TMI Blog2017 (5) TMI 1215X X X X Extracts X X X X X X X X Extracts X X X X ..... e, Addl. CIT, DR For the Respondent : Shri Subash Agarwal, Advocate ORDER Per Shri A.T.Varkey, JM All these appeals filed by the revenue against the common order of Ld. CIT(A), Jalpaiguri dated 09.05.2014 for AYs 2009-10 to 2011-12. Since all these appeals were heard together and grounds are common, we dispose of all these appeals by this common order. 2. First we take up ITA No. 1517/Kol/2014 for AY 2009-10. At the outset, we find that the appeal of the revenue falls in the ken of the CBDT Circular no. 21/2015 dated 10.12.2015, wherein the CBDT has directed the department to withdraw/not press the appeal if the tax effect is less than ₹ 10 lacs before the ITAT. On perusal of the Circular No. 21 / 2015 dated 10.12.2015 and the materials available on record, Ld. DR could not point out whether this case falls under any of the exception as provided in the circular despite specific opportunity was given, does not fall under any of the exceptions contemplated in the said Circular, as this is covered. We also find that the Circular makes it very clear that the revised monetary limits shall apply retrospectively to pending appeals also. We find that the Circular ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision of the Hon ble Supreme Court in Tara Agencies (supra) which the revenue relies on its ground no. 1 (supra) to assail the decision of Ld. CIT(A) and the Special Bench in assessee s own case held as under: 30. We find that the Hon ble Kerala High Court considered exactly the same issue in the case of Girnar Industries Vs. CIT (2011) 338 ITR 277 (Ker.). In that case, the assessee, an industrial unit located in a special economic zone, was engaged in blending and repacking of tea for export. For the assessment year2004-05, it claimed deduction under Section 10A of the Income-tax Act, 1961. The Assessing Officer held that blending did not answer the description of manufacture or processing and the assessee was not entitled to deduction under Section 10A of the Act. It was the specific case of the department that blending could be treated as a manufacturing activity only after the definition clause of manufacture contained in Section 2(r) of the Special Economic Zones Act, 2005, was incorporated in the provisions of Section 10AA of the Act with effect from February 10, 2006. The CIT(A) held that the subsequent amendment was clarificatory in nature whereas the Tribunal co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment year 2004-05. That the ratio of the above decision would be squarely applicable in the case of the assessee because the facts are identical. 31. The Hon ble Kerala High Court reiterated the same view in the case of Tata Tea Ltd. Vs. ACIT (2011) 338 ITR 285 (Ker). In that case, 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 the AYs 1996-97 onwards, which was granted upto the AY 2000-01. However, for the AYs 2001-02 and 2002-03, exemption was declined for the reasons that by the 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. Hon ble High Court noted that the department 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 e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provide a restricted meaning for that term contained in the main section because if that was so, then the Legislature would have only modified the definition clause. Further, the definition of 100 per cent. export oriented unit even after the amendment is retained in the said section, which defines it as an undertaking which has been 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 and Regulation) Act, 1951, and the Rules made under that Act. It is pertinent to note that the products for which the assessee's unit is recognised 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 packing of tea for export and is not manufacturing or producing any other article or thing. Still it is recognised as a 100 per cent. export oriented unit by the concerned authority within the meaning of that term contained in the definition clause of section 10B of the Income-tax Act and the Department has no case that the assessee's unit engaged in expor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to section 1OAA lays down that the expression manufacture shall have the same meaning as assigned to it in section 2(r) of the Special Economic Zones Act, 2005, which definition is as under: Manufacture means to make, produce, fabricate, 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 husbandiy, floriculture, horticulture, pisciculture, poultry, sericulture, viticulture and mining In Exim Policy, the expression manufacture is defined, in paragraph 9.30 9.31 thereof almost in the same manner as in the Special Economic Zone Act, 2005, which is as under: Manufacture means to make, produce, fabricate, 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, repacking, polishing and labeling. Manufacture, for the purpose of this Policy, shall also include agriculture, aquaculture, animal husbandry, floricultur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f manufactured tea commercially known as green tea; 320 ITR 665, 667 (SC). 33. The Assessee Company carries out its operations of blending, packaging and export of tea bags, tea packets and bulk tea packs in its modern factory, well equipped with all imported and sophisticated automatic plant and machineries with the help of over 100 workmen engaged on contract basis through M/s. Trot Pvt. Ltd. The manufacturing operations are carried in its said factory situated at I 9/4A, 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 APB. 