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2016 (11) TMI 68 - ITAT LUCKNOW

2016 (11) TMI 68 - ITAT LUCKNOW - TMI - Validity of reopening of assessment - whether the assessee failed to challenge the jurisdiction within the prescribed time of 30 day as per section 124(3)(a) of the Act? - Held that:- From the reading of section 124(2)(a) of the Act, it is seen that this section mandates that no person shall be entitled to call in question the jurisdiction of an Income Tax Officer after the expiry of one month from the date on which he has furnished the return u/s 139(1) f .....

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ct. If we look into the said clause (b) of section 124(3), we noted that this clause talks of challenge of jurisdiction not after the expiry of the time allowed by the notice issued u/s 148 but clause (b) is applicable only in case where the assessee has not furnished the return. In the case of the assessee, the assessee has furnished the return u/s 139(1) therefore, it is only clause (a) of section 124(3) which is applicable. Clause (a) of section 124(3) does not refer to notice issued u/s 148 .....

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th the provisions of section 151(2) before issue of notice u/s 148 of the Act.The Revenue has not come in appeal against the aforesaid finding of CIT(A). - Decided against revenue - Claim of the assessee u/s 80IC - Held that:- The assessee is engaged in manufacturing and production of an article and therefore, the assessee shall be entitled for the deduction available u/s 80IC of the Act. We accordingly confirm the order of CIT(A) as in our opinion, no illegality or infirmity is found in the .....

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n law and on facts of the case in annulling the assessment order passed u/s 147/143(3) of the I.T. Act ignoring the fact that the assessee failed to challenge the jurisdiction within prescribed time of 30 days as per section 124(3)(a) of the I.T. Act. 2. The CIT(A) has erred in law and on facts of the case in deleting the addition of ₹ 31,31,98,995/- made on account of disallowance u/s 80IC of the I.T. Act without appreciating the fact that the assessee was not doing any manufacturing or p .....

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assed u/s 147/143(3) only on the ground that the assessee failed to challenge the jurisdiction within the prescribed time of 30 day as per section 124(3)(a) of the Act. The provisions of section 124(3)(a) are apparently clear. This clause is applicable in the case of the assessee who has filed the return u/s 139(1) of the Act. Clause (b) of the said section is applicable to the assessee who has not filed such return of income. The assessee has filed the return of income u/s 139(1) of the Act on .....

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x Officer-1(2), Lucknow who was not having the jurisdiction over the assessee. The jurisdiction in the case of the assessee lies with Dy.C.I.T., Range-4, Lucknow who has completed the assessment proceedings u/s 147 read with section 143(3) of the Act. In this regard, our attention was drawn towards the provision of section 120(1), 120(2) of the Act as well as the definition of the Assessing Officer given under section 2(7A) of the Act. 3. We have heard the rival submissions, carefully considered .....

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ore us that the jurisdiction in the case of the assessee does not lie with the Dy.C.I.T., Range-4, Lucknow but it lies with the Income Tax Officer-1(2), Lucknow. The only grievance of the Revenue before us is that the assessee failed to challenge the jurisdiction within the prescribed time of 30 days as per section 124(3)(a) of the Act. In view of the grievance of the Revenue, the only question before us is whether under clause (a) of section 124(3) the assessee was required to challenge the jur .....

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ub-section (2) of section 143 or after the completion of the assessment, whichever is earlier ; (b) where he has made no such return, after the expiry of the time allowed by the notice under sub-section (2) of section 115WD or sub-section (1) of section 142 or under sub-section (1) of section 115WH or under section 148 for the making of the return or by the notice under the first proviso to section 115WF or under the first proviso to section 144 to show cause why the assessment should not be com .....

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pletion of the assessment whichever is earlier. Clause (a) of section 124(3) does not talk of any time limit for questioning the jurisdiction of the Assessing Officer for the service of notice u/s 148 of the Act. This provision provides a time limit of one month to question the jurisdiction of the Assessing Officer to issue notice u/s 143(2) and 142(1) of the Act. If we look into the said clause (b) of section 124(3), we noted that this clause talks of challenge of jurisdiction not after the exp .....

