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2019 (9) TMI 490 - AT - Income TaxEligibility of deduction u/s 80IB(11A) - profit derived from the business of processing preservation and packaging of fruits - HELD THAT:- The intention of the legislature for giving the exemption u/s 80IB(11A) is to promote agro processing industries as is evident from the Finance Ministers speech and also memorandum explaining the amendments to the bill. There is no doubt that oil palm fresh fruit bunches are agricultural products. They may not be edible in their raw or ripe form, but they extract therefore after processing is edible. The language used in the section itself is processing, preservation and packaging of fruits or vegetables. Thus, the legislature was aware of the fact that certain fruits and vegetables would require processing and preservation for their long shelf-life. As long as the end product is also consumable it cannot be denied exemption u/s 80IB(11A). Therefore we are satisfied that the oil palm fruits are fruits u/s 80IB(11A) of the Act. Whether the assessee satisfies all the three conditions of processing, preservation and packaging? - In the case of the assessee before us also, the question involved was whether the extraction of oil from the FFBs of oil palm is processing or not, and the AAR has held similar activity in the case of mango pulp or powder, to be so and hence the principle and ratio of decision of the AAR in the case of Delna Rustum Boyce Inre [2009 (10) TMI 23 - AUTHORITY FOR ADVANCE RULINGS] is definitely applicable in other similar cases also and we have to hold that the activities carried on by the assessee for extraction of oil from FFB’s of oil palm, will amount to processing u/s 80IB(11A) of the Act. Preservation - As long as the assessee is maintaining the standards and is taking steps to maintain such standards, it can be said that it satisfies the condition of preservation. DR had relied upon the contention of the assessee before the A.O that the crude palm oil requires the least preservation as it is a durable commodity. But this contention of the assessee alone cannot mean that the assessee is not taking any steps for preservation of the oil. It is common knowledge that all items, particularly food items, have an expiry date unless they are preserved in the required conditions. Therefore, we are satisfied that the assessee is also preserving the palm oil extracted from the fresh fruit bunches of oil palm fruits, after the process of ‘pressing and extraction of oil’. Packaging - The assessee is preserving and maintaining the palm oil in large containers / tanks. As rightly pointed out by the learned Counsel for the assessee, packaging can be varied and includes the simple boxes to large container/vessel. Since the assessee is involved in large scale operation, it has to store the extracted oil in tanks. Therefore, we are satisfied that all the three processes necessary for claiming deduction u/s 80IB(11A) are satisfied by the assessee. Whether the end product is not a fruit but it is edible oil or kernels and shells which are not consumable goods, and hence it does not satisfy the condition of section 80IB(11A) ? - In the case of Delna Rustum Boyce Inre, the AAR has also held that the end product need not remain in the same form as the raw material. It may be in the form of juice or cut fruits or even oil or powder. As long as the end product is derived from the fruits or vegetables, the assessee is eligible for deduction u/s 80IB(11A) of the Act. In these circumstances, we are satisfied that the oil palm is a fruit and that it undergoes different processes before extraction of oil, and the palm oil is preserved under adjusted temperature and they are packed in large container or tanks and therefore, the assessee is eligible for deduction u/s 80IB(11A) of the Act. The assessee’s appeals are accordingly allowed.
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