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 Industrial Approvals, ECU Section in the state of West Bengal for manufacture of Packet Tea, Tea Bags/Bulk Tea with annual capacity of 3110 Mt. in terms of Registration Certificate dated 26th December, 1995, inter alia, with the condition that its 100% production (excluding rejects ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ree 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. We find that Hon ble Kerala High Court also considered the judgment in the decision of Supreme 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 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereby All the facilities and privileges admissible and subject to the provisions of the SEZ Scheme as envisaged in Export Import Policy /Handbook of Produces (Vol I), 2002-2007 .This is also certified by Development Commissioner, Falta SEZ as on 27-05-2005. We find that AO in AY 2004-05 has admitted that the activity of the assessee is that of blending of tea and merely blending of tea amounts to processing of tea and it thus fall short of manufacturing or producing of thing within the meaning of Section 10A of the Act. We find that this issue is answered by the Special Bench of this Tribunal in the case of Madhu Jayanti International Ltd. (supra). Further, the AO in AY 2004-05 has admitted the blending of tea after verifying the details. Similarly in AY 2005-06 also noted the fact in assessment order that the unit is buying different varieties of tea from the market and after blended the same export the blended tea. Further, in AY 2006-07 also the AO from the details noted that the assessee is engaged in blending different types of tea and then exporting it. This issue of the assessee is occurring in earlier years also and the CIT(A) has confirmed the disallowance made by AO in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reme Court in the case of CIT Vs. Tara Agencies (2007) 292 ITR 444 (SC) he could not find the passage quoted by the AO as above (quoting the Hon ble Supreme Court). According to Ld. Counsel, the AO has erred in making such quote from the Hon ble Supreme Court s order in his order which is quite misleading. The Ld. DR pointed out that it may be a typographical mistake wherein the inverted commas have been inadvertently put by the AO. We note that the AO has not made the aforesaid quote from the order of the Hon ble Supreme Court. This may be AO s view after reading the judgment of the Hon ble Supreme Court and when the order was typed, inadvertently may have put the inverted commas which has created the confusion and therefore, no credence need to be given to the aforesaid passage quoted by the AO became it is not the view of the Hon ble Supreme Court but is that of the view of AO. With the aforesaid observation we dismiss these grounds of appeal of revenue for both the assessment years. 8. Ground no. 3 for AY 2011-12 reads as under: 3. Whether on the facts and in the circumstances of the case, the Ld. CIT(A), Siliguri was justified in law, in treating the profit from sale o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve to them for import of goods by reducing custom duty to certain extent. In this case, the assessee is procuring all raw materials domestically; so he sold the licences to others to earn a profit. If these licences were utilized for import of goods by the assessee then the profit of the assessee would have increased. In that case the income would have been directly attributable to the regular business of the assessee. Therefore, the income from the sale of the DEPB licences is also essentially the income from regular business. This has been upheld by the Honourable Supreme Court also in the case cited by the assessee. The AO is directed to treat the income from sale of DEPB licences as income from regular business for calculation of exemption U/S 10A/10AA. Aggrieved by the aforesaid order of the Ld. CIT(A), the revenue is before us. 10. We have heard rival submissions and gone through the facts and circumstances of the case. We note that the issue in respect to the sale of DEPB licence is no longer res integra. We note that the Special Bench in the case of M/s. Maral Overseas Ltd. reported in 136 ITD 177 (Ind) (SB) has dealt with the similar issue. The Ld. AR took our att ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue is identical. The Special Bench answered the aforesaid question as under: It is clear from the plain reading of section 10B(1) of the Act that the said section allows deduction in respect of profits and gains as are derived by a 100% EOU. Further, section 10B(4) of the Act stipulates specific formula for computing the profit derived by the undertaking from export. Thus, the provisions of sub-section (4) of section 10B of the Act mandate that deduction under that section shall be computed by apportioning the profits of the business of the undertaking in the ratio of export turnover by the total turnover. Thus, even though sub-section (1) of section 10B refers to profits and gains as are derived by a 100% EOU, the manner of determining such eligible profits has been statutorily defined in, subsection (4) of that section. Both sub-sections (1) and (4) are to be read together while computing the eligible deduction U/S 10B of the Act. We cannot ignore sub-section (4) of section 10B which provides specific formula for computing the profits derived by the undertaking from export. As per the formula so laid down, the entire profits of the business are to be determined which are f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of certain income from the ''profits of the business 11 which is, however, conspicuous by its absence in section 10B. On the basis of the aforesaid distinction, sub-section (4) of section 10A/10B of the Act is a complete code providing the mechanism for computing the profits of the business eligible for deduction u/s. 10B of the Act. Once an income forms part of the business of the income of the eligible undertaking of assessee, the same cannot be excluded from the eligible profits for the purpose of computing deduction u/s 10B of the Act. As per the computation made by the Assessing Officer himself, there is no dispute that both these incomes have been treated by the Assessing Officer as business income. The CBDT Circular No. 564 dated 5th July, 1990 reported in 184 ITR (St.) 137 explained the scope and ambit of section 80HHC and the mode of determination of profits derived by an assessee from the export of goods. 1 T.A.T., Special Bench in the case of International Research Park Laboratories v. ACIT, 212 ITR (AT) 1, after following the aforesaid Circular, held that straight jacket formula given in sub-section (3) has to be followed to determine the eligible deduction. T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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