TMI Blog2012 (11) TMI 426X X X X Extracts X X X X X X X X Extracts X X X X ..... hat since assessee's produce is "plant", which is a lively object, therefore, it is covered by section 2(29)BA). 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. - Decided in favor of assessee. - IT Appeal No. 1142 (Mds.) of 2012 - - - Dated:- 5-10-2012 - N.S. Saini And S.S. Godara, JJ. R. Meenakshisundaram for the Appellant. Dr. S. Moharana for the Respondent. 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)/CIT-I/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 ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is observed that the assessee had claimed exemption in respect of a Unit which was engaged in raising tissue culture plants and exporting the same. Since the product is live plants, it cannot be considered as article or thing for the purposes of section 10B of the Income-tax Act, 1961. As such the industrial undertaking of the assessee cannot be said to have satisfied the conditions prescribed in sub-section (2) of section 10B. The Assessing Officer did not examine the relevant facts before allowing the claim." 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R representing the assessee has made us to go through the grounds raising various pleas of jurisdiction, legality of Commissioner of Income Tax's order under section 263, assessee's claim of exemption under section 10B of the "Act" as well as necessary provisions of "Act" in contending that the Commissioner of Income Tax has wrongly revised the assessment finalized by the Assessing Officer. In support thereof, he has also cited case law CIT v. A.V. Thomas Co. Ltd. [1996] 221 ITR 882 (Ker.) decision of the Special Bench of ITAT, Kolkata in the case of Madhu Jayanti International Ltd. v. Dy. CIT [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 and CIT v. Venkateshwara Hatcheries (P.) Ltd. [1999] 237 ITR 174 ) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... produces small plants The tissue will begin to grow. It may make a big blob of tissue called callus, or it may make new shoots directly from the explant tissue that was inserted in the container. A mass of callus tissue is formed that is just starting to make new plantlets. (c) Rapid Multiplication by Transfer of Cultures Once the plantlets start developing, some can be removed and placed in new tissue culture containers. Thus, another "forest'" of plants is produced. This results in a rapid multiplication of the cultures and many thousands 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 gre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cluding any processing exercise alike the substituted provision (supra). Thereafter, the Finance Act, 2003 w.e.f. 01.04.2004 added explanation 4 to section 10B which stated that "manufacture or produce would also include cutting and polishing precious stone and semi precious stone". But, as already clarified, the word "manufacture" or produce did not find any definition in section 10B. During all this, the assessee filed 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 retro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the ITAT Kolkata Special Bench's decision cited by the assessee, wherein it has been observed as follows: "35. . We are of the considered view that the contention of the assessee that the scheme of income tax exemption available to units in the SEZ u/s. 10A of the Act and units in the free trade zone provided u/s. 10AA of the Act and the exemption available to 100% EOU u/s. 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 S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee, the Hon'ble Apex Court had observed that there was no manufacture or production since the "chicks" were merely hatched which did not amount to manufacture or produce. Contrary to the facts of those cases, in the instant case the assessee is involved in tissue culture, which can in no way be called any activity other than 'manufacture or produce' because one mother plant 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, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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