1981 (6) TMI 49 - AT - Income Tax

ITAT Bombay-B Allows Deduction Under Section 80J for Grinding Job Work

The ITAT BOMBAY-B ruled in favor of the assessee, allowing the deduction under section 80J of the IT Act for the grinding job work undertaken. The ... - Issues:- Entitlement to deduction under section 80J of the IT Act, 1961 based on manufacturing or producing articles through job work activities.Analysis:The appeal before the Appellate Tribunal ITAT BOMBAY-B pertained to the assessment year 1975-76, with the sole issue being the denial of deduction under section 80J of the IT Act by the Commissioner (Appeals). The assessee, engaged in the business of purchasing and selling Chloride Powder and undertaking grinding work for another company, claimed relief under section 80J for the grinding activity. The key contention was whether the grinding work done by the assessee for other parties constitutes manufacturing or producing articles as required under section 80J(4) of the Act.The assessee argued that the grinding process should be considered a manufacturing process based on a precedent from the Madras High Court, which held that converting boulders into small chips of stones with machinery and labor qualifies as manufacturing. The Tribunal found this ruling applicable to the present case, emphasizing that the work done for another party on hire does not impact the eligibility for relief under section 80J. Additionally, the Tribunal noted that the end-product, soap-stone powder, is distinct from the original product and serves a different purpose, supporting the contention that the grinding activity amounts to production for income-tax purposes.In contrast, the Departmental Representative cited a Bombay High Court ruling involving a specialized construction method where a new product was created, suggesting that manufacturing requires the production of something entirely new and different from the raw materials used. However, the Tribunal distinguished this case, indicating that the requirement for a totally new article to be manufactured was specific to the facts of that case and not a universal standard for all manufacturing activities. Ultimately, the Tribunal ruled in favor of the assessee, allowing the appeal and granting the deduction under section 80J(1) for the grinding job work undertaken by the assessee.In conclusion, the Tribunal held that the grinding activity performed by the assessee qualifies as manufacturing or producing articles within the scope of section 80J of the IT Act, entitling the assessee to the claimed deduction.