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2022 (12) TMI 543
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.... CIT(A) passed order u/s 154 of the Act dated 10.09.2018 and some portions of the finding were replaced by new finding. Against these orders, the Revenue is in appeal in ITA Nos. 239 & 240/Kol/2018. We observe that some of the grounds raised by the Revenue in the original appeal for AY 2013-14 & 2014-15 have not been raised in the revised appeals in ITA Nos. 239 & 240/Kol/2018 and in place of challenging the deduction claimed by the assessee u/s 80IE of the Act for units located at Sivasagar, North Lakhimpur and Duliajan, Revenue has only challenged the claim of the assessee allowed by ld. CIT(A) for Duliajan unit. 3. The Revenue is in appeal before this Tribunal raising the following grounds: I.T.A. No.: 318/Gau/2018: "(i) On the facts and circumstances of the case, the Ld. CIT(A) erred in facts as well as in law in deleting the addition/ disallowance of Rs. 1,51,53,274/- toward assessee's claim for deduction u/s 80IE of the Income Tax Act, 1961 in respect of its industrial unit located at Duliajan. (ii) The appellant craves leave to add, alter or amend any or all of the grounds of appeal before or during the course of appeal." I.T.A. No.: 319/Gau/2018: "(i) On the fact....
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....and circumstances of the case, the Ld. CIT(A) erred in facts as well as in law in deleting the addition/ disallowance of Rs. 56,53,5721- toward assessee's claim for deduction 80IE of the Income Tax Act, 1961 in respect of its industrial unit located at North Lakhimpur. (iv) That on the facts and circumstances of the case, the Ld. CIT(A) erred in facts as well as in law in deleting the addition/ disallowance of Rs. 1,51,53,274/- toward assessee's claim for deduction 80IE of the Income Tax Act, 1961 in respect of its industrial unit located at Duliajan. (v) That on the facts and circumstances of the case as well as on the points of law the Ld. CIT(A) has erred in admitting additional evidences without calling for remand report from the AO which was in clear violation of Rule 46A of the Income Tax Rules, 1962. (vi) That the appellant craves leave to add, alter or amend any or all of the grounds of appeal before or during the course of appeal." I.T.A. No.: 240/Gau/2018: "(i) That on the facts and circumstances of the case, the Ld. CIT(A) has erred in law in holding that the assessee's activity of conversion of oxygen in its liquid form into Oxygen in gaseous form tantamount t....
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....e similar allowing the claim of the assessee for deduction u/s 80IC/80IE of the Act for the units located at Sivasagar, North Lakhimpur & Duliajan. Therefore, for the purpose of adjudication, we will take the facts of the case for AY 2014-15 in ITA Nos. 240/Gty/2018 & 319/Gty/2018 and our decision on adjudication of the issues raised for these two appeals shall apply mutatis mutandis on all the remaining appeals. 5. Brief facts of the case as culled out from the records are that the assessee is a private limited company engaged in the manufacturing of oxygen gas. E-return for AY 2014-15 filed on 21.11.2014 declaring income of Rs. 62,94,400/- after claiming deduction u/s 80IC/80IE of the Act for oxygen gas manufacturing and processed high pressure natural gas manufacturing for its units at Sivasagar, North Lakhimpur and Duliajan. Case selected for scrutiny through CASS followed by serving of notices u/s 143(2) & 142(1) of the Act. Ld. AO examining the claim of deduction u/s 80IC/80IE of the Act was not satisfied with the explanations/submissions given by the assessee and denied the said claim and with other minor disallowances assessed the income at Rs. 3,71,32,967/-. 6. Aggrieved....
