TaxTMI Login
Just a moment...
Press 'Enter' to add multiple search terms. Rules for Better Search
When case Id is present, search is done only for this
of 
of 
No Folders have been created
Are you sure you want to delete "My most important" ?
NOTE:
of of 
All Case Laws
of of All Case Laws
Note
Bookmark
Share
Don't have an account? Register Here
of <h1>Tribunal orders fresh examination on Attars to determine manufacturing status</h1> <h3>Nemat Enterprises Pvt. Ltd. Versus ACIT</h3> Nemat Enterprises Pvt. Ltd. Versus ACIT - TMI Issues Involved:1. Disallowance of deduction under section 80IC(2)(a)(ii) of the Income Tax Act.2. Determination of whether the product 'Attar' is an organic chemical.3. Determination of whether the process of producing 'Attar' constitutes manufacturing.Issue-wise Detailed Analysis:1. Disallowance of Deduction under Section 80IC(2)(a)(ii):The assessee claimed a deduction of Rs. 90,66,660 under section 80IC(2)(a)(ii) for a new industrial undertaking at Belikhol, Himachal Pradesh, which commenced activities in June 2006. The deduction was claimed for Attars produced by the assessee. The Assessing Officer (AO) disallowed the deduction, arguing that Attars were organic chemicals, which are specified in Part B of the 13th Schedule of the Income Tax Act and thus excluded from the deduction. The AO also noted that the process was handmade and did not involve substantial machinery, concluding that the assessee was not engaged in manufacturing.2. Determination of Whether 'Attar' is an Organic Chemical:The AO argued that Attars, being aromatic mixtures, retained the characteristics and qualities of their original ingredients (aromatic chemicals and essential oils), and thus were organic chemicals. The CIT(A) upheld this view, noting that the report from the Head of Tech. & Applied Chemistry Dept. of VJTI did not clearly state that Attars were not organic chemicals. The assessee countered that the blending process resulted in a new product with a different composition from the original chemicals, and that Attars were classified separately under the Excise Act.3. Determination of Whether the Process Constitutes Manufacturing:The AO and CIT(A) argued that the process of producing Attars did not qualify as manufacturing because it did not involve substantial machinery and the final product was not substantially different from the raw materials. The assessee argued that the process was irreversible and resulted in a new product, citing various judicial precedents to support the claim that the process constituted manufacturing. The Tribunal noted that the determination of whether the process was manufacturing depended on whether the final product was substantially different from the original ingredients.Tribunal's Decision:The Tribunal restored the matter to the file of the Assessing Officer for fresh examination. It directed the AO to obtain a detailed scientific report from specialized institutes to determine whether Attars are organic chemicals and whether the process of producing Attars constitutes manufacturing. The Tribunal emphasized the need for a technical assessment to reach a definitive conclusion on these issues.Conclusion:The Tribunal set aside the order of the CIT(A) and remanded the case to the AO for a fresh decision after obtaining a specialized scientific report and allowing the assessee an opportunity to be heard. The decision was pronounced in open court on 23-12-2010.
TaxTMI 