For the Purpose of sub-section 14(c) of s. 80-IB term ‘begins to manufacture or produce articles or things’ means the manufacture or production for the purpose of commerce and not for the purpose of testing

Teracom Ltd. v ACIT ( Bombay HC) –   Tribunal has failed to appreciate that the term “begins to manufacture or produce articles or things” has been interpreted to mean the manufacture or production for the purpose of commerce and not for the purpose of testing. According to the learned Counsel, the Tribunal has not properly appreciated this issue and has passed its conclusion on irrelevant material such as admission of the appellant that the appellant had resold the products and paid sales tax on it. In the submission of the learned Counsel for the appellant, admission that the appellant paid sales tax on the products which were resold cannot lead to interpretation that they were not purchased for testing when in fact they were so purchased for testing. We find that the judgment of the Tribunal does not consider the question whether the products were purchased for testing and, therefore, whether the activity of the assessee of using that products in the machine amounts to manufacture and whether the relevant year can be considered to be initial Assessment Year properly. In this view of the matter, we set aside the order of the Tribunal and remand the matter back to the Tribunal for fresh consideration in accordance with law

Teracom Ltd. v ACIT

High Court of Bombay

Tax Appeal No. 4 of 2011

Decided on: 21 July 2011

Judgment

S.A. Bobde, J

1. Heard. Admit.

2. Heard finally by consent.

3. Shri Rivankar, learned Counsel for the appellant submitted that the Tribunal has not properly considered the question of initial assessment year as defined under section 80-IB sub-section 14(c) of the Income Tax Act and as defined in that section the Tribunal has failed to appreciate that the term “begins to manufacture or produce articles or things” has been interpreted to mean the manufacture or production for the purpose of commerce and not for the purpose of testing. According to the learned Counsel, the Tribunal has not properly appreciated this issue and has passed its conclusion on irrelevant material such as admission of the appellant that the appellant had resold the products and paid sales tax on it. In the submission of the learned Counsel for the appellant, admission that the appellant paid sales tax on the products which were resold cannot lead to interpretation that they were not purchased for testing when in fact they were so purchased for testing. We find that the judgment of the Tribunal does not consider the question whether the products were purchased for testing and, therefore, whether the activity of the assessee of using that products in the machine amounts to manufacture and whether the relevant year can be considered to be initial Assessment Year properly.

4. In this view of the matter, we set aside the order of the Tribunal and remand the matter back to the Tribunal for fresh consideration in accordance with law. By way of interim protection, we direct that no coercive action shall be taken against the appellant in respect of the notices in question for a period of four weeks from today. All the issues are left open. Appeal stands disposed of accordingly. No order as to costs.

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