TaxTMI 
TaxTMI 
2009 (1) TMI 12
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....proposed business establishment will be covered as small-scale industrial unit in the status of a proprietary concern. The applicant's primary job, as stated, will be to provide milling, tooling and grinding of the surface of the raw castings of Rear Cover & Differential Housing which are important parts of tractors. These raw castings are to be provided by the Principal and they will be, as stated, processed by the applicant within the specified parameters given by the Principal. The processing is reportedly to be done through requisite technology such as Special Purpose Machines (SPM), special Jigs, Jags and tools. The applicant avers that pursuant to processing, a new product/article called 'Machined casting' is manufactured and these 'machined castings' fit compatibly into tractor parts. 2. Based on the above facts, the applicant sought advance ruling from this Authority on the following question:- 1. Whether the applicant would be eligible for deduction under Section 80 IC(2) (similar to Section 80 IB(4) of the Income-tax Act 1961) for carrying out activities as ancillary unit as defined in Section 80 IA(12)(f)." In course of hearing of the case, we have, after notify....
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....things with a distinct name, character or use. It has been emphasized that in the instant case no new article or thing has been manufactured and it can thus be said that the applicant has not done any manufacturing to enable it to merit the requisite deduction under section 80-IC(2) of the Act. 5. The representative for the Revenue has further argued that the applicant has received the raw castings from the Principal and has immediately sent back these raw castings to the principal after making some cosmetic changes. The process adopted by the applicant cannot be termed as manufacturing process as no new product has come into being. The decision in the case of Perfect Liners (supra), as relied upon by the applicant, is not applicable to the facts of the case. Reliance is placed on the decision of Rajasthan High Court in the case of CIT Vs. Lucky Minerals Pvt. Ltd. 226 ITR 245. 6. In the course of hearing of the application we required the applicant's counsel to furnish details of manufacturing processes which are to be undertaken at the proposed unit by the applicant. The counsel for the applicant has accordingly furnished the details comprising of (a) Process flow chart (b) ....
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....s or enterprises in certain special category states - 80-IC- (1) Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section(a) (2), (a) there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains, as specified in sub-section (3). (2) This section applies to any undertaking or enterprise- (a) which has begun or begins to manufacture or produce any article or thing(a), not being any article or thing specified in the Thirteenth Schedule, or which manufactures or produces any article or thing, not being any article or thing specified in the Thirteenth Schedule and undertakes substantial expansion during the period beginning- (i) on the 23rd day of December, 2002 …………………. in the State of Sikkim ; or (ii) on the 7th day of January, 2003 and ending before the 1st day of April, 2012, in any Export Processing Zone or Integrated Infrastructure Development Centre or Industrial Growth Centre or Industrial Estate(a) or Industrial Park or Software T....
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....IA shall apply for the purposes of clause (ii) of this sub-section as they apply for the purposes of clause (ii) of that sub-section. (5)] to] xxx xxx xxx (7)] (8) For the purposes of this section, - (i) "Industrial Area" means such areas, which the Board, may, by notification in the Official Gazette, specify in accordance with the scheme framed and notified by the Central Government; (ii) to (x) xxx xxx xxx 9. Tracing the legislative history we find that the Finance Act, 2003 has inserted the above section with effect from 1.4.2004 in order to give effect to the new packages of fiscal and non-fiscal concessions announced by the Union Government for special category of states such as Himachal Pradesh, Uttaranchal, Sikkim and North-Eastern States. Consequent to this, deductions under section 10C and 80-IB(4) of the Act are not available in respect of the undertakings or enterprises eligible for deduction under this section (i.e. 80-IC) from the Assessment Year 2004-05. The deduction is granted broadly to an undertaking / enterprise referred to in either clause (a) or clause (b) of sub-section (2). Clause (a) of sub-section (2) is applicab....
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.... Park or Industrial Area or Theme Park, as notified by the Board in accordance with rules prescribed in this regard. Similar deduction shall be available to thrust sector industries, as specified in the Fourteenth Schedule. 49.3 The amount of deduction in the case of undertakings or enterprises in the States of Sikkim, and the North-Eastern States shall be one hundred per cent of the profits of the undertaking for ten assessment years. The amount of deduction in case of undertakings or enterprises in the States of Uttaranchal, Himachal Pradesh shall be one hundred per cent of the profits of the undertaking for five assessment years, and thereafter twenty-five per cent (thirty per cent for companies) for the next five assessment years. 49.4 The section also provides that no deduction shall be allowed to any undertaking or enterprise under this section, where the total period of deduction inclusive of the period of deduction under this section or under section 80-IB or under section 10C, as the case may be, exceeds ten assessment years. Further, in computing the total income of the assessee, no deduction shall be allowed under any other section contained in Chapter VI-A or in s....
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....usefully recalled:- "There are several criteria for determining whether a commodity is consumed in the manufacture of another. The generally prevalent test is whether the article produced is regarded in the trade, by those who deal in it, as distinct in identity from the commodity involved in its manufacture. Commonly, manufacture is the end result of one or more processes through which the original commodity is made to pass. The nature and extent of processing may vary from one case to another, and indeed there may be several stages of processing and perhaps a different kind of processing at each stage. With each process suffered, the original commodity experiences a change. But it is only when the change, or a series of changes, take the commodity to the point where commercially it can no longer be regarded as the original commodity but instead is recognized as a new and distinct article that a manufacture can be said to take place." Similarly, the Apex Court in the case of CIT vs N.C.Budhiraja, 204 ITR 413 (SC), has observed as follows:- "The test for determining whether manufacture can be said to have taken place is whether the commodity which is subjected ....
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....nd out whether as a result of the operation in question, a different commodity has been produced having its own name, identity character or end use." [C.I.T. vs. Jamal Photo Industries (I) Pvt. Ltd. 285 I.T.R. 209 (Mad)] In other words, the essence of manufacturing is that what is made shall be a different thing from that out of which it is made despite the original material not losing its identity completely. 12. Applying the above tests, if the present case is analyzed, it emerges that the applicant's is a proposed undertaking i.e. business establishment which will be processing or refining the raw castings provided by the Principal. It further emerges that the mechanical process to be applied to raw castings would bring into existence commercially new goods called 'machined castings' which fits compatibly into a tractor. The raw castings pass through the inspection drill, tooling and milling processes on machines and in its wake flat surfaces, contour surfaces are chiselled and refined. Pursuant thereto, the original article i.e. raw casting, as the photographs furnished indicate, would undergo a substantial change and there comes into being a commercially differe....