TMI Blog2010 (1) TMI 743X X X X Extracts X X X X X X X X Extracts X X X X ..... g like blending. - Free Trade Zones and to 100 per cent Export Oriented Units covered by sections 10, 10AA and 10B of the Income-tax Act. Therefore, following the judgment of this court in Girnar Industries v. CIT (2009 -TMI - 78306 - KERALA HIGH COURT) we hold that assessee is entitled to exemption on the profit derived by its 100 per cent Export Oriented Unit engaged in blending, packing and export of tea bags and tea packets. - IT Appeal Nos. 87 and 89 of 2009 - - - Dated:- 21-1-2010 - C.N. Ramachandran Nair, V.K. Mohanan, JJ. Joseph Vellappally, Joseph Kodianthara and Terry V. James for the Appellant Jose Joseph for the Respondent JUDGEMENT C.N. Ramachandran Nair, J:- 1. In the connected appeals filed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the assessment year 2001-02 which covered even processing and therefore, blending and packing of tea for export was treated as manufacture or production of an article qualifying for exemption. However, once the definition clause is deleted, "processing" does not qualify for exemption from the assessment year 2001-02 onwards and so much so, assessee's activity being only processing not amounting to manufacture or production, is not entitled to exemption under section 10B. However, Senior counsel appearing for the assessee has relied on recent Division Bench judgment of this court in Girnar Industries v. CIT [2010] 187 Taxman 136 declaring eligibility for exemption from payment of tax in respect of the income from same activity carried on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erein the Supreme Court has clearly held that blending of tea does not amount to manufacture or production of an article, but is only processing. Even though processing also qualified for exemption under the definition clause of "manufacture" contained in section 10B and assessee was in fact granted exemption up to the assessment year 2001-02, the contention of counsel for the revenue is that once the definition clause of "manufacture" is deleted from the assessment year 2001 -02, the processing that was until then covered in the definition clause, no longer qualifies for exemption. The question, therefore, to be considered is whether the removal of definition clause on manufacture by the Legislature through the amendment introduced by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heme of deduction of export market development allowance earlier available and the scheme of exemption on export profits are different in nature. It may be noticed that exemption on export profit is available even to merchant exporters by virtue of the provisions contained under section 80HHC of the Income-tax Act. Besides the exemption available on profits earned in export business by traders, specific provisions are incorporated in sections 10A, 10AA and 10B providing for exemption to entire profits earned by industrial units in Free Trade Zones, Special Economic Zones and industries which are declared 100 per cent Export Oriented Units. While deciding the issue in the case of the industry located in the Special Economic Zone in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mic Zones Act, 2005 into section 10AA of the Income-tax Act is to provide a liberal meaning to the word "manufacture" which takes in even blending, refrigeration etc. It was noticed by this court that the definitions of "manufacture" contained in the above definition clauses are very liberal which takes in even processing like blending. The contention of counsel for the assessee is that the purpose of removal of definition of "manufacture" from section 10B was not to provide a restricted meaning for that term contained in the main section because if that was so, then the Legislature would have only modified the definition clause. Further, definition of 100 per cent Export Oriented Unit even after the amendment is retained in the said sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be denied of export exemption available under section 80 HHC even to a merchant exporter. In our view, the decision of the Supreme Court in Tara Agencies' case (supra) is not applicable for the purpose of considering exemption for industries in the Export Processing Zones, Free Trade Zones and to 100 per cent Export Oriented Units covered by sections 10, 10AA and 10B of the Income-tax Act. Therefore, following the judgment of this court abovereferred we hold that assessee is entitled to exemption on the profit derived by its 100 per cent Export Oriented Unit engaged in blending, packing and export of tea bags and tea packets. Consequently we allow the appeals by reversing the orders of the Tribunal and by restoring the orders of the f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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