TMI Blog2017 (4) TMI 1556X X X X Extracts X X X X X X X X Extracts X X X X ..... that in such circumstances, the only conclusion which could be drawn was that the product had been manufactured by the assessee. It was, therefore, held that in view of the same, there was no question of denying the assessee the benefit of deduction of its eligible profits under section 80IC Since the facts in the present case are identical to that in the case of M/s Jaiswal Metals Pvt. Ltd. [ 2017 (2) TMI 1498 - ITAT CHANDIGARH] the decision rendered therein squarely applies to the present case also, following which we hold that the assessee is entitled to deduction of its entire eligible profits u/s 80IC - The addition, therefore, made is directed to be deleted.- Decided in favour of assessee. - ITA No. 573/CHD/2016, ITA No. 535/CHD/2016 - - - Dated:- 25-4-2017 - SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND Ms.ANNAPURNA GUPTA, ACCOUNTANT MEMBER For the Appellant : Shri Tej Mohan Singh For the Respondent : Shri Manjit Singh ORDER PER ANNAPURNA GUPTA,AM Both the appeals relate to the same assessee against orders passed by ld. CIT(Appeals), Panchkula dated 18.04.2016 and CIT (Appeals)-2 Gurgaon dated 03.03.2016 for assessment years 2011-12 and 2012- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the associate company. The AO. raised the query that according to the provisions of section 80IC only the profit and gains of manufacturing activity undertaken by the assessee itself can be considered for deduction. The assessee replied that in view of the economic viability of the process and volume of available in house facility the part process of manufacturing had to be outsourced. The assessee contended that no part of the expenses incurred by the assessee on job work could legally be disallowed. After considering the assessee's reply, the Assessing Officer held that the profit gains of the manufacturing activities undertaken by the assessee company itself could only be considered as eligible for deduction u/s 80IC. The AO held that the profit of outsourced process was to be deduced by an amount computed @ 2.08% of total job work charges paid/payable to Nahan Ferro Alloys Chemicals Pvt. Ltd. for the previous year relevant to the A.Y. 2011.12. Thus, 2.08% of ₹ 1,12,06,584/-, i.e., of ₹ 2,53,362/-was considered as the profit gains of the assessee not eligible for deduction u/s 80IC of the Act and was added to the income of the assessee. 7.1 During the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to manufacture the product. The ld. counsel for the assessee pointed out that in identical facts and circumstances, the ITAT in the said case had deleted the addition made by the Assessing Officer on account of disallowance of deduction of profits relatable to manufacturing got done by the assessee from outside parties. 9(i) The ld. DR, on the other hand, relied upon the order of CIT (Appeals) but at the same time did not dispute that identical issue had been dealt by the ITAT in the case of M/s Jaiswal Metals Pvt. Ltd. Vs JCIT (supra) and had been adjudicated in the said case in favour of the assessee. 10. We have heard the contentions of both the parties, perused the orders of authorities below and gone through the documents placed before us. The sole issue in the present case relates to disallowance of deduction on eligible profits claimed under section 80IC by the assessee, relatable to the part process of manufacturing being got done by outside parties.The undisputed facts are that the assessee produces stainless steel ingots at its factory premises in Kala Amb and is entitled to deduction of its eligible profits u/s 80IC of the Act.It is also not disputed that all ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 80IC to any extent at all. The relevant findings of the ITAT at para 14 to 30 of the said order is as under : 14. Evidently the issue before us relates to the quantum of deduction u/s 80IC qua manufacturing carried out by the assessee. The relevant provision of section 80IC allowing deduction to entities carrying out manufacturing activity reads as under: 80IC (2) This section applies to any undertaking or enterprise,- (a ) which has begun or begins to manufacture or produce any article or thing, not being any article or thing specified in the Thirteenth Schedule, or which manufactures or produces any article or thing, not being any article or thing specified in the Thirteenth Schedule and undertakes substantial expansion during the period beginning- (i) on the 23rd day of December, 2002 and ending before the 1st day of April, 2012, in any Export Processing Zone or Integrated Infrastructure Development Centre or Industrial Growth Centre or Industrial Estate or Industrial Park or Software Technology Park or Industrial Area or Theme Park, as notified by the Board in accordance with the scheme framed and notified by the Central Government in this regard, in the State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g . 