COMMISSIONER OF INCOME TAX vs. MIDAS POLYMER COMPOUNDS PVT. LTD.

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ITA/155/2013HC KeralaKLHC01026040201303 March 2014Bench: HONOURABLE MR.JUSTICE A.M.SHAFFIQUE,HONOURABLE THE CHIEF JUSTICE DR. MANJULA CHELLUR5 pages
AI SummaryDismissed

What did the High Court hold?

The High Court, in its judgment dated March 3, 2014, declined to interfere with the orders of the appellate authorities. The Court noted that the Income Tax Appellate Tribunal (ITAT), after considering the Full Bench decision of the High Court in ITA No. 84 of 2009 (dated December 21, 2010), had held that the assessee is eligible for the deduction under Section 80-IB. The Court further observed that the Revenue had not filed a Special Leave Petition before the Supreme Court against the High Court's decision in ITA No. 84 of 2009 due to the tax effect being below the prescribed monetary limits. Therefore, the Full Bench decision in ITA No. 84 of 2009 was considered the declared law on the subject. The High Court dismissed the appeal filed by the Revenue, upholding the ITAT's revised order which allowed the deduction to the assessee. The operative direction was to dismiss the appeal in terms of the High Court's earlier decision.

What were the facts?

The assessee, M/s. Midas Polymer Compounds Pvt. Ltd., is a private limited company engaged in pre-cured tread rubber. For the assessment year 2007-08, the Revenue opined that the assessee incorrectly included income from mixing on a job work basis in profits eligible for deduction under Section 80-IB of the Income Tax Act. The assessing officer rejected this claim, arguing that complete manufacturing does not occur during mixing, making it ineligible for the deduction. The assessee's initial appeal was rejected. Subsequently, the Income Tax Appellate Tribunal (ITAT) also rejected the claim. However, upon being presented with a Full Bench decision of the High Court in ITA No. 84 of 2009, the ITAT reconsidered the matter via a Miscellaneous Application and held that the assessee is eligible for the deduction. The Revenue did not file a Special Leave Petition against the High Court's decision due to the tax effect being below monetary limits.

What were the issues?

1. Whether the income derived from mixing on a job work basis constitutes income from 'manufacturing' eligible for deduction under Section 80-IB of the Income Tax Act, 1961. Assessee's Contentions: The assessee contended that the income from mixing on a job work basis should be considered as part of manufacturing activities and thus eligible for deduction under Section 80-IB. They relied on the Full Bench decision of the High Court in ITA No. 84 of 2009, which was subsequently brought to the Tribunal's notice. Revenue's Contentions: The Revenue argued that the process of mixing does not constitute complete manufacturing. They contended that mixing is merely one of several processes involved in the overall work, and therefore, the income generated from mixing charges should not be treated as income from 'manufacturing' for the purpose of Section 80-IB deduction. The Revenue's initial stand was upheld by the assessing officer and the first appellate authority.

Which sections of the Income-tax Act were involved?

Section 80-IB,Section 143(3)

AI-generated summary — verify with the full judgment below

Heard together (2 matters)

MA. NO.100/COCH/2012
ITA NO.266/COCH/2010

Read from the judgment's own cause title. This page is filed under one of them.

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HON'BLE THE CHIEF JUSTICE DR. MANJULA CHELLUR & THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE MONDAY, THE 3RD DAY OF MARCH 2014/12TH PHALGUNA, 1935 ITA.No. 155 of 2013 () ----------------------- MA. NO.100/COCH/2012 (ARISING OUT OF ITA NO.266/COCH/2010) OF INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH. ....... APPELLANT/RESPONDENT.: ------------------------------------------ THE COMMISSIONER OF INCOME TAX, KOTTAYAM. BY SRI.P.K.R.MENON,SR.COUNSEL, GOI (TAXES). ADV. SRI.JOSE JOSEPH, SC, INCOME TAX. RESPONDENT/APPELLANT: ---------------------------------------- M/S.MIDAS POLYMER COMPOUNDS PVT. LTD., MIDAS MARKETING BUILDING, MARIATHURUTHU P.O., KOTTAYAM- 686 027. THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 03-03-2014, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: rs.

ITA.No. 155 of 2013 APPENDIX PETITIONER'S ANNEXURES:- ANNEXURE A COPY OF THE ASSESSMENT ORDER U/S.143(3) DATED 02/12/2009. ANNEXURE B COPY OF THE CIT (APPEALS) ORDER NO.ITA-23/CIT(A)/ IV/KTM/09-10 DATED 17/02/2010. ANNEXURE C COPY OF THE ORDER OF THE TRIBUNAL IN ITA NO.266/COCH/2010. ANNEXURE D COPY OF THE ORDER OF THE HON'BLE HIGH COURT IN ITA NO.84/2009. ANNEXURE E COPY OF THE ORDER OF THE TRIBUNAL IN MA NO.100/COCH/2012 (ARISING OUT OF ITA NO.266/COCH/2010). RESPONDENT'S ANNEXURES:- NIL. //TRUE COPY// P.S. TO JUDGE rs.

Manjula Chellur, C.J. & A.M. Shaffique, J. - - - - - - - - - - - - - - - - - - - - - - - - - - - - I.T.A. No. 155 OF 2013 - - - - - - - - - - - - - - - - - - - - - - - - - - - - Dated this the 3rd day of March, 2014 JUDGMENT Manjula Chellur, C.J. Revenue is before this Court aggrieved by orders of the appellate Tribunal. In brief the facts that lead to the filing of the present appeal is as under. 2. Assessee is a private limited company engaged in pre-cured tread rubber. The activities of the assessee according to the Revenue are manufacturing rubber treading material and rubber compound and mixing on job work basis. The present appeal pertains to the assessment year 2007-08. Revenue opined that assessee included the income from mixing on job work basis also in the profits liable for deduction under Section 80-IB of the Income Tax Act. However, according to the assessing officer, the said income was not liable for deduction, therefore rejected the claim of the assessee. According to the stand of the revenue that in

ITA No. 155 of 2013 -:2:- mixing, the complete manufacturing does not occur and it is only one of the several processes involved in the work, therefore, the claim that mixing charges also constitute income from “manufacturing” was rejected. This came to be challenged by the assessee and the first appeal came to be rejected. Assessee approached the Tribunal and Tribunal initially rejected the claim. But, later on when the Full Bench decision of the High Court in ITA No.84 of 2009 dated 21.12.2010 was brought to the notice of the Tribunal, it considered the Miscellaneous Application. Tribunal has also now held that assessee is eligible for such deduction. So far as ITA No.84 of 2009, Revenue did not file Special Leave Petition before Supreme Court as the tax effect was below the prescribed monetary limits for filing SLP. Fact remains that as on today the Full Bench decision in ITA No.84 of 2009 is the law declared on the subject matter. In that view of the matter, we decline to interfere with the orders of the authorities concerned and accordingly

ITA No. 155 of 2013 -:3:- the appeal is dismissed in terms of ITA No.84 of 2009 dated 21.12.2010. Manjula Chellur, Chief Justice. A.M. Shaffique, Judge.

ttb/03/03

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