The Commissioner of Income-tax, Chennai v. M/s.Light Alloy Products Ltd
[Citation -2015-LL-0311-39]

Citation 2015-LL-0311-39
Appellant Name The Commissioner of Income-tax, Chennai
Respondent Name M/s.Light Alloy Products Ltd.
Court HIGH COURT OF MADRAS
Relevant Act Income-tax
Date of Order 11/03/2015
Assessment Year 2002-03
Judgment View Judgment
Keyword Tags infrastructure development • industrial undertaking • gross total income • eligible business • works contract • job work basis • work contract • end product • excise duty
Bot Summary: In view of the above, and following various judicial precedents, I hold that the appellant is entitled to deduction under section 80IB. The AO is directed to allow the deduction under section 80IB in computing the total income. The short issue that arises for consideration in this appeal is whether sub-section of Section 80IA of the Income Tax Act can be made applicable in respect of a claim made by the assessee in terms of Section 80IB of the Income Tax Act. The Commissioner of Income Tax as well as the Tribunal accepted the plea of the assessee and came to the conclusion that sub-section of Section 80IA, which is relatable to enterprises falling under sub-section of Section 80IA, was not applicable in a case of claim under Section 80IB of the Income Tax Act. Assuming for a moment that certain clauses of Section 80IA was made applicable by virtue of sub-section(13) of Section 80IB, we find that the said provision is applicable only in respect of sub-section and sub-sections to of Section 80IA and not in relation to sub-sections and of Section 80IA. Therefore, there cannot be any controversy on this issue, as the claim of the respondent/assessee does not fall under Explanation to sub-section of Section 80IA of the Income Tax Act. For better clarity, Section 80IA(13) and Section 80IB(13) read as follows: Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc. 80-IB. Where the gross total income of an assessee includes any profits and gains derived from any business referred to in sub-sections to 41(11), and, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to such percentage and for such number of assessment years as specified in this section ....... The provisions contained in sub-section and sub- sections to of section 80-IA shall, so far as may be, apply to the eligible business under this section 8 11. A plain reading of the above-said provision makes it clear that the provisions contained in sub-section and sub-sections to of Section 80-IA alone are applicable and not sub-section or of Section 80-IA of the Income Tax Act.


IN HIGH COURT OF JUDICATURE AT MADRAS Dated: 11.03.2015 Coram Honourable Mr.Justice R.SUDHAKAR and Honourable Mr.Justice R.KARUPPIAH Tax Case (Appeal) Nos.1028 to 1030 of 2014 & M.P.Nos.1 and 1 of 2014 Commissioner of Income Tax Chennai. Appellant in above T.Cs -vs- M/s.Light Alloy Products Ltd., 67, Chamiers Road, Chennai -600 028.Respondent in above T.Cs APPEALs filed under Section 260 of Income Tax Act against order dated 01.08.2011 made in I.T.A.Nos.893to 895/Mds/2011 on file of Income Tax Appellate Tribunal, Chennai"A" Bench for assessment years 2002-03, 2003-04 and 2004-05. For Appellant: Mr.T.R.Senthilkumar Standing Counsel COMMON JUDGMENT (Delivered by R.SUDHAKAR,J.) above Tax Case (Appeals) are filed by Revenue as 2 against order of Income Tax Appellate Tribunal raising following substantial question of law: "Whether on facts and in circumstances of case, Income Tax Appellate Tribunal was right in holding that deduction under Section 80IB on profits derived from industrial undertaking on job work contract is to be allowed?" 2. brief facts of case are as follows: assessee is engaged in manufacture of automotive components made of aluminium castings. assessee filed return of income for respective assessment years claiming deduction under Section 80IB of Income Tax Act on works contract. assessment was completed at first instance and later it was reopened. Subsequently, after issuance of notice, assessment was completed by Assessing Officer denying claim of deduction under Section 80IB and determined total income by making additions. 3. Aggrieved by said addition, assessee preferred appeals before Commissioner of Income Tax (Appeals) challenging denial of deduction under Section 80IB of Income Tax Act and also on other grounds. Commissioner of Income Tax (Appeals), 3 while dismissing appeal on other grounds, allowed appeal with regard to claim of deduction under Section 80IA, holding as follows: "I have carefully considered facts of case and various submissions made by Ld. AR. I have also gone through decisions relied on by AO and AR. After considering facts of case and precedents, I am of considered opinion that claim of appellant has to be allowed. perusal of evidences furnished by appellant reveal that appellant has obtained requisite power connection from Tamilnadu Electricity Board for manufacturing activities. High Tension load is awarded for manufacturing activities only. From photographs produced and flow charts furnished it is very clear that finished product of appellant is distinct and different from raw materials used. appellant has also submitted that goods are dispatched on payment of excise duty after completion of manufacturing operations. payment of excise duty will arise only on manufactured products which goes to prove that appellant is engaged in manufacturing activity. Further, it has also