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2019 (9) TMI 657 - AT - Income TaxDisallowance of deduction u/s 80IB - net profit on the trading goods of Dholpur Unit - whether repacking of trading goods after a cleaning process can be called as manufacturing? - HELD THAT:- The word "manufacture" has been defined u/s 2(29BA) in the present appeal in case of trading goods, the purchased material is Deshee Ghee and Skimmed Milk and the material sold is also Deshee Ghee and Skimmed Milk. The only difference is that before selling, guthaie from Deshee Ghee and moisture from Skimmed Milk has been removed and they are packed in pouches and tins having brand name of company. No other processing done on trading goods before theirs sale has been explained. Therefore, purchased goods as well sold goods remained to be Deshee Ghee and Skimmed Milk in respect of trading goods and no new product has come into existence with a different chemical composition or having different name, character and use Therefore, the Deshea Ghea and Skimmed Milk sold after purchasing from the market and repacking them after removing guthale from Deshee Ghee and moisture from Skimmed milk would not amount to manufacture, if the above definition of manufacture is applied. In the present case also, for the Deshee Ghee and Skimmed Milk sold out of Desnee Ghee and Skimmed Milk purchased from the market, what was Deshee Ghee and Skimmed Milk continued to be Deshee Ghee and Skimmed Milk but with lesser quantity of guthale in Deshee Ghee and lesser quantity of moisture in Skimmed Milk and no new product has emerged from the process employed by the assessee. Since the output product is not different than the input product and the purpose for which input product can be used, arc only the purpose for which the output product can be used, the Deshee Ghee and Skimmed Milk purchased from the marked cannot be said to be sold out of manufactured Dashee Ghee and Skimmed Milk. Therefore, such sales have been shown by the assessee (appellant) to the Trade Tax Department as trading sale and hence, for such sale, the assessee (appellant) would not be entitled for deduction u/s 80IB as held by the AO in the assessment order and accordingly, the CIT(A) was justified in confirming the addition in articulative manner. Heating of the scrap bitumen in order to obtain solid bitumen, by causing moisture and oil in the scrap bitumen to evaporate or separated, cannot amount to a process of manufacturing. Similarly removing of guthale from Deshee Ghee and moisture from Skimmed Milk cannot amount to a process of manufacturing. Therefore, we appreciate the finding of the CIT(A) in holding hold that the AO is correct in his decision not allowing deduction u/s 80IB on such sale made by the assessee (appellant) out of purchased Deshee Ghee and Skimmed Milk. Since there is no dispute in respect of calculation of trading and manufacturing goods, we confirm the decision of the CIT(A)in upholding AO’s disallowing net profit on trading goods of Dholpur unit while calculating deduction u/s 80IB and hence deduction u/s 80IB computed by the AO is confirmed and accordingly - Decided against assessee.
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