IN HIGH COURT OF DELHI AT NEW DELHI INCOME TAX APPEAL NOS. 509/2014, 510/2014 & 515/2014 Date of decision: 12th September, 2014 COMMISSIONER OF INCOME TAX-IV Appellant Through Mr. Kamal Sawhney, Sr. Standing Counsel. versus M/S. FAITH BIOTECH PVT. LTD.Respondent Through Nemo. CORAM: HON'BLE MR. JUSTICE SANJIV KHANNA HON'BLE MR. JUSTICE V. KAMESWAR RAO SANJIV KHANNA, J. (ORAL): CM No. 13629/2014 in ITA No. 510/2014 CM No. 13862/2014 in ITA No. 515/2014 Exemption applications are allowed, subject to all just exceptions. INCOME TAX APPEAL NOS. 509/2014, 510/2014 & 515/2014 These appeals by Revenue pertain to Assessment Years 2006-07, 2008-09 and 2009-10. common issue raised is whether respondent- assessee was engaged in manufacture of goods and things to claim deduction under Section 80-IC of Income Tax Act, 1961 ( Act , for short). claim was disallowed by Assessing Officer, but stands ITA Nos. 509/2014, 510/2014 & 515/2014 Page 1 of 5 allowed by Commissioner of Income Tax (Appeals), finding affirmed by Income Tax Appellate Tribunal ( Tribunal , for short). 2. respondent-assessee was engaged in business of manufacture of health care and surgical items and in returns filed for Assessment Years 2006-07, 2008-09 and 2009-10 had declared taxable income of Rs.26,25,230/-, Rs.94,90,363/- and Rs.32,18,350/- respectively. deduction claimed under Section 80-IC of Act was to tune of Rs.42,90,162/-, Rs.35,69,594/- and Rs.2,46,13,965/- respectively. respondent-assessee had set up manufacturing unit for manufacture of air purifier or air purification systems. Assessing Officer held that aforesaid activities would not qualify as manufacturing activity as respondent-assessee was mere assembler and did not have requisite tools or machinery. He referred to value of fixed assets of about Rs.1,25,000/- and assessee had produced bills worth Rs.1,00,000/- for purchase of tools, etc. Before Assessing Officer, respondent- assessee had given following explanation:- Steri -Air air purification systems use multiple technologies like ozone gas, electrostatic precipitation, Ultra violet germicidal irradiation, multiple mechanical filters like synthetic pre filters, secondary filters, activated carbon filters, HEPA (High efficiency particulate arrestor) filets in various permutations and combinations. combinations depend upon need of customer and area of application. This is ITA Nos. 509/2014, 510/2014 & 515/2014 Page 2 of 5 probably for first time in India that array of technologies for air purification, which were available, has been combined into single system for highest efficiency. Apart from this in order to make system user friendly we have incorporated programmable timers in system so that user can pre define time of switching on and off and time of running of system. system has been appreciated and well accepted by health care industry workers. We have been promoting it aggressively all dyer North Indian Market. Details regarding our marketing activities and already existing approvals have been given in latter part of this report. Steri-Air is versatile system, which can be used in almost all areas of hospital on continuous 24x7 basis. Manufacturing of Steri-Air is assembly process, where we procure various parts/components of system from different vendors and assemble same at our facility in Roorkee. All electronic and electrical components are received in form of cards, with suitable connectors and all required cards are connected using connectors". 3. term manufacture has been defined in Section 2(29BA) of Act, which is as under:- 2(29BA) manufacture , with its grammatical variations, means change in non-living physical object or article or thing,- (a) resulting in transformation of object or article or thing into new and distinct object or article or thing having different name, character and use; or (b) bringing into existence of new and distinct object or article or thing with different chemical composition ITA Nos. 509/2014, 510/2014 & 515/2014 Page 3 of 5 or integral structure; 4. finding of appellate authorities, including Tribunal is that product produced and sold by respondent-assessee was air purification system. For manufacturing said product, assessee had purchased parts like base motors, filters, UV lights etc. but final product produced was entirely different from its constituents or parts. product manufactured or produced, i.e. air purifier or air purification system, was completely new and entirely different commodity having distinct name, character and use. respondent-assessee had even filed photographs before Assessing Officer to support his contentions on manufacturing activities undertaken. respondent-assessee had filed flow chart of manufacturing process. manufacturing unit stood registered with District Industries Centre, Roorkee, Pollution Control Department, Commercial Tax Department, Uttaranchal, etc. 5. Assessing Officer did not dispute or question purchases of parts used for manufacturing as well as sale consideration received by respondent-assessee from sale of air purifiers but did doubt purchases of tools and implements required to undertake manufacturing activities. It is not case of Revenue that air purifiers were not actually manufactured or sold to third parties and there was bogus purchase of parts or transactions for sale of manufactured goods. stand of respondent-assessee was that they had used simple ITA Nos. 509/2014, 510/2014 & 515/2014 Page 4 of 5 tools and testing equipments like frequency tester, multi meter, VV intensity meter, wires, CFM flow meter, ozone intensity monitor, nuts and bolts, hand drill, screw driver set, plier cutting set, etc. to carry out assembling and manufacturing of air purifiers. 6. In view of aforesaid factual findings, we do not think any substantial question of law arises for consideration in present appeals. appeals are thus dismissed. SANJIV KHANNA, J. V. KAMESWAR RAO, J. SEPTEMBER 12, 2014 VKR ITA Nos. 509/2014, 510/2014 & 515/2014 Page 5 of 5 Commissioner of Income-tax-IV v. M/s. Faith Biotech Pvt. Ltd