Pr. CIT v. Fine Line Circuits Company

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The Tax Publishers2019 TaxPub(DT) 7431 (Guj-HC) : (2020) 421 ITR 0225 : (2020) 317 CTR 0929

INCOME TAX ACT, 1961

Section 10B

The raw material, i.e., CCGL sheets was first sent to shearing department. The shearing machine was set for the desired size and laminates were cut into specified sizes as required by customer. The laminates were, thereafter, checked for the oxidation effect. A thorough surface clearing was done to remove oxidation. The Quality Control Department, thereafter, would verify quality parameters like thickness of material, thickness of copper using Alco Meter etc. At the end of entire process, the final product was called as CCGL. change or the series of changes brought about by application of the process explained, commodity in the form of CCGL could no longer be regarded as original commodity bt was instead, recognised as a distinct and new article emerged as a result of the process and thus various activities performed by assessee for making CCGL amounted to manufacturing activities and assessee was duly eligible to claim deduction under section 10B.

Deduction under section 10B - Allowability - Manufacture or production - Assessee engaged in--Export of Copper Cladded Glass Expoxy Laminate (CCGL)

Assessee engaged in Export of Copper Cladded Glass Expoxy Laminate (CCGL) claimed deduction under section 10B. AO denied deduction on the ground that assessee had not carried out any manufacturing activities qua the said product, i.e., CCGL. Assessee submitted that CCGL sheets underwin the following process : Receipt of purchase order from the customers; issuance of Job Travel Card for manufacturing, which would include instructions for manufacture as per specific design and production process to be deployed. Job Card goes to Store Department for identity and issuance of required material to the production department viz. Copper Gladded Glass Epoxy Laminates. Raw Material is sent to the Shearing Department. The shearing machine is set for the desired size and laminates are cut into specified sizes decided by customer. After shearing, production inspection takes place where laminates are checked for oxidation effect. A thorough surface clearing is done to remove the oxidation. The cut pieces of laminates are checked by the Quality Control Department for final inspection. This department verifies various quality parameters like the thickness of material, thickness of copper using Alco Meter (Copper thickness guage), Micrometer, Measuring Tape, Verifier Caliper and Magnifying glass. Such inspected laminates are packed by the Packing Department. At this stage, the product is called as CCGL. The same is registered under the Excise and Kandla Economic Zone as 'Sorting/Checking/Clearing/Packing/repacking of Copper Gladded aminates'. Held: Change or the series of changes brought about by application of the process explained commodity in the form of CCGL could not longer be regarded as original commodity but was instead, recognized as a distinct and new article emerged as a result of the process and thus various activities performed by assessee for making CCGL amounted to manufactring activities and assessee was duly eligible to claim deduction under section 10B.