2013 (3) TMI 818 - AT - Income Tax

Tribunal upholds deduction under section 80IB for film manufacturing, dismisses Department's appeal

Income Tax Officer 1 (2), Kanpur Versus Shri. Kishori Lal Agarwal Prop. M/s Shanky Films

The Tribunal upheld the first appellate authority's decision to allow the deduction under section 80IB, amounting to Rs. 45,70,969, rejecting the ... - Issues involved: Appeal against order of ld. CIT(A)-II, Kanpur for assessment year 2005-06.Deduction u/s 80IB:The main issue is whether the deduction under section 80IB of the Act of Rs. 45,70,969 was rightly allowed by the first appellate authority. The Assessing Officer disallowed the deduction on the grounds that the process of cutting big rolls into smaller size does not qualify as manufacturing or production. However, the first appellate authority relied on the decision of the Hon'ble Supreme Court in India Cine Agencies vs. CIT [2009] 308 ITR 98, which held that such conversion amounts to production. The Tribunal upheld this view, stating that the conversion of jumbo rolls of photographic films into smaller rolls constitutes manufacturing. Additionally, the allegation that the assessee did not employ 10 or more workers was refuted, as the assessee had 41 workers directly employed, along with skilled labor supplied by a contractor. The Tribunal also noted that the assessee maintained separate books of account for each unit, and the Assessing Officer failed to provide concrete evidence supporting the claim of excess profits in the Pondicherry Unit. Consequently, the Tribunal upheld the findings of the first appellate authority and dismissed the appeal of the Department.Judges:The judgment was delivered by Shri Sunil Kumar Yadav, Judicial Member, and Shri J Sudhakar Reddy, Accountant Member.This summary provides a detailed overview of the issues involved in the legal judgment, focusing on the deduction u/s 80IB and the key arguments and decisions made by the Tribunal.