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s to ground taken by the Revenue in respect of the provision of section 124(3)(a) of the Act is concerned. We also noted that the CIT(A) has annulled the assessment not only on the basis of jurisdiction but has also annulled the reassessment on the basis of provision of section 151 as in his opinion, the Assessing Officer has not taken approval in accordance with the provisions of section 151(2) before issue of notice u/s 148 of the Act. The relevant findings of CIT(A) are reproduced below as un .....

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esent case the case is re-opened and notice under section 148 of the Act has been issued on approval of Commissioner of Income Tax who is different authority then the Joint Commissioner of Income Tax as per section 2 of the Act. For the said reason the notice issued under section 148 of the Act is bad in law and liable to be quashed. The issue of valid jurisdiction is a condition precedent to the validity of any assessment under Section 147 of the Act. In any case the notice under section 148 of .....

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consequence of the notice under section 148 of the Act which was invalid. Ground of appeal numbers 2 and 3 are allowed. 3.2 The Revenue has not come in appeal against the aforesaid finding of CIT(A). Even if the first ground of appeal taken by the Revenue is allowed, the finding of the CIT(A) that the assessment order passed u/s 147 read with section 143(3) will remain to be final and the ground taken by the Revenue will become to be infructuous. In view of the aforesaid discussion, we dismiss .....

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is of the statement, took the view that the assessee was not doing any manufacturing or processing activity. It was only mixing and repacking various ingredients and selling these in the market. The Assessing Officer was not convinced with the reply of the assessee therefore, he took the view that the assessee has not complied with primary condition as given u/s 80IC of being engaged in manufacturing or processing. The Assessing Officer therefore, disallowed the claim u/s 80IC of the Act. The as .....

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acture so as to be eligible for claim of deduction under section 80IC of the Act. The evidences filed indicate that - • The appellant was allotted a plot for setting up of an industrial unit at Integrated Industrial Estate, Pantnagar i.e. SIDCUL • The unit is registered as a SSI. The registration has been granted to the appellant under the category of a "small" Unit engaged in "Manufacturing" activity. • The products manufactured by the appellant are excisable .....

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VAT on the products depending on the item produced and the VAT rates were different for different products and also for different raw materials. (6)(6)(i) The appellant is engaged in manufacture of Odoriferous Compounds and Industrial Perfumes. The appellant in its business activity consumes over 1500 raw materials and produces more than 500 finished goods, all different from each other. The finished goods manufactured by the appellant are used in various industries which include Skin care prod .....

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a flavor may involve from as less as 10 to as much as 50 raw materials to manufacture the product. Furthermore, a raw material may have 0.1% to even 50% of the constitution of finished goods. The raw materials have to be added in a proper chronological manner and a proper formulation without which the finished goods cannot be produced. 6(6)(ii) Some of the features explained by the appellant outline the following significant characteristics - • Mixing has to be done at controlled temperatu .....

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therwise rot/decay with passage of time, and are in concentrated form are required to be treated and blended with other chemicals etc. so as to render them usable in various types of industries and applications. • Mixing cannot be done without proper lab testing techniques and without studying the behavioral pattern of various blends over a period of time, which may range from one hour to 15 days. The blended mixtures' properties change as some chemicals react over a period of time, whi .....

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shed product is made, it is either a flavor or a fragrance and the same can, by no means, be either converted or separated back to raw materials stage. Further some raw materials are received in solid state, some liquid and sum in lumps. Some are essential oils, some are aromatic chemicals, some are spices, some are spice, extracts and some are oleoresins. Thus all these types of raw materials are required to produce the finished goods. It may be submitted that these raw materials fall under var .....

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, R & D etc. 6(8) The facts and evidences brought on record therefore clearly establish that the activity carried on by the appellant is manufacturing process where a finished product distinct from the raw material has come into existence. The appellant is registered with Excise Department. The Hon'ble Supreme Court in the case of Arihant Tiles & Marbles Pvt. Ltd. 320 ITR 79 (SC) has observed that when the activity undertaken by the assessee involves levy of excise duty then to say t .....

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nsidered the same along with the orders of the tax authorities below as well as the documents placed before us. The only question before us is whether the assessee is engaged in manufacturing activities to be eligible for deduction u/s 80IC of the Act. The provision of section 80IC although lays down various conditions to be complied with by an undertaking to be eligible for deduction u/s 80IC(3) of the Act but the Revenue did not raise any objection in this regard except that the assessee is no .....

