2017 (9) TMI 1234

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....eposited before the date of filing of return under Section 139(1) of the Income Tax Act. 2. Background facts leading to filing of this appeal briefly stated are that the appellant is a small scale industry which is engaged in the manufacture of black and galvanized iron pipes. The appellant also undertakes the job work of galvanization of other parties. The appellant is registered with the Industries Department for the manufacture of black pipes, galvanized pipes and for the job of galvanization. It is the case of the appellant that appellant is entitled to deduction on the process of manufacture and production of goods under Section 80 IB of the Act. The appellant filed the return for the Assessment Year 2001-2002 in which it claimed deduction on account of galvanization. However, the Income Tax Officer vide order dated 27.02.2004 inter alia held that galvanization does not amount to manufacture by placing reliance on decision rendered in Kolkata High Court in the case of CIT v. Hindustan Metal Refineries Work, 128 ITR 472 (Cal). Being aggrieved, the appellant preferred an appeal which was dismissed by the Commissioner of Income Tax (Appeals) and the order passed by the Commissio....

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....rred to decision in the cases of CIT v. Hindustan Metal Refining works (P) Ltd. (1981) 128 ITR 472 (Calcutta), Empire Industries Ltd. and anothers v. UOI, 162 ITR 846 (SC), Ujagar Printers v. U.O.I, (1989) 74 STC 401(SC), Laminated Packings (P) Ltd. V. Collector of Central Excise, 1990 SCC (4) 51, Standard Packaging And Ors. v. Union of India, 1985 (4) ECC 299, Vijay Kumar v. CIT in ITA No.108/2012 (J & K High Court), CIT v. Lovlesh Jain, (2012) 67 DTR 0232 (Delhi), CIT v. Oracle Software India Ltd. (2010) 320 ITR 546 (SC), CIT v/s Esquire Translam Industries & Nexus Transcore Industries, (2012) 344 ITR 0308, ITO V. Arihant Tiles & Marbles (P) Ltd. (2010) 320 ITR 0079 (SC), CIT v. Perfect Liners (1983) 142 ITR 0654 (Madras), CIT V. Budharaja & Co. (SC),(1993) 204 ITR 413, CIT V. Dharam Pal Prem Chand Ltd.,, (2009) 317 ITR 353 (Delhi), CIT v. Dr. V.P. Gopinathan, 248 ITR 449 (SC). 5. On the other hand, learned counsel for the Revenue submitted that it was not the case of the appellant before the authorities that the appellant is engaged in the production activity. All along the case of the appellant before the authorities is that the process of galvanization amounts to manufacture.....

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.... transformation, a new and different article must emerge having a distinctive name, character or use. 8. At this stage, we deem it appropriate to take note of the Circular issued by the Department namely Circular No.528 dated 16.12.1988 by which the department itself has held that the expression manufacture implies a change, but every change is not manufacture and yet every change of an article is the result of treatment, labour and manipulation. But something more was necessary and there must be transformation; a new and different article must emerge having a distinct name, character or use. Thus manufacture implies bringing in something new. It was further held that term "processing" has a wider meaning than the term "manufacture". 9. In the backdrop of aforesaid well settled legal position as well as the Circular issued by the department itself, we may now examine whether the activity of galvanization undertaken by the appellant amounts to manufacture. The appellant is admittedly engaged in the manufacture of black pipes as well as galvanized iron pipes. The appellant also undertakes to manufacture all galvanized iron pipes by galvanization of raw pipes of customers on job wor....

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....such profits and gains and the industrial undertaking or business. Such nexus cannot be only incidental. It therefore found, on the facts before it, that by reason of an export promotion scheme, an assessee was entitled to import entitlements which it could thereafter sell. Obviously, the sale consideration therefrom could not be said to be directly from profits and gains by the industrial undertaking but only attributable to such industrial undertaking inasmuch as such import entitlements did not relate to manufacture or sale of the products of the undertaking, but related only to an event which was post manufacture namely, export. On an application of the aforesaid test to the facts of the present case, it can be said that as all the four subsidies in the present case are revenue receipts which are reimbursed to the assessee for elements of costs relating to manufacture or sale of their products, there can certainly be said to be a direct nexus between profits and gains of the industrial undertaking or business, and reimbursement of such subsidies. However, Shri Radhakrishnan stressed the fact that the immediate source o the subsidies was the fact that the Government gave them an....