TMI Blog2022 (11) TMI 896X X X X Extracts X X X X X X X X Extracts X X X X ..... is supplied in different designs/sizes is being used as ingredient by others, namely, assembly operators for the car seats. Merely because the assessee is using the chemicals and ultimately what is manufactured is polyurethane foam and the same is used by assembly operators after the process of moulding as car seats, it cannot be said that the end product manufactured by the assessee is car seats/automobile seats. There must be a further process to be undertaken by the very assessee in manufacturing of the car seats. No further process seems to have been undertaken by the assessee except supplying/selling the polyurethane foam in different sizes/designs/shapes which may be ultimately used for end product by others as car seats/automobile seats. When the articles/goods which are manufactured by the assessee, namely, polyurethane foam is an article classifiable in the Eleventh Schedule (entry 25), considering Section 80IB(2)(iii), the assessee shall not be entitled to the benefit under Section 80-IB - The High Court has rightly held so and has rightly set aside the order passed by the ITAT and has rightly restored the order passed by the assessing officer denying the deduction/ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e or thing specified in the list in the Eleventh Schedule of the IT Act. 2.1 The assessee preferred an appeal before the Commissioner of Income Tax (Appeals) (for short, CIT(A)) against the assessment order. The CIT(A) upheld the order of the assessing officer. The CIT(A) observed that the two chemicals, namely, Polyol and Isocyanate used in the manufacture of polyurethane foam seats assemblies were the basic ingredients of polyurethane foam and therefore the case would squarely fall in what is specified in the Eleventh Schedule. 2.2 Against the order of the CIT(A), the Assessee filed an appeal before the Income Tax Appellate Tribunal (for short, ITAT ). The ITAT set aside the assessment order as well as the order passed by the CIT(A) and allowed the appeal filed by the assessee by observing that polyurethane foam was neither produced as a final product nor is an intermediate product nor is a by-product by the assessee and the same was used as automobile seat and therefore does not fall within entry 25 to Eleventh Schedule of the IT Act and therefore the assessee shall be entitled to claim deduction under Section 80-IB of the IT Act. The order passed by the ITAT has been se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orders for supply of automobile seats and even paid the sales tax as automobile seats. It is submitted that the final product is commercially distinct from polyurethane foam. 3.4 It is submitted that the High Court ought to have appreciated that in fact in assessee s own case in respect of the very same product, in relation to classification for the purposes of payment of excise duty, the CEGAT has observed that the product manufactured by the assessee can never be said to be known in trade parlance as articles of polyurethane foam and hence cannot be classified as polyurethane foam. It is submitted that the order passed by the CEGAT had attained finality. It is submitted that therefore once the articles/goods manufactured cannot be classified as polyurethane foam under the Excise Act, the same cannot be treated and/or considered as polyurethane foam under the IT Act. 3.5 It is submitted that in the present case the Tribunal noted in detail the elaborate manufacturing process undertaken by the assessee whereby the final product, namely, car seats are manufactured. It is submitted that after elaborating the process, the Tribunal has returned a finding of fact that the said pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e manufactured. It is submitted that therefore, by no stretch of imagination, it can be said that the assessee is manufacturing and selling automobile seats. It is submitted that what is manufactured and sold is the polyurethane foam which is manufactured by using two chemicals Polyol and Isocyanate. 4.1 It is submitted that the High Court has specifically observed and held that except manufacture of polyurethane foam which is manufactured by injecting two chemicals, there is no further process undertaken by the assessee. It is submitted that as rightly observed by the High Court the assessee produces the polyurethane foam seats which are used for making end product to be fixed in different vehicles. It is submitted that the assessee as such is not manufacturing the end product, namely, automobile seats to be fixed in the vehicles. For the aforesaid, Shri Balbir Singh, learned ASG has taken us to the findings recorded by the CIT(A) and has submitted that after considering the detailed process undertaken by the assessee, the CIT(A) opined that the assessee is not the manufacturer of the car seats and what is manufactured is the polyurethane foam which is being sold in different d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been undertaken by the assessee except supplying/selling the polyurethane foam in different sizes/designs/shapes which may be ultimately used for end product by others as car seats/automobile seats. 9. So far as the reliance placed upon the decisions of this Court in the cases of Vinbros and Company (supra) and Hindustan Petroleum Corporation Limited (supra), relied upon by the learned counsel appearing on behalf of the assessee is concerned, the same shall not be applicable to the facts of the case on hand and/or the same shall not be of any assistance to the assessee in view of the findings recorded hereinabove. 10. In view of the above when the articles/goods which are manufactured by the assessee, namely, polyurethane foam is an article classifiable in the Eleventh Schedule (entry 25), considering Section 80IB(2)(iii), the assessee shall not be entitled to the benefit under Section 80-IB of the IT Act. The High Court has rightly held so and has rightly set aside the order passed by the ITAT and has rightly restored the order passed by the assessing officer denying the deduction/benefit claimed under Section 80-IB of the IT Act. We are in complete agreement with the ..... 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