KASHMIR TUBES Vs. INCOME TAX OFFICER AND OTHERS

JUDGEMENT

(1.) This appeal under Section 260-A of the Income Tax Act, 1961 (for short 'the Act') was admitted by this Court on following substantial questions of law:

(2.) Background facts leading to filing of this appeal briefly stated are that the appellant is a small scale industry which is engaged in the manufacture of black and galvanized iron pipes. The appellant also undertakes the job work of galvanization of other parties. The appellant is registered with the Industries Department for the manufacture of black pipes, galvanized pipes and for the job of galvanization. It is the case of the appellant that appellant is entitled to deduction on the process of manufacture and production of goods under Section 80 IB of the Act. The appellant filed the return for the Assessment Year 2001-2002 in which it claimed deduction on account of galvanization. However, the Income Tax Officer vide order dated 27.02.2004 inter alia held that galvanization does amount to manufacture by placing reliance on decision rendered in Kolkata High Court in the case of Commissioner of Income Tax v. Hindustan Metal Refineries Work, 128 ITR 472 (Cal) . Being aggrieved, the appellant preferred an appeal which was dismissed by the Commissioner of Income Tax (Appeals) and the order passed by the Commissioner of Income Tax (Appeals) was affirmed by the Income Tax Appellate Tribunal (for short 'the Tribunal') vide order dated 07.12.2007. In the aforesaid factual background, this appeal has been filed.

(3.) Learned counsel for the appellant submitted that if by adopting the process, a new commodity/good comes into existence which is fit for use, the same would amount to manufacture. It is also submitted that under Section 80 IB of the Act, even if the process does amount to manufacture, still in view of the fact that the appellant is engaged in the activity of production, the appellant is entitled to the benefit of deduction under Section 80 IB of the Act. Alternatively, it is submitted that Section 80 IB of the Act provides that where the gross total income of an assessee includes any profits and gains derived from any business referred to in sub-sections (3) to (11), (11A) and (11B), such business being hereinafter referred to as the eligible business, 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. In particular, learned counsel for the appellant has invited the attention of Court to Section 80-IB (2)(iii) of the Act.