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TMI Blog2017 (9) TMI 1234X X X X Extracts X X X X X X X X Extracts X X X X ..... unts to manufacture. - Decided in favour of the assessee and against the Revenue. Accepting interest subsidy received by the appellant being reimbursement of the interest paid to the Bank on working capital advances for increasing the production of the industrial undertaking as income derived from such industrial undertaking and is entitled to deduction under Section 80 IB. See Commissioner of Income Tax v. Meghalaya Steel Ltd [2016 (3) TMI 375 - SUPREME COURT]- Decided in favour of assessee. Non allowing the deduction of EPF u/s 43B - EPF was deposited before the date of filing of return under Section 139(1) - Held that:- Substantial question of law is no longer res integra as is covered by the decision of CIT v. Alom Extrusions Ltd [2009 (11) TMI 27 - SUPREME COURT] wherein held that relaxation allowed by 1st proviso to Section 43B of the Act was restricted only to tax, duty, cess and fee, and did not apply to contributions to labour welfare funds. Since the second proviso to Section 43B resulted in implementation problems, it was deleted by Financial Act, 2003, thereby equating tax, duty, cess and fee with contributions to welfare funds. It was further held that the afores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner of Income Tax (Appeals) was affirmed by the Income Tax Appellate Tribunal (for short the Tribunal ) vide order dated 07.12.2007. In the aforesaid factual background, this appeal has been filed. 3. Learned counsel for the appellant submitted that if by adopting the process, a new commodity/good comes into existence which is fit for use, the same would amount to manufacture. It is also submitted that under Section 80 IB of the Act, even if the process does not amount to manufacture, still in view of the fact that the appellant is engaged in the activity of production, the appellant is entitled to the benefit of deduction under Section 80 IB of the Act. Alternatively, it is submitted that Section 80 IB of the Act provides that where the gross total income of an assessee includes any profits and gains derived from any business referred to in sub-sections (3) to (11), (11A) and (11B), such business being hereinafter referred to as the eligible business, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to such percentage and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to manufacture. It is submitted that process of galvanization does not amount to manufacture. It is urged that the appellant cannot be permitted to take a new plea before this Court that he is engaged in the activity of production. In support of the aforesaid submissions, reference has been made to the decision of the Supreme Court in the case of Gujarat Steel Tubes Ltd v. State of Kerala, AIR 1990 SC 1779 and the case of Sidhartha Tubes Ltd. v. Commissioner of Customs and Central Excise, Indore (MP), 2005 (8) Supreme 511. 6. It is further submitted that under Section 80-IB of the Act in order to claim deduction, the incentive granted by the government cannot the treated as profit or gain. In support of the aforesaid submission, reference has been made to the decisions of the Supreme Court in the case of Commissioner of Income Tax, Kernataka v. Sterling Foods Manglore, AIR 1999 SC 2036 and decision of Delhi High Court in the case of CIT v. Ritesh Industries, 2004 192 CTR Delhi 81. 7. We have considered the submissions made by both the sides and have perused the record. The Supreme Court in the case of Empire Industries Ltd. and anothers supra has held that process creating s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of customers on job work basis. The pipe is required to undergo the processes of prickling, rinsing, fluxing, drier, zinc tank and water quenching for the purpose of galvanization of iron pipe. After the completion of the entire processes, the end product which comes into existence is called galvanized iron pipe which is a different commercial commodity than iron pipe. A galvanized iron pipe is sold at a higher price than an iron pipe and a galvanized iron pipe is used for laying water lines, manufacture of different machinery and plants and for other purposes for which iron pipes cannot be used. Thus, galvanized iron pipe is a different commercial commodity than a iron pipe, therefore the activity of galvanization in our considered opinion amounts to manufacture. 10. At this stage, we may refer to the decisions relied by learned counsel for the Revenue in the case of Gujarat Steel Tubes Ltd supra. In the aforesaid decision, the Supreme Court while dealing with the provisions of Central Sales Tax Act had the occasion to deal with the issue whether galvanized pipes or Steel Tubes fall within the meaning of section 14(iv) and (xi) of the Central Sales Tax Act. In the aforesaid co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the Government gave them and that, therefore, the immediate source not being from the business of the assessee, the element of directness is missing. We are afraid we cannot agree. What is to be seen for the applicability of Sections 80-IB and 80-IC is whether the profits and gains are derived from the business. So long as profits and gains emanate directly from the business itself, the fact that the immediate source of the subsidies is the Government would make no difference, as it cannot be disputed that the said subsidies are only in order to reimburse, wholly or partially, costs actually incurred by the assessee in the manufacturing and selling of its products. The profits and gains spoken of by Section 80-IB and 80-IC have reference to net profit. And net profit can only be calculated by deducting from the sale price of an article all elements of cost which go into manufacturing or selling it. Thus understood, it is clear that profits and gains are derived from the business of the assessee, namely, profits arrived at after deducting manufacturing cost and selling costs reimbursed to the assessee by the Government concerned. The aforesaid decision also has taken int ..... X X X X Extracts X X X X X X X X Extracts X X X X
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