JCIT(OSD)-10(2)(1), MUMBAI vs. M/S.JYOTHY LABORATORIES LIMITED, MUMBAI

of the assessee as under: Ground No. 1 & 2: Claim of deduction u/s 80IC of the Act:

3. The assessee is a public limited company and registered under the Company Act, 1956. It is engaged in the business of manufacturing and marketing fabrics whiteners, soaps, detergents, mosquito repellents, scrubber etc. During the year under consideration the assessee claimed deduction of Rs.31,62,34,803/- u/s 80IC of the Act in respect of profit derived from its undertaking established in Uttaranchal. In this regard, the A.O relied on the findings given in the assessment order for assessment year 2011-12 and 2012-13 and concluded that the undertaking was not eligible for claim of deduction u/s 80IC of the Act. The A.O stated that the issue of allowability of deduction u/s 80IC has been exhaustively discussed and examined during the assessment proceedings for assessment year 2011-12 and 2012-13 and it was held that the Uttaranchal undertaking was not entitled for deduction u/s 80IC of the Act mainly on the reasoning that making of Ujala Supreme did not amount to manufacturing of any article, the process of making Ujala &3876/Mum/2018 and C.O Nos. 149 & 150/Mum/2019 4 DCIT-10(2)(1) Vs. M/s Jyothy Laboratories Limited Supreme did not amount to production of any article and the assessee’s product was prohibited under Schedule XIII etc. On similar reasoning the A.O has disallowed the claim of deduction of Rs.31,62,34,803/- claimed u/s 80IC(2)(a) of the Act for Uttaranchal undertaking.

4. The assessee filed the appeal before the ld.CIT(A). The ld. CIT(A) has allowed the appeal of the assessee. The relevant part of the decision is reproduced as under:

is dismissed. 4.3 Ground Nos.2, 2.1 to 2.9 and 3, 3.1 to 3.3 are related to disallowance of deduction u/s 801C(2)(a) amounting to Rs.31,62,34,803/- 4.3.1 The appellant company has claimed deduction of Rs.31,62,34,803/- u/s 80IC in respect of Uttaranchal Unit

1. (Ujala Division) The AO, relied on the detailed findings given in the assessment orders for AY 2011-12 and 2012-12 and held that (i) The making of Ujala Supreme or Acid Dye by simply diluting Acid Violet Paste with water at Uttaranchal Undertaking does not amount to "manufacture of any article or thing as contemplated in the provisions of section 80IC(2)(a) of the Act.

(ii) The process adopted by the appellant in making Ujala Supreme (Violet Dye Liquid or Acid Dye) does not bring in any distinct article as the finished goods have all the characteristics of raw material and the process is reversible. Therefore, the process of making Ujala supreme does not also amount to production of any article or thing. (iii) The appellant's product is prohibited under SI.No.6 of Schedule XIII and it is not entitled to claim deduction u/s 80IC(2)(a). &3876/Mum/2018 and C.O Nos. 149 & 150/Mum/2019 5 DCIT-10(2)(1) Vs. M/s Jyothy Laboratories Limited (iv) Further, with regard to Test Report, certain objections have been raised by the appellant during the assessment proceedings. In this regard, remand report for AY 2011-12 was submitted to the CIT(A) dealing with the objections raised by the appellant with regard to the Test Report obtained from Sophisticated Analytical Instruments Facility (IIT Bombay) The AO reiterated the findings in the remand report for AY 2011-12 and disallowed the claim of deduction of Rs.31,62,34,803/- u/s 80IC(2)(a) for Uttaranchal Undertaking 4.3.2 The AR of the appellant stated that the Ujala Supreme is prepared out of acid dye and satisfies the test of manufacture and production. Ujala Supreme would not fall within the scope of Sr. No 6 of Part B of the Thirteenth Schedule of the Act. The finding of the SAIF Report that the finished product can be brought back to raw material by natural evaporation of water is completely irrelevant. The Probe Qualitative Research Report dated 13.05.2014 establishes that Acid Violet 49 paste and Ujala Supreme are commercially distinct products as understood by trade The appellant has been claiming tax holiday as provided under Section 801B and section 801C of the Act in respect of profits derived from its undertakings established in the specified areas of Wayanad, Himachal Pradesh and Uttaranchal respectively. 4.3.3 The Assessing Officer has observed in the impugned assessment order that the facts involved in the year under consideration are identical to those discussed in the assessment order for AY 2011-12 and AY 2012-13. According to the AO, the appellant in its submissions made for AY 2013- 14, has reiterated the submissions made before the AO during the course assessment proceedings for AY 2011-12 In thereof the AO has cited and relied on the detail findings and conclusions arrived at in the assessment order for AY 2011-12 4.3.4 It is clear from the above, that there is no dispute in facts of these assessment years and arguments and submissions have followed from the preceding years. The grounds of appeal raised in this regard are also more or less identical Further, the AR has reiterated the complete submissions on merits as in the assessment year 2011-12 and the same is not being dealt with in this order. 4.3.5 It is clear that facts and circumstances of this year's case are absolutely identical to that of AY 2011-12 and AY 2012

