The present Appeal by the Revenue preferred under section 260A of the Income Tax Act, 1961 is directed against order dated 04.02.2011 of the Income Tax Appellate Tribunal, Ahmedabad Bench 'C' in ITA No. 2981 of 2008. 1.1 Following question is sought to be raised by the appellant proposing it as a substantial question of law.
“Whether on the facts and in the circumstances of the case, the Tribunal was right in law in upholding the decision of the Ld. CIT(A) in allowing deduction u/s 10B observing that the activities carried out by the assessee were manufacturing without considering the fact that it was polishing the valves, which is in contradiction to Hon'ble Apex Court's ratio laid down in CIT v/s N.C. Budhiraja reported in (1993) 204 ITR 412 (SC)?”
2. We heard learned advocate Mr. K.M.Parikh for the appellant.
3. The relevant facts are that the respondent-assessee has been carrying on the business of manufacture of different types of machine castings, knife gate valves and other flow control devices at its plant at Chennai, which is 100% export oriented unit. A deduction under section 10B of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’ for sake of brevity) amounting to Rs.2,52,24,882/- was claimed by the assessee in the return of income filed for the Assessment Year 2003-04. The year under consideration was the fifth year of the similar claim. The Assessing Officer disallowed the claim by his order dated 30.03.2006 passed under section 143(3) of the Act, taking a view that the assessee obtains castings from outside parties and simply polishes them before selling in the market, therefore, the activity of polishing undertaken by it amounted to processing and was not manufacturing.
3.1 The assessee in its support relied on decision dated 11.04.2008 of this Court in its own case for the Assessment Years 2000-01 to 2002-03 rendered in Special Civil Application No.29650 of 2007 to 29652 to 2007 holding that the activity carried out by the assessee constituted manufacture and therefore, denial of deduction under section 10B of the Act was not justified. The Commissioner of Income-tax (Appeals), therefore, directed the Assessing Officer to allow the claim in question allowing the appeal of the assessee on that aspect.
3.2 The department preferred appeal before the Income Tax Appellate Tribunal, which came to be dismissed. The findings of the Tribunal on the issue were based on the decision of this Court in the aforementioned writ petitions in which it was held that the activity carried on by the assessee was manufacturing activity.
4. It may be useful to extract relevant portion of order of this Court in the aforesaid writ petitions.
“.....the petitioner has shown various manufacturing steps which the raw castings have to undergo [viz. Turning, boring, milling, radial drilling and boring, de-burning, etc.]. He purchased raw valves and thereafter put them under the aforesaid processs. Therefore, after processing that raw valves, that becomes altogether a new product, which is distinct from raw casting and is commercially marketable, and that comes under the manufacturing activity. Mr. Shah placed reliance on the decision of the Madras High Court in the case of C.I.T. V/s. Perfect Liners – [1983] 142 ITR 654. Following its earlier decision i.e., CIT v. M.R. Gopal – [1965] 58 ITR 598, the Madras High Court has taken the view that the word “manufacture” has to be understood in a wide sense. After the rough casting was polished, the product was a new product which was utilized as a component in internal combustion engines. It is to be seen whether after some processes under which the raw goods have undergone, the type is different from the original goods which were put under the process. Here, considering the processes of the raw valves for final use, when the different product has come out, then it cannot be said that it is the same goods, as the raw goods could not be used without the processes under which the goods of the assessee have gone”.
5. Learned advocate for the appellant could not dispute that at present the aforesaid decision of this Court holds the field having not shown to be reversed by the higher forum, is a law binding to the Tribunal. It has taken view that in the process undertaken by the assessee, new product comes out, therefore, the activity of the assessee is a manufacturing activity.
6. The Tribunal did not commit any error in relying on the aforesaid decision of this Court and on that basis dismissing the Revenue’s appeal. No question of law, much less a substantial question of law, arises for consideration.
7. Accordingly, the appeal is dismissed.
[V.M.SAHAI, J.] [N.V.ANJARIA, J.] cmjoshi