Bottling of LPG amounts to ‘Production’: SC allows Deduction [Read Judgment]

In a significant ruling, the Supreme Court of India held that, Bottling of LPG is an activity which amounts to ‘production’ or ‘manufacturing’ for the purposes of provisions of the Income Tax Act.

A two judge bench comprising of Justice A.K Sikri and Justice Ashok Bhushan has allowed deductions under Sections  80-I and 80-IA of the Income Tax Act, 1961.

The Assessees M/S. Hindustan Petroleum Corporation Ltd and others, who were engaged in the process of bottling Liquefied Petroleum Gas (LPG) cylinders meant for domestic use, had claimed benefit of Sections 80HH, 80-I and 80-IA of the Income Tax Act, 1961.

The Apex Court observed that, the aforesaid activity would definitely fall within the expression ‘production’. The definition of ‘manufacture of gas’ in Rule 2 (xxxii) of the Gas Cylinders Rules, 2004 also supports the case of the assessees inasmuch as gas distribution and bottling is treated as manufacturing or producing gas.

“The word ‘production’ has a wider connotation in comparison to ‘manufacture’, and any activity which brings a commercially new product into existence constitutes production. The process of bottling of LPG renders it capable of being marketed as a domestic kitchen fuel and, thereby, makes it a viable commercial product”, the Apex Court also said. ­­

While dismissing the appeal, the Court also observed that, “We are also inclined to accept the submission of the learned counsel for the assesses that various High Courts have, from time to time, decided that bottling of gas into cylinder amounts to production and, therefore, claim of deduction under Sections 80HH, 80-I and 80-IA of the Income Tax Act would be admissible”.

Read the full text of the Judgment below.

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