2012 (2) TMI 692 - AT - Income Tax

Tribunal affirms SSI Unit's manufacturing activity qualifies for tax deduction under Income Tax Act

The Tribunal dismissed the Revenue's appeal, affirming that the process of making dal from chana, toor, and masur constitutes a manufacturing activity. ... - Issues Involved:1. Whether making of dal from chana, toor, and masur is a manufacturing activity.2. Entitlement to deduction u/s 80IB(3)(ii) of the I.T. Act.Summary:Issue 1: Manufacturing ActivityThe primary issue was whether the process of making dal from chana, toor, and masur constitutes a manufacturing activity. The Revenue argued that no new item, article, or thing comes into existence, thus no manufacturing is involved. Conversely, the assessee claimed that the process involves a specialized procedure with the aid of machinery, resulting in a commercially new and distinct product. The Tribunal, referencing its earlier order dated 2.3.2011, detailed the manufacturing process, including mixing, grading, watering, drying, de-husking, splitting, sorting, polishing, and packaging. The Tribunal concluded that the end product, dal, is commercially different from the raw material, thus constituting a manufacturing activity.Issue 2: Deduction u/s 80IB(3)(ii)The Tribunal examined whether the assessee is entitled to deduction u/s 80IB(3)(ii) of the I.T. Act. The assessee, a registered SSI Unit, claimed this deduction as a small-scale undertaking. The Assessing Officer had denied the deduction, arguing that no manufacturing was involved. However, the Commissioner of Income Tax (Appeals) decided in favor of the assessee. The Tribunal upheld this decision, citing various judicial pronouncements, including the Hon'ble Apex Court's decisions in cases like India Cine Agencies vs. CIT and CIT vs. Oracle Software India Limited, which supported the view that the process undertaken by the assessee qualifies as manufacturing. Consequently, the Tribunal affirmed that the assessee is entitled to the deduction u/s 80IB(3)(ii) of the Act.Conclusion:The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision that the assessee is entitled to the deduction u/s 80IB(3)(ii) of the I.T. Act, as the process of making dal from chana, toor, and masur constitutes a manufacturing activity.