M/S POLYFLEX (INDIA) PVT. LTD. versus THE COMMISSIONER OF INCOME TAX & ANOTHER

Citation: [2022] 10 S.C.R. 127 · Decided: 17-11-2022 · Supreme Court of India · Bench: M.R. SHAH · Disposal: Dismissed

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Judgment (excerpt)

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M/S POLYFLEX (INDIA) PVT. LTD.
v.
THE COMMISSIONER OF INCOME TAX & ANOTHER
(Civil Appeal No. 8260 of 2022)
NOVEMBER 17, 2022
[M. R. SHAH AND M. M. SUNDRESH, JJ.]
Income Tax Act – s.80-IB – Deduction under – Appellant-
assessee manufactured ‘polyurethane foam,’ which is used as
automobile seat – The assessee filed its return of income for the
assessment year 2003-04 and claimed deduction u/s. 80-IB –
Assessing officer disallowed the deduction u/s. 80-IB of the Act –
CIT(A) upheld the order of the assessing officer – However, ITAT
set aside the assessment order as well as the order passed by the
CIT(A) – High Court set aside the order passed by the ITAT and
restored the order passed by the assessing officer denying the
deduction/benefit claimed u/s.80-IB of the Act – On appeal, held:
The assessee shall not be eligible for the benefit u/s. 80- IB of the IT
Act if it is found that the articles and/or goods manufactured by the
assessee do not fall and/or classifiable under Eleventh Schedule of
the Act – The assessee is manufacturing polyurethane foam and
supplying the same in different sizes/designs to the assembly operator,
which ultimately is being used for car seats – Merely because the
assessee is using the chemicals and ultimately what is manufactured
is polyurethane foam and the same is used by assembly operators
after the process of moulding as car seats, it cannot be said that
the end product manufactured by the assessee is car seats/automobile
seats – Polyurethane foam is an article classifiable in the Eleventh
Schedule (entry 25), considering s. 80- IB(2)(iii), the assessee shall
not be entitled to the benefit u/s. 80-IB – The High Court has rightly
held so and has rightly set aside the order passed by the ITAT.
Dismissing the appeal, the Court
HELD: 1. The assessee shall not be eligible for the benefit
under Section 80- IB of the IT Act if it is found that the articles
and/or goods manufactured by the assessee do not fall and/or
classifiable under Eleventh Schedule. According to the revenue,
[2022] 10 S.C.R. 127
127
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SUPREME COURT REPORTS
[2022] 10 S.C.R.
the assessee is manufacturing polyurethane foam which falls under
the Eleventh Schedule. However, it is the case on behalf of the
assessee that the final product manufactured and sold by the
assessee is automobile seats/car seats which is other than the
manufacture of polyurethane foam. By the impugned judgment
and order, the High Court has specifically observed and held that
what is manufactured and sold by the assessee is polyurethane
foam which is manufactured by injecting two chemicals, namely,
Polyol and Isocyanate and the polyurethane foam which is
manufactured by the assessee is used as ingredient for
manufacture of automobile seats. The assessee is manufacturing
polyurethane foam and supplying the same in different sizes/
designs to the assembly operator, which ultimately is being used
for car seats. The assessee is not undertaking any further process
for end product, namely, car seats. The polyurethane foam which
is supplied in different designs/sizes is being used as ingredient
by others, namely, assembly operators for the car seats. Merely
because the assessee is using the chemicals and ultimately what
is manufactured is polyurethane foam and the same is used by
assembly operators after the process of moulding as car seats, it
cannot be said that the end product manufactured by the assessee
is car seats/automobile seats. There must be a further process
to be undertaken by the very assessee in manufacturing of the
car seats. No further process seems to have been undertaken by
the assessee except supplying/selling the polyurethane foam in
different sizes/designs/shapes which may be ultimately used for
end product by others as car seats/automobile seats. In view of
the above, when the articles/goods which are manufactured by
the assessee, namely, polyurethane foam is an article classifiable
in the Eleventh Schedule (entry 25), considering Section 80-
IB(2)(iii), the assessee shall not be entitled to the benefit under
Section 80-IB of the IT Act. [Paras 7, 8 & 10][133-F-H; 134-A-E,
F-G]
Commissioner of Income Tax, Madras v. Vinbros and
Company, (2015) 14 SCC 483; Commissioner of Income
Tax-I, Mumbai v. Hindustan Petroleum Corporation
Limited, (2017) 15 SCC 254 : [2017] 7 SCR 631 –
referred to.
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                       Case Law Reference
[2017] 7 SCR 631
referred to                     Para 3.8
CIV

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