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2007 (1) TMI 234 - AT - Income TaxDisallowance of deduction u/s 80-IB - manufacturing/production activities - Capsulation of mushroom powder - taxability of interest income - Payment towards excise duty liabilities u/s 43 - assessment completed u/s 143(3) - notice issued - HELD THAT:- In our opinion, all these activities do not bring in any new article or product into existence. The mushroom powder even after capsulation remains the same. There is no transformation of mushroom powder into new article. Before the capsulation, it was mushroom powder and even after the capsulation, it remains to be mushroom powder only. Once the capsule is removed, only mushroom powder emerges out of it. By filling this mushroom powder into gelatin capsules no new and distinct or separate product comes into existence. There is no change in the basic identity of the product and taste of the product. It is a matter of fact that mushroom powder can be consumed in bulk form nakedly without being put into any enclosure or it can be consumed by putting into the gelatin capsule. Putting of the mushroom powder into the gelatin capsule is for the purpose of smoothening its marketability which is nothing but a processing which does not amount to manufacture or production of a thing or article so as to fulfil the conditions stipulated for availing the benefit u/s 80-IB of the Act. For this purpose, we feel it pertinent to place reliance on the judgment of the Hon'ble Supreme Court in the case of Nilgiri Tea Co.[1959 (7) TMI 40 - BOMBAY HIGH COURT], it was held that when different brands of tea are mixed by the assessee for the purpose of producing of tea mixture of a different kind and quality, according to the formula evolved by them, there was plainly indubitably processing of different brands of tea because these brands of tea experienced as a result of mixing, qualitative change in that the tea mixture which came into existence was of different quality and flavour than the different brands of tea which went into the mixture. But the question whether the processing brings into existence any article or thing which may be said to be distinct from the article on which the process has been applied had been answered in negative. It was held that it was processing only. Thus, we have no hesitation in coming to the conclusion that the expression 'manufacture' or 'producing' any thing or article u/s 80-IB(2)(iii) has been used in a generic sense and within its ambit it does not include any processing of goods, which does not bring out a new or commercially distinct commodity. Accordingly, putting the mushroom powder into the gelatin capsule does not amount to manufacture or production of any commercially distinct commodity. Therefore, we hold that the assessee is not entitled for deduction u/s 80-IB. This ground of the assessee is rejected. Payment towards excise duty liabilities u/s 43 - This expenditure was never claimed as expenditure in the books of account and this was shown as advance in the books of account. The assessee made this claim before the Assessing Officer by way of a letter. Before us, the learned counsel for the assessee has not furnished any iota of evidence in support of the claim of the assessee. Admittedly this amount was shown as current assets being loans and advances. The assessee is not in a position to spell out the nature of liability. The assessee was making only verbal argument without stating the nature of expenditure, for which assessment year it relates and whether it was wholly and exclusively spent for business purpose and whether it was advance payment or payment towards liability for the current year. The assessee has not produced any order of the excise duty through which this liability is stated to have emerged. No judgment from any Court of law was also produced for compliance. In our opinion, to avail of the deduction, the payments are required to be actually paid within the time stipulated in the proviso to section 43B of the Act. If the payments have not been made within the stipulated time, the deduction cannot be claimed at any time thereafter. Thus, we decline to interfere with the order of the lower authorities and the order of the CIT(A) on this issue is confirmed. In the result, the appeals filed by the assessee are dismissed.
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