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as claiming as if he is engaged in manufacturing or production of an article. 5.1 On the other hand, the Learned counsel for the assessee vehemently relying on the order of the CIT(A) contended before us that the assessee is very much engaged in manufacturing/production of an article. He was carrying on the manufacturing operation. He has submitted various documents and evidences before the Assessing Officer as well as before the CIT(A). The Assessing Officer could not appreciate this fact while .....

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s, consumer edibles, incense sticks and room fresheners, industrial perfumes and flavors used by pan masala and other industries. He furnished price list of the firm showing the nature and type of finished goods manufactured or produced and it was submitted that each of the above category of the product require the different chemical compositions and properties. For example, an essence of rose has to have different ingredients when it is used in a toilet soap, as an agarbatti compound, as a food .....

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of the constitution of finished goods. The raw materials have to be added in a proper chronological manner and a proper formulation without which the finished goods cannot be produced. The mixing has to be done at controlled temperatures to get the desired chemical reaction. The finished goods are themselves a result of chemical reactions only. Several raw materials used by the assessee are hazardous chemicals, which are not per se fit for human consumption or application. However, scientifical .....

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ing the behavioral pattern of various blends over a period of time, which may range from one hour to 15 days. The blended mixtures properties change as some chemicals react over a period of time, while in some cases reactions are instant. It was further submitted that the testing is done at each stage by again reacting the finished products with other chemicals and substances, at various temperatures depending on the intended use of the finished product. Thus, it was expressed that the industry .....

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ncluding the year under appeal. The assessee has commenced the production on 04/10/2006 in a notified area as per Notification No.SO741(E) dated 28/06/2004. The assessee is engaged in manufacture of odoriferous compounds and industrial perfumes which are not specified in XIII Schedule. Our attention was also drawn towards the definition of manufacture as given u/s 2(29BA) of the Act. The reliance was placed on the following case laws: (i) CIT vs. Vinbros & Co. 349 ITR 697 (SC) (ii) CIT vs. V .....

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ix) Madhu Jayanti International Ltd. vs. DCIT 137 ITD 377 Kolkatta (SB) (x) Shree Bhavani Minerals vs. CIT, I.T.A. No.68/PNI/2013 (Goa) (xi) Fiberfill Engineers vs. ACIT, I.T.A. No.1853/Del/2015 (xii) Aspinwall & Co. Ltd. vs. CIT [2001] 251 ITR 323 (SC) 5.3 Learned counsel for the assessee vehemently contended that if this Tribunal wants to verify whether the product or the article produced by the assessee is different from the raw material having the different market value and which cannot .....

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and compound bela. 5.4 On 15/09/2016 the representative of the assessee appeared along with three chemical engineers of the assessee company having different chemicals in small bottles along with the induction and glass jars. The assessee first demonstrated how the sweet gulab is manufactured. The chemical engineer showed us 15 items out of which two were in solid form while 13 were in liquid form. He pointed out that the items brought by him for manufacturing 100 gms of sweet gulab were as und .....

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these items are mixed up in different order, the desired sweet gulab will not come and the product will be just a waste. Two items namely Benzophenone and rose crystals being solid were put in a jar and he applied heating process so that they can be converted into liquid form. Before us and before Learned D. R., the chemical engineer mixed up all these items in a glass jar in the same seriatim and ultimately brought us the smell of the product manufactured called sweet gulab, which was in liquid .....

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Indole 2.5 12 Linalool 6.1 13 Methyl Anthranilate 2.8 14 Folione 0.015 15 Phenyl Ethyl Alcohol 1.7 16 Sandela 2 17 S Absolute 0.1 5.6 The chemical engineer has also brought the small bottle showing the fragrance and the smell of the product which were handed over to Learned D. R. On the basis of the demonstration held before us, we noted that the product being produced by mixing the various chemicals is entirely different from the raw material. Its usage as well as the utility is different. It c .....

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/s 80IA as well as u/s 10B of the Act. Section 10B defined the word manufacture for the purpose of the said section to include any - (a) process or (b) assembling or (c) recording of programme on disc, tape, perforated media or other information storage device. Thus, process was included within the word manufacture for the purpose of sec. 10B. Explanation (iv) of the said sec. 10B further provided that the word produce for the purpose of said section, in relation to any article or thing shall in .....

