In the case of CIT v. Hindustan Petroleum Corporation Ltd. while considering the issue whether bottling of LPG in cylinders amounts to manufacture for the purposes of eligibility to claim deduction under Section 80-HH, Section 80-I and Section 80IA of the Act, the Hon’ble Apex Court noted that aforesaid provisions use the expression manufacture or profession. Hence, if the process amounts to either of these, the assessee would be entitled to benefits enshrined in those sections.
Relying on the ruling in Arihant Tiles and Marbles P Ltd [2010] 320 ITR 79 (SC), the Apex Court observed that the term “production” is wider than the term “manufacture” and the interpretation in the context of Central Excise Act cannot be applied since the provisions relevant to the assessee under Income Tax Act covers even assessees who are engaged in the activity of production of goods.
On the aspect of bottling of LPG, the Apex Court noted that the stages of activities involved in LPG bottling are: (i) receiving bulk LPG in the bottling plant through road tankers/rail wagons, (ii) unloading the LPG into spheres/bullets through compressors which use variable levels of pressure (iii) refilling/bottling of LPG in cylinders by compressing the same into liquid form (iv) capping, fixing of seals and safety valves prior to storage and loading of filled cylinders.
The Court, thus opined that LPG obtained from refinery undergoes a complex technical process in the assessee’s plant and is clearly distinguishable from the LPG bottled in cylinders and cleared from these plants for domestic use by customers. Hence, the activity falls within the ambit of production. Reliance was also placed on the definition of manufacture of gas in Rule 2(xxii) of the Gas Cylinders Rules, 2004 which treats gas distribution/bottling as manufacture or production of gas.