PUTTUR PETRO PRODUCTS PVT. LTD. REP. BY ITS MANAGING DIRECTOR SRI J. UDAY BHAT Vs. ASSISTANT COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS income tax appeal is preferred by an assessee against the order dated 31st January 2007 rendered by Income Tax Appellate Tribunal, Bangalore Bench (B) (for short "Tribunal") in ITA No. 121/Bang/2006, whereby, the assessee's appeal came to be dismissed. The assessee had preferred an appeal before the Tribunal against the order dated 16 -11 -2005 passed by the Commissioner of Income Tax Appeals (Appellate Authority) in appeal No. ITA/271/CIT(A)/MNG/2003 -04. In the appeal before the Appellate Authority the assessee had challenged the order dated 25 -2 -2004, under Section 143(3) of the Income Tax Act, 1961 (for short the "Act") passed by the Assistant Commissioner of Income Tax, Circle -I, Bangalore (for short "Assessing Officer"). Thus, all the three authorities negatived the claim of the assessee seeking deduction under Section 80IB of the Act. The assessee had claimed deduction contending that bottling of LPG gas in the cylinders amount to production/manufacturing activity and hence eligible for deduction under Section 80IB of the Act.

(2.) THE present appeal was admitted on the substantial questions of law raised/framed in paragraph 11(1) to 11(5) in the memorandum of appeal. However, with the assistance of the learned counsel for the arties, in the beginning of hearing of the appeal, we formulated the following question for our consideration: (i) whether on the facts and in the circumstances of the case, and in law, the authorities below were justified in holding that bottling of gas into gas cylinders is production activity for the purpose of Section 80IB(3) of the Act?

(3.) AT the outset, we would like to refer to the judgment of the Bombay High Court in Commissioner of Income Tax -I v. M/s. Hindustan Petroleum Corporation Ltd., 2013 TOIL 253 HC MUM IT, wherein, almost identical question was considered and answered by the Division Bench. One of the questions that was framed by the High Court was "whether on the facts and in the circumstances of the case, and in law, the Tribunal was justified in holding that bottling of gas into gas cylinders as a production activity for the purpose of Section 80HH, 80I/80IA ignoring the fact that no new product comes into existence in this process - In other words, the controversy that was considered by the Bombay High Court was whether the activity of bottling of LPG gas amounts to production or manufacturing activity for the purpose of deduction under Section 80HH, 80I/80IA of the Act. After considering its other judgment and the judgment of the Gujarat High Court in Bharat Petroleum Corporation Ltd. v. State of Gujarat, the Bombay High Court in paragraph -4 observed thus: 4. Since the Tribunal in the impugned order has relied upon the decision of this Court and the consequent order of the Electricity Ombudsman to hold that the activity of bottling LPG Gas is a very specialized process and the same is considered to be an activity of manufacture. The Tribunal in the impugned order had observed to the effect that the word used in Section 80HH, 80I/80IA of the Act is manufacturing or production. The term production is wider then the word manufacture. Therefore, every activity which bring into existence a new product would constitute production. The impugned order records a finding of fact that the process of bottling the LPG Gas into cylinder makes the same marketable on execution of the process. It therefore follows that a new product comes into existence. The fact that the decision of this Court in HPL (supra) and the Gujarat High Court dated 6/5/2010 are rendered keeping in view of the fact that Gas Cylinder Rules 1984 which were not in force during the relevant assessment year would not in any way detract from the finding of fact arrived at by the Tribunal. In these circumstances, as the Tribunal has rendered a finding of fact and placed reliance upon the decision of this Court and also the Gujarat High Court dated 6/5/2010, we see no reason to entertain the proposed questions of law. (emphasis supplied)