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ing within the block of eight assessment years. The exemption provided under this new section was similar to the one provided under sec. 10A of the Act to industrial undertaking operating under the free-trade zone. It was also clarified therein that the expression manufacture for the purpose of both sections 10A and 10B of the said Act would include any processing or assembling or recording of programme on disc, tape, perforated media or other information storage device. 5.7 This definition of m .....

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nufacture shall have the same meaning as assigned to it in clause ® of section 2 of Special Economic Zone Act, 2005. Subsequently, Special Economic Zone Act, 2005 was passed by the Parliament in May, 2005, which was brought into effect w.e.f. 23/06/2005. Section 2(r) of Special Economic Zone Act defines the expression manufacture as under:- Manufacture means to make, produce, fabricate, assemble, process or bring into existence, by hand or by machine, a new product having a distinct name, ch .....

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anufacture shall have the same meaning as assigned to it in clause (r) of section 2 of the Special Economic Zone Act, 2005. 5.10 As per the said definition process is included in manufacture. Subsequently, by the Finance Act, 2009 w.e.f 1.4.2009, clause (29BA) was inserted in section 2 of the Income Tax Act, 1961defining the expression manufacture as under: manufacture , with its grammatical variations, means a change in a non-living physical object or article or thing,- (a) Resulting in transfo .....

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TC 500 (Bom.), clearly observed on the question whether the blending of ore, whilst loading it in the ship by means of the mechanical ore handling plant, constituted manufacture or processing or ore for sale within the meaning of section 8(3)(b) and Rule 13 of the Central Sales Tax Act, 1956. Dealing with this question, their lordships held and observed at pages 659 and 660 of the reports as under:- It still remains to consider whether the ore blended in the course of loading through the mechani .....

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ss of manufacture, development of preparation for the market etc.; to convert into marketable form as livestock by slaughtering, grain by milling, cotton by spinning, milk by pasteurizing, fruits and vegetables by sorting and repacking. Where therefore any commodity is subjected to a process or treatment with a view to its development or preparation for the market , as, for example, by sorting and repacking fruits and vegetables, it would amount to processing of the commodity within the meaning .....

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be compressed into camphor cubes by application of mechanical force or pressure without addition or admixture of any other material and yet the operation would amount to processing of camphor powder as held by the Calcutta High Court in Om Prakash Gupta Vs Commissioner of Commercial Taxes [16 STC 935 (Cal)]. What is necessary in order to characterize an operation as processing is that the commodity must as a result of the operation, experience some change. Here, in the present case, diverse quan .....

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mpositions. When the chemical and physical composition of each kind of ore which goes into the blending is changed, there can be no doubt that the operation of blending would amount to processing of ore within the meaning of Section 8(3)(b) and Rule 13. It is no doubt true that the blending of ore of diverse physical and chemical compositions is carried out by the simple act of physically mixing different quantities for such ore on the conveyor belt of the mechanical ore handling plant, but to o .....

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ve chemical and physical compositions. 5.12 Thus, the Hon'ble Supreme Court accepted that there is change in chemical compositions after processing of the iron ore. From the said decision of the Apex Court, it is apparent that Hon ble Apex Court held even blending of iron ore for the purpose of export involves change in the chemical and physical composition of iron ore. If we look to the facts of the impugned case of the assessee, we find that the assessee is mixing various chemicals either .....

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as given by us in the preceding paragraph, both the products manufactured are entirely different from the various chemicals and the items used by the assessee. These items so produced have a different name, different utility and they are being used for different purposes in soaps, detergents, edible items, juices etc. according to the fragrances and taste to be given to these items. These items so produced are different in physical appearance and chemical composition. We do not agree with Learne .....

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ot a case that all the ingredients which are being mixed are in liquid forms. The taste as well as the smell and the utility of the input and the output which we have seen during the course of demonstration in the court, are entirely different. In our opinion, in view of this clause and the decision of Hon'ble Supreme Court in the case of Chowgule & Co. (supra), it cannot be held that the assessee is engaged in these units in manufacturing. 5.13 Further, in CIT Vs N.C. Budharaja & Co .....

