Income Tax Deduction under Sec 80 IB allowable even If Goods were not manufactured by own plant and machinery: ITAT [Read Order]

The Surat bench of the Income Tax Appellate Tribunal (ITAT) has held that the income tax deduction under section 80 IB of the Income Tax Act,1961 is allowable even if the goods were not manufactured by own plant and machinery.

Shri A Gopalakrishnan appeared on behalf of the assessee and Shri Vinod Kumar appeared on behalf of the revenue.

The assessee, N Core Cables engaged in the business of manufacturing insulated cable, copper scrap, AC, DC wire set, stranded copper wire, wiring harness and PV tape and sleeve. The assessee filed its return of income declaring a total income of Rs. NIL, on 07.10.2004, wherein, an amount of Rs.8,00,308/-, was claimed as deduction u/s 80-IB of the Act.

The assessing officer observed that the assessee was not utilizing the power in its unit, as the electricity connection has not been released by the Electricity Department, it has used a generator for generating the power, which was hired from M/s Nangalwala Impex (Pvt) Ltd, in the period from 15.02.2004 to 31.03.2004.

The Assessing Officer disallowed the claim of deduction u/s 80IB of the Act to the tune of Rs.8,00,308/-. The CIT(A), has confirmed the action of the Assessing Officer.

The assessee contended that they used their Technical know-how, own process for manufacturing, own raw material and under the direct supervision of one of the partners

It was observed that even if the assessee operates the machinery for one day on 31.03.2004 and manufactures items, it was eligible for deduction u/s 80IB of the Act.

It was clear that it was not necessary that the manufacturing company must manufacture the goods by its plant and machinery at its factory. If in substance the manufacturing company has employed another company for getting the goods manufactured by it under its own supervision or control, the assessee can be considered as a company engaged in the manufacture of goods and, thus, an industrial company.

Shripawan Singh, JM &Dr A L Saini, AM observed that the assessee applied their own technology, standard process, own raw material, own quality control/check, and the goods are manufactured as per the specification given by customers. Based on these facts the assessee was entitled to get a deduction under section 80-IB of the Act and allowed the appeal filed by the assessee.      

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