13. As a matter of fact, the AO for the instant year has also relied upon the discussion, analysis and arguments made by his predecessor in the assessments of preceding year i.e AY 2011-12 and AY 2012

13. I is seen that the CIT(A) for AY 2011-12 has given an elaborate discussion on each and every argument made by the A.O. and AR of the appellant on this issue of disallowance of deduction u/s 80IC(2)(a) The discussion and finding by the learned CIT(A) for AY 2011-12 are exhaustive and speaking and which has been followed in the ITA Nos. 3875 &3876/Mum/2018 and C.O Nos. 149 & 150/Mum/2019 6 DCIT-10(2)(1) Vs. M/s Jyothy Laboratories Limited subsequent appellate order i.e. AY 2012-13 The relevant portion of the order of the CIT(A) for A.Y. 2011-12 is quoted below: “I have gone through the assessment order, submissions of the AR of the appellant, remand report and judicial decisions referred by the AD and AR of the appellant. The AO is of the opinion that the appellant M/s Jyothy Laboratories Ltd is not eligible to claim deduction u/s 801C(2) holding the view that the appellant company is not manufacturer of goods as defined in section 2(29BA) for the following reasons:

1. 1. The AO relied on the CEGAT [Customs Excise and Gold Appellate AR Tribunal order did. 12.08.1993 wherein the Hon’ble Members held the view that the product 'Ujala Supreme' is not an excisable item.

2. The AO further relied on IIT, Bombay Expert's report dtd 14.03.2014 wherein it is held that finished product can be brought back to its original state [raw material) by natural evaporation and the finished product and raw material use are one and the same.

3. Further the AO states that the appellant has not produced any new or distinct object or article. He further states that even the consumers can manufacture the same.

4. The AO is of the opinion that the appellant company is not eligible to claim 80IC as the appellant company is not in manufacturing activity and has also not produced article or thing.

5. The AO held that the Ujala Supreme is known as Violet dye liquid and same is not different from Acid Violet 49 Accordingly, Ujala Supreme is a dye, which comes under serial 6 of Part B of Thirteenth Schedule of the Income-tax Act and the same falls under negative list.

6. The AO states that the assessee classified its product as "Acid Dye" for the purpose of Uttarakhand Value Added Tax (VAT Act).

