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2015 (11) TMI 637 - ITAT KOLKATA

2015 (11) TMI 637 - ITAT KOLKATA - TMI - Eligibility for deduction u/s. 10B in respect to tea blended and exported - CIT(A) denied the exemption holding that even though assessee-company is a 100% Exported Oriented Unit (EOU for short) but merely engaged in trading activity in purchase and sale of tea and there was no processing or blending out of activities carried out by it - Held that:- There is a blending of tea in the present case of assessee and assessee before AO during remand proceedings .....

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- Held that:- This issue stands covered in favour of assessee and against Revenue and respectfully following the judgment of Hon'ble jurisdictional High Court in the case of Rajarani Exports P. Ltd. (2013 (5) TMI 410 - CALCUTTA HIGH COURT ) we confirm the order of CIT(A) in deleting the disallowance. - ITA Nos. 942 & 943/Kol/2009, ITA Nos.1384&1385/Kol/2009 - Dated:- 7-10-2015 - Mahavir Singh, JM And M Balaganesh, AM For the Petitioner : Shri R P Agarwal & J M Thard, Adv For the Respondent .....

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ls of assessee as well as the appeals of revenue is against the order of CIT(A) denying the exemption u/s 10B of the Act in respect to tea blended and exported by it, by holding that even though assesseecompany is a 100% Exported Oriented Unit (EOU for short) but merely engaged in trading activity in purchase and sale of tea and there was no processing or blending out of activities carried out by it. Since common grounds are raised in both the appeals of assessee as well as the revenue and issue .....

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st. Year 2003-04. b) For that the Ld. CIT(A) failed to notice that the said assessee M/s. Northern Projects Ltd. had filed appeal against the order of the Ld. CIT(A) on the issue of the denial of the exemption u/s. 10B in the Asst. Year 2003-04 and the said issue in the Asst. Year 2003-04 was still subjudice before the Appellate Tribunal." Revenue's ground in AY 2002-03: "2. That on the facts and circumstances of the case, the Ld. CIT(A) has erred in law as well as on facts in allo .....

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ort of its claim, assessee filed report in Form No. 56G u/s 10B of the Act. But AO denied exemption to the assessee. Aggrieved, assessee preferred appeal before CIT(A), who also confirmed the action of AO and denied the exemption u/s 10B of the Act by observing in para-4.1 and 4.2 as under:- "4.1. G. Nos. 4, 5, 6 & 7- These grounds are against denial of the exemption claimed by the appellant u/s. 10B of the I. T. act. The appellant had claimed exemption of Income of ₹ 37,80,468/- .....

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(i) V. N. Enterprises Ltd. (ii) Northern Projects Ltd. in the Asst. Yr. 2003-2003. After examining the claim in detail in the assessments of these companies, the AO had rejected the claim of those Companies. On appeal the CIT(A)-IV, Kolkata (my predecessor in office) by his order dtd. 23.05.2008 in the case of Northern Projects Ltd. in appeal No. 47/CIT(A)-IV/06-07 has also upheld the action of the AO after dealing with all aspects of the issue in extensor. This issue is dealt with in Paras 3 & .....

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Nos. 4, 5, 6 & 7 are rejected." Aggrieved, now assessee is in appeal before. 4. At the outset, Ld. counsel for assessee, Shri R.P. Agarwal, Senior advocate stated that the issue now stands covered by the order of Special Bench of ITAT Kolkata in the case of Madhu Jayanti International Ltd. v. Dy. CIT (2012) 137 ITD 377 (Kol) (SB) and he referred to relevant para 35 to 37 of the order, which reads as under:- "35. We find from the above facts and circumstances and case laws relied o .....

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Finance Act 2000, the definition of 'manufacture' which included 'processing' contained in section 10B of the Act was deleted w.e.f. 01.04.2001. The argument of the department is that manufacture or production had liberal meaning under the definition clause contained in section 10B of the Act until its deletion which covers even processing and, therefore, blending and packaging of tea for export was treated as 'manufacture' or 'production' of an article qualifyin .....