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....ontention interalia therein that the process of production of Oxygen gas from Liquid Oxygen amounts to production. The Appellant had also relied upon the ratio of the Judgment of the Hon'ble Apex Court rendered in the case of CIT vs. Hindustan Petroleum Corporation Ltd. (2017) 396 ITR 696 (S.C.) and contends that the issue is no longer resintegra, moreso when the Apex Court has held Bottling of liquefied petroleum gas obtained by an assessee from refinery which undergoes complex technical process in its plant is distinct from liquefied petroleum gas bottled in cylinders and cleared from plant for domestic use by customers. The Hon'ble court have held that such an activity amounts to 'Production' and the appellant before it was thus held entitled to deduction(s) under sections, 80HH, 80-1, 80-IA of the Income Tax Act. The judgment of the Hon'ble Apex Court in the case of CIT vs. Hindustan Petroleum Corporation Ltd. (2017) 396 ITR 696 (S.C.) is being reproduced as under: "1. A. K. Sikri J.-The question of law that arises of consideration in all these appeals, which are filed by the Commissioner of Income-tax, Mumbai, is identical. The respondents-assessees in th....
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....at section 80-1 of the Act provides for certain amount of deductions in respect of profits and gains derived from an industrial undertaking or a ship or the business of a hotel or the business of repairs to ocean-going vessels or other powered craft to which the said section applies. Section 80-IA gives similar benefits to those industrial undertakings or enterprises which are engaged in infrastructure development. Section 80HH, on the other hand, entitles deduction in respect of profits and gains from a newly established undertaking or a hotel business in backward areas. 4. As mentioned above, all the assessees are in the business of bottling LPG cylinder and according to them they are industrial undertakings and the aforesaid process amounts to production or manufacture. Since, manufacture or production of articles is sine qua non for treating these assessees as industrial undertakings and for the applicability of the aforesaid provisions, it is essential to establish that the assessees are industrial undertakings. It is in this context the question mooted above has arisen for consideration. 5. Learned counsel appearing for the Revenue opened his arguments by referring to the....
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....ce) and then filled into the cylinder by a very sophisticated process. The activity carried out in the various LPG bottling plants are as below: * Receipt of bulk LPG through tankers/tank wagons, its unloading and storage into spheres/bullets. * Receipt of LPG cylinders from manufacturers, distributors and repairers. * Receipt of valves, regulators and consumable spare for operation/ running of the plants. * Refilling/bottling of LPG in cylinders by compressing the same into liquid. * Storage of LPG packed cylinders. * Despatch of packed cylinders to LPG. *Distributors for aEUR" illegible. * Maintenance/upkeeping of plant equipment to ensure smooth operation of plant. * Imparting necessary training to the employees, contract workmen and transporters crew to ensure safe operation/handling of LPG/LPG cylinders in plant and enroot." 8. After taking note of reply to the aforesaid two questions, the Assessing Officer proceeded to decide as to whether the assessee was an industrial undertaking and whether it is manufacturing or producing article. He noted the decision of the Gujarat High Court in the case of State of Gujarat v. Kosan Gas Company*, wherein identical fa....
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.... of the gas into cylinder was not a manufacturing process. 9. Heavily relying upon the aforesaid reasoning of the Assessing Officer, the learned counsel for the Revenue submitted that this view is consistently taken in catena of judicial pronouncements and, therefore, should be accepted. He also referred to the following judgments in support of his contention: Servo-Med Industries Private Limited v. Commissioner of Central Excise* and CIT v. Tara Agencies**. 10. The aforesaid submissions were refuted by Mr. TarunGulati, learned counsel appearing for the assessee M/s. Hindustan Petroleum Corporation Limited. He explained the LPG bottling process by pointing out that the traditional source of LPG is oil refineries where crude oil is processed. LPG vapour is one of the lighter fractions produced by oil refining and petrochemical processes. Since LPG typically consists of a mixture of propane, propylene, butane and butylene (containing 3 or 4 carbon atoms per molecule), these hydrocarbons are easily liquefied by moderate compression at ambient temperature. Unlike natural gas which can be piped to the consumer, LPG has to be transported in the liquid phase at ambient temperature and....