17. We find that Courts in a number of cases have been seized with the issue of allowability of deduction u/s 80I/IB, which grant deduction of profits derived from manufacturing any article or thing, when the assessee outsourced part or whole of the manufacturing process. After considering the facts of each case, the courts ruled that it is not essential for the assessee to carry out the entire manufacturing activity itself, for the purpose of claiming deduction on the profits earned thereon and even if a part of the activity is outsourced or for that matter even if the whole manufacturing activity is outsourced, but carried on under the supervision and control of the assessee, it would still tantamount to manufacturing being carried out by the assessee itself, making it eligible to claim deduction of profits earned thereon. 18. In the case of Add.CIT Vs. A. Mukherjee Co. (P) Ltd., 113 ITR 718,(Cal) the Hon'ble High Court upheld the findings of the Tribunal which were as follows : The assessee is a publisher of books. The assessee job is to get the manuscript for publication, hit upon a suitable format for the book, get it printed as per its requirements under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... als under the direct technical supervision of the expert staff employed by the assessee and the products manufactured were of the quality prescribed by the assessee. The risk for the entire operation was that of the assessee. In view of this, we fail to see how it can be said that it was not the assessee but Pharmed which manufactured the said drugs and pharmaceuticals, the goods in question. 20. In the case of CIT Vs. Indian Resins Polymers (1998) 235 ITR 5 (Ker), the assessee was engaged in business of export of cashew kernels and shell oil. The assessee purchased cashewnuts and entrusted to a third party for processing. Similarly' roasting and dehusking of cashew kernels was got done from a third party under assessee's own supervision. On these facts, it was held that assessee was an industrial undertaking entitled to special deductions under section 80HH. 21. In the case of CIT Vs. Anglo French Drug Co. (Eastern) Ltd. (1991) 191 ITR 92 (Bom), the Hon'ble Bombay High Court has held that it is not necessary that the manufacturing activity should undertaken by the assessee itself. The assessee can employ another company to manufacture goods under its supervisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the assessee undertook the manufacturing of SS flats and was entitled to claim deduction on entire profits earned from the same. 24. We may add that the section does not qualify the word manufacture by preceding it with the word wholly or any such adjective. A bare reading of the provisions of section 80IC of the Act reveals that the only condition required for claiming deduction is that the eligible undertaking should be involved in manufacturing activity. Therefore, the meaning and purport of section would have to be gathered from a literal interpretation of the same, which is the basic rule of interpretation, and there is no reason to read more than what is stated in the section or go to the intent behind introducing the section when there is no ambiguity in the same. The Hon,ble Apex Court in the case of Padmasundara Rao (Decd.) Others Vs. State of Tamil Nadu Others held as follows: The court cannot read anything into statutory provision which is plain and unambiguous. A statute is the edict of the Legislature. The language employed in a statute is the determinative factor of legislative intent. The first and primary rule of construction is that the intentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofits in such cases and allow deduction to that extent only. The provision of section 80IA (10) is to check the tendency of eligible units to inflate their profits by entering into transactions with related concerns or closely connected concerns in such a manner so as to resort to showing unreasonably higher profits in their own businesses and claim hundred percent deduction of the same under the provisions of the Act. In the present circumstance we find that the case is exactly the opposite. The Ld. CIT (Appeals) we find has stated that by getting the work done by its associate concern a part of the profits have been siphoned off to the associate concern which may also have claimed deduction under section 80IC on the same. Having said so it is evident that in the case of the assessee the profits have been reduced to that extent. The profits having been reduced to that extent, being the finding of the CIT (Appeals) in the present case, section 80IA(10) has no applicability at all since as stated above it applies to cases where the profits appear to be inflated on account of transactions entered into with an associate concern. Even otherwise for the applicability of section 80IA(10 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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