TaxTMI 
TaxTMI 
2017 (2) TMI 1498
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....duction u/s 80IC on sale of products got manufactured from others through job work in utter disregard of the explanations rendered which is illegal, arbitrary and unjustified. 2. That the order of the Ld. Commissioner of Income Tax(Appeals) is erroneous, arbitrary, opposed to law and facts of the case and is, thus, untenable." 4. Brief facts relating to the issue raised in appeal is that during assessment proceedings the AO noted that the gross total income declared by the assessee for the year included profit and gains of Rs. 1,51,36,157/- from its industrial undertaking at Kala Amb,Himachal Pradesh. Against the said profit, the assessee had claimed deduction of Rs. 1,19,24,801/-under section 80 IC of the Act. The AO observed that the assessee was in the business of manufacturing stainless steel flats(hereinafter referred to as SS Flats) and that during the course of manufacturing the same, the stainless steel ingots produced by the assessee at its factory premises were sent to its associate company, Nahan Ferro Alloys & Chemicals Private Limited (NEA), for getting rolled into stainless steel flats on job work basis. The AO further noted that the stainless steel flats ....
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....) referred to para 49 of CBDT Circular No. 7/2003 dated 5/9/2003, which constituted the explanatory notes of Finance Act 2003 through which the deduction under section 80IC of the Income Tax Act was introduced in the statute and stated that the intent of providing deduction was to encourage manufacturing activity by an undertaking in specified areas for overall economic development of the area. Ld. CIT (Appeals) thereafter stated that the assessee without making investment in setting up manufacturing facility could not claim benefit of section 80IC. Ld. CIT (Appeals) further held that the argument that section 80IC does not specify any requirement of having the whole manufacturing process in-house is against the intent of the provisions of section 80IC since it provides deduction on account of manufacture or production of any specified article of thing. Ld. CIT (Appeals) further held that the conversion of ingots into flats is the major process in the manufacturing for which the appellant had no direct or indirect control or any input. Thereafter, referring to subsection (10) of section 80IA of the Act Ld. CIT (Appeals) held that the AO was correct in denying deduction under sectio....
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....ufacture stainless steel flats includes the following: i) Conversion of SS/MS scrap to molten mass ii) Pouring of molten mass into moulds to obtain SS ingot. iii) Annealing of ingots in a furnace and rolling to obtain SS flats. iv) Grinding, trimming and end cutting to make saleable SS flats. 11. Admittedly and undisputedly all the above processes are carried out in the undertaking of the assessee at Kala Amb except the process at Sr.No.3 being annealing/conversion of ingots to SS flats, which is carried out in another company M/s Nahan Ferro Alloys & Chemicals Private Limited. 12. The case of the Revenue is that the profits relating to this outsourced process are not eligible for deduction u/s 80IC to the assessee for the reason : a) This activity was not undertaken by the assessee. b) The unit which undertakes this activity is also located in section 80IC specified area and must have also claimed deduction on the profits earned on conversion of ingot to flats and; c) In view of the provisions of section 80IA(10), which become applicable in the present case in view of the provisions of....
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....ftware Techno-logy Park or Industrial Area or Theme Park, as notified by the Board in accordance with the scheme framed and notified by the Central Government in this regard, in any of the North-Eastern States; b)) which has begun or begins to manufacture or produce any article or thing, specified in the Fourteenth Schedule or commences any operation specified in that Schedule, or which manufactures or produces any article or thing, specified in the Fourteenth Schedule or commences any operation specified in that Schedule and undertakes substantial expansion during the period beginning- (i) on the 23rd day of December, 2002 and ending before the 1st day of April, 2012, in the State of Sikkim; or (ii) on the 7th day of January, 2003 and ending before the 1st day of April, 2012, in the State of Himachal Pradesh or the State of Uttaranchal; or (iii) on the 24th day of December, 1997 and ending before the 1st day of April, 2007, in any of the North-Eastern States. 15. Clearly the section mandates that undertakings or enterprises eligible for deduction are those which "manufacture" any article or thing. 16. It is the scope and extent of this man....
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....e assessee does not have its own printing press. That, however, really does not make any material difference. The assessee's activity cannot be called purely a trading activity. A trader merely purchases the goods which have already been manufactured by others and then sells them. In this case, the assessee gets the books printed to suit its requirements and under its active supervision and guidance. Even after the printing is over, the assessee has to get the books bound which involves a considerable amount of processing. In other words it purchases paper and other printing materials and ultimately manufactures or processes publications for sale. The business that the assessee is doing can, therefore, be called a manufacture activity." The High Court upheld the findings as follows: "The findings of the Tribunal in our opinion conclusively show that the assessee was carrying on the activity of manufacturing and also of processing of Books which are also Goods" 19. In the case of CIT Vs. Neo Pharma P. Ltd., 137 ITR 879 (Bom) on the question before the Court, whether the assessee company was a manufacturing company, entitled to rebate at high rate, The Hon'ble ....
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....ses/undertaking at Kala Amb, except for conversion of ingots into flats which the assessee outsourced to another company i.e. Nahan Ferro Alloys & Chemicals Private Limited, since it did not have the required infrastructure for the same. Undeniably all the activities undertaken in the order stated above resulted in the manufacture of SS Flats and thus constitute one integrated activity which tantamounts to manufacturing activity. Though the assessee does not carry out one process involved in the entire process of manufacturing, but the assessee also cannot be termed carrying out trading activity. Undeniably, the final product manufactured i.e. SS flats, was manufactured by the assessee itself for sale in the market and the process outsourced to Nahan Ferro Alloys & Chemicals Private Limited was as per its specification and requirement since it is not denied that the risk associated with the sale of the final product was with the assessee and the assessee was responsible for the sale of the same. Further, we find, that it is not the Revenues case that the outsourced activity was not under the supervision and control of the assessee. Therefore, clearly, the entire manufacturing activ....
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....of the Act. For the said reason also we are not in agreement with the contention of the Ld. DR that the profits should be apportioned to different activities involved in manufacturing of a product and deduction u/s 80IC thereafter be restricted to profits on manufacturing carried out by the assessee only 26. It is pertinent to point out that while allowing deduction on part of the profits earned by the assessee, the Revenue admits that the assessee is involved in manufacturing activity. Also admittedly the assessee has been allowed deduction of entire profits in earlier years in identical set of facts. The Ld.DR has not controverted this fact contended by the Ld Counsel for the assessee. Therefore also there is no reason to restrict the deduction to the extent of manufacturing activity carried out by the assessee in the impugned year. 27. Ld.DR has also relied upon the findings of the Ld. CIT (Appeals), who we find has applied the provisions of section 80 IA(10) to the facts of the case and stated that since the job work was got done by the assessee through its associate concern, the provisions of 80 IA(10) were attracted in the present case and in view of the same he denied ....