ITAT rules for assessee on deduction under Section 80-IC, recognizes manufacturing activities. Sales tax penalty disallowance dismissed.

The Appellate Tribunal ITAT, Mumbai ruled in favor of the assessee regarding the disallowance of deduction under section 80-IC, recognizing the manufacturing activities carried out by the assessee at the new unit. The Tribunal dismissed the issue of sales tax penalty disallowance as not pressed during the hearing.

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Issues:
1. Disallowance of deduction under section 80-IC.
2. Disallowance made on account of sales tax penalty.

Analysis:

Issue 1: Disallowance of deduction under section 80-IC
The appeal concerned the disallowance of deduction under section 80-IC for the assessment year 2006-07. The assessee, a company engaged in manufacturing and sale of leather products, claimed deduction under section 80-IC for setting up a new undertaking in Himachal Pradesh. The Assessing Officer and CIT(A) rejected the claim, stating that the assessee did not provide sufficient evidence of manufacturing activities at the new unit. The Assessing Officer questioned the commencement date of business, while the CIT(A) deemed the activities as mere packing and not manufacturing. The AR of the assessee presented evidence including purchase and sale invoices, machinery details, employee information, and registration certificates to support the claim. The AR argued that the activities undertaken, such as hole punching and embossing, transformed raw materials into a distinct commercial commodity, qualifying as manufacturing. The Tribunal noted that the assessee had the necessary infrastructure and facilities for manufacturing leather belts, concluding that the activities constituted manufacturing under section 80-IC. Citing relevant Supreme Court decisions, the Tribunal allowed the appeal, granting the assessee the deduction under section 80-IC.

Issue 2: Disallowance made on account of sales tax penalty
During the hearing, the AR of the assessee informed that the ground related to the disallowance on account of sales tax penalty was not pressed. The DR did not object, leading the Tribunal to dismiss this ground as not pressed. Consequently, the appeal of the assessee was partly allowed, with the disallowance on sales tax penalty not being pursued further.

In conclusion, the Appellate Tribunal ITAT, Mumbai ruled in favor of the assessee regarding the disallowance of deduction under section 80-IC, recognizing the manufacturing activities carried out by the assessee at the new unit. The Tribunal dismissed the issue of sales tax penalty disallowance as not pressed during the hearing.

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