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....nder to any other cylinder. He further pointed out that even Gas Cylinders Rules, 2004 which superseded the aforesaid Rules of 1981 contain identical definition of "manufacture of gas" in rule 2(xxxii). His submission was that this definition itself provides legislative intent as well as that of the Central Government treating the process as manufacture of gas. Mr. Gulati also argued that for the purposes of section 80-IB of the Act, which provides a deduction for industrial undertaking established in the North Eastern region, the Central Government has notified vide Notification No. S. O. 627(E), dated August 4, 1999, eligible industries and the following entry is relevant for the purposes of the instant appeals ([1999] 239ITR (St.) 47, 49): "13. Gas based intermediate products industry manufacturing or producing- (i) Gas exploration and production; (ii) Gas distribution and bottling; (iii) Power generation; (iv) Plastics; (v) Yarn raw materials; (vi) Fertilizers; (vii) Methanol; (viii) Formal debycle and FR Resin Melamme and MF Resin; (ix) Methylamine, hexamethiene, tetranine, ammonium bi-carbonate; (x) Nitrite acid and ammonium nitrate; (xi) Carbon black;....
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.... of marble blocks into marble slabs does not amount to manufacture. At the same time, it clarifies that it would be relevant for the purpose of the Central Excise Act. When it comes to interpreting section 80-IA of the Act (which was involved in the said case), the court was categorical in pointing out that the aforesaid interpretation of "manufacture" in the context of Central Excise Act would not apply while interpreting section 80-IA of the Act as this provision not only covers those assessees which are involved in the process of manufacture but also those who are undertaking "production" of the goods. Taking note of the judgment in CIT v. Sesa Goa Ltd. * which was rendered in the context of section 32A of the Act and which provision also applies in respect of "production", the court reiterated the ratio in Sesa Goa Ltd. to hold that the word "production" was wider than the word "manufacture". On that basis, finding arrived at by the court was that though cutting of marble blocks into marble slabs did not amount to "manufacture", if there are various stages through which marble blocks are subjected to before they become polished slabs and tiles, such activity would certainly be ....
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....ion and processing of iron ore did not amount to 'manufacture'. However, it came to the conclusion that extraction of iron ore and the various processes would involve 'pro duction' within the meaning of section 32A(2)(b)(iii) of the Income-tax Act, 1961 and consequently, the assessee was entitled to the benefit of investment allowance under section 32A of the Income-tax Act. In that matter, it was argued on behalf of the Revenue that extraction and processing of iron ore did not produce any new product whereas it was argued on behalf of the assessee that it did produce a distinct new product. The view expressed by the High Court that the activity in question constituted 'production' has been affirmed by this court in Sesa Goa Ltd. case [2004] 13 SCC 548; [2004] 271 ITR 331 saying that the High Court's opinion was unimpeachable. It was held by this court that the word 'production' is wider in ambit and it has a wider connotation than the word 'manufacture'. It was held that while every manufacture can constitute production, every production did not amount to manufacture. In our view, applying the tests laid down by this court in Sesa Goa L....
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.... of LPG is an essential process for rendering the product marketable and usable for the end customer. (d) The word "production" has a wider connotation in comparison to "manufacture", and any activity which brings a commercially new product into existence constitutes production. The process of bottling of LPG renders it capable of being marketed as a domestic kitchen fuel and, thereby, makes it a viable commercial product. 18. In the considered opinion of this court, the aforesaid activity would definitely fall within the expression "production". We agree with the submission of the learned counsels for the assessees that the definition of "manufacture of gas" in rule 2(xxxii) of the Gas Cylinders Rules, 2004 also supports the case of the assessees inasmuch as gas distribution and bottling is treated as manufacturing or producing gas. We are also inclined to accept the submission of the learned counsel for the assessees that various High Courts have, from time to time, decided that bottling of gas into cylinder amounts to production and, therefore, claim of deduction under sections 80HH, 80-1 and 80-IA would be admissible. Another important aspect which was highlighted by learne....
