TMI Blog2012 (8) TMI 803X X X X Extracts X X X X X X X X Extracts X X X X ..... oint where commercially it can no longer be regarded as original commodity but is recognized as a new distinct article, manufacturing can be said to have taken place. Deduction u/s 80IB cannot be disallowed only on the ground that the product by the assessee has been used as a raw material by the sister concern. In case the product is a distinct commercial product different from the raw materials used by the assessee, the claim has to be disallowed. We, therefore, set aside the order of the CIT(A) and restore back the matter to the AO for limited purpose to verify whether emulsifier produced by the assessee on behalf of the sister concern is a new commercial product difference from the raw materials used and recognized as such in the mar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not doing any manufacturing activity and therefore was not eligible for deduction u/s 80IB and thus denied the claim of deduction u/s 80IB in relation to the profit derived from the activity of job work under taken on behalf of the sister concern. The AO noted from the profit and loss account of the assessee for the assessment yea 2009-10 that the assessee had shown net profit of Rs.88,12,231/- from labour charges receipt of Rs.1,27,12,951/- which came to about 70% of the receipt. The AO, therefore, computed the profit from labour charges for this year of Rs.86,73,380/- at the rate of 70% which come to Rs.60,71,366/-. The AO, therefore, disallowed the claim of deduction to the above extent and allowed only deduction of Rs.45,96,563/- out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubsequent year. 4.1 The CIT(A) forwarded the submissions of the assessee to the AO. The AO in his report submitted that the sister concern i.e. M/s Witmans Industries was getting job work done from assessee for some of its required additives like emulsifier and esters, which were used by them to produce lubricating oils/textile lubricants. Therefore, the job work done by the assessee was nothing but an intermediate process done in course of manufacturing of final products viz. lubricating oils/textile lubricants. The AO reiterated his stand that the assessee was not entitled for deduction u/s 80IB in relation to work contract. He also referred to the decision of the Mumbai Bench of the Tribunal in case of M/s B.T.Patil and Sons Belgaum V/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision of the Special Bench of the Tribunal in Shaw Scott Distilleries (P) Ltd V/s ACIT (supra) was also distinguishable as in that case, the original commodity was alcohol and commodity produced also remained alcohol, which is not so in the present case as in this case, the product was a new commercial product different from the raw material. 4.3 The CIT(A), after considering the submissions of the assessee, agreed that the assessee had manufactured a new commercial product i.e. emulsifier which was a distinct product from the raw material used. He, therefore, held that claim of deduction u/s 80IB was allowable to the assessee in case of goods manufactured on job work basis on behalf of the sister concern and accordingly allowed the clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s/things produced by the assessee. The claim of deduction has been disallowed only in relation to the goods manufactured on behalf of the sister concern on job work basis. There is no provision in section 80IB as in the case of section 80IA that deduction cannot be allowed in case of contract work and therefore, the deduction has to be allowed in case the assessee had manufactured the goods on behalf of the assessee on job work basis. What constitutes manufacture is well settled by several judgments of the Hon ble Apex Court. As held by the Hon ble Supreme Court in the case of DCIT V/s Pio Food Packers (supra), will each process suffered, the original commodity experiences a change, but it is only when the change or a series of changes, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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