2022 (3) TMI 616 - AT - Income Tax

ITAT Delhi affirms deduction for manufacturing activities under Income Tax Act

DCIT Circle – 1, Haldwani Versus Himalayan Auto Era (India) Pvt. Ltd.

The ITAT Delhi upheld the Commissioner of Income Tax (Appeals) decision to allow the claim of deduction under section 80IC of the Income Tax Act for the ... Deduction u/s 80IC - As per AO assessee was not engaged in the business of manufacturing of any new product but was engaged in job work - CIT(A) by following the order of his predecessor for A.Y. 2012-13 held the assessee to be engaged in the business of manufacturing and held that assessee to be eligible for deduction u/s 80IC - HELD THAT:- As identical issue about the claim for deduction u/s 80IC of the Act arose in assessee’s own case in A.Y. 2009-10 & 2010-11 wherein [2017 (8) TMI 1657 - ITAT DELHI] held the assessee to be eligible for deduction u/s 80IC of the Act. Before us, Revenue has not placed any material on record to demonstrate that the facts in the case in the year under consideration and that of A.Y. 2009-10 & 2010-11 are different and distinguishable and further no material has been placed by the Revenue to demonstrate that the decision rendered by the Tribunal in assessee’s own case for A.Y. 2009-10 & 2010-11 has been stayed/ set aside/ overruled by higher judicial forum. In such a situation, we find no reason to interfere with the order of CIT(A). Thus ground of the Revenue is dismissed. Issues:1. Denial of claim of deduction u/s 80IC of the Income Tax Act.2. Interpretation of the term 'manufacturing activity' under section 2(29BA) of the Income Tax Act, 1961.3. Discrepancy between job work and manufacturing activity.4. Consistency in decisions across assessment years.Issue 1: Denial of claim of deduction u/s 80IC of the Income Tax Act:The case involves the appeal filed by the Revenue against the order passed by the Commissioner of Income Tax (Appeals) relating to the Assessment Year 2013-14. The Assessing Officer (AO) had denied the claim of deduction u/s 80IC of the Act amounting to Rs. 3,21,71,012 by concluding that the assessee was not engaged in manufacturing activity but was only involved in job work. The AO found that the activities performed by the assessee did not amount to manufacturing of a new product. The Commissioner of Income Tax (Appeals) allowed the appeal of the assessee based on the precedent set in the previous year. The Revenue challenged this decision before the ITAT Delhi, which upheld the order of the Commissioner of Income Tax (Appeals) and dismissed the appeal of the Revenue.Issue 2: Interpretation of the term 'manufacturing activity' under section 2(29BA) of the Income Tax Act, 1961:The dispute centered around the interpretation of the term 'manufacturing activity' as per section 2(29BA) of the Income Tax Act, 1961. The Revenue contended that the activities carried out by the assessee, such as drilling, turning, and boring, did not qualify as manufacturing but were merely job-related works. The Revenue argued that the transformation of raw materials into saleable items did not constitute manufacturing. However, the Commissioner of Income Tax (Appeals) and the ITAT Delhi held that the assessee's activities fell within the ambit of manufacturing, as established in previous decisions and allowed the claim of deduction under section 80IC of the Act.Issue 3: Discrepancy between job work and manufacturing activity:The Assessing Officer emphasized the distinction between job work and manufacturing activity. The AO found that the assessee was primarily engaged in job-related works on raw materials, which did not qualify as manufacturing of a new product. The Revenue contended that the process flow chart alone should not determine manufacturing activity. However, the ITAT Delhi, following the precedent and consistency in decisions, ruled in favor of the assessee, stating that the activities undertaken by the assessee constituted manufacturing and upheld the claim of deduction under section 80IC of the Act.Issue 4: Consistency in decisions across assessment years:The case highlighted the importance of consistency in decisions across assessment years. The Commissioner of Income Tax (Appeals) relied on the decision of the previous year to allow the claim of deduction under section 80IC of the Act for the current assessment year. The ITAT Delhi also referred to previous decisions in the assessee's case for A.Y. 2009-10 and 2010-11, where similar issues arose, and the Tribunal had ruled in favor of the assessee. The ITAT Delhi emphasized that in the absence of any material demonstrating a change in facts or a reversal of previous decisions by a higher judicial forum, there was no basis to interfere with the order of the Commissioner of Income Tax (Appeals).This detailed analysis covers the issues involved in the legal judgment, providing a comprehensive overview of the arguments, decisions, and reasoning presented in the case.