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....test of "manufacture" propounded on that case would not be applicable when dealing with the cases under the provisions of sections 80HH, 80-1 and 80-IA of the Act which use both the expressions "manufacture" and "production". It has already been clarified in Vadilal Chemicals Ltd.'s judgment. In so far as the judgment in Tara Agencies is concerned, the factual scenario therein was totally different where three different stages in relation to tea were examined by this court. The court held that the procedure of blending of different qualities of tea would amount to "processing of tea" and it did not amount to "manufacture or production of tea". Here, the case set up by the assessees is not that bottling of LPG is "processing" as distinguished from "manufacture" or "production". We may, at this juncture, refer to the judgment of this court in CIT v. Vinbros and Co. * where bottling and blending of alcohol is held to be "manufacture or production "for the purpose of section 80-IB of the Act. 21. We, thus, find that the view of the Income-tax Appellate Tribunal as affirmed by the High Court is correct and, therefore, there is no merit in these appeals which are accordingly dismis....
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....)/Corres/2015-16/3419 dated 22.09.2015 issued by the Ministry of Micro. Small and Medium Enterprises. Bamunimaidam. Guwahati (Annexure - "B" at pages 2 to 15), wherein, after detail study and observation of the appellants process/activity, the said Ministry of Micro, Small and Medium Enterprises, Bamunimaidam, Guwahati recommend that all the four units of the appellant are manufacturing units (Small Enterprises) and are eligible for CCIS benefit under IMEIIPP. "On account of the above reasons, where the process of the appellant is akin to the one as referred in the judgment of the Hon'ble Apex Court Supra, I find no hesitation in holding that the activity of the appellant of conversion of oxygen in its liquid form into Oxygen in gaseous form for industrial and medical purpose amounts to 'Production' and therefore, being so is exigible for claim of deduction under section 80IC as well as under section 80IE of the Act. The above grounds of appeal are allowed. 9. In the result, the appeal is partly allowed. In the result the appeal is decided as above." 12. Further, we find that subsequent to the application for AY 2013-14 & 2014-15 u/s 154 of the Act pointing out certa....
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....claim of deduction under section 80IC as well as under section 80IE of the Act. The above grounds of appeal are allowed." With the view to rectify the said appeal order, instead of the aforesaid last para as enumerated in the aforesaid appeal order, by way of rectification, the following para is substituted-. "Similarly, from the Enquiry Report dated 22.01.2015 of the Inspector of Income Tax, quoted in the Assessment Order, it is noted that the following processes are carried out at the Duliajan unit: "Raw Natural Gas (RNG) - a mixture of oil, water and gas is the raw material, which is piped into the plants from the Oil Collecting Station (OCS) of nearby oilfields of Oil India Ltd. The RNG undergoes a process or separation in a Knock Out Vessel (KOV), whereby the oil and water are separated and piped back to the OCS, while the gas is piped to the Natural Gas Compressor (NGC) - the main machinery component of the plant. In the NGC, the gas goes through two stages of compression, by which NGL and PHNPG is obtained. The NGL is piped back to the OCS and the same is spiked in crude oil to improve the quality of petroleum products obtained from oil refineries. The PHPNG is piped to ....
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...., Guwahati, for examining as to whether the appellan'ts activity amounts to manufacture or otherwise. In this regard, it is pertinent to mention that the appellant had filed a copy of Letter No. Chem6(19)/Corres/2015-16/3419 dated 22.09.2015 issued by the Ministry of Micro, Small and Medium Enterprises, Bamunimaidan, Guwahati (Annexure - "B" at pages 2 to 15), wherein, after detail study and observation of the appellants process/activity, the said Ministry of Micro, Small and Medium Enterprises, Bamunimaidan, Guwahati recommend that all the four units of the appellant are manufacturing units (Small Enterprises) and are eligible for CCIS benefit under NEIPP. On account of the above reasons, where the processes of the appellant are akin to the one referred in the judgement of the Hon'ble Apex Court Supra, I find no hesitation in holding that the activity of the appellant of conversion of Oxygen in its liquid form into Oxygen in gaseous form for industrial and medical consumers and conversion of low pressure Natural gas in gaseous form to high pressure Natural Gas and Natural Gas Liquid in liquid form to supply to power plant, fertilizer plant and domestic consumers amounts ....