TMI Blog2004 (7) TMI 337X X X X Extracts X X X X X X X X Extracts X X X X ..... er any of the above grounds of appeal." 3. The facts of the case in brief are that the assessee was engaged in the business of manufacturing pan masala and gutkha at its units at Ghodnadi, Baroda, Mumbai, Hyderabad and Pune. The assessee claimed deduction under s. 80-I and under s. 80-IA in respect of its Ghodnadi, Baroda and Hyderabad units for asst. yrs. 1994-95 and 1995-96 as under: Asst. yr. Unit Claim under s. 80-I (Rs.) Claim under s. 80-IA (Rs.) 1994-95 Ghodnadi 91,78,120 1995-96 Ghodnadi 1,36,59,044 Baroda 52,36,545 Hyderabad 36,67,369 1,36,59,044 89,03,913 4. The AO disallowed the above claims made by the assessee. In first appeal, the CIT(A) allowed the assessee s claims and the Department has challenged the orders of the CIT(A) in the present appeals. 5. Shri Satya Prakash, the learned Departmental Representative, placed reliance on the orders of the AO and vehemently argued saying that the CIT(A) had erred in allowing the assessee s claims for deduction und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... citur a sociis supported the assessee s case and reliance was placed on the judgment of Bombay High Court in the case of CIT vs. Caltex (India) Ltd. (1989) 75 CTR (Bom) 98 : (1989) 177 ITR 239 (Bom) that attention was invited to the meanings of the words bidi , cheroot , cigarette , snuff , preparation as given in The Random House Dictionary of the English Language by Jess Stein and Laurence Urdang 7. We have considered the rival submissions in the light of material on record and the precedents cited. The only issue involved in this appeal is whether gutkha manufactured by the assessee-company is a tobacco preparation within the meaning of Item no. 2 of the Eleventh Schedule to the IT Act, 1961. The relevant part of the Eleventh Schedule is reproduced as under: "THE ELEVENTH SCHEDULE [See s. 32A, s. 32AB, s. 80CC(3)(a)(i), s. 80-I(2), s. 80J(4) s. 88A(3)(a)(i)] List of articles or things 1. Beer, wine and other alcoholic spirits. 2. Tobacco and tobacco preparations, such as, cigars and cheroots, cigarettes, bidis, smoking mixtures for pipes and cigarettes, chewing tobacco and snuff. 3. Cosmetics and toilet preparations. 4.... 5...." 8. It is seen t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction under s. 80-I to the appellant." 9. While the learned Departmental Representative heavily relied on the order of the AO, the first and foremost argument of Shri Dastur was that tobacco was not the main ingredient of gutkha . He drew our attention to a chart at Page No. 1 of his paper book which shows comparative consumption (in percent) of in all 16 ingredients out of which four ingredients in descending order of their share (by weight) are as under: Particulars % consumption Supari 73.21 Kattha powder 9.68 Tobacco 6.20 Lime powder 3.00 10. Shri Dastur contended that all the tobacco preparations illustrated in Item No. 2 of the Eleventh Schedule had tobacco as the main ingredient about 99 per cent. He repeatedly emphasised that gutkha had only about 6 per cent of tobacco (in terms of weight) and that its main ingredients was supari. He even suggested that gutkha could more appropriately be called a supari preparation . 11. The argument of Shri Dastur, that gutkha is not a tobacco preparation because unlike cigarette, bidi, cigar, etc. it has only about 6 per cent of tobacco is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter two distinct products. The benefit under s. 80-I is denied for manufacture of beer as well as for manufacture of wine and other alcoholic drinks. 14. In order to explain a little further the view that we are inclined to take in this case, in a little more detail, we would like to give the example of a cup of tea. The extract of tea leaves in water in a cup of tea represents a very small component and the rest of it is water, but still a cup of tea is taken for that very small component (in terms of weight) of the extract of tea leaves in water and not for its ingredient of plain water. 15. The decision of the Tribunal, Allahabad Bench in the case of Kothari Products Ltd. relied upon by Shri Dastur, needs some amount of discussion. It is seen that the Tribunal had decided a question of fact and that the Allahabad High Court while rejecting the application filed by the CIT, (Central) Kanpur, under s. 256(2) of the IT Act on the ground that no question of law arose out of the order of the Tribunal, Allahabad Bench had observed as under: "This is an application under s. 256(2) of the IT Act. Having heard learned counsel Shri Rakesh Ranjan Agarwal and perusing the application, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... small negligible quantity. Alcoholic preparations are only beer, wine and other alcoholic spirits but no medicine prepared with a base as alcohol is ever treated either in the common parlance or by any law as alcoholic preparations. With all these facts in the background, we hold that zarda yukta pan masala is not a tobacco preparation and thus it cannot be taken out of the items for which deductions under s. 32AB and s. 80-I are allowable." 17. With due respect, we find it difficult to agree with the view held by the Tribunal, Allahabad that about 4 to 5 per cent tobacco content in zarda yukta pan masala was of a very small and negligible quantity and that it made plain pan masala just a little more tastier . In our opinion, 4 to 5 per cent of tobacco does not merely make plain pan masala a little tastier , but it is the required quantity of tobacco which converts the plain pan masala into an entirely different product which is consumed by an entirely different group of people. A person who does not take tobacco and who does not wish to start taking tobacco will not consume pan masala having 4 to 5 per cent of tobacco content. 18. Shri Dastur relied upon the decision o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ords or expressions of restricted meaning must be susceptible of the import that they represent a class. If no class can be found, ejusdem generis rule is not attracted and such broad construction as the subsequent words may admit will be favoured. The preceding words in the statutory provision which, under this particular rule of construction, control and limit the meaning of the subsequent words must represent a genus or a family which admits of a number of species or members. If there is only one species it cannot supply the idea of genus." 19.3 In the instant case, in Item 2 of the Eleventh Schedule, the expression tobacco preparation is preceded by the word tobacco which represents the genus for all the terms which are mentioned in Item 2. gutkha is a preparation which has tobacco content of about 6 per cent by weight and it is consumed for the desired tobacco effect just as a smoker gets the desired tobacco effect from a cigaretee. Therefore, in our opinion, gutkha comes within the ambit of the genus describing term of tobacco preparation and the principle of ejusdem generis also does not support the assessee s case. 20. Shri Dastur, the learned Authorised Representat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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