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2015 (11) TMI 1134 - ITAT MUMBAI

2015 (11) TMI 1134 - ITAT MUMBAI - TMI - Deduction u/s 80IC - manufacturing and sale of nutritional food supplements, agro products and veterinary feed supplements, etc. - assessee is merely mixes various ingredients, required for final products, with the help of machineries and the final product/finish product is filled in pouches - Held that:- Analyzing the processing activity done by the assessee, we find that the resultant end product is commercially known differently in the trading world, t .....

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outcome of combination of efforts with the help of men and machine using homogenizer. Likewise, Aloevera juice is extracted from the aloevera leaves with the help of machines and men and the end product is aloevera juice, which is outcome of various processes, therefore, whole activity of the assessee routs through various processes, thus, certainly amounts to manufacturing. The case of the assessee further find support from the decision in the case of Ramit Kumar Sharma vs DIT (IT) (2009 (1) TM .....

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e (2009 (10) TMI 23 - AUTHORITY FOR ADVANCE RULINGS) processing, packaging and packing of fruits and vegetables were held to be eligible for deduction u/s 80IB of the Act, therefore, it can be concluded that the end product is commercially known differently, therefore, the assessee is involved in manufacturing - Decided in favour of assessee. - ITA NO.2369/Mum/2013, ITA NO.973/Mum/2014 - Dated:- 16-10-2015 - Shri Joginder Singh, Judicial Member, and Shri Ramit Kochar, Accountant Member For The R .....

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h are identical to the ground raised by contending that the ld. First Appellate Authority, while granting relief to the assessee, overlooked the conditions enshrined in section 80IC, which were not fulfilled by the assessee. On the other hand, Shri Deepak P Tikekar, ld. counsel for the assessee, defended the conclusion arrived at in the impugned order. 2.1. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee, an indivi .....

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ing activity carried out by the assessee as the assessee is merely mixing up the ingredients/raw material. (b) The enterprise is formed by splitting up or reconstruction of an existing business and thus, has not fulfilled the conditions provided for claiming deduction u/s 80IC of the Act. In view of the above, the ld. Assessing Officer disallowed the claimed deduction u/s 80IC of the Act by observing that the assessee is merely mixes various ingredients, required for final products, with the hel .....

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e disposed off by this common and consolidated order. Before coming to any conclusion, we are expected to analyze the process adopted by the assessee, which is reproduced/summarized hereunder:- The above process of the assessee needs analysis which is further elaborated as under:- 1) "Naturamore Protein supplement (Vanilla Flavour)" "These materials are charged in the ribbon blender and mixed thoroughly for about 30 minutes to get a uniform Premix. " "Excipients like mal .....

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a homogenizer so that the powders dissolve completely in the water" "1 kg of Aloevera 200 x powder ie. Spray dried aloevera extract is added to the vessel and stirred well with the homogenizer for 20 mins" "The Aloevera juice is then filled manually in plastic bottles, foiled by heat sealing labelled manually, shrinkwrapped in the shrink tunnel, put in master cartons. Cartons are then strapped with nylon tapes and Bopp tapes. " 3) "Gayatri's Aloevera Juice (fib .....

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ly, shrinkwrapped in the shrink tunnel, put in master cartons. Cartons are then strapped with nylon tapes and Bopp tapes. " 4) "Herbomineral powder for pets" "The mixture is mixed thoroughly for 20 mins in a ribbon blender" "The blended mixture is then sieved for eliminating any foreign particles and collected in a storage vessel. " "The pouches are ,filled in plastic jars which are labeled manually, shrinkwrapped in the shrink tunnel, put in shipper carto .....

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Cartons are then strapped manually with nylon tapes and Bopp tapes. " 6) "Biofit cattle feed concentrate (Biofit CFC) " "These materials are charged in a ribbon blender and mixed thoroughly for about 30 mins to get uniform premix" "Excipients like dicalcium phosphate, herbs, talc and soya powder and premix are weighed using balance, as per formula" "Weighed Excipients and the premix are charged in the blender and mixed thoroughly, 15 minutes in each direct .....

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on the manufacturing process undertaken by him. Extracts of the submissions are reproduced as under- Input- Manufacturing Process- Output After setting up the manufacturing unit as aforesaid, the assessee actually carried out manufacture/production of items by employing a process which is given in detail (summarized above) Note on Manufacturing Activities 1. The above mentioned finished products are scientifically well balanced formulations and have been widely accepted by several customers as b .....

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is would emphasize that raw materials used in manufacturing of finished products are totally different and distinct from resultant finished products. 3. The raw materials mentioned above are generic in nature having different properties such as particle sizes, colour, odour, bulk density, PH value etc. They also have different chemical structures. Whereas the finished products are proprietary formulae having altogether different and distinct properties. 4. The raw materials once blended cannot b .....

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nnel, Sieving Plates, Homogenizers, Heating Equipments, Heat Sealing Machines, Carton Strapping Machines. 8. The factory employs around 8 to 10 semi-skilled workers who carry out manufacturing activities. The production is supervised by proprietor himself assisted by Manager Mr. Virender Singh. The list of employees with designation for Oct.2009 (as a sample) 9. The production is carried out with the aid of power and copies of electricity bills for the period April 2009 to March 2010 The manufac .....

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particles. d) The resultant blend is then packed in pouches, bottles, and jars, labeled appropriately and finally packed in shipper cartons. If the whole process is analyzed, we find that the end product is outcome of combination of employment of man and machine and definitely the end product is different from raw material. The raw material which is in a specified percentage of quantity is mixed thoroughly for a specified period with a homogenizer and after adding, the dried aloevera extract, t .....

