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2016 (7) TMI 395 - ITAT AHMEDABAD

2016 (7) TMI 395 - ITAT AHMEDABAD - TMI - Eligibility of deduction under section 80IC - nature of activity undertaken by assessee - manufacturing of electric bike or mere assembly of parts - whether the activity amounts to "manufacture' or not? - Held that:- The moment there is transformation into a new commodity commercially known as a distinct and separate commodity having its own character, use and name, whether be it the result of one process or several processes 'manufacture' takes place an .....

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had undergone a change and new product came to the light. The assessee has produced flow chart giving different stages how the product has undergone changes. This flow chart has been reproduced by the ld.CIT(A) while taking cognizance of the assessee’s written submissions. As far as the objection of the AO that the very meager machinery was being used by the assessee is concerned, the case of the assessee is that it requires only tools and not big plant to assemble parts. Similar, section 80IC n .....

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ken three grounds of appeal, but its grievance revolves around single issue whereby it has pleaded that ld.CIT(A) has erred in allowing deduction of ₹ 44,94,463/- under section 80IC of the Income Tax Act. 3. Brief facts of the case are that the assessee has filed its return of income on 20.9.2008 declaring total income at ₹ 2,00,211/-. The case of the assessee was selected for scrutiny assessment and notice under section 143(2) of the Act was issued and served upon the assessee. On s .....

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, assembling of the part does not amount to manufacturing of and/or production of any products. Apart from this objection, the ld.AO further doubted the capacity of the assessee to manufacture bike on the ground that plant and machinery of ₹ 8,52,348/- only was installed by the assessee, which could not generate a sale turnover of ₹ 3,53,78,640/-. The AO has observed that out of the total value of plant and machinery, a conveyor belt with system was having value of ₹ 5,61,242/- .....

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g, S.T. Road, Palanpur, Gujarat. Its factory is located in Dehradun. During the year under consideration, it claimed deduction u/s.80- IC of ₹ 46,94,674/-. This claim was denied by the AO on the ground that appellant is not engaged in production or manufacture. 4.3(i) The contentions of the Learned AR in brief are as follow. Appellant commenced its activity on 27-11-2006. It is manufacturing Electric Bikes. It registered its brand, design and patents with the Controller General of Patents, .....

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003. It was filing excise returns containing monthly information (regarding the value of production and amount of Excise duty exemption claimed) with the Central Excise Department. It procures the chasis from China in CKD condition as per the design provided by it with its logo. Front Shockers, Tyres & Tubes, Nuts, Bolts and Screws are procured in India. After welding and assembling the bike, accessories are fitted. The resultant product is commercially distinct. The activity squarely falls .....

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10-09-2007. 'Electric Bikes' are excisable, but for the exemption given by notification No.50 dt. 10-06-2003. Appellant is filing excise returns monthly. In the case cited at 308 ITR 222(relied on by the AR), Punjab & Haryana High Court held that -"Motorcycle wheel assembled by assessee by using rim, tube, tyre, bearing, drum, spoke, nipple and collar resulted in an article distinct in name, character and use hence 'manufacture' eligible for deduction under s.80-IB; fin .....

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ill. Those different paerts bear distinctive names and when assembled together, thereafter it gets transformed into an ultimate product which is commercially known as a "Wind Mill". There can, therefore, be no difficulty in holding that such an activity carried on by the respondent- assessee would amount to "manufacture" as well as "production: of a thing or article as set out in Section 80IB(2)(iii) of the Income-tax Act. In such circumstances, the conclusion of the Tri .....

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, I have gone through the record carefully. The dispute is whether assembling of parts for bringing into existence an electric bike amounts to manufacturing or not. The expression "manufacture" has been defined in section 2(29)(B)(a) which read as under: "(29BA) "manufacture", with its grammatical variations, means a change in a non-living physical object or article or thing,- (a) resulting in transformation of the object or article or thing into a new and distinct objec .....

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le Court has explained both these expressions in detail. A reference to the decision of Hon'ble Supreme Court in the case of CIT vs. M/s. Arihant Tiles & Marbles Pvt. Ltd. reported in 320 ITR 79, India Cine Agency Vs. CIT reported in 308 ITR 98, CIT vs. Sesa Goa Ltd. reported in 271 ITR 331 and to the following decision of Hon ble Gujarat High Court can be made : (a) CIT vs. Neokarna reported in 137 ITR 879 (Bombay) (b) CIT vs. Anglo French Drug Co. Ltd. reported in 191 ITR 92 (Bom.) (c) .....

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g of expression "manufacture" as well as "production". The relevant discussion made by the Hon'ble Court reads as under: "2. As noted above, the core issue is whether activity undertaken was manufacture or production. 3. In Black's Law Dictionary (5th Edition), the word "manufacture' has been defined as, "the process or operation of making goods or any material produced by hand, by machinery or by other agency; by the hand, by machinery, or by art. .....

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lose its identity or may become transformed into the basic or essential properties. (See Dy. CST (Law), Board of Revenue (Taxes) Coco Fibres [1992] Supp. 1 SCC 290). 9. Manufacture implies a change but every change is not manufacture, yet every change of an article is the result of treatment, labour and manipulation. Naturally, manufacture is the end result of one or more processes through which the original commodities are made to pass. 10. The nature and extent of processing may vary from one .....

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mmodity but instead is recognized as a new and distinct article that a manufacture can be said to take place. Process in manufacture or in relation to manufacture implies not only the production but also various stages through which the raw material is subjected to change by different operations. It is the cumulative effect of the various processes to which the raw material is subjected to that the manufactured product emerges. Therefore, each step towards such production would be a process in r .....

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acture' or not is: Does a new and different good emerge having distinctive name, use and character. The moment there is transformation into a new commodity commercially known as a distinct and separate commodity having its own character, use and name, whether be it the result of one process or several processes 'manufacture' takes place and liability to duty is attracted. Etymologically the word 'manufacture' properly construed would doubtless cover the transformation. It is .....

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