TMI Blog2018 (1) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... ers of Commissioner of Income Tax (Appeals)-10, Mumbai, [in short CIT(A)] in appeal No. CIT(A)-10/ITAT/256,257 258/2014-15 even dated 29-10-2015. The Assessments were framed by the Deputy Commissioner of Income Tax, Circle 5(2), Mumbai (in short DCIT) for the assessment year 2003-04, 2004-05,2005-06 vide different orders of even dated 30-11-2010 under section 143(3) read with section 147 of the Income Tax Act, 1961(hereinafter the Act ). 2. The only issue in these three appeals of Revenue is against the order of CIT(A) in holding the re-opening of the assessment under section 147 read with section 148 of the Act for the purposes of disallowance of the claim of deduction under section 10B of the Act in respect of manufacturing and processing of the Oil Seeds, Spices, Cereals and Pulses as invalid. The Revenue has also raised the issue on merits. For this Revenue has raised the following grounds: - 1 1(a). On the facts and in the circumstances of the case, the Ld. CIT(A) erred in holding that the reopening of the assessment for the purpose of disallowing the exemption under section 10B was invalid. 1(b). On the facts and in the circumstances of the case, the Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es and remove all the foreign particles then dry it. After the spices are dried, it is grounded in different sizes viz, coarse, medium, and also fine powder, after cleaning and sorting etc. the)' are packed in bags and undergo sterilization, and ultimately exported. Ongoing through their submission, it is very clear that this process of making powder from whole spices does not constitute manufacture, within the meaning of section 10B of the I.T. Act. The words manufacture and 'production have received extensive judicial attention both under this Act as well as the Central Excise Act and the various Sates Tax Laws. The word production has a wider connotation than the word manufacture . While every manufacture can be characterized as production, every production need not amount to manufacture. The test evolved for determining whether manufacture can be said to have taken place is, whether the commodity which subjected to the process of manufacture. The test evolved for determining whether manufacture can be said to have taken place is, whether the commodity which subjected to the process of manufacture can no longer be regarded as the original commodity but is rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is recognized in the trade as a non and distinct commodity, it can be easily said that manufacturing activity is carried out in bringing the change to the input article. The process is a manufacturing process when it brings out a complete transformation in the original article so as to produce a commercially different article or commodity. That process itself may consist of several processes and all these different processes are integrally connected with each other which results in the production of a commercially different article. If a commercially different article or community results after processing, then it would be a manufacturing activity. 15 All these facts prove beyond doubt that me assessee is not carrying out any manufacturing activity and hence not eligible for claiming exemption u/s. 10B of the I.T. Act Assessee s claim of exemption uls. 100 of the I.T. Act, is therefore, disallowed. Aggrieved, assessee filed before CIT(A). 5. Before CIT(A), it was contended that original return was processed under section 143(1)(a) of the Act on 25-11-2003 and subsequently, case was re-opened and assessment was completed under section 143(3) read with section 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 1,23,563/- the assessee company is not eligible for deduction u/s. 10 B, as this income is not generated on account of manufacturing activity. Any income which is eligible for deduction u/s 10B, has to be necessarily derived from the business of the assessee The source of such income has to be the business of the assessee. Any incidental income of the assessee is not includable in the profits eligible for deduction u/s10 B. The word derived from is distinct from the expression attributable to Derived from has to be construed in a narrow fashion. In this regard, I'm here with discussing the meaning of the words derived from and attributable to...... 5.2 The above income on which assessee company has claimed deduction u/s. 10 B, being business income, but in view of the discussion in the above paragraphs, the income on account of other income being received by the assessee for defective goods can at best be said to have been attributable to business but not 'derived from the manufacturing activity. As the ratio of the above judgment and the fact of the case clearly shows that the other income described above cannot be related to the manufacturing activity of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grading of the material and powdering some spices. ii) the debiting of expenditure under the head grinding is not the criteria to be see since the appellant has debited certain expenses under other heads of expenditure also such as labor charges, wages, depreciation of machinery etc. The appellant is also owner certain fixed assets meant for manufacturing activity. iii) the appellant is claiming not only exports under EOU for 1 O purpose but also doing; export sales u/s.80HHC and local sales Some of the sates directly without putting them r manufacturing activity could be in the category of exports under BOHHC and local sales Therefore, sale of material as it is should not be viewed in the perspective that the appellate is not engaged in manufacturing activity. iv) the appellant has furnished all the details required by the AO during the course of reassessment proceedings and also before the CIT(A). V) the company is registered under SEZ Act as manufacturing unit. vi) the definition of 'manufacture was inserted as clause (298A) Of Section 2 of the A by the Finance Act. 2009 with retrospective effect from 1.4. 2009 and the appellant was not aware ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Navi Mumbai i.e. letter of permission No. 245(1998)EOB/219/98 dated 21-12-1998 issued for the manufacture of processed spices and Oil seeds under 100% EOU Schemes vide letter No. SEEPZ/28/EOU/45/98-99/12089 dated 05-12-2000. The certificate was issued to the assessee vide Green Card No. 0001272 dated 31-03-2004 and AO has raised query vide notice dated 08-02-2007 during original assessment proceedings vide question No. 2 (v) which reads as under:- (v) Please furnish details and evidences in support of exemption claimed under section 10B are being fulfilled in your case alongwith proof in support of manufacturing activities and foreign exchange realization within the prescribed limit. Please also give details of working of various figures as has been shown in Auditor s certificate under section 10B. This was replied by the assessee vide letter undated, which is enclosed in assessee s paper book at pages 18-20. 4. In view of the facts, we are of the view that the AO has formed an opinion during the course of original assessment proceedings and this reopening is merely on change of opinion, which is not permissible under section 147 of the Act in view of the decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... below the relevant portion of Circular No.549 dated 31st October, 1989, which reads as follows: 7.2 Amendment made by the Amending Act, 1989, to reintroduce the expression reason to believe' in Section 147.--A number of representations were received against the omission of the words reason to believe' from Section 147 and their substitution by the opinion' of the Assessing Officer. It was pointed out that the meaning of the expression, reason to believe' had been explained in a number of court rulings in the past and was well settled and its omission from section 147would give arbitrary powers to the Assessing Officer to reopen past assessments on mere change of opinion. To allay these fears, the Amending Act, 1989, has again amended section 147 to reintroduce the expression has reason to believe' in place of the words for reasons to be recorded by him in writing, is of the opinion'. Other provisions of the new section 147, however, remain the same. For the afore-stated reasons, we see no merit in these civil appeals filed by the Department, hence, dismissed with no order as to costs. 5. In view of the above decision of Hon ble Supr ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
