The assessee is not eligible for deduction u/s 80-IB of the IT Act on manufacturing of polyurethane foam which falls under the Eleventh Schedule irrespective of the fact that assessee sale automobile seats/car seats made of polyurethane foam. Court was of the view that assessee is not undertaking any further process to make the end product except supplying/selling the polyurethane foam in different sizes/designs/shapes.

"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. 

9. So far as the reliance placed upon the decisions of this Court in the cases of Vinbros and Company (supra) and Hindustan Petroleum Corporation Limited (supra), relied upon by the learned counsel appearing on behalf of the assessee is concerned, the same shall not be applicable to the facts of the case on hand and/or the same shall not be of any assistance to the assessee in view of the findings recorded hereinabove. 

10. 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. The High Court has rightly held so and has rightly set aside the order passed by the ITAT and has rightly restored the order passed by the assessing officer denying the deduction/benefit claimed under Section 80-IB of the IT Act."

[Polyflex (India) Pvt. Ltd v. CIT; CA No. 8260/2022 dated 17.11.2022]

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