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2019 (11) TMI 603 - HC - Income TaxDeduction u/s 80IB - Whether process undertaken by its industrial undertakings during the Assessment Year 2002-03 was not manufacturing process but only a process of testing optical fiber cable or trial production? - HELD THAT:- ITAT upon appreciation of entire material on record has noted that the finished products manufactured and sold by the Appellant during the AY 2002-03 were in fact manufactured on the basis of purchase orders already received. Admittedly, the price at which the Appellant procured the material and the price at which the Appellant sold the material after value additions to the purchasers on the basis of purchase orders is almost double. ITAT has also noted that absolutely there is no evidence was produced on record that the processes undertaken in AY 2002-03 were in the nature of testing or trial production. No contemporaneous report of such trial production or testing were produced by the Appellant. No reports of production staff for testing were ever produced. According to us, all this material is more than sufficient to sustain the findings of fact recorded by the Assessing Officer and ITAT. It is not possible for us to say that the finding of fact recorded by the two authorities is vitiated by perversity or that the inferences drawn by the two authorities are not legal inferences that could have been drawn in the matter of this nature. In fact, the material on record suggests that prior to the amendment by Finance Act, 2002 in Section 80IB(4), the Appellant had declared the date that the Appellant's industrial undertakings began manufacture was 26th March, 2002. After the amendment of extended date for beginning of manufacture upto 31st March, 2004, the Appellant sought to contend that the manufacture began for the first time at its industrial undertakings only on 1st February, 2003. The ITAT has rightly observed that the Appellant has been shifting the stances. Such shifting of stances clearly amounts to approbation and reprobation. Even if the returns filed by the Appellant or declarations made by the Appellant are to be excluded from consideration, rest of the material on record also does not support the Appellant's contention that the processes undertaken during the Assessment Year 2002- 03 were in the nature of testing or trial run is only involvement, there is no element of manufacture. Accordingly, the first substantial question of law is required to be answered against the Appellant and in favour of the Revenue. Taking into consideration the findings of fact recorded by the AO and the ITAT that the manufacturing in the present case actually commenced in the AY 2002-03 and not in the Assessment Year 2003-04. Even this substantial question of law will have to be decided against the Appellant and in favour of the Revenue. It is pertinent to note that the findings of fact is not at all vitiated by any perversity and therefore, it cannot be said that the ITAT was not justified in holding that the Assessment Year 2002-03 is the final Assessment Year as contemplated under clause (c) of sub-section 14 of Section 80IB of IT Act. Third substantial question of law is again required to be answered against the Appellant and in favour of the Revenue because the substantial question of law seems to proceed on the basis that there was no dispute that the process of purchasing the material by the Appellant from open market was only for the purpose of testing optical fiber cable. The material on record as noted earlier establishes that there was manufacture involved and the process undertaken by the Appellant during the Assessment Year 2002-03 was not restricted to mere testing or trial run. The findings of fact in this regard are amply borne out from the material on record and consequently are not vitiated by any perversity or absurdity.
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