7. The AO states that the excise classification and NIC classification given in the Thirteenth Schedule would have to be read as ‘EITHER OR’ and not as 'AND Since Ujala Supreme falls under Chapter 32 of The Central Excise Tariff, it falls under serial no 6 of Thirteenth Schedule 8. Further the AO has relied on various decisions in support of his action as under” i. Commissioner of Sales Tax Vs. Ruby Surgical & Allied Products Pvt Ltd [1997] 106 STC 26 ii. Tejan Beverages vs, State of Kerala &Ors (2013) 131 STC 538 Ker &3876/Mum/2018 and C.O Nos. 149 & 150/Mum/2019 7 DCIT-10(2)(1) Vs. M/s Jyothy Laboratories Limited iii. Tungabhadra Industresi ltd. Vs. CTO (1960) 11 STC 827 (SC) iv. CIT vs NC Buddhiraja & Co (1993) 204 ITR 412(SC) v. DD Shah & Bros (2015) 148 Taxmann 4 (Raj) vi. Vijay Ship Breaking Corporation vs. CIT (10 SSC 39) (SC) 9. On the other hand, the AR of the appellant vehemently argued that the appellant company is engaged in the manufacturing activity and production of Ujala Supreme and claimed of 801C(2) deduction correctly for the following reason:- i. The Ld. AO stated that the CEGAT order in the assessee's own case reported in 1994 (50) ECR 36 (T) held that in terms of Chapter Note 6 to Chapter 32 when applied to the process by which Ujala Supreme is manufactured, it cannot be said that the process of manufacture as divisaged in the Chapter Note has taken place and hence it is to be concluded that no process of manufacture has taken place under Central Excise. This is not a reason to deny deduction under Section 801C(2) as per the Income tax Act ii. It will be appreciated that the Expert's report received from IIT, Bombay has not correctly addressed the issue and report itself having some deficiency by reading last line of the report which is as under "Contents of the report is meant for your information only and it will not be used for advertisement, evidence and litigation." iii. The raw material used for manufacturing Ujala Supreme is only Acid Violet 49 actually purchased from qutside market and not produced by the appellant company By adding 1% of Acid Violet 49 and balance 99% water under strict supervision of the Quality Control and stirring electrically, the end product Ujala Supreme which is derived is a product with a different name, character and use and is commercially a different product. In support of this the appellant has relied on the following decisions - CIT vs Vinbros & Co (2009) 177 Taxmann 217 - Jalna Seeds Processing and Refrigeration Company Limited 246 ITR 156 iv. It is not practically or economically feasible for a consumer to prepare Ujala Supreme fabric whitener and in any event it is irrelevant to the issue whether Ujala Supreme is commercially a new and distinct product &3876/Mum/2018 and C.O Nos. 149 & 150/Mum/2019 8 DCIT-10(2)(1) Vs. M/s Jyothy Laboratories Limited v. in respect of negative list, the appellant company is not producing Acid Violet 49 However, 4 is a fact that 1% of the Acid violet is used as raw material and 99% water is added for, dilution and end product Ujala Supreme is not prohibited item as envisaged in serial 6 of Schedule 13 of the Income tax Act. vi. The appellant states that the scheme of classification under the VAT Act is different from the Income-tax Act and the classification under VAT Act cannot be used for interpreting the provisions of Thirteenth Schedule under the Income tax Act based on the judgements cited by it The AR of the appellant states that unlike Central Excise, there is no separate classification under the VAT Act for the preparation from acid dye. vii. The Appellant submits that Ujala Supreme does not fall under NIC 24113 and 24114 but under NIC 24243 as stated in the certificate of Industrial Department (DIC, Roorkee). viii. With regard to judicial decisions relied by AO, the AR of the appellant pleads that the decisions in the case of Ruby Surgicals & Allied Pvt Ltd. as quoted by the AO support the claim of the appellant company. ix. Whereas in case of Teejan Beverages; ground water as well as mineral water can be considered as same product and can be consumed by the consumer, in the appellant company's case, Acid Violet 49 cannot be directly used by the consumer for whitening the washed clothes But it has to be mixed with water and then it becomes fit to whiten the washed white clothes Thus the decision in case of Teejan Beverages vs. State of Kerala & Ors does not apply to the appellant's case. x. In case of Tungabhadra Industries Ltd vs, CTO, groundnut oil and hydrogenated groundnut oil, both can be directly consumed by the consumer In case of Ujala Supreme, it is not possible for the consumer to whiten clothes by bying Acid Violet 49 as the same can be done with Ujala Supreme xi. With regard to D D Shah Bros, the case is related to blending of different qualities of tea so as to produce the specified blend of tea and the facts of the case are not similar to the present case.

