TMI Blog2002 (3) TMI 210X X X X Extracts X X X X X X X X Extracts X X X X ..... e company was being assessed in the name of M/s Hemkund Drugs (P.) Ltd., but in the accounting year relevant to assessment year 1988-89, it had changed its name to M/s Oscar Laboratories Pvt. Ltd. He also noted that in the accounting year relevant to assessment year 1988-89, the assessee had purchased plant and machinery worth Rs. 47,996, laboratory equipment Rs. 5,609 and furniture and fixtures Rs. 8,072 for the administrative office. While scrutinizing the details, the Assessing Officer noted that plant and machinery purchased by the assessee was meant only for carrying out the final performance of the activity on medicines, namely, capsule filling machine or strip sealing or for batch printing on the labels. The main manufacturing activities was done by M/s Ranbaxy Laboratories Ltd., Delhi to whom the assessee had paid processing charges of Rs. 3,01,990. Besides, the assessee had paid testing charges of Rs. 47,875 to M/S. Analytical Testing Services Ltd. for testing the quality of raw material, packing material and finished goods. Thus, the Assessing Officer observe that the assessee had not carried out any manufacturing activity, rather it got the manufacturing activity done fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aceuticals, etc. Instead, the assessee entered into an agreement with M/s Ranbaxy Laboratories Ltd. and the same is at pages 19 to 24 of the paper book. She drew our attention to page 19 of the paper book, which mentions that M/s Ranbaxy Laboratories Ltd. had the necessary facilities for manufacture of medicinal and pharmaceutical products and holds a valid drug manufacturing licence. Clause I of the agreement at page 20 of the paper book clearly mentions that M/s Ranbaxy Laboratories Ltd. shall undertake the manufacturing of the products mentioned in Annexure-A. Clause 2 of the said agreement refers to the scope of activities of the assessee as per which the assessee was required to procure the raw-material of standard quality and specification required for manufacturing and packing drugs. Clause 4 of the agreement further mentions that the assessee was required to provide to the manufacturer necessary quality and quantity specifications for manufacturing those drugs and M/s Ranbaxy Laboratories Ltd. shall ensure manufacturing these drugs as per the required specifications. Clause 5 of the agreement further mentions that it is the responsibility of M/s Ranbaxy Laboratories Ltd. to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dy else. But she submitted that in this case, the entire manufacturing activity was undertaken by M/s Ranbaxy Laboratories Ltd. She further submitted that the decision of Bombay High Court in the case of Anglo French Drug Co. (Eastern) Ltd. was not applicable because earlier the assessee was manufacturing the various pharmaceutical goods of its own and thereafter transferred the entire plant and machinery to its associate concern retaining its control over the manufacture. Thus, the Bombay High Court held that the assessee could be said to be in the business of manufacturing of goods. But in the present cases, the entire manufacturing activity is being done by M/s Ranbaxy Laboratories Ltd. She further submitted that the decision of Calcutta High Court in the case of A. Mukherjee Co. (P.) Ltd., was also not applicable because that related to printing of books. She therefore, submitted that in the present cases, the assessee did not undertake any manufacturing 414 Income-tax Tribunal Decisions activity and, therefore, the assessee would not be entitled to deduction under section 80-I. 5. The ld. Counsel for the assessee, on the other hand, strongly supported the orders of the CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods were manufactured by M/s Ranbaxy Laboratories Ltd. yet the supervision and overall control was that of the assessee. He submitted that the judgment of Supreme Court in the case of CIT v. N.C. Budharaja Co. [1993] 204 ITR 412, was not applicable to the facts of the present case because in that case the assessee was engaged in the business of laying 'pressure filling' foundation For buildings and other structures and it was held that assessee was not manufacturing or producing articles or things. But the same is not the case here. The assessee is manufacturing medicines under its own supervision and control. He submitted that all the judgments relied on by the CIT(A) in his order were applicable to the facts of present cases because the goods were being manufactured under assessee's own control and supervision. He further relied on Board's Circular No. 347, dated 7-7-1982, where by referring to the decision of Calcutta High Court in the case of A. Mukherjee Co. P. Ltd. the Board has clarified to its field officers that book publishing companies even though they may themselves not be engaged in the printing or binding of books, qualified to be treated as industrial companie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity, Delhi. Items to be manufactured have been mentioned at page 48 of the paper book, which were covered in the licence issued by the drug licensing authority. He, therefore, submitted that the assessee was an industrial undertaking engaged in the business of manufacture of drugs and medicines and, therefore, qualified for special deduction under section 80-I. 6. The ld. D.R. stated in rebuttal that in all the cases cited by the ld. Counsel the goods were got manufactured from third party under assessee's own control and supervision but in the present cases, even the control and supervision was with the third party. She therefore, submitted that the various decisions relied upon by the ld. Counsel were not applicable to the facts of the present cases. 7. We have heard both the parties at some length and carefully considered the rival submissions. We have also examined the facts, evidence and material on record and referred to the various judgments to which our attention has been drawn. The orders of the lower authorities have also been carefully perused. Section 80-I applies to any industrial undertaking, which fulfils the following conditions: (i) it is not formed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , which is engaged in the business of manufacture and not to an undertaking engaged in the business of processing. In the present cases, the assessee is no doubt engaged in the business of manufacturing of drugs and medicines. The assessee does not have necessary machinery for manufacturing the drugs itself. It is an admitted fact that the assessee has got the manufacturing done from M/s Ranbaxy Laboratories Ltd. for which raw material, specifications and the specific requirements are being given by the assessee. It is also a fact that the assessee does not have the requisite testing facilities of its own. For this purpose, the assessee has hired the technical services of M/s Analytical Testing Services Pvt. Ltd. In fact, after manufactured goods have been received by the assessee, it has only done capsule filling, strip sealing, etc., which are essentially marketing activities. If we take into account purely these activities without taking into account the manufacturing activities, which the assessee got it done from M/s Ranbaxy Laboratories Ltd., the same would not fall in the category of manufacturing or production, though these activities are essential in order to sell the comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Now the question is whether the assessee would still be eligible for deduction under section 80-I even if these activities were done from others. From the facts detailed above, it is obvious that the CIT(A) has relied on the judgments of Bombay High Court in the cases of Neo Pharma P. Ltd. Anglo French Drug Co. (Eastern) Ltd. and the judgment of Calcutta High Court in the case of A. Mukherjee Co. P. Ltd. The contention of the ld. D.R. that in all these cases, goods were manufactured from others under its own control and supervision has been carefully considered. In the case of Neo Pharma P. Ltd. the facts before the Bombay High Court were that the assessee was incorporated mainly with the object of engaging itself in the business of manufacturing and processing pharmaceuticals. It entered into an agreement with another company to make available to the assessee their premises, plant and machinery and services of the staff for carrying on the manufacturing activities for and on behalf of the assessee. The goods manufactured by the company were as per the quality and specifications prescribed by the assessee. In the light of these facts, Bombay High Court held that although the pl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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