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not amount to manufacture. It also takes in all the by-products, intermediate products and residual products which emerge in the course of manufacture of goods. 5.14 In Christian Mica Industries Ltd. Vs. State of Bihar (1961) 12 STC 150 (SC), Hon ble Supreme Court defined the word production , albeit, in connection with the Bihar Sales Tax Act, 1947. The definition was adopted from the meaning ascribed to the word production in the Oxford English Dictionary, as meaning amongst other things that .....

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juxtaposition of the word manufacture with agriculture and horticulture is significant and cannot be lost sight of. The intention in employing the word produced obviously was to introduce an element of volition and effort involving the employment of some process for bringing into existence some goods. 5.16 In paragraph 7 of its in the case of Chowgule & C0 (P) Ltd. Vs. UOI (supra), Hon ble Apex Court also considered the question whether the different brands of tea purchased and blended by t .....

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of the Bombay High Court in Nilgiri Ceylon Tea Supplying Co. Vs. State of Bombay [10 STC 500 (Bom HC)]. The assessees in this case were registered dealers in tea under the Bombay Sales Tax Act, 1953 and they purchased in bulk diverse brands of tea and without the application of any mechanical or chemical process blended these brands of different qualities according to a certain formula evolved by them and sold the tea mixture in the market. The question arose before the Sales Tax Authorities whe .....

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ng of the proviso to clause (a) of Section 8, because there was not even application of mechanical force so as to subject the commodity to a process, manufacture, development or preparation and the commodity remained in the same condition. The argument of the Revenue before us was that this decision of the Bombay High Court was on all fours with the present case and if the blending of different brands of tea for the purpose of producing a tea mixture in accordance with a formula evolved by the a .....

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t law. When different brands of tea were mixed by the assessee in Nilgiri Tea Company case [10 STC 500 (Bom HC)] for the purpose of producing a tea mixture of a different kind and quality according to a formula evolved by them, there was plainly and indubitably processing of the different brands of tea, because these brands of tea experienced, as a result of mixing, qualitative change, in that the tea mixture which came into existence was of different quality and flavor than the different brands .....

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t we do not think that is the correct test to be applied for the purpose of determining whether there is processing . The question is not whether there is manual application of energy or there is application of mechanical force. Whatever be the means employed for the purpose of carrying out the operation, it is the effect of the operation on the commodity that is material for the purpose of determining whether the operation constitutes processing we are clearly of view that the blending of ore i .....

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om), inter alia, observed as follows: (i) When different brands of tea were mixed by the assessee as in Nilgiri Ceylon Tea Supplying Co. s case (1959) 10 STC 500 (Bom) for the purpose of purchasing a tea mixture of a different kind and quality according to a formula evolved by them, there was plainly and indubitably processing for the different brands of tea, because these brands of tea experienced, as a result of mixing, a qualitative change, in that the tea mixture which came into existence wa .....

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esent case, the blending was done by application of mechanical force, but that is not the correct test to be applied for the purpose of determining whether the operation constitutes is processing . (iii) The question is not whether there is any manual application of energy or there is application of mechanical force. Whatever be the means employed for the purpose of carrying out the operation, it is the effect of the operation on the commodity that is material for the purpose of determining whet .....

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ider the expression manufacture since the question was decided only on the expression processing . However, considering the judgment of the Bombay High Court in the case of Nilgiri Tea Co. [1959] 10 STC 500, Hon ble Supreme Court observed that, for the purpose of producing a tea mixture of a different kind and quality according to a formula evolved by them, there was plainly and indubitably processing of the different brands of tea, because these brands of tea experienced, as a result of a quali .....

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ase that the Revenue s stand 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 qualifying for exemption. Hon ble Kerala High Court considered 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 .....

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article or thing, but is only processing. Hon ble High Court allowing the appeal of the assessee held 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 recognized as a 100% EOU division and the Department had no case that the assessee s unit engaged in export of tea bags and tea packets was not a 100% EOU. If exemption was denied on the ground that products exported were not produced or m .....

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blending, packing and export of tea bags and tea packets. Hon ble High Court held as under: The finding of this court is that the purpose of incorporation of section 2(r) of the Special Economic 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 ev .....

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en approved as a 100 per cent export oriented undertaking by the Board appointed in this behalf by the Central Government in exercise of powers conferred by section 40 of the Industries (Development & Regulation) Act, 1951, and the Rules made under that Act. It is pertinent to note the products for which the assessee s unit is recognized as a 100 per cent export oriented unit are tea bags, tea in packets and tea in bulk packs. In fact, the assessee is exclusively engaged in blending and pack .....