been submitted by appellant that manufacturing process is done directly under control and supervision of appellant's employees. appellant has also furnished flow chart of 4 operating personnel with regard to its operations from which it is observed that all staff including its supervisory staff are employees of appellant. Hon'ble jurisdictional High Court in case of Taj Fire Works (supra) had clearly held that assessee who is engaged on job work basis and who satisfies test of manufacture by producing new material which is different from raw material is entitled to special deduction under section 80HH and 80I. appellant has filed evidences in form of flow charts, photographs of various stages of manufacture, raw material used and final products which confirm fact that end product is distinct from raw material used. In view of above, and following various judicial precedents, I hold that appellant is entitled to deduction under section 80IB. AO is, therefore, directed to allow deduction under section 80IB in computing total income. This ground of appeal is allowed." 4. Aggrieved by said order of Commissioner of Income Tax (Appeals), Revenue filed appeals before Tribunal, which dismissed same confirming order of Commissioner of Income Tax (Appeals). 5. As against order of Tribunal, Revenue pursued 5 matter before this Court by filing above appeals. 6. Heard Mr.T.R.Senthil Kumar, learned Standing Counsel appearing for Revenue and perused materials placed before this Court. 7. short issue that arises for consideration in this appeal is whether sub-section (13) of Section 80IA of Income Tax Act can be made applicable in respect of claim made by assessee in terms of Section 80IB of Income Tax Act. 8. respondent/assessee in this case claimed certain benefits under Section 80IB of Income Tax Act. Department denied same on ground that nature of activity is job work and therefore, Explanation to sub-section (13) of Section 80IA would operate in respect of such claim. Commissioner of Income Tax (Appeals) as well as Tribunal accepted plea of assessee and came to conclusion that sub-section (13) of Section 80IA, which is relatable to enterprises falling under sub-section (4) of Section 80IA, was not applicable in case of claim under Section 80IB of Income Tax Act. 6 9. Assuming for moment that certain clauses of Section 80IA was made applicable by virtue of sub-section(13) of Section 80IB, we find that said provision is applicable only in respect of sub-section (5) and sub-sections (7) to (12) of Section 80IA and not in relation to sub-sections (4) and (13) of Section 80IA. Therefore, there cannot be any controversy on this issue, as claim of respondent/assessee does not fall under Explanation to sub-section (13) of Section 80IA of Income Tax Act. 10. For better clarity, Section 80IA(13) and Section 80IB(13) read as follows: Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc. 80-IA. (1) Where gross total income of assessee includes any profits and gains derived by undertaking or enterprise from any business referred to in sub- section (4) (such business being hereinafter referred to as eligible business), there shall, in accordance with and subject to provisions of this section, be allowed, in computing total income of assessee, deduction of amount equal to hundred per cent of profits and gains derived from such business for ten consecutive assessment years.(13) Nothing contained in this section shall apply to any Special Economic Zones notified on or after 1st day of April, 2005 in accordance with scheme referred to in sub-clause (iii) of clause (c) of sub-section (4). Explanation. For removal of doubts, it is hereby declared that nothing contained in this section shall apply to person who executes works contract entered into with undertaking or enterprise, as case may be. Deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings. 80-IB. (1) Where gross total income of assessee includes any profits and gains derived from any business referred to in sub-sections (3) to 41[(11), (11A) and (11B)] (such business being hereinafter referred to as eligible business), there shall, in accordance with and subject to provisions of this section, be allowed, in computing total income of assessee, deduction from such profits and gains of amount equal to such percentage and for such number of assessment years as specified in this section ....... (13) provisions contained in sub-section (5) and sub- sections (7) to (12) of section 80-IA shall, so far as may be, apply to eligible business under this section" 8 11. plain reading of above-said provision makes it clear that provisions contained in sub-section (5) and sub-sections (7) to (12) of Section 80-IA alone are applicable and not sub-section (4) or (13) of Section 80-IA of Income Tax Act. 12. We, therefore, hold that no question of law arises for consideration in these appeals. Accordingly, above Tax Case (Appeals) stand dismissed. No costs. Consequently, M.P.Nos.1 and 1 of 2015 are also dismissed. Index :Yes/No (R.S.,J) (R.K.,J) Internet:Yes/No 11.03.2015 sl To 1. Income Tax Appellate Tribunal, Chennai "A" Bench 2. Commissioner of Income Tax (Appeals), III, Chennai. 3. Income Tax Officer (OSD), Company Circle II(4), Chennai. R.SUDHAKAR,J. 9 AND R.KARUPPIAH,J. sl T.C.(A) Nos.1028 to 1030 of 2014 & M.P.Nos.1 and 1 of 2014 11.03.2015. Commissioner of Income-tax, Chennai v. M/s.Light Alloy Products Ltd
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