TMI Blog2011 (8) TMI 460X X X X Extracts X X X X X X X X Extracts X X X X ..... 37 of the Act cover both "expenses incurred" as well as loss even if the "loss" amount had not gone out of the pocket of the assessee - Hon'ble Apex Court also observed that business losses are deductible under section 37(1) of the Act on the basis of ordinary principles of commercial accounting - Decided in favour of assessee. - 598 TO 600 AND 620 AND 621 (MAD.) OF 2011 - - - Dated:- 26-8-2011 - ABRAHAM P. GEORGE, GEORGE MATHAN, JJ. ORDER 1. ITA Nos. 598, 599 600/Mds/2011 are appeals filed by the assessee against the order of the learned CIT(Appeals)-VI, Chennai in ITA Nos. 214/10-11, 86/10-11 and 465/10-11 dated 18-01-2011 for the assessment years 2005-06, 2006-07 and 2007-08 respectively. ITA Nos. 620 621/Mds/2011 are appeals filed by the Revenue against the orders of the learned CIT(Appeals)-VI, Chennai in ITA Nos. 86 465/10-11 dated 18-01-2011 for the assessment years 2006-07 and 2007-08 respectively. Since common issues are involved in all these appeals, they were heard together and are being disposed of by this consolidated order for the sake of convenience. 2. Shri Shriram Sheshadri, CA represented on behalf of the assessee and Shri K.E.B. Rengarajan, Jr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he pit by a conveyer into a rod washer which removes extraneous matter from the gherkins, as a result of which the products get cleansed; (k) Subsequently, the gherkins are inspected for removal of defective fruits. The defective fruits include any broken, bloated, enzymes softened or discoloured gherkins. After defect removal, the gherkins are sliced; (l) Once sliced, secondary inspection is carried out as the sliced gherkins move across a conveyer. At this stage, slices with holes/incomplete skins or cuts are removed; (m) The slices thereafter move across a shaker table which allows the slices not having the desired size specifications to drop through a screen; (n) Thereafter a vibratory two-speed automatic pail filler packs the slices and covers the slices in the pail with the solution having appropriate blend of spice emulsion. The pails have manufacturing dates written on them as well as the hour of the day when they were produced; (o) In addition to the above, the gherkins removed at the stage of pre-cutting fie gherkins of good quality and big in size) are again taken into process. These gherkins are put into a machine which washes them, cuts them into r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd was ancillary to the hotel business and that was why it was not held to be a separate industrial undertaking within the meaning of section 80J of the Act. It was the further submission that the decision in the case of Indian Hotels Co. Ltd., referred to (supra), would not apply insofar as in the said decision the assessee therein was engaged in the business of trading activity. It was the further submission that in any case even if the decision of the Hon'ble Supreme Court in the case of Indian Hotels Co. Ltd. was to be applied, then it had been categorically held there that food prepared in the flight kitchen involved only the activity of processing and not manufacturing. 5. The learned authorised representative drew our attention to the provisions of section 10B as it stood when the assessee started its business. It was the submission that the assessment year 2006-07 was the 7th year of claim and the date of commencement of manufacture or production was 1-4-1999. It was the submission that the provisions of section 10B had been substituted by the Finance Act, 2000 w.e.f. 1-4-2001. It was the submission that when the assessee had made its claim for deduction under section 10B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he various activities done by the assessee for converting the gherkins into gherkin pickles. It was the further submission that the term "manufacture" has been defined in section 2(29BA) of the Act and as per the definition of "manufacture" there should be the transformation of the object or article or thing into a new and distinct object or article or thing having different name, character and use, which in the present case was not available. The learned DR further relied upon the decision of the Hon'ble Supreme Court in the case of Pio Food Packers reported in 46 STC 63 to say that converting pineapple into pineapple slices, pineapple jam, pineapple squash and pineapple juice was not "manufacture". He vehemently relied upon the order of the learned CIT(A) as also the decision of the co-ordinate Bench of this Tribunal in the assessee's own case for the assessment years 2001-02 to 2003-04, referred to supra. 7. In reply, the learned authorised representative submitted that the decision in the case of Pio Food packers, referred to supra, also recognized that what was being done there was processing. It was the submission that for the purpose of Kerala General Sales Tax Act, 1963, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the same purpose as gherkin could normally be used. Further, a reading of the provisions of section 80-IC(2) talks of manufacture or production. The XIV Schedule to the Income Tax Act, 1961 which gives the list of articles or things or operations in Item I recognizes Fruit and Vegetable Processing Industries manufacturing or producing - (i) canned or bottled products. Obviously, the assessee is a Vegetable Processing Industry and as per the XIV Schedule itself, it is manufacturing or producing the bottled product of gherkin pickles. 9. A reading of the decision of the Hon'ble Supreme Court in the case of CIT v. N.C Budharaja Co., reported in 204 ITR 412 clearly shows that the Hon'ble Supreme Court has defined the term "production" when used in juxtaposition with the word "manufacture" to take in bringing into existence new goods by a process which may or may not amount to manufacture. It also takes in all the byproducts, immediate products and residual products which emerge in the course of manufacture of goods. Here again the word "process" is used. A perusal of the decision in the case of Indian Hotels Co. Ltd., referred to supra, also clearly recognizes the process. Howe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, Vice President of the assessee-company had taken a conscious decision in consultation with the management to write-off the amounts. However, A.O. was of the opinion that the above mentioned write-off was claimed by the assessee under the head "selling and distribution expenses", but, such expenses were, as per admission of the assessee itself, incurred for procurement of agricultural produce/raw materials. Hence, according to him, this claim under the head "selling and distribution expenses" could not be allowed. He, therefore, disallowed the claim for the respective assessment years. 14. In its appeal before ld. CIT(Appeals), argument of the assessee was that the main raw material for the production of pickle was Gherkins grown by the agriculturists. According to assessee, it was necessary for it to ensure regular supply of Gherkins from the farmers. For this purpose, advance money was given to agriculturists which were adjusted against supplies made by them. However, when there was failure of crop, some farmers failed to honour their commitment for supply of Gherkins. According to assessee, the advances in such circumstances became irrecoverable. As per the assessee, the los ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