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cts exported are not produced or manufactured in the industrial unit of the assessee s 100 per cent export oriented unit, the same would defeat the very object of section 10B. Further, industrial units engaged in the very same activity, i.e., blending, packing and export of tea in the special economic zones and free trade zones, will continue to enjoy tax exemption under section 10A and section 10AA respectively. The still worse position is that the appellant would be denied of export exemption .....

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he 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 first appellate authority declaring the appellant s entitlement for exemption. 5.20 Hon ble high court in this case, in our opinion, has clearly laid down that once the assessee is recognized as a 100% EOU for engaging in an activity and assessee is engaged in t .....

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r production of an article but is only processing. Thus, the Hon ble Kerala high court in the case of Tata Tea Ltd. (supra) gave the clear cut finding impliedly that even if the assessee is engaged in processing and is recognized as 100% EOU, it will be entitled for exemption claimed u/s 10B of the Act. 5.21 Thus, Hon'ble Kerala High Court in the case of Tata Tea Ltd. (supra) gave the clear cut finding implies that even if the assessee is engaged in processing, it will be entitled for exempt .....

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for the purpose of Section 10A/10B of the I.T. Act, 1961? 5.23 The brief facts in the case of Madhu Jayanti International Ltd. in ITA No. 1463/Kol/2007 were that the assessee was engaged in the business of manufacturing, processing, exporting and dealing in various commodities, more particularly tea, coffee, jute, pepper, chillies, cardamom, turmeric and similar other spices, etc. The assessee, as per the claim is a 100% EOU within the meaning of section 10B of the I.T. Act, 1961 and claimed ex .....

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oreign substances and thereafter it blends different varieties of tea to make it of uniform and consistent quality throughout the year. Thereafter, it is packed in consumer packets of 50, 100, 250, 500 or 1000 gms. Etc. or packed in the form of tea bags of 1.94 gms. Or 2 gms. etc., as the case may be. The assessee claimed exemption u/s 10B of the Act in respect of its 100% EOU for export of manufactured jute bags, packet tea, tea bags, bulk tea, etc. The AO rejected the claim of assessee of exem .....

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Economic Zones (including units therein) were all along treated like EQU / FTZ / EPZ for all purposes whatsoever and were dealt within the Exim Policy accordingly. Section 2(k) of the Special Economic Zone Act, 2005 defines the expression "Existing Special Economic Zone" to mean every Special Economic Zone which is in existence on or before the commencement of the said Act. Section 2(e) defines the expression "existing unit" to mean every unit which has been set up on or bef .....

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cate, assemble, process or bring into existence, by hand or by machine, a new product having a distinctive name, character or use and shall include processes such as refrigeration, cutting, polishing, blending, repair, remaking, re-engineering and includes agriculture, aquaculture, animal husbandly, floriculture, horticulture, pisciculture, poultry, sericulture, viticulture and mining". In Exim Policy, the expression "manufacture" is defined, in paragraph 9.30 & 9.31 thereof a .....

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ture, poultry, sericulture, viticulture and mining." But the only difference between the Exim Policy of 2002-07 and of 2000 is that words "and segregation" which were appearing in the definition of the expression 'manufacture" in the Exim policy of 2000 was deleted in the Exim Policy of 2002-07. Further, even in Prevention of Food Alternation Rules, 1955, it has been inter alia stated that Tea used in the manufacture of flavoured tea shall conform to the standards of tea. .....

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Tea (Marketing) Control Order, 2003 issued by the ' Central Government, in exercise of the powers conferred by section 30(5)(3) of The Tea Act, 1953, the expressions "manufacturer", "Buyer", "Packet Tea", "Tea Bag",- "Green Tea", "Quick Brewing Black Tea", "Instant Tea" and "Made Tea" have also been distinctly and separately defined. Clause (29BA) was inserted in section 2 of the Income Tax Act, 1961 by the Fina .....

