The Supreme Court on Thursday held that the process of bottling of LPG cylinders meant for domestic use is an activity which amounts to ‘production’ and ’manufacturing’ and is liable for income tax deductions.

The apex court also accepted the views expressed by various high courts from time to time that bottling of gas into cylinder amounts to production and liable for claim of deduction under Sections 80HH, 80-I and 80-IA of Income Tax Act.

A bench of justices AK Sikri and Ashok Bhushan dismissed a batch of appeals filed by Commissioner of Income Tax against the order of high court and the Income Tax Appellate Tribunal (ITAT), which has allowed the tax benefit to parties engaged in bottling of Liquefied Petroleum Gas (LPG) for domestic use. The ITAT order, which was also affirmed by the high courts, has held that LPG produced in the refineries cannot be directly supplied to households without bottling of the LPG into the cylinders and the LPG bottling is concerned, it is a complex activity, which can only be carried out by experts. The tribunal noted that the entire process involved in LPG bottling and hence the activity will be considered as a ‘manufacturing activity’

“In the considered opinion of this Court, the activity would definitely fall within the expression ‘production’ We agree with the submission of the counsels for the assessees that the definition of ‘manufacture of gas’ in Rule 2 (xxxii) of the Gas Cylinders Rules, 2004 also supports the case of the assessees in as much as gas distribution and bottling is treated as manufacturing or producing gas,” the apex court said.

It said, “We are also inclined to accept the submission of the counsel for the assesses that various high courts have, from time to time, decided that bottling of gas into cylinder amounts to production and, therefore, claim of deduction under Sections 80HH, 80-I and 80-IA would be admissible”.