Part of manufacturing by outside agency cannot be reason for disallowance of deduction u/s 80IB

DCIT Vs ACE Plastics (ITAT Mumbai)

ITAT Mumbai held that disallowance of deduction under section 80IB of the Income Tax Act merely because part of manufacturing activities are being done from outside the unit is unsustainable in law.

Facts- The Assessee is into the business of manufacturing of plastic containers, bottles, caps etc., filed return by declaring its income at Rs.39,62,080/- and also claimed deduction u/s. 80IB of the Income Tax Act, 1961 which was accepted by AO by framing the assessment u/s. 143(3). Subsequently, in re -assessment proceedings, AO disallowed Rs.5,46,724/- out of the total deduction claimed by the assessee under section 80IB of the Act. CIT(A) passed an order in favour of the assessee. Being aggrieved, revenue has preferred the present appeal.

Conclusion- Held that CIT(A) has passed valid order by taking the view that even if the part of manufacturing activities are being done from outside the unit, the deduction u/s. 80IB could not be disallowed. Hence, merely because of the fact that part of the manufacturing process resulting in N products was carried on by an outside agency the assessee would still be considered as manufacturer.

FULL TEXT OF THE ORDER OF ITAT MUMBAI

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