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tion or integral structure; The aforesaid definition of the expression "manufacture", although brought into the statute book w.e.f. 01.04.2009, was applied by the Hon'ble Supreme Court even for the assessment year 2001-02 in ITO v. Arihant Tiles and Marbles Pvt. Ltd. (2010) 320 ITR 79, 82 (SC) on the ground that Parliament had taken note of ground reality in inserting section 2(29BA) in the Income Tax Law. The said definition was again applied by the Hon'ble Supreme Court in CI .....

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operations are carried in its said factory situated at 19/4A, Munshiganj Road (under Falta Export Processing Zone), Kolkata. We find from facts of the case that the details of turnover of the assessee shows Bulk Tea (0.94%), Packet Tea and Tea Bags .(99.06%),. as. per different descriptions, brand names and varieties, as listed APR. Assessee Company is duly registered as a 100% EOU by the Government of India, Ministry of Industry, Department of industrial Policy and Promotion Secretarial for In .....

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emises is a case of substantial value addition, as compared to the unblended black tea in granule and dust form normally available for sale in the open retail market throughout India. 34. The subject for consideration under sections 10A and/or 10B of the said Act is manufacture / production of tea ; the object being grant of benefits of tax exemption to exporters carrying out their operations in FTZ, EOU, EPZ & SEZ areas in accordance with the Exim Policy declared by the Government of India .....

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es and case laws relied on by both the sides that the assessee was exclusively engaged in blending, packaging and export of tea bags, tea packets and bulk tea packs. The assessee's division enjoys recognition as a 100% EOU, which is granted by the Development Commissioner, Ministry of Commerce & Industry, Govt. of India. The assessee claimed exemption u/s. 10B of the Act for AYs 2000-01 onwards, which was granted upto the AY 2003-04. However, for the AY 2004-05, exemption was declined fo .....

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f an article qualifying for exemption. 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. TOA 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. 1OB of the Act are very similar in nature and the wordings of the statutory provisions are similar in nature is correct. We find that Hon'ble Kerala High Court also considered the judgment in-t .....

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see's unit engaged in export of tea bags and tea packets was not a 100% EOU. If exemption was denied on the ground that products exported were not produced or manufactured in the industrial unit of the assessee's 100% EOU, it would defeat the very object of sections 10B of the Act. 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 engage .....

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ection 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 term manufacture under the common parlance, and it includes processing, blending, packaging etc. In view of the abov .....

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we answer the question referred in favour of the assessee by holding that the assessees who are in the business of blending and processing of tea and export thereof, in 100% EOUs are manufacturer/ producer of the tea for the purpose of claiming exemption u/s.10B of the Act. Further, assessees who are in the business of blending and processing of tea hi respect of undertakings in free trade zones are manufacturer/producer of tea for the purpose of claiming exemption u/s. 10A of the Act. We have e .....

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Act in accordance with law. 5.24 From the reading of para 35 of the aforesaid judgment we noted that the Special Bench in this case clearly held that the assessee was engaged only in processing and was not engaged in the manufacture or production but had ultimately under para 36 it took the view in view of the fact that the definition of manufacture u/s 2(r) of the SEZ Act, 2005 which is incorporated in section 10AA w.e.f. 10/02/2006 includes processing . Therefore, following the decision of Ker .....

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desired sizes, whether such activity undertaken by the assessee was manufacture or production? In this case, the Hon ble Supreme Court after discussing various cases, the provisions of different Acts and the dictionary meaning took the view that the assessee was engaged in manufacture / production. While holding so under para 12 of its order, Hon ble Supreme Court has given the same analogy for the purpose of eligibility of deduction under section 80HH and 80-I as has been given by the Kerala Hi .....

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320 ITR 79(sc). In this case when the assessee was engaged in the activity of cutting and polishing of marble blocks, the question before the Supreme Court was whether the activities undertaken by the assessee would fall within the meaning of the words manufacture or production in section 80-IA of the Income-tax Act, 1961? In this case, Hon ble Supreme Court, after discussing the definition of manufacture given in section 2(29BA) of the Income-tax Act, 1961 and also discussing the provisions of .....

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s, not only there is manufacture but also an activity which is something beyond manufacture and which brings a new product into existence and, therefore, on the facts of these cases, we are of the view that the High Court was right in coming to the conclusion that the activity undertaken by the respondents-assessees did constitute manufacture or production in terms of Section 80IA of the Income Tax Act, 1961. 23. Before concluding, we would like to make one observation. If the contention of the .....

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