CIT V Heat treatment Fetting Services (P) Ltd (1999) 238 ITR 540 (Madras) as well as in the recent decision in the case of Sundaram Fasteners Ltd vs CIT 339 ITR 40 (Mad) wherein it has been held that a sub contractor is entitled to deduction u/s 80IB and ought to have followed the said decision. 2. Your Appellant submits the AO had taken another premise that the "test to be applied to identify the real manufacturer is whether "Direct Supervision and control is exercised by the original manufacturer on the manufacturing process undertaken in the premises of the contractor". The appellant submits that the appellant company is the actual manufacturer and it's customer (Brakes India Ltd) who gets his goods manufactured. The activities performed by appellant company is one of "manufacture". The person who carries out manufacturing activities is the manufactures for the purpose of Income Tax Act. Reliance is placed on the jurisdictional High Court in Addl CIT v Chillies Export House Ltd 115 ITR 73 wherein it has been held that it is not the party who gets his goods manufactured who is entitled to be given exemption but the party who carries out the said activities who is e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove all, a separate and distinct identity of the industrial unit set up. " In as much as all the above conditions are fulfilled by the appellant, the question of disallowance does not arise. 6. Your appellant submits that even the cross examination carried out by the AO of the executive of the customer viz Brakes India Ltd only vindicates the stand of the appellant as can be seen from following answers by the said employee- Page 6 of Order 5. Q. Since all the Tractor Brake requirements of M/s.Brakes India Limited were manufactured at the premises of M/s.Aztec Auto Limited, can I say that as a person in charge of Tractor Brake Products, you were in Charge of the manufacturing activity in M/s.Aztec Auto Limited with regard to Tractor Brakes. A. As Divisional Manager in charge of Tractor Brakes in M/s.Brakes India Limited I give drawings(sketches) and raw materials to M/s.Aztec Auto Limited for manufacturing and ensure that the finished products are despatched to the customers as per the drawings. I ensure that the schedules for supply given by M/s.Brakes India to M/s .Aztec Auto are being met. I also assess the technical capability of' M/s.Aztec Auto Limited in producin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity for manufacture and had it been a simple letting out facilities the question of assuming responsibility would not have arisen. Also the fact that the appellant is foisted with the liability to pay excise duty on manufacture under the Excise Act on its manufactured goods and accordingly has been paying excise duty on manufactured goods established the fact that the appellant is only the manufacturer. The term manufacturer as explained by the Supreme Court in Union of India Vs Delhi Cloth and General Mills AIR (1963) SC 791 as under : "The 'manufacture' which is liable to excise duty under Central Excise Duty and Salt Act 1944 must be therefore the "bringing into existence of a new substance known to the market". Hence the activities undertaken by the appellant amounted to "manufacture" within the meaning of Income Tax Act." 8. Your Appellant further submits that the ACIT misdirected himself in relying on the following explanation contained of Sec 80lA viz to disallow the deduction U/S 80lB " Explanation .-For the removal of doubts, it is hereby declared that nothing contained in this section shall apply to a person who executes a works contract entered into with the un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aterial but manufacturing activity was carried out by the assessee resulting in a new product the assessee was entitled to deduction u/s 80-HH and 80-I. Similarly, in the case of Heat Treatment Fettling Services (supra), the Hon'ble Court had held that where the assessee received material for heat treatment to toughen .them to requisite standards for sale in the market, the same amounts to manufacture even though the materials do not belong to the assessee. Further, in the case of Sundaram Fasteners Ltd (supra), the Hon'ble Court has held that sub-contract Charges received are eligible for deduction u/s 80-IB. The facts of the appellant s case are similar to the facts of the above cases. Further, as per the AO, the "test to be applied to identify the real manufacturer is whether "Direct supervision and control is exercised by the original manufacturer on the manufacturing process undertaken in the premises of the contractor". As far this issue is concerned, the same has to be viewed both on legal and factual basis. On legal principles, the decision of Apex Court in the Textiles Machinery case (supra) relied by the appellant is clearly the authority on the subject. It is not in di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... risdictional High Court in the cases of Taj Fire Works, Heat Treatment Fetting Services Sundaram Fasters Ltd (supra) directly cover the case of the appellant. In view of the above factual and legal positions, I am of the considered opinion that the claim of the appellant has to be allowed. Accordingly, this ground is allowed. 8. The DR could not point out any specific error in the order of the CIT(A). He simply supported the order of the Assessing Officer. We do not find any good and justifiable reason to interfere with the order of the CIT(A). In our considered view, it makes no difference in the manufacturing process carried out by an assessee whether the raw material belongs to the assessee himself or owned by some other person. In both the circumstances, manufacturing activities are carried out in the same process by using the similar plant and machinery and similar manpower. No material could be brought on record by the Revenue to show that the risk incidental to manufacturing was not of the assessee and was liability of any other person. We, therefore, confirm the order of the CIT(A) and dismiss the grounds of appeal of the Revenue for all the assessment years under c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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