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Court in Tara Agencies, (supra) relied on by the Ld. CIT, DR, wherein Hon'ble Supreme Court clearly held that blending of tea does not amount to 'manufacture' or 'production' of an article, but is only processing. We find that the assessee was exclusively engaged in blending and packing of tea for export and was not manufacturing or producing any other article or thing. It was recognised as a 100% EOU division and the Department had no case that the assessee's unit engag .....

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cking 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 I .....

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ctfully following the decision of Hon'ble Kerala High Court in the case of Girnar Industries (supra) and Tata Tea Limited (supra), we hold that the assessee is entitled for exemption under Section 10B of the Act on account of blending of tea. Similarly, in our view, the industrial units engaged in the very same activity i.e. blending, packing and export of tea in the free trade zone shall also be entitled to enjoy tax exemption under Section 10A of the Act. 37. Accordingly, we answer the que .....

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ussed the facts in the case of Madhu Jayanti International Ltd. and found that there is blending of tea and consequently the assessee is eligible for exemption u/s. 10B of the Act as prayed for. Their appeal for the AY 2004-05 is allowed. As regards other appeals and that of the interveners, the matters are restored back to the Division Bench, with directions to decide those appeals in the light of principle laid down herein, so far as the claim for relief u/s. 10A or 10B of the Act in accordanc .....

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report, wherein the AO has discussed the fact as under:- "The facts of the case - as they emerge from the records as well as the assessee's submission in the form of a paper book - are that the appellant company purchases tea from auction centres located in various parts of the country and then the teas of different qualities / grades as selected are laid down on the floor of the Warehouse. Thereafter, the tea of one type/grade are mixed/blended with another type/grade of tea to achiev .....

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ther that the expressions 'manufacture' and / or 'produce' have not been defined in the Income Tax Act 1961 in an exhaustive manner, the assessee has argued in its paper book hat for the purposes of section 100B of the Income Tax Act 1961 an exclusive definition has been given in respect of the said two words and that the expression 'manufacture' has been defined to include inter alia any 'process' for the purposes of section 10B of the Income Tax Act 1961. Placin .....

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nd this is exactly in line with order of ITAT Kolkata Special Bench in the case of Madhu Jayanti International Ltd. (supra). On query from the Bench, Ld. CIT-DR Shri Adhir Kumar Bar relied on the order of AO. 5. We find that factual there is a blending of tea in the present case of assessee and assessee before AO during remand proceedings have proved the complete procedure explaining that there is blending of tea. This is exactly in line with the order of ITAT Kolkata Special Bench in the case o .....

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ment. For this, Revenue has raised identical issue and the ground raised in AY 2002-03, reads as under:- "4) That on the facts and circumstances of the case, the Ld. CIT(A) has erred in law as well as on facts in deleting the disallowance of payment of commission to the tune of ₹ 15,69,790/- without appreciating the fact that such payment of commission was illegal as it is in contravention to the UNO sponsored scheme of Óil for Food' programme in Iraq. Explanation to Sec. 3 .....

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rt has considered that assessee made payment of commission in consideration of services rendered. The CIT(A) held that the commission on export activity was fully disclosed in all correspondence and activities in relation to export, the commission was paid through banking channels with the Reserve Bank approval and it was paid pursuant to an agreement approved by the Government of India and the United Nations, that the payment of commission was for business consideration and there was no illegal .....

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s. The Tribunal held that the assessee was concerned with commercial expediency of the payment and not with the actual costs incurred in rendering the services for which the payment was made. Hon'ble Calcutta High Court confirmed the order of Tribunal in the case of CIT Vs. Rajarani Exports P. Ltd. (2014) 361 ITR 152 (Cal) by observing as under: "Aggrieved by the order of the Commissioner (Appeals) the Revenue preferred an appeal before the Tribunal. The Tribunal dismissed the appeal ho .....

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