ITA Nos. 3875 &3876/Mum/2018 and C.O Nos. 149 & 150/Mum/2019 9 DCIT-10(2)(1) Vs. M/s Jyothy Laboratories Limited xii. With regard to CIT vs NC Buddhiraja and Vijay Shipping Breaking Corporation vs CIT the appellant stated ratio of the said case supports the case of the appellant and production of Ujala Supreme should be regarded having taken place in view of ratio of the said case. xiii. Further the appellant highly relied on Vinbros & Co whose ratio is squarely applicable of the fact of the case concerned Le raw material ENA (Extra neutral alcohol) was diluted with water to make it fit for human consumption Similarly, Acid Violet 49 cannot be used directly for whitening clothes whereas Ujala Supreme made by diluting Acid Violet 49 with water can directly be used for whitening clothes. SLP against this decision has been dismissed by Supreme Court in the case of CIT vs. Vinbros & Co. (2012) 25 Taxmann.com 367(SC) xiv. The appellant relied upon the decision of Delhi High Court in Ajay Kumar vs CIT (214 Taxmann 518) to contend that for a product to fall within serial No 6 of Thirteenth Schedule of the Income tax Act, the product should fit in all the columns of the applicable serial number in the said schedule The AR of the appellant has given explanation that the acid violet 49 is the main raw material actually purchased from outside market and then added with water in stipulated proportion and then filtered for impurities after stirring & electronically under strict as Quality Control by respective staff. Thereafter the materials are transferred to the HDPE container in the requisite quantity of 30ml 75ml and 250ml capacity alongwith dropper which will dispense requisite 4 drops for 1 litre of water. The wordings used in Excise Act cannot be imported for the purpose of the Income tax definition based on the following decisions CIT va Venkateshwara Hatcheries Pvt Ltd 237 ITR 174 (SC) CIT vs Hormasji Manchagi Vaid (Gu)) 250 ITR 542 MB Chemicals vs DCIT (76 ITD 1) ITAT. Pune Arihant Tiles & Marbles vs ITO (2007) 295 ITR 148(Raj) The AO again relied on the expert report received by IIT Bombay atd 14.03 2014 wherein I am in agreement with the AR of the appellant that the report has not addressed full issue and by virtue of the reading given in the bottom of the report that it should not be used for advertisement evidence and litigation, it tosses the sanctity. With regard to the AO's contention in respect of negative list in the Thirteenth Schedule, the AR of the appellant very well &3876/Mum/2018 and C.O Nos. 149 & 150/Mum/2019 10 DCIT-10(2)(1) Vs. M/s Jyothy Laboratories Limited explained that the raw material is purchased from the outside market and appellant company is not producing the said Acid Violet 49 and accordingly it will never come under the negative list as per the Income tax Act and is eligible to claim 80IC(2) In this regard as brought to my notice by the AR of the appellant company, CEGAT order did 12.08 1993 as per page 13 & 14, para 148, the Excise authority held a clear decision that Ujala is a blueing agent only, not a dye The relevant portion is as under "It has been established by sufficient evidence on record that Ujala is blueing agent which cannot be regarded as a dye for which it is relevant to refer to Encyclopedia of Chemical Technology, page 395, on Acid Dyes and Theory of Dyeing It has been mentioned therein that these dyes are applied in the presence of Organic or minerals acids. There is no evidence of the presence of such acids in the case of the appellant's product I agree with the contention of the appellant that the scheme of classification under the VAT Act is different from the Income-tax Act and the classification under VAT Act cannot be used for interpreting the provisions of Schedule under the Income tax Act based on the above cited judgements. I also agree with the AR of the Appellant that in view of Ajay Kumar's case, the product has to fall in all the columns of the relevant Serial No to fall in the Thirteenth Schedule. I have also gone through NIC 24113, 24114 and 24243 I am in agreement that the correct classification of Ujala Supreme is NIC 24243 as stated in the certificate of industrial Department (DIC Roorkee). I have gone through the judicial decision by the AO which are discussed as under: CTO vs Ruby Surgical and Allied Products Private Limited [1197] 106 STC 26 "The court held view that there must be transfomation and a new different article must emerge, having a distinctive name, character or use” By relying on the above case law to reject the claim of the appellant claimed u/s 80IC(2), the AO vido para 5.3.11.7 on page 21 of the assessment order, relied on the Uttranchal Val authorities decision of Acid Dye which is nothing but Acid violet paste and accordingly no new product emerged. DD Shah & Bros (2015) 148 Taxmann 4 (Raj) It was held that blending of different chemicals and physical composition so as to produce the specified blend of tea does &3876/Mum/2018 and C.O Nos. 149 & 150/Mum/2019 11 DCIT-10(2)(1) Vs. M/s Jyothy Laboratories Limited not involve an act of manufacture of tea. Here different teas can be consumed with blending or without blending whereas in the appellant case, add violet 49 cannot be consumed directly by the consumer and the above decision cannot be application in the appellant's case. Tungabhadra Industries Ltd. v. CTO (1960) 11 STC 827 (SC) In this case, the ground oil or hydrogenated groundnut oil can be consumed separately whereas in the case of the appellant company the acid violet 49 cannot be separately used for whitening the clothes. Teejan Beverages vs. State of Kerala Crs (2013) 131 STC 538 Ker In this case ground water and mineral water both can be consumed directly by the consumer whereas in the case of appellant company, Acid violet 49 cannot be directly used by the consumer for whitening of washed cloths. Vijay Ship Breaking Corporation vs. CIT (10 SSC 39) (SC) The Honble SC held the view that the production of distinct article must emerge from the process. In the appellant's case, Ujala Supreme is a new product emerged as per the Income tax Act, 1961. On the other hand, the AR of the appellant relies on the following case laws CIT vs Vinbros & Co (2009) 177 Taxmann 217 Jalna Seeds Processing and Refrigeration Company Limited 246 ITR 156 I have gone through the case Jaw of CIT vs Vinbros & Co. wherein it is held that ENA is blended with water and thereafter it become fit for human consumption otherwise ENA directly cannot be consumed by the customer. In the case of Jalna Seeds Processing & Refrigeration Co Lid, before manufacturing the seeds are edible for consumption but after processing of manufacturing is not fit for consumption but only for cultivation. Similarly in the appellant's case, acid violet 49 cannot be directly used for whitening of washed clothes but has to be diluted with water in stipulated proportion for whitening of washed clothes. Hence I held that the view of these citations referred above le CIT vs, Vinbros & Co and Jalna Seeds Processing & Refrigeration Co Ltd., is similar to the facts of the case of the appellant company.

