TMI Blog2006 (12) TMI 172X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacturer of automobile filter. The income derived by the assessee from such business was considered exempt in terms of s. 80-IA of the Act. The AO was of the view that the assessee was not entitled to deduction under s. 80-IA of the Act on the ground that the process carried out by the assessee did not yield any new or commercially different product and, therefore, the assessee was not engaged in the production or manufacture of any article or thing. The AO perused the manufacturing process carried out by the assessee, and concluded that it did not amount to manufacture. According to the AO, the process listed by the assessee involves merely pleating the paper which is then passed through pre curing oven so that the position of pleats is permanent; it is then cut and sealed; then the round vertical paper is inserted into the outer retainer and end caps are fitted then with the adhesive. The processes are merely assembling processes and do not involve any production or manufacture. Nothing new or commercially different is evolved in the processes through which the paper passes. It remains paper except that it is pleated and fitted into a perforated outer and inner retainers whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uments of the learned counsel by placing reliance on the order of the lower authorities. Apart form placing reliance on various authorities the learned Departmental Representative pointed out that the assessee was merely carrying out job work for M/s Purolator India Ltd. That the entire raw materials are supplied by the said concern. He, therefore, argued that no production or manufacture was being carried out by the assessee on its own account and that it was merely engaged in the assembly of filter parts. The learned Departmental Representative pointed out the observations of the AO that the concern M/s Purolator India Ltd. had also confirmed that the assessee has been assigned the job work of assembling of semi-finished filters. In this regard he referred to the decision of the Madras High Court in the case of India Cine Agencies vs. CIT (2003) 180 CTR (Mad) 41 : (2003) 261 ITR 491 (Mad). According to the learned Departmental Representative the profits earned by the assessee from carrying out of job work cannot be equated with the profits derived by a manufacturer by selling products manufactured by it. 6. With respect to the process of manufacture carried out, the learned De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be/outer retainer (b) End caps 3. Adhesives. The manufacturing process considered by the lower authorities is detailed as below: - Paper passes through the marathon machine for pleating. - After pleating of paper, paper passes through the precuring oven so that the position of pleats has to be permanent. - Paper is being cut as per the specified length. - Both ends of the particular length of the paper are being sealed with the help of a clip at side sealer machine. - After the sealing of ends, round shape (Vertical) has to be given to paper and inserted into the outer retainer along with a centre true inside the paper pack. It is called sub-assembling. - PVC adhesive to be filled in the end cap with the help of PVC dispenser machine. - Place cap on one end of sub-assembly and pass it through jeller having a constant temperature for curing of adhesive. - Fill another cap with adhesive with the help of dispenser, place on the other end and pass it through FCO at specified temperature of curing of PVC adhesive and paper. - Final product-Semi-finished automotive filter. 9. The finished product of the assessee i.e. automobile filter element is a s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he components. The AO has not disputed that the assessee is carrying out assembly of various components. The thrust of the arguments of the AO is that the change/transformation in raw material brought out by the process of the assessee concern are not irreversible. According to the AO, there was a mere physical change in the goods. On this reasoning, he has concluded that there is no production or manufacture being carried out by the assessee. We are unable to appreciate the aforesaid reasoning of the AO. The relevant test that has been referred to by the apex Court is that the manufacture implies a change and that there must be transformation i.e. a new and different article must emerge having different name, character or use. It is not necessary that the transformation or the emergence of new article must always be irreversible so as to qualify to be an activity of manufacture. For instance a watch is manufactured by using various components. The various components in a watch are assembled and put together so as to make a complete watch. A watch can be again dismantled and each of the components can be separately retrieved. Can we say for that reason that activity of producing a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee. 16. The other objection of the Revenue is that the assessee does not manufacture on its own account but does it on a job work basis for another concern. This objection deserves to be rejected The assessee has been supplied the raw materials by the other concern but other aspects namely labour and other infrastructure, equipments, etc. are met by the assessee on its own account. The assessee also satisfies the test of the manufacture by producing a new material namely the semi-finished automotive filter. The assessee, therefore, qualifies to be an 'industrial undertaking'. Merely because the product is manufactured under a job contract it does not distract from the fact that it is the assessee who is engaged in an activity of manufacture. The parity of reasoning enunciated by the Madras High Court in the case of Taj Fireworks Industries is squarely applicable in the instant case. We, therefore, are of the opinion that on this issue the assessee has to succeed. 17. In the result we conclude by holding that the assessee is carrying out manufacturing activity and is therefore, entitled to claim the benefits of s. 80-IA of the Act. We have noted that apart from the af ..... X X X X Extracts X X X X X X X X Extracts X X X X
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