TMI Blog2007 (10) TMI 521X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Counsel, for the Appellant. [Judgment per : Chitra Venkataraman, J.]. This appeal is filed by the revenue seeking admission by framing the following question of law : Whether on the facts and circumstances of the case, the Tribunal was right in holding that blending and bottling of IMFL would amount to manufacture for the purpose of claiming deduction under Section 80IB? 2. The assessee herein is small scale industry recognised as so by the Director of Industries, Pondicherry. It set up a second unit to manufacture and bottle Indian Manufactured Foreign Liquor (IMFL) at Pondicherry. In its return for the assessment years 2003-04 and 2004-05, it claimed deduction under Section 80-IB of the Act in respect of the profits and gains derived from the second unit. The assessing officer however rejected the plea on the issue that the process carried on by the assessee for its product does not constitute manufacture within the meaning of Section 80-IB of the Act. He further held that setting up of the second unit is only an expansion or reconstruction of the existing unit. Aggrieved by the same, the assessee preferred an appeal before the Commissioner of Income tax ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the assessee has not manufactured an item to have the benefit of deduction under Section 80-IB of the Act. He also pointed out that the assessee cannot claim deduction under Section 80-IB of the Act in respect of the items manufactured as referred to in the list in the 11th Schedule. He referred to the decision of the Karnataka High Court in the case of State of Karnataka v. Shaw Wallace Co. Ltd. reported in 110 STC 507 in support of his contention that unless and until the assessee is able to show what had been undertaken viz., blending amounted to manufacture, claiming the relief under Section 80-IB of the Act does not arise. 7. We do not agree with the submission of the learned Counsel for the Revenue. A perusal of Section 80-IB shows that a deduction under the said provision is available only where the assessee engages in the manufacture or production of an article or thing, not being an article or thing as specified in the list in the 11th Schedule or operates one or more cold storage plant or plants in any part of India. The proviso to sub-clause (iii) of sub-section (2) of Section 80-IB of the Act shows that the condition with reference to the list in the 11th Sch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dy, rum, vodka and gin. However, the Commissioner held that there was no manufacture or production of any new article or thing as the alcohol which was the main input, remained as alcohol. The Commissioner, however, rejected the claim on this view that there was no manufacture. The Tribunal, in its order, has stated that the blending was subject to filtration for required time and thereafter only, the final product was sold. It is also stated that the alcoholic strength of the ENA was reduced considerably to more than 50% to result in a final marketable commodity. On the face of the facts stated above, it is not possible for us to accept that the blending should not be treated as a manufacturing activity under Section 80-IB of the Act. 9. Learned Counsel for the Revenue submitted that what had been undertaken by the assessee was only part of the manufacture and that every process would not amount to manufacturing. The process undertaken did not result in a totally different commodity and the input remained the same even after processing and consequently, there is no justification in granting the benefit. 10. The Tribunal referred to the decision of the Supreme Court in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct results in a new different commodity, which is recognised as to in the trade. 12. In Aspinwall Co. Ltd. v. CIT reported in (2001) 251 ITR 323, the Apex Court, while considering the question of investment allowance, in the case of curing of coffee, considered whether the manufacturing of coffee beans would amount to manufacturing activity, and held that the word manufacture has not been defined in the Income-tax Act, 1961. The Supreme Court held that the word manufacture has to be given a meaning as is understood in common parlance. The Apex Court held at page 327 as follows : It is to be understood as meaning the production of articles for use from raw or prepared materials by giving such materials new forms, qualities or combinations whether by hand labour or machines. If the change made in the article results in a new and different article then it would amount to a manufacturing activity. The Apex Court pointed out to the various processes and held that conversion of the raw berry into coffee seeds was a manufacturing activity; that coffee bean had an independent identity from the raw material i.e., berry from which they were produced. Considering the various pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