ITA Nos. 3875 &3876/Mum/2018 and C.O Nos. 149 & 150/Mum/2019 12 DCIT-10(2)(1) Vs. M/s Jyothy Laboratories Limited Respectfully following the judicial decision in the case of Jalna Seed Processing & Registration Co. Ltd. (246 ITR 156) and Vinbrose & Co. [(2009) 77 Taxmann 217]. I am of the considered opinion that it is not far on the part of the AO to reject claim of deduction u/s 80IC(2) of the Income tax Act 1961, 11 am of the opinion that the appellant company is eligible to claim deduction u/s 801C(2) and considering the above fact on record this ground of appeal is allowed" 4.3. 6 In view of the submission made by the appellant company, discussion and analysis given by the CIT(A) for AY 2011-12 on each and every parameter which has been taken up by the AO for disallowance u/s 80IC(2)(a), the principles laid down by the various judicial ratios quoted by the predecessor in earlier year and by the A/R of the appellant, it is clear that the AO was not justified in denying deduction u/s 80IC(2)(a) under identical facts and circumstances to that of AY 2011-12, and respectfully following the finding of Ld. predecessor for AY 2011-12, the AO is directed to allow deduction u/s 80IC(2)(a) Appeal field on this issue is therefore allowed.”

5. During the course of appellate proceedings before us the ld. D.R submitted that assessee was producing fabrics whiteners, soaps, detergents, mosquito repellents, scrubber etc. which was not manufacturing but it was mixture and he supported the order of assessing officer.

6. On the other hand, the ld. Counsel submitted that identical issue on similar facts in the case of the assessee itself has been adjudicated in favour of the assessee vide for A.Y. 2011-12 & ITA No. 7280/Mum/2016. He also referred page no. 45 of the order of CIT(A) and submitted that A.O has incorrectly relied on the order of (CEGAT) Custom and Excise and Gold Appellate Tribunal order dated 12.08.1993 wherein held that the product Ujala Supreme was not excisable item. The ld. Counsel submitted that ld. CIT(A) has exhaustively discussed the issue of manufacturing in his finding along with judicial pronouncements and submitted that the wording used in excise act cannot be imported for the purpose of Income Tax. The ld. ITA Nos. 3875 &3876/Mum/2018 and C.O Nos. 149 & 150/Mum/2019 13 DCIT-10(2)(1) Vs. M/s Jyothy Laboratories Limited Counsel also submitted that ld. CIT(A) has also discussed the report of III Bombay at para 47 of the order stating that report has not addressed the full issue and in the report it was mentioned that it should not be used for advertisement purpose and litigation.

