M/s Polyflex (India) Pvt. Ltd. vs The Commissioner of Income Tax & Another

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, 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 80IB(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.