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y different article/thing/product. Thus, it can be safely concluded that it is a manufacturing activity carried out by the firm of the assessee. 2.3. So far as, the contention of ld. DR and also objection of the ld. Assessing Officer that there was no new enterprise was set up by the assessee and old machinery was used is concerned, as mentioned earlier, we are not agreeing with this assertion of the ld. DR, as explained by the ld. counsel for the assessee that earlier product was limited and th .....

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form the State Government. The entire staff was newly recruited and neither any staff/machinery from the old unit was transferred to the new unit at Parwanoo. It was explained that in the new unit, the final product is produced around 600 kg per day. Except for arguing that old machinery was used, no evidence was produced either before the ld. Commissioner of Income Tax (Appeals) or before this Tribunal by the Revenue evidencing that any old machinery was used, therefore, we find no substance i .....

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a different name and identified by the buyers and seller as a different product and is sold as a different product from its raw material one can say that it is a manufactured product. The case of the assessee find support from the ratio laid down in the case of R.M. Chemicals Pvt. Ltd. (ITA No.111/Indore/2012) (Assessment Year 2003-04) order dated 11/05/2012 (wherein, one of us i.e., Judicial Member, is signatory to the order). The relevant portion from the aforesaid order is reproduced hereunde .....

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gistered as a small scale industry by the Director of Industries on 26.6.1995 (page 32 of the paper book) and continued as such as is evident from acknowledgment dated 15.4.2010 (paper book page 52), therefore, this condition of the section is also satisfied by the assessee. 3.6 The dictionary meaning of the two terms i.e. soaps and detergent are also different items. There is a generic unity in these terms and the distinct genus or category present in these terms in their application. Therefore .....

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of these facts, the assessee is eligible for deduction u/s 80IB of the Act. The appeal of the assessee is allowed. 2.5. Now, we shall deal with the issue of manufacturing with the help of certain cases which are analyzed hereunder:- i. Ms Delna Rushtam Boyce (2009) 318 ITR 455 (AAR) New Delhi, wherein the assessee was deriving profit from business of squeezing of juice from fruits and vegetables and etc was eligible for deduction u/s 80IB of the Act to be holding the same to be manufacturing. i .....

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ing and sale of computer stationery amounts to manufacturing. v. The Hon ble Punjab & Haryana High Court in CIT vs HSED Corporation Ltd. held that activity of manufacturing of voter identity card amounts to manufacture. vi. Likewise, in CIT vs Zainav Trading pvt. Ltd. 333 ITR 144 (Mad.) conversion of paper corrugated sheets into paper boxes was held to be manufacturing. vii. Likewise, the Hon ble Apex Court in CIT vs Vinbros & Company (2012) 210 taxman 252 (SC) held that blending and bot .....

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amounts to manufacturing. xi. Hon ble Allahabad High Court in CIT vs Shiv Oil & Dal Mill 153 taxman 127 held that refining of oil amounts to manufacturing. xii. Even, buying tendu lives and tobacco and thereafter making bidi amounts to manufacturing (CIT vs Prabhudas Kishoredas Tobacco Products) 154 taxman 404 (Guj.). xiii. Tobacco curing was held to be manufacturing in CIT vs Premier Tobacco Packers Pvt. Ltd. 284 ITR 222 (Mad.). xiv. Hon ble Madras High Court in CIT vs P Damodaran (2006) 28 .....

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n held that book publishing activity amounts to manufacturing. xviii. In CIT vs Tata Locomotive and Engineering Company Ltd. (1968) 68 ITR 325 (Bom.) held that assembling works amounts to manufacturing. xix. In CIT vs Kanam Letex Industries Pvt. Ltd. 221 ITR 1 held that conversion of natural latex into preserved latex amounts to manufacturing. xx. In Tarai Development Corporation 120 ITR 342 Hon ble Allahabad High Court even held that processing of seeds is a process which amounts to manufacture .....

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(Raj.) High Court held that ginning of cotton is process, thus entitled to deduction. 2.6. There are certain contra decisions also, which are discussed hereunder:- a) Addl. CIT vs Southern Structural Ltd. 110 ITR 164 (mad.) wherein it was held that production of proto type will not amount to manufacturing. b) Hon ble Apex Court in Tamilnadu State Transport Corporation Ltd. vs CIT 252 ITR 883 (SC) held that tyre retreading is not manufacturing. c) In Appeejy Pvt. Ltd. vs CIT 77 taxman 208 (Cal.) .....

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o deduction in CIT vs Venkateshawara Hatcheries Pvt. Ltd 237 ITR 174 (SC), Indian Poultry vs CIT 116 Taxman 493 (SC) and CIT vs JD Farms (2010) 187 taxman 151 (Del.) g) In CIT vs Relish Foods 237 ITR 59 (SC) held that processing of Shrimps could not be said to be manufacturing or production. h) Likewise in Bhatsons Acquatic Products vs ACIT 329 ITR 67 (Ker.) held that fish processing does not amount to manufacture or production. i) Likewise in CIT vs Gitwako Pharma (I.)(P) Ltd. (2011) 10 taxman. .....

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with the processing activity done by the assessee, we find that the resultant end product is commercially known differently in the trading world, therefore, certainly it can be said that the activity of the assessee amounts to manufacture, consequently, entitled to deduction u/s 80IC of the Act, because, mixing various ingredients in a specified manner and the net result come into nutritional food supplement, agro products and veterinary food supplement amounts, which is used by the public at l .....

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