7. Heard both the sides and perused the material on record. Without reiterating the facts as elaborated above during the course of assessment the A.O has not allowed the claim of deduction u/s 80IC in respect of Uttaranchal unit of the assessee on the reasoning that the process of making if Ujala Supreme did not result into any new product. During the course of appellate proceedings before us the ld. Counsel submitted that coordinate bench of the ITAT in the case of the assessee itself for assessment year 2011-12 and 2012-13 have adjudicated identical issue on similar facts vide & ITA No. 7280/Mum/2016 in favour of the assessee. 7.1 With the assistance of the ld. Representative we have gone through the decision of the ITAT vide ITA No. 7280/Mum/2016 wherein the relevant issue was decided after following the decision of the ITAT in the case of the assessee for assessment year 2011-12 vide ITA No. 7281/Mum/2016. The relevant part of the decision is reproduced as under: “7. Heard both the side and perused the material on record. Without reiterating the facts as elaborated above during the course of assessment the A.O has not allowed the claim of deduction u/s 80IC in respect of Uttaranchal Unit of the assessee and deduction u/s 80IB in respect of Himachal Unit of the assessee on the reasoning that the process of making of Ujala Supreme did not result into any new product. During the course of appellate proceedings before us the ld. Counsel submitted that coordinate bench of the ITAT in the case of assessee itself for A.Y. 2011-12 has adjudicated identical issue on similar facts vide ITA No. 7281/Mum/2016 in favour of the assessee. With the assistance of the ld. representative we have gone through the above referred decision of the ITAT. The relevant part of the decision is reproduced as under: &3876/Mum/2018 and C.O Nos. 149 & 150/Mum/2019 14 DCIT-10(2)(1) Vs. M/s Jyothy Laboratories Limited “7. Before us the learned A.R. for the respondent assessee made a preliminary point in defence of the ultimate conclusion of the CIT(A), which is based on the judgement of the Hon'ble Bombay High Court in the case of Simple Food Products (P) Ltd. vs. CIT (2017) 84 taxmann.com 239.

8. The point raised is that when the deductions under section 80IC as well as under section 80IB of the Act have been granted in the initial assessment years, the same could not be rejected for the subsequent assessment years unless the relief allowed for the initial year was withdrawn. It has been pointed out by the learned A.R. that the deductions under Section 80IB and 80IC of the Act are allowable to an assessee over a specified number of consecutive assessment years, and in the instant case, such claims have not been withdrawn in the initial assessment years, therefore the action of the Assessing Officer to deny the claim in the instant assessment year is untenable. In support, reliance has also been placed on the principle laid down by the Hon'ble High Court in the case of CIT vs. Paul Brothers (1995) 216 ITR 548 (Bom.), which has been subsequently reiterated and applied by the Hon'ble High Court in the case of Simple Food Products (P) Ltd. (supra).

15. In our view, the aforesaid objection of the Revenue does not come in the way of applying the proposition laid down by the Hon'ble Bombay High Court in the case of Simple Food Products (P) Ltd. (supra) in the instant case. In fact, to recapitulate, the following observation of the Hon'ble High Court is worthy of notice and provides an answer to the objection raised by the Revenue :- “Therefore, once deduction is granted in the initial Assessment Year, the same would continue for the period of 10 consecutive year unless the relief for initial year is also withdrawn at the time of withholding the relief under Section 80IA/IB of the Act.” [underlined for emphasis by us].

16. As per the Hon'ble High Court, once the deduction is granted in the initial assessment year, the same would continue for the specified period unless the relief for initial year is also ‘withdrawn at the time of withholding the relief under Section 80IA/80IB of the Act’. Clearly, in the instant year when the claim of deduction is rejected by the Assessing Officer, the relief allowed in the initial assessment year has not been ITA Nos. 3875 &3876/Mum/2018 and C.O Nos. 149 & 150/Mum/2019 18 DCIT-10(2)(1) Vs. M/s Jyothy Laboratories Limited withdrawn. Mere initiation of proceedings under Section 148 of the Act to reopen the assessment of the past year cannot be understood to mean that the ‘claim is withdrawn’. Therefore, in our view, the Assessing Officer could not have rejected the claim for deduction under Sections 80IB as well as 80IC of the Act in the subject assessment order because the relief allowed in the initial assessment year was not withdrawn at the time of such rejection in the instant year.

17. In the above background, we, therefore, find merit in the preliminary point made out by the respondent-assessee and the appeal of Revenue on this point deserves to be dismissed. Thus, in the final analysis, we uphold the ultimate conclusion of the CIT(A) to allow the benefit under Sections 80IB and 80IC of the Act to the assessee, albeit on a different ground.” After taking into consideration the facts and finding in the order of the ITAT in the case of the assessee itself as supra we find that facts and circumstances in this order are also similar to the A.Y. 2011-12 except variation in the amount of quantum of addition. There is nothing before us on hand to differ from the issue raised in the case of the assessee cited (supra) to take a different view on this issue. Therefore, since the issue on hand being squarely covered following the principle of consistency, we find merit in submission of the assessee and allow the claim of deduction u/s 80IB & 80IC of the Act. Therefore, this ground of appeal

