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TMI Blog2012 (9) TMI 574X X X X Extracts X X X X X X X X Extracts X X X X ..... er hand, the A.R of the assessee supported the orders of the CIT(A). 6. We find that in the instant case, the assessee has claimed deduction u/s 80IB of Rs. 19,00,570/- in assessment year 2005-06, Rs. 4,77,302/- in assessment year 2001-02, Rs. 4,26,853/- in assessment year 2002-03, Rs. 2,54,023/- in assessment year 2003-04 and Rs. 5,12,159/- in assessment year 2004-05. The Assessing Officer disallowed the claim of deduction to the assessee for the reason that the assessee is engaged in the manufacture of goods on job work basis under the direct supervision and control of M/s Brakes India Ltd and therefore, was not entitled to the benefit of deduction u/s 80IB. The Assessing Officer has also stated that in view of the amendment made to section 80IA with retrospective effect from 1.4.2007 that person who executes works contracts will not be eligible for deduction u/s 80IA and since the substantive provision of section 80IA are applicable to section 80IB, the assessee was not entitled to deduction u/s 80IB of the Act. 7. On appeal, the CIT(A) has allowed the appeal of the assessee in assessment year 2005-06 by observing as under: "4. The first ground of appeal relates to the disal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stomer (Brakes India Ltd) who gets his goods manufactured. The activities performed by appellant company is one of "manufacture". The person who carries out manufacturing activities is the manufactures for the purpose of Income Tax Act. Reliance is placed on the jurisdictional High Court in Addl CIT v Chillies Export House Ltd 115 ITR 73 wherein it has been held that it is not the party who gets his goods manufactured who is entitled to be given exemption but the party who carries out the said activities who is entitled to exemption. 3. Your Appellant submits that the activities performed by appellant company is one of "manufacturer" whereas the customer (who gets goods manufactured) is the owner of goods. As far the legal principles of "manufacturer" is concerned, the decision of the Allahabad High Court in Bulbu Prasad Amarnath v. Commissioner of Sales Tax [1964]15 STC 46 (All) which was considered the Madras High Court in Addl CIT v Chillies Export House Ltd 115 ITR 73 clearly held that the party who carries out manufacture of the article is the manufacturer. 4. Your Appellant submits that reliance placed on the decision of ACIT v Oscar Laboratories (P.) Ltd. 83 ITD 408 (Chd.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y in M/s.Aztec Auto Limited with regard to Tractor Brakes. A. As Divisional Manager in charge of Tractor Brakes in M/s.Brakes India Limited I give drawings(sketches) and raw materials to M/s.Aztec Auto Limited for manufacturing and ensure that the finished products are despatched to the customers as per the drawings. I ensure that the schedules for supply given by M/s.Brakes India to M/s .Aztec Auto are being met. I also assess the technical capability of' M/s.Aztec Auto Limited in producing out requirements. I also accompany the persons from ultimate customers namely M/s.Mahindra & Mahindra, M/s.Escorts, M/s. TAFE, etc, to the premises of M/s.Aztec Auto Limited for quality audit, process validation, etc., 9. Q. Who bears your salary cost? A. M/s.Brakes India Limited is my employer who pays me the salary. As per the agreement that my company has with M/s.Aztec Auto Limited, my salary cost is debited to M/s.Aztec Auto Limited by way of a debit note. 9. Q. When the raw materials are supplied by your company M/s.Brakes India, How is the quality of the final product manufactured at the premises of M/s.Aztec Auto Limited ensured? A. The raw materials given by M/s. Brakes India are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the market". Hence the activities undertaken by the appellant amounted to "manufacture" within the meaning of Income Tax Act." 8. Your Appellant further submits that the ACIT misdirected himself in relying on the following explanation contained of Sec 80lA viz to disallow the deduction U/S 80lB "Explanation.-For the removal of doubts, it is hereby declared that nothing contained in this section shall apply to a person who executes a works contract entered into with the undertaking or enterprise, as the case may be". Your Appellant submits that it is governed by provisions of Sec 80lB and not by 801A. Further no such explanation as inserted in sec 80 IA is inserted in sec 801B. Hence lifting a provision not contained in the relevant section from another section amount to adding something in the statute which is not permissible. 9. Further the memorandum explaining provisions of the amendment clearly shows that "the tax benefit u/s 80lA is for the persons making investment in development of infrastructure sector and not for persons who merely execute civil contracts or any other works contract. Therefore the explanation cannot be attributed to a manufacturer-sub contracto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the "test to be applied to identify the real manufacturer is whether "Direct supervision and control is exercised by the original manufacturer on the manufacturing process undertaken in the premises of the contractor". As far this issue is concerned, the same has to be viewed both on legal and factual basis. On legal principles, the decision of Apex Court in the Textiles Machinery case (supra) relied by the appellant is clearly the authority on the subject. It is not in dispute that the appellant ha's complied with all conditions and situations for terming the activity as manufacture I as enumerated in the above decision. I am also inclined to agree with the contention that the decision of Hon'ble ITAT, Chandigarh in Oscar Laboratories Ltd (supra) had not canvassed the view that sub contractor is not eligible for deduction lu/s 80IB. Be that as may, the decisions of Hon'ble Apex Court in Textile Machinery Corporation Ltd (supra) and Hon'ble Jurisdictional High Court in the case of Chillies Export House Ltd (supra) have to be followed. On facts too, the mere fact that an engineer from the customer company is appointed to supervise the manufacturing process carried out by the appella ..... 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