S. 80IB Ginning and pressing of cotton amounts to manufacturing activity

The nature of processing of loose cotton into cotton bales after sprinkling water and mechanically pressing the same is similar to processing camphor powder into camphor cubes. Loose cotton in bulk quantity with lighter density is as a result of pressing converted into cotton bales and to that limited extent it certainly undergoes a change. In view of the Supreme Court having approved the view taken by the Calcutta High Court in the aforesaid case, our task is made easy. There can be no doubt that if camphor powder pressed into cubes can can be said to have undergone some sort of processing, loose cotton too can be said to have been processed when mechanically pressed and converted into cotton bales. We are, therefore, of the opinion that the Tribunal was right in coming to the conclusion that the assessee- company falls within the definition of an industrial company because it processes cotton into cotton bales.

HIGH COURT OF GUJARAT AT AHMEDABAD
TAX APPEAL No. 1062 of 2011

COMMISSIONER OF INCOME TAX
Versus
JAYDEEP COTTON FIBERS PVT LTD

CORAM : HONORABLE MR. JUSTICE AKIL KURESHI

and

HONORABLE MS . JUSTICE HARSHA DEVANI

Date : 24/09/2012

ORAL ORDER

(Per : HONORABLE MR. JUSTICE AKIL KURESHI)

1) Revenue is in appeal against the judgment of the Income Tax Appellate Tribunal (hereafter to be referred to as “the Tribunal”) dated 31.3.2011 raising following substantial question for our consideration:-

“Whether the Appellate Tribunal is right in law and on facts in deleting the dis allowance of claim of deduction under section 80IB of the Act?”

2) The respondent- assessee claimed deduction under section 80IB of the Income Tax Act, 1961 for the assessment year 2006-07. The Assessing Officer, while framing scrutiny assessment, denied such claim on the ground that the assessee was not engaged in the manufacturing activity. We may record that this was the only ground, on which such benefit was withheld.