TMI Blog2012 (10) TMI 806X X X X Extracts X X X X X X X X Extracts X X X X ..... aw, which could not be revised by CIT under section 263. Consequently, once the assessee’s unit is entitled to be treated to be a qualifying unit under the provision of section 10B(2)(1) the order of the Commissioner of Income Tax revising the assessment does not withstand the test of the law - in favour of assessee. - ITA No.1142/Mds/2012 - - - Dated:- 5-10-2012 - N S Saini and S S Godara, JJ. Appellant Rep by: Shri R Meenakshisundaram, Adv. Respondent Rep by: Dr S Moharana, CIT-DR ORDER Per: Bench: This assessee s appeal has arisen from the order of Commissioner of Income Tax, Chennai I, Chennai dated 30.03.2012 in C.No. 218(44)/CITI/ 263/2011-12 for the assessment year 2007-08 in proceedings under section 263 of the Income Tax Act 1961 [in short Act ]. 2. The brief facts of the case are that the assessee is a company engaged in the business of producing and exporting tissue culture plants. Regarding assessment year 2007-08, it filed its return of income on 29.09.2007 admitting income of Rs.1,35,58,850/-. As the record of the case reveals, the Assessing Officer initiated scrutiny proceedings and sought details from the assessee qua deduction and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... After receiving the notice, the assessee filed a detailed reply containing the details of its manufacturing and production exercise leading to the production of plants through tissue culture technique and submitted following documents. (a) Detailed note explaining the various processes involved in the development of Plants under tissue culture technology. (b) Certificate issued by the Ministry of Commerce and Industry certifying the assessee's unit as EOU. (c) Certificate issued by the Agricultural and Processed Food Products Export Development Authority. (d) Extract from the Special Economic Zone Act, 2005. (e) Extract from Chapter 6 of the Foreign Trade Policy 2004 2009 issued by the Ministry of Commerce, Government of India. 5. However, the Commissioner of Income Tax was not convinced with assessee s reply. Therefore, vide impugned order, by exercising jurisdiction under section 263 of the Act , the CIT has ordered revision of the assessee s assessment finalized by holding as under: 5. I have carefully considered the explanation given by the assessee. The contention of the assessee that raising tissue culture plants is manufacture for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Thomas and the decision of the Special Bench of ITAT, Kolkata in the case of Madhu Jayanti International Ltd. Vs. DCIT reported as [2012] 137 ITD 377 and prayed for acceptance of the appeal. 7. Opposing the arguments, the DR had chosen to strongly support the Commissioner of Income Tax s order by relying on various findings contained therein as well as the case law relied upon by the Commissioner of Income Tax i.e. CIT v. Relish Foods (1999) 237 ITR 59 (SC) and CIT v. Venkateshwara Hatcheries Pvt. Ltd. [1999] 237 ITR 174 (SC) and prayed for upholding the Commissioner of Income Tax s order. 8. After considering the respective stands adopted by both the parties before us, we frame the following issue for our apt adjudication: Whether the Commissioner of Income Tax has rightly revised the assessment finalized by the Assessing Officer on the ground that the assessee s unit engaged in production of plants through the technology of tissue culture is not entitled for exemption under section 10B of the Act. If so, whether the CIT s order deserves to be modified or confirmed per respective stands of the parties? 9. We have heard both parties at length and also perused the rele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thus, another "forest'" of plants is produced. This results. in a rapid multiplication of the cultures and many thousand of plants can be produced in a few months. Some of the small plantlets can be removed and transferred to new tissue culture containers. These will produce more shoots and fill the container: d) Transplanting When the plantlets are large enough, they can be removed from the tissue culture container and transferred into pots with potting soil. When the small plant clones are removed from the culture containers, they must be transplanted into some type of acclimation container or kept under a mist system until they acclimate to the ambient environment. After acclimation, the young plants can be transplanted and grown in pots in a greenhouse to produce new plants. The entire tissue culturing production process is being carried out in a highly sterilized environment. Entry protocols of man and material are strictly controlled and done under extreme hygienic conditions. The process of initiation / multiplication is performed by the trained manpower in an equipment called laminar flow benches (LFB's). The manufacturing process of Tissue culture plants ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled its return in question pertaining to the assessment year 2007-08. Thereafter, the Finance (No. 2) Act of 2009, the Legislature has chosen to incorporate definition of the word manufacture in section 2(29BA) of the Act as under: (29BA) manufacture , with its grammatical variations, means a change in a non-living physical object or article or thing. (a) resulting in transformation of the object or article or thing into a new and distinct object or article or thing having a different name, character and use; or (b) bringing into existence of a new and distinct object or article or thing with a different chemical composition or integral structure. It is also found that the said definition has been incorporated in the Act by the Legislature with retrospective effect i.e. w.e.f. 01.04.2009. Meaning thereby that the Legislature itself has thought it appropriate not to incorporate the definition with retrospective effect for the period preceding 01.04.2009. This ultimately implies that the said definition does not cover the assessee s case re assessment year 2007-08. Therefore, the assessee s export business activity has to be judged under section 10B(2) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10B of the Act are very similar in nature and the wordings of the statutory provisions are similar in nature is correct. .. 36. We, in view of the above, hold that when the products for which the assessee s unit is recognized as a 100% EOU are tea bags, tea in packets and tea in bulk packs and the assessee is exclusively engaged in blending and packing of tea for export may not be manufacturer or producer of any other article or thing in common parlance. However, for the purpose of Section 10A, 10AA and 10B, we have to consider the definition of the word manufacture as defined in Section 2(r) of SEZ Act, Exim Policy, Food Adulteration Rules, 1955, Tea (Marketing) Control Order, 2003, etc. We also find that the definition of manufacture as per Section 2(r) of the SEZ Act, 2005 is incorporated in Section 10AA of the Income-tax act with effect from 10.02.2006. Hon ble Kerala High Court in the case of Girnar Industries (supra) had held such amendment in Section 10AA to be of clarificatory in nature. The definition of manufacture under the SEZ Act, Exim Policy, Food Adulteration Rules and Tea (Marketing) Control Order is much wider than what is the meaning of the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant is tissue cultured, which gives rise to production of voluminous number of plants by artificial processes and stages (supra). Hence, we hold that the peculiar facts and circumstances of the case before us are altogether different than those before the Hon ble Apex Court. Accordingly, in our considered opinion, the Assessing Officer did not commit any error prejudicial to the interest of Revenue in granting the assessee deduction under section 10B of the Act so as to give rise to exigibility of Commissioner of Income Tax s jurisdiction under section 263 of the Act . 14. In the light of above discussion, we are of the opinion of the Assessing Officer in finalizing the assessment had rightly granted the assessee deduction under section 10B of the Act . It was one of the possible view as per law, which could not be revised by CIT under section 263 of the Act. Consequently, once we have held that the assessee s unit is entitled to be treated to be a qualifying unit under the provision of section 10B(2)(1) of the Act , our conclusion is that the order of the Commissioner of Income Tax revising the assessment does not withstand the test of the law. In view of the same, we a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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