Bottling Of LPG Gas Amounts To ‘Production’ For Purpose Of I-T Deductions: SC [Read Judgment]

The Supreme Court, in Commissioner of Income Tax – 1, Mumbai vs Hindustan Petroleum Corporation Ltd, has upheld the Income Tax Appellate Tribunal’s finding that the activity of filling of cylinder with compressed LPG gas amounts to ‘production’ for the purposes of Sections 80HH, 80-I and 80-IA of the Income Tax Act.

Assessees, who are engaged in the process of bottling Liquefied Petroleum Gas (LPG) cylinders meant for domestic use, claimed benefit of Sections 80HH, 80-I and 80-IA of the Income Tax Act. Their claim for deductions was disallowed by the assessing officer. Later, the appellate tribunal and the high court held otherwise.

A bench comprising Justice AK Sikri and Justice Ashok Bhushan upheld the following reasoning adopted by the tribunal:

• There is no dispute that the LPG produced in the refinery cannot be directly supplied to the consumer for domestic use because of various reasons of handling, storage and safety.


• LPG bottling is a highly technical and complex activity which requires precise functions of machines operated by technically expert personnel.


• Bottling of LPG is an essential process for rendering the product marketable and usable for the end customer.


• The word ‘production’ has a wider connotation in comparison to ‘manufacture’, and any activity which brings a commercially new product into existence constitutes production. The process of bottling of LPG renders it capable of being marketed as a domestic kitchen fuel and, thereby, makes it a viable commercial product.

Upholding the tribunal order, the bench observed: “The LPG obtained from the refinery undergoes a complex technical process in the assessees’ plants and is clearly distinguishable from the LPG bottled in cylinders and cleared from these plants for domestic use by customers.”