TaxTMI 
TaxTMI 
2022 (12) TMI 543
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....TA Nos. 318 & 319/Kol/2018. Subsequently, ld. 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 t....
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....d assessee's claim for deduction u/s 80IC of the Income Tax Act, 1961 in respect of its industrial unit located at Sivasagar. (iii) 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. 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 th....
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....erit in the application u/s 154 of the Act filed for AY 2013-14 & 2014-15 and accordingly inserted some more finding to that given in the original appellate order for these two years. However, the result of all the impugned orders are 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....
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....impur 80IE Duliajan 80IE 2014-15 6892968 4288555 19611395 Year of deduction 10th Year 5th Year 3rd Year During the course of appellate proceedings, the appellant had relied upon its submissions filed before the Ld. AO, as well his appellate submission, contention 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.....
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....h the view of the Income-tax Appellate Tribunal. This is how the Department is before this court and insists that the process of bottling LPG cylinder in domestic use does not amount to manufacture. 3. Before discussing the aforesaid central issue which has arisen for consideration, it may be noted that 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 ind....
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....ture has to be com pressed into liquefied stage, the flow of which shall be controlled by the value fitted on to the cylinder. Accordingly, in order to facilitate the convenience of handling as well as to make it usable as domestic fuel, bulk LPG from the refineries are transported to the LPG bottling plants situated in different places, (more proximate to the customers' place) 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 wor....
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....y itself be sufficient to hold that the product so finished is commercially different from the one on which such a process had been carried out. The value addition, therefore, does not amount to production or manufacture. On that basis, the Assessing Officer concluded that since no new product had come into existence after going through the process undertaken by the assessees and it remained the same product, namely, LPG, the process of filling up 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 cru....
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....rom the judgment of this court in Vadilal Chemicals Ltd. v. State of A. P.** wherein this court held that bottling of ammonia amounts to manufacture. He also took support from the definition of "manufacture of gas" occurring in rule 2(xxv) of the erstwhile Gas Cylinders Rules, 1981 issued under the Explosives Act, 1881 which defines the aforesaid expression to mean filling of a cylinder with any compressed gas and also includes transfer of compressed gas from one cylinder 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 ([199....
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....s to be emphasised that the aforesaid provisions of the Act use both the expressions, namely, "manufacture" as well as "production". It also becomes clear after reading these provisions that an assessee whose process amounts to either "manufacture" or "production" (i.e., one of these two and not both) would become entitled to the benefits enshrined therein. It is held by this court in Arihant Tiles and Marbles P. Ltd. case that the word "production" is wider than the word "manufacture". The two expressions, thus, have different connotation. Significantly, Arihant Tiles judgment decides that cutting 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 "producti....
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....548; [2004] 271 ITR 331 (SC), the meaning of the word 'production' came up for consideration. The question which came before this court was whether the Income-tax Appellate Tribunal was justified in holding that the assessee was entitled to deduction under section 32A of the Income-tax Act, 1961, in respect of machinery used in mining activity ignoring the fact that the assessee was engaged in extraction and processing of iron ore, not amounting to manufacture or production of any article or thing. The High Court in that case, while dismissing the appeal preferred by the Revenue, held that extraction 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 prod....
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....rly distinguishable from the LPG bottled in cylinders and cleared from these plants for domestic use by customers. It may be relevant to point out that keeping in view the aforesaid process, the Income-tax Appellate Tribunal arrived at the specific findings in support of its decision, which are as under: (a) There is no dispute that the LPG produced in the refinery cannot be directly supplied to the consumer for domestic use because of various reasons of handling, storage and safety. (b) LPG bottling is a highly technical and complex activity which requires precise functions of machines operated by technically expert personnel. (c) Bottling 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 defini....
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....ture" and the issue was as to whether the process amounted to manufacture or not. As pointed out above, the question as to whether it amounts to "production" as well did not arise for consideration. The Assessing Officer committed manifest error in relying upon the said decision inasmuch as the provisions with which we are concerned in the instant case use the words "manufacture or production" and are not limited to "manufacture" alone. 20. The judgment in the cases of Servo-Med Industries Private Limited and Tara Agencies, which were cited by the learned counsel for the Revenue, may not apply to the present case. They dealt with the provision of the Central Excise Act and, therefore, 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....
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....orizer has a capacity of vaporizing 300 cum/hr of LOX into gas." It is to be noted that the above process of the appellant, is akin to the activity which the Hon'ble Supreme Court had appreciated in Paras 6, 7 & 16 of the above judgment and held the same to be Production. In fact, I further find that the Liquid Oxygen persebe cannot be directly supplied to the consumer for use because of various reasons of handling, storage and safety. I further find that in the case of the appellant, the appellant had made a reference to the Ministry of Micro. Small and Medium Enterprises, Bamunimaidam, Guwahati, for examining as to whether the appellants 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. 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 un....
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....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 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 eligible for 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 Repo....
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....activities requiring precise functions of machines operated by technically expert personnel, similar to LPG bottling. c) Bottling of Oxygen gas and pressurizing and purification of Natural Gas are essential process for rendering the products marketable and usable - the end consumer, like bottling of LPG. 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 Oxygen and pressurization and purification of Natural Gas renders them capable of being marketed and thereby, makes it a viable commercial product, just like bottling of LPG. I further find that in the case of the appellant, the Commissioner of Industries & Commerce, Govt of Assam had made a reference to the Ministry of Micro, Small and Medium Enterprises, Bamunimaidan, 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 Med....