In Vijay Kumar v. CIT, a division bench of the Jammu & Kashmir High Court held that the activity of supplying the audio of the back ground sound to the film already shot by the customers, would amount to manufacture within the meaning of Section 80-IB of the Income Tax Act, 1962.
A bench of Justices Alok Aradhe and Sanjeev Kapoor was hearing an income tax appeal against an ITAT order whereby the Tribunal given a different view and concluded the matter in favour of the Revenue.
Assessee was engaged in the activity of editing of supplying the audio of the back ground sound to the film already shot by the customers. Assessee, for the above activity, claimed deduction under section 80-IB of the Income Tax Act claiming that it would amount “manufacture”. However, the assessing officer rejected the claim and observed that it would not amount to manufacture of processing of goods in terms of the said section.
The bench observed that the activity of Video Software Generation has been recognized as Small Scale Industries by Government of India, Ministry of Industry vide order dated 04.03.1993, as well as 03.11.1993.
Further, it noted that the Supreme Court, in the case of Commissioner of the Income Tax Vs. Oracle Software India Ltd, held that by providing the Audio Software to the Video already shot makes an article fit for use which in turn amounts to manufacture.
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