of the revenue stand dismissed.” 7.2 We have also perused the finding of ld. CIT(A) as elaborated supra where exhaustive discussion has been made on the process of manufacturing of Ujala Supreme. It is explained that the acid violet-49 is the main raw material actually purchased from outside market and then added with water in stipulated proportion and then filtered for impurities after stirring it electronically under strict as Quality Control by respective staff. Thereafter, the material are transferred to the HDPE container in the requisite quantity of 30 ml, 75 ml, 250 ml capacity along with dropper which will dispense requisite 4 drops for1 litre of water. It was also explained that production of the assessee was not listed in the Thirteenth schedule and the raw material is purchased from the outside market and assessee company is not producing the said Violet-49. It is also explained that scheme of classification under the VAT Act is different from the Income Tax Act and the classification under the VAT &3876/Mum/2018 and C.O Nos. 149 & 150/Mum/2019

19. DCIT-10(2)(1) Vs. M/s Jyothy Laboratories Limited cannot be used for interpreting the provisions of Thirteenth Schedule under the Income Tax Act.

7.3 The assesse had employed more than 300 persons in the Uttranchal Unit and machines were used for the purpose of manufacturing and the end product is Ujala Supreme (Fabric Whitener) list of machines installed were also furnished before the A.O showing the appropriate value of Rs.8.4 crore as on 31.03.2013. The assesse explained that making of Ujala Supreme amounts to manufacturing within the meaning of section 2(29BA) of the Act. The assesse’s unit is a composite unit manufacturing the product liquid and plastic container for filling the same. The process of manufacture of Ujala Supreme (Fabric whitener) are as follows:

“(a) Blow Moulding of High Density Polyethylene (HDPE) containers required for the above product. These containers are not sold but used for production of end product Ujala Supreme (Fabric Whitener). (b) Injection Moulding of closures for captive consumption only. (c) Sleeve labelling of the containers with brand name, commodity name, instruction to use and other statutory descriptions. (d) Blending (mixing) of the raw material acid violet 49 paste (hereinafter referred to as 'AVP' or "Acid Violet Paste") in water in a specified proportion (1% of AVP mixed with 99% of water) and stirring for 45 minutes using electrically operated stirrer. This dilution is undertaken with the use of plant and machinery involving electric power as well as manpower. (e) This liquid is pumped through filter cloth to remove impurities/undissolved particles & stored in distribution tank from where it is transferred to filling stations using pipe. (f) Filling the labelled HDPE containers of 30 ml, 75 ml and 250 ml capacity with the above liquid Fabric Whitener and closing/capping to market the end product to be used by consumers for obtaining super whiteness of clothes. (g) The quality assurance is ensured by the designated department at various stages from receipt of materials till final dispatch of the end product. (h) Filling in polypropylene covers for retail dispensation. &3876/Mum/2018 and C.O Nos. 149 & 150/Mum/2019 20 DCIT-10(2)(1) Vs. M/s Jyothy Laboratories Limited (i) Secondary packaging in corrugated boxes (j) Storing and outward dispatch.”

A different commodity (fabric whitener) comes into existence which has a different name character and use. The revenue could not substantiate that assesse company is not manufacturer of goods as defined in section 2(29BA) of the Act contrary to the facts and findings as discussed above and in the findings of ld. CIT(A). Therefore, we don’t find any infirmity in the decision of ld. CIT(A). Therefore, after following the decision of the ITAT as supra grounds of appeal of revenue stand dismissed. Ground No. 3 & 4: Deleting disallowance u/s 14A of the Act:

8. The identical issue on similar facts has been adjudicated in the case of the assessee itself vide in favour of the assessee.

9. Heard both the sides and perused the material on record. Since, the assessee has not earned any exempt income during the year under consideration, therefore, we don’t find any infirmity in the decision of ld. CIT(A) in allowing the claim of the assessee following the decision of Delhi High Court in the case of M/s Chem Invest Ltd. Vs. ITO (2009) 121 ITD 318. Therefore, both these ground of appeal of the revenue stand dismissed. Ground No. 5: Regarding addition on account of disallowance u/s 14A to the book profit of the assessee:

10. Heard both the sides and perused the material on record. The ld. CIT(A) has dismissed this ground of appeal

of the assessee on the reasoning that disallowance of expenditure under the normal provision of &3876/Mum/2018 and C.O Nos. 149 & 150/Mum/2019 21 DCIT-10(2)(1) Vs. M/s Jyothy Laboratories Limited the Act was deleted on account of not earning any exempt income. After considering decision of ld. CIT(A) we don’t find any merit in the appeal of the revenue, therefore the same stand dismissed.

