$~7, 8 & 9.
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ INCOME TAX APPEAL NOS. 509/2014, 510/2014 & 515/2014
Date of decision: 12th September, 2014
COMMISSIONER OF INCOME TAX-IV
..... Appellant
Through Mr. Kamal Sawhney, Sr. Standing
Counsel.
versus
M/S. FAITH BIOTECH PVT. LTD.
..... Respondent
Through Nemo.
CORAM:
HON'BLE MR. JUSTICE SANJIV KHANNA
HON'BLE MR. JUSTICE V. KAMESWAR RAO
SANJIV KHANNA, J. (ORAL):
CM No. 13629/2014 in ITA No. 510/2014
CM No. 13862/2014 in ITA No. 515/2014
Exemption applications are allowed, subject to all just exceptions.
INCOME TAX APPEAL NOS. 509/2014, 510/2014 & 515/2014
These appeals by the Revenue pertain to Assessment Years 2006-07,
2008-09 and 2009-10. The common issue raised is whether the respondent-
assessee was engaged in manufacture of goods and things to claim
deduction under Section 80-IC of the Income Tax Act, 1961 (,,Act, for
short). The claim was disallowed by the Assessing Officer, but stands
ITA Nos. 509/2014, 510/2014 & 515/2014 Page 1 of 5
allowed by the Commissioner of Income Tax (Appeals), a finding affirmed
by the Income Tax Appellate Tribunal (,,Tribunal, for short).
2. The respondent-assessee was engaged in the business of manufacture
of health care and surgical items and in the returns filed for Assessment
Years 2006-07, 2008-09 and 2009-10 had declared taxable income of
Rs.26,25,230/-, Rs.94,90,363/- and Rs.32,18,350/- respectively. The
deduction claimed under Section 80-IC of the Act was to the tune of
Rs.42,90,162/-, Rs.35,69,594/- and Rs.2,46,13,965/- respectively. The
respondent-assessee had set up a manufacturing unit for manufacture of air
purifier or air purification systems. The Assessing Officer held that the
aforesaid activities would not qualify as ,,manufacturing activity as the
respondent-assessee was a mere assembler and did not have requisite tools
or machinery. He referred to the value of the fixed assets of about
Rs.1,25,000/- and the assessee had produced bills worth Rs.1,00,000/- for
purchase of tools, etc. Before the Assessing Officer, the respondent-
assessee had given the following explanation:-
"Steri -Air air purification systems use
multiple technologies like ozone gas,
electrostatic precipitation, Ultra violet
germicidal irradiation, multiple mechanical
filters like synthetic pre filters, secondary
filters, activated carbon filters, HEPA (High
efficiency particulate arrestor) filets in
various permutations and combinations. The
combinations depend upon the need of the
customer and the area of application. This is
ITA Nos. 509/2014, 510/2014 & 515/2014 Page 2 of 5
probably for the first time in India that an
array of technologies for air purification,
which were available, has been combined into
a single system for the highest efficiency.
Apart from this in order to make the system
user friendly we have incorporated
programmable timers in the system so that the
user can pre define the time of switching on
and off and the time of running of the system.
The system has been appreciated and well
accepted by the health care industry workers.
We have been promoting it aggressively all
dyer the North Indian Market. Details regarding
our marketing activities and already existing
approvals have been given in the latter part of
this report.
Steri-Air is a versatile system, which can be
used in almost all areas of a hospital on a
continuous 24x7 basis.
Manufacturing of Steri-Air is an assembly
process, where we procure various
parts/components of the system from different
vendors and assemble the same at our facility
in Roorkee. All the electronic and electrical
components are received in the form of cards,
with suitable connectors and all the required
cards are connected using connectors".
3. The term ,,manufacture has been defined in Section 2(29BA) of the
Act, which is as under:-
"2(29BA) "manufacture", with its grammatical
variations, means a change in a non-living physical
object or article or thing,-
(a) resulting in transformation of the object or article or
thing into a new and distinct object or article or thing
having a different name, character and use; or
(b) bringing into existence of a new and distinct object or
article or thing with a different chemical composition
ITA Nos. 509/2014, 510/2014 & 515/2014 Page 3 of 5
or integral structure;"
4. The finding of the appellate authorities, including the Tribunal is that
the product produced and sold by the respondent-assessee was air
purification system. For manufacturing the said product, the assessee had
purchased parts like base motors, filters, UV lights etc. but the final
product produced was entirely different from its constituents or parts. The
product manufactured or produced, i.e. the air purifier or air purification
system, was completely a new and an entirely different commodity having
distinct name, character and use. The respondent-assessee had even filed
photographs before the Assessing Officer to support his contentions on the
manufacturing activities undertaken. The respondent-assessee had filed a
flow chart of the manufacturing process. The manufacturing unit stood
registered with District Industries Centre, Roorkee, Pollution Control
Department, Commercial Tax Department, Uttaranchal, etc.
5. The Assessing Officer did not dispute or question the purchases of
the parts used for manufacturing as well as the sale consideration received
by the respondent-assessee from sale of the air purifiers but did doubt the
purchases of the tools and implements required to undertake the
manufacturing activities. It is not the case of the Revenue that the air
purifiers were not actually manufactured or sold to third parties and there
was bogus purchase of parts or transactions for sale of the manufactured
goods. The stand of the respondent-assessee was that they had used simple
ITA Nos. 509/2014, 510/2014 & 515/2014 Page 4 of 5
tools and testing equipments like frequency tester, multi meter, VV
intensity meter, wires, CFM flow meter, ozone intensity monitor, nuts and
bolts, hand drill, screw driver set, plier cutting set, etc. to carry out
assembling and manufacturing of the air purifiers.
6. In view of the aforesaid factual findings, we do not think any
substantial question of law arises for consideration in the present appeals.
The appeals are thus dismissed.
SANJIV KHANNA, J.
V. KAMESWAR RAO, J.
SEPTEMBER 12, 2014
VKR
ITA Nos. 509/2014, 510/2014 & 515/2014 Page 5 of 5
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