Case Note & Summary
The assessee, M/s Puttur Petro Products Pvt Ltd, an LPG bottling company, filed an appeal under Section 260-A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal (ITAT) dated 31 January 2007, which dismissed its appeal. The assessee had claimed deduction under Section 80IB of the Act for the assessment years 2001-02, arguing that bottling of LPG gas in cylinders constitutes manufacture or production of an article or thing. The Assessing Officer rejected the claim, and the Commissioner of Income Tax (Appeals) and the ITAT affirmed that decision. The High Court admitted the appeal on the substantial question of law: whether bottling of LPG gas amounts to manufacture or production for the purpose of Section 80IB. The Court, after hearing both sides, held that the process of bottling LPG gas does not involve any manufacturing or production activity. The gas is merely transferred from bulk storage to cylinders without any change in its essential character or the emergence of a new commercial product. Relying on the principle that manufacture or production requires a transformation resulting in a distinct new article, the Court dismissed the appeal, affirming the orders of the lower authorities. The Court found no merit in the appeal and answered the question of law against the assessee.
Headnote
A) Income Tax - Deduction under Section 80IB - Manufacture or Production - Bottling of LPG gas - The assessee claimed deduction under Section 80IB of the Income Tax Act, 1961 contending that bottling of LPG gas in cylinders amounts to manufacture or production. The Assessing Officer, CIT(A), and ITAT rejected the claim. The High Court held that bottling of LPG gas does not involve any manufacturing or production activity as the gas is merely transferred from one container to another without any change in its essential character. The process does not result in a new commercial product. Therefore, the assessee is not entitled to deduction under Section 80IB. (Paras 1-5)
Issue of Consideration
Whether bottling of LPG gas in cylinders amounts to manufacture or production of an article or thing so as to be eligible for deduction under Section 80IB of the Income Tax Act, 1961?
Final Decision
The High Court dismissed the appeal, holding that bottling of LPG gas does not amount to manufacture or production, and therefore the assessee is not entitled to deduction under Section 80IB of the Income Tax Act, 1961. The order of the ITAT was affirmed.
Law Points
- Bottling of LPG gas does not constitute manufacture or production
- Deduction under Section 80IB not available for bottling activity
- Interpretation of 'manufacture' and 'production' in tax law
Case Details
2013 LawText (KAR) (10) 6
Justice Dilip B Bhosale, Justice B Manohar
Sri Chythanya (for appellant), Sri K V Aravind (for respondent)
M/S Puttur Petro Products Pvt Ltd
The Assistant Commissioner of Income Tax, Circle 1(1), Mangalore
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Nature of Litigation
Income tax appeal under Section 260-A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal.
Remedy Sought
The appellant (assessee) sought to set aside the order of the ITAT and to be allowed deduction under Section 80IB of the Act.
Filing Reason
The assessee claimed deduction under Section 80IB for bottling of LPG gas, which was denied by the Assessing Officer, CIT(A), and ITAT.
Previous Decisions
The Assessing Officer passed order under Section 143(3) on 25-2-2004 rejecting the claim; CIT(A) dismissed appeal on 16-11-2005; ITAT dismissed appeal on 31-1-2007.
Issues
Whether bottling of LPG gas in cylinders amounts to manufacture or production of an article or thing for the purpose of deduction under Section 80IB of the Income Tax Act, 1961?
Submissions/Arguments
The assessee argued that bottling of LPG gas amounts to production/manufacturing activity and hence eligible for deduction under Section 80IB.
The revenue contended that bottling does not involve manufacture or production as the gas remains the same without any transformation.
Ratio Decidendi
Bottling of LPG gas, which involves mere transfer of gas from one container to another without any change in its essential character or emergence of a new commercial product, does not constitute manufacture or production. Therefore, deduction under Section 80IB of the Income Tax Act, 1961 is not available for such activity.
Judgment Excerpts
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) in ITA No.121/Bang/2006, whereby, the assessee’s appeal came to be dismissed.
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.
The present appeal was admitted on the substantial questions of law raised/framed in paragraph 3.
Procedural History
The Assessing Officer passed order under Section 143(3) on 25-2-2004 rejecting the assessee's claim for deduction under Section 80IB. The assessee appealed to the Commissioner of Income Tax (Appeals), who dismissed the appeal on 16-11-2005. The assessee then appealed to the Income Tax Appellate Tribunal, which dismissed the appeal on 31-1-2007. The assessee filed the present appeal under Section 260-A of the Act before the High Court of Karnataka, which was admitted on substantial questions of law and ultimately dismissed on 7-10-2013.
Acts & Sections
- Income Tax Act, 1961: Section 80IB, Section 260-A, Section 143(3)