11. The appeal of the revenue stand dismissed.

12. As the facts and the issues involved in this appeal are same as supra in therefore, applying the same findings mutatis mutandis, this appeal of the revenue also stand dismissed. C. O. No. 149/Mum/2019 Ground No. 1: Pertaining to not allowing deduction u/s 80IB/80IC for Jammu Maxo Unit & Himachal Poly Vinyle Emulsion Unit: 13. Since as supra the claim of deduction u/s 80IC has been adjudicated in favour of the assessee, therefore, the cross objection pertaining to without prejudice grounds for the claim of deduction u/s 80IB/80IC as discussed at para 4.6.8 of the order of ld. CIT(A) has become infructuous, therefore the same stand dismissed. Ground No. 2: Claim of set off of the total deductions u/s 80IC/80IB to the amount of Rs.35,46,49,672/- against the gross total income of Rs.48,15,59,637/-: 14. The ld. CIT(A) has discussed the issue at para 4.6 to para 4.6.6 of his order. The Assessing Officer has disallowed the claim of set off of deduction u/s 80IC against the income from other sources on the ground that the interest earned by the assessee on fixed deposits, loans to subsidiaries, inter corporate deposits were not derived from the business activity of the assessee. The ld. CIT(A) has uphold the action of assessing ITA Nos. 3875 &3876/Mum/2018 and C.O Nos. 149 & 150/Mum/2019 22 DCIT-10(2)(1) Vs. M/s Jyothy Laboratories Limited officer that impugned income against which set off claimed were not derived from business activity after referring various judicial pronouncements viz. Cambay Electrical Supply Company Ltd (113 ITR 84), Liberty India Ltd. Vs. CIT (2009) 183 taxman 349 (SC) and in the case of Vellore Electric Corporation ltd. Vs. CIT (1997) 93 taxman 401/227 ITR 557 (SC).

“9. The controversy in this case pertains to the deduction under section 80 IA of the Act being allowed to the extent of business income only. The claim of the Assessee that deduction under section 80-IA should be allowed to the extent of 'gross total income' was rejected by the Assessing Officer. It is relevant to reproduce Section 80AB of the Act which is as follows: 80AB Deductions to be made with reference to the income included in the gross total income Where any deduction is required to be made or allowed under any section included in this Chapter under the heading "C Deductions in respect of certain incomes" in respect of any income of the nature specified in that section which is included in the gross total income of the assessee, then, notwithstanding anything contained in that section, for the purpose of computing the deduction under that section, the amount of income of that nature as computed in accordance with the provisions of this Act (before making any deduction under this Chapter) shall alone be deemed to be the amount of income of that nature which is derived or received by the assessee and which is included in his gross total income.” As stated above, Section 80AB was inserted in the year 1981 to get over a judgment of this Court in Cloth Traders (P) Lid (supra) The Circular dated 22-9- 1980 issued by the CBDT makes it clear that the reason for introduction of Section 80AB of the Act was for the deductions under Part C of Chapter VI-A of the Act to be made on the net income of the eligible business and not on the total profits from the eligible business. A plain reading of Section 80AB of the Act shows that the provision pertains to determination of the quantum of deductible income in the 'gross total income' Section 80AB cannot be read to be curtailing the width of Section 80-IA. It is relevant to take note of Section 80A(1) which stipulates that in computation of the total income of an assessee, deductions specified in Section 80C to Section 80U of the Act shall be allowed from his 'gross total income", Sub-section (2) of Section 80A of the Act provides that the aggregate amount of the deductions under Chapter VI-A shall not exceed the gross total income of the Assesse. We are in agreement with the Appellate Authority that Section SOAB of the Act which deals with determination off deductions under Part C of Chapter VI-A is with respect only to computation of deduction on the basis of ‘net income’.”

ITA Nos. 3875 &3876/Mum/2018 and C.O Nos. 149 & 150/Mum/2019 24 DCIT-10(2)(1) Vs. M/s Jyothy Laboratories Limited Section 80A(2) provide that the aggregate deduction under chapter VIA shall not in any case exceed the gross total income of the assesse. However, Section 80AB is only deals with computation of deduction on the basis of income of the nature specified in the relevant section. In accordance to the above provisions of the act and after following the decision of Hon’ble Supreme Court as supra we direct the A.O to allow the claim of deduction out of the gross total income of the assesse. Therefore, this ground of cross objection is allowed.