TMI Blog2019 (3) TMI 223X X X X Extracts X X X X X X X X Extracts X X X X ..... tivity of 'manufacture'. Referring to definition of the term 'manufacture' inserted in the Act by Finance (No.2) Act 2009, with effect from 1.4.2009 any activity that would result in the transformation or change in the character of the object or article or thing, such that a new and distinct object is brought into existence would amount to 'manufacture'. The definition statutorily enshrines one of the long settled tests of what would constitute 'manufacture'. Thus, notwithstanding that the definition itself has been inserted only with effect from 01.04.2009, the test has itself has been consistently applied by the Courts even prior thereto in determining whether an activity would amount to manufacture or not. - Decided in favour of the assessee Allowability of payment u/s 37 - Amounts paid to the Labour Welfare Association for Death Relief Fund - Assessing Authority held not sllowble in the view of Section 40A (9) - HELD THAT:- Contribution made by the employer to the Death Relief Fund is also an allowable business expenditure in terms Section 37 in so far as the expenditure is incurred wholly and exclusively for the welfare of its employees an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces of the case, the Tribunal is right in holding that the reassessment made under Section 147 of the Income Tax act is valid? 4. The appellant is a public limited company engaged in the business of manufacturing of cloth, industrial fabrics, readymade garments, sewing threads etc. Two issues arise for determination in this batch of appeals and we take up the substantial question of law relating to grant of deduction under section 80HH of the Income tax Act 1961 (in short the Act ) first. The relevant facts are common in respect of all assessment years involved. 5. The appellant claimed a deduction under Section 80 HH of the Act in respect of its dipping plant. The claim was questioned by the Assessing Officer who was of the view that the plant did not undertake any manufacturing or production activity, mandatory for the allowance of deduction under Section 80 HH of the Act. Despite the appellants' objection explaining the nature of activity carried out by the plant, the claim was rejected on the ground that the activity carried on amounted only to 'processing' and not 'manufacture'. 6. The appellant was successful in appeal before the Commissioner of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to make them compatible with rubber. This also enhances rubber adhesion. Fabric is dipped in the above solution and heat stabilised by employing 3 techniques namely time, temperature and Tension in the machine called dipping plant. 11. The activity of dipping is, thus, key to stabilising and heat- setting the products. It is only after such dipping and heat stabilisation that the material would be compatible for rubber adhesion in various products requiring dimensional stability. The input used is industrial fabric or yarn and what emerges after the aforesaid activity is a commercially distinct product, different from the input used. The conclusion of the Tribunal to the effect that the activity engaged is a mere process does not appear to be justified as it is seen from the explanation provided before the authorities that a series of processes are carried out resulting in the final products. Such a series of processes in itself, in our view, amounts to the activity of 'manufacture'. 12. We may profitably cite the decision of this Court in the case of Tamil Nadu Heat Treatment and Fetting Service (supra) that considered the process of heat treatment to cranks ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithstanding that the definition itself has been inserted only with effect from 01.04.2009, the test has itself has been consistently applied by the Courts even prior thereto in determining whether an activity would amount to manufacture or not. 17. In the light of the discussion above, the substantial question of law relating to disallowance of deduction under section 80HH of the Act, arising in Tax case (A) Nos.1813, 1815, 1818 to 1820 of 2008 in relation to Assessment Years 1994-95, 1991-92, 1998-99, 1990-91, 1993-94 and 1992-93 respectively is held in favour of the assessee and against the Revenue. 18. The second substantial question of law relates to the disallowance of a contribution made by the assessee to a Labour Welfare Association, and arises in Tax case (A) Nos.1813 to 1817 of 2008 (Assessment Years 1994-95, 1991-92, 1995-96 and 1998-99). 19. The Appellant had claimed certain amounts paid to the Labour Welfare Association as allowable under Section 37 of the Act. The Assessing Authority was of the view that the amounts were not permitted allowances in terms of Section 40A (9) of the Act that bars a claim made of any sum paid by the assessee as an employer toward ..... X X X X Extracts X X X X X X X X Extracts X X X X
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