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2015 (2) TMI 278 - AT - Income TaxRe-computation of the deduction claimed by the Assessee u/s 80IB in respect of Unit-II and u/s 80IC in respect of Unit-III - Held that:- Assessee has taken the contention before CIT(A) that the realizable value of the powder coating is more than the realizable value of the resin but we noted that in respect of this contention, no evidence or material has been brought on record or referred to before the CIT(A). The other contention taken by the Assessee that the plant and machinery of Unit-I was set up about 20 years back and in respect of Unit-I the Assessee had to incur high maintenance cost. CIT(A) simply relied on the submission of the Assessee. No data in respect of incurring of the high maintenance cost has been provided by the Assessee. We may also mention that the cost of the machinery have increased and therefore if the machinery is established after many years in Unit-II and III, the depreciation will be much higher while in respect of Unit-I the depreciation will be lower. CIT(A) has not appreciated all these facts and has simply allowed the relief to the Assessee on the basis of the submission and rate of profit as agreed by the counsel of the Assessee. In our opinion, the basis adopted by CIT(A) is not correct and in accordance with law. We, therefore, set aside ground nos. 2 & 3 and restore both these issues to the file of CIT(A) as, in our opinion, the profit shown in respect of Unit-II & III are abnormally high as compared to the profit shown by the Assessee in respect of Unit-I. - Decided in favour of Revenue for statistical purposes. Whether Unit-III established by the Assessee has undertaken manufacturing activity or not? - Held that:- The raw materials used are flakes and cannot be marketed as such. For making it marketable it has to be converted into coating powder through manufacturing process with the help of machines and manpower. CIT(A) has exhaustively dealt with the manufacturing process adopted by the Assessee alongwith the definition of the word ‘manufacture’ as given u/s 2(29)(BA) of the Income Tax Act. Thus no interference is called for in the order of CIT(A) in this regard and we, therefore, confirm the order of CIT(A) by holding that Unit-III of the Assessee is engaged in manufacturing activity. Even otherwise also, we noted that this is not the first year for eligibility of the claim of deduction by the Assessee u/s 80IC. The condition whether the Assessee is engaged in manufacturing activity or not has to be decided only in the very first year when the Assessee is eligible for the claim of deduction u/s 80IC. In view of this fact, we confirm the order of CIT(A) on this issue. - Decided against revenue.
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