TMI Blog2009 (10) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... prawns and lobsters in Sterling Foods’ case and the process of roasting and powdering chicory roots in Sacs Eagles Chicory’s case – assessee is not entitled for benefit of exemption u/s 80IA or 80IB - 27, 28 of 2005 - - - Dated:- 14-10-2009 - Deepak Gupta and V.K. Ahuja, JJ. Mr. K.D. Sood, Advocate (in both the appeals) for the appellant. Mr. Vinay Kuthiala, Advocate (in both the appeals) for the respondents. JUDGMENT The judgment of the court was delivered by Deepak Gupta, J. - These two appeals are being disposed of by this common judgment as the following identical questions of law are involved in both the appeals: "i) Whether in the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aking goods or any material produced by hand, by machinery or by other agency; by the hand, by machinery, or by art. The production of articles for use from raw or prepared materials by giving such materials new forms, qualities, properties or combinations, whether by hand labour or machine". 4. In M/s. Sterling Foods v. State of Karnataka and another , 1986 (3) SCC 469, the question for determination before the Apex Court was whether shrimps, prawns and lobsters subjected to processing like cutting of heads and tails, peeling, deveining, cleaning and freezing cease to be the same commodity or become a different commodity. The Apex Court held as follows:- 6. It is clear on an application of this test that processe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zen shrimps, prawns and lobsters are not a new and distinct commodity but they retain the same character and identity as the original shrimps, prawns and lobsters." 5. This judgment was followed by the Apex Court in Commissioner of Income Tax v. Relish Foods , 1999 (237), 59 wherein the same definition was applied to the provisions of the Income Tax Act. 6. A Division Bench of the Madras High Court in Commissioner of Income Tax v. Sacs Eagles Chicory, 2000 (241) ITR 319 dealt with the issue as to what is 'manufacture'. In the case before the Madras High Court, chicory roots were being roasted and then changed it into powder form. The question was whether this amounted to manufacture within the meaning of Income Tax Act. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d amounts to manufacture and produces new articles or things. The Apex Court held as follows:- "The question that the High Court and we are here concerned with is whether, in cutting and polishing diamonds, the assessee manufactures or produces articles or things. 9. There can be little difficulty in holding that the raw and uncut diamond is subjected to a process of cutting and polishing which yields the polished diamond, but that is not to say that the polished diamond is a new article or thing which is the result of manufacture or production. There is no material on the record upon which such a conclusion can be reached." 10. A three Judge Bench of the Apex Court in Aspinwall and Co. Ltd. v Commissioner of Income Tax 2001 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of a new article cannot be accepted. The process is a manufacturing process when it brings out a complete transformation in the original article so as to produce a commercially different article or commodity. That process itself may consist of several processes. The different processes are integrally connected which result in the production of a commercially different article. If a commercially different article or commodity results after processing then it would be a manufacturing activity. The assessee after processing the raw berries converts them into coffee beans which is commercially different commodity. Conversion of the raw berry into coffee beans would be a manufacturing activity." 12. Sh. K.D. Sood, learned counsel for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tity as shrimps, prawns and lobsters. Similarly in Sacs Eagles Chicory's case, the process of roasting and grounding the chicory roots was not held to amount to manufacture. The conversion of raw material into food was not held to be manufacture in Indian Hotels case. 15. In Aspinwall's case, the coffee powder was made from the raw beans. The raw beans are inedible and coffee beverage cannot be made out of the raw beans. After going through nine processes, the coffee beans were converted into roasted coffee beans from which coffee can be produced. In our considered view, this judgment does not apply to the facts of the present case. In the said case, the roasted coffee beans are a totally different item and the original raw coffee berri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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