Bottling of LPG whether Manufacturing or Production under Sec 80HH, 80-I and 80-IA ?

CIT vs. Hindustan Petroleum Corporation Ltd (Supreme Court)

Key NOTES as summarized :

The question of dispute was :

 "Whether bottling of LPG, as undertaken by the assessee, is a process which amounts to ‘production’ or ‘manufacture’ for the purposes of Sections 80HH, 80-I and 80-IA of the Act?; and if so, whether the respondents/assessees are entitled to claim the benefit of deduction under the aforesaid provisions while computing their taxable income?

Some of the major areas worth to be noted :

1) Learned court has stated that it is clear either manufacturing or production will make an assessee eligible to claim deduction under sec. 80HH, 80I & 80IA,

2) Word "Production" has much wider ambit than the word manufacture and the sections stated herewith requires either to manufacture or production which is to be noted/ considered appropriately , Hence it was held that in case SESA GOA (2004) - every manufacturing can constitute production but every production cannot be a manufacturing..

3) It was noted by the learned court about the LPG bottling process if falls under production "  after the bottling activities at the assessees’ plants, LPG is stored in cylinders in liquefied form under pressure. When the cylinder valve is opened and the gas is withdrawn from the cylinder  the pressure falls and the liquid boils to return to gaseous state. This is how LPG is made suitable for domestic use by customers who will not be able to use LPG in its vapour form as produced in the oil refinery. It, therefore, becomes apparent that the LPG obtained from the refinery undergoes a complex technical process in the assessees’ plants and is clearly distinguishable from the LPG bottled in cylinders and cleared from these plants for domestic use by customers......."

4) It was further noted by the learned court that the bottling process for such LPG is an essential part for make its availability to the end user as explained above.

5) It was also established the fact of knowing this process as production being " The process of bottling of LPG renders it capable of being marketed as a domestic kitchen fuel and, thereby, makes it a viable commercial product 

6) The learned court also note that AO only looked at the case if it is a manufacturing activity and has not looked at from the angle if falls under "Production" which is eventually a wider in meaning,

 

7) It was also noted by the learned court that the reference of cases has been used by AO was not correct as some of them was explaining the defination for local sales tax act where only manufactring process was defined and some of the cases it was referring the process of manufacturing used in central excise which did not serve purpose to argue in this case,

8) A reference has also been taken of a case of Commissioner of Income Tax, Madras v. Vinbros and Company where bottling and blending of alcohol is held to be ‘manufacture or production’ for the purpose of Section 80-IB of the Act."

COURT AGREED and DISMISSED APPEAL against assessee (claimed deduction u/s 80HH, 80I or 80IA)

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