TMI Blog2018 (3) TMI 468X X X X Extracts X X X X X X X X Extracts X X X X ..... ittedly made only for the purpose of obtaining controlling interest in the said companies and not for the purpose of earning dividend income which is exempt. Hence they would stand differently from other regular investments. - Decided against revenue - ITA No 2300/Kol/2016 - - - Dated:- 1-3-2018 - Hon'ble Sri N.V.Vasudevan, JM And Hon'ble Sri Waseem Ahmed, AM For the Appellant: Shri.S.Dasgupta Addl.CIT DR For the Respondent: Shri D.S.Damle, FCA ORDER Per Shri N.V.Vasudevan, JM This is an appeal filed by the Revenue against order dated 27.9.2016 of CIT(A)-20, Kolkata, relating to AY 2013-14. 2. The grounds of appeal raised by the revenue in this reads as follows: (i) That the Ld. CIT(A) has erred in accepting that the term 'manufacture' occurring in the context of section 80-IB does not necessarily require that the end product of the manufacturing process is to be completely different from the ingredients, as regards its chemical composition, integral structure or its use. (ii) That the Ld. CIT(A) has erred in accepting that the process of manufacturing of poultry feeds does not amount to mere mixing together of all different ing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the profit derived from the activity of manufacture of poultry feed was entitled to deduction u/s.80IB(5) of the Act. 5. It was the plea of the Assessee that the process of producing poultry feed involved mechanical, chemical electrical processes for which the Assessee used sophisticated Plant Machinery. In the course of production of poultry feed raw- materials which exceeded 30 in number, lost individual identity and the emerging product was distinct and separate in shape, character and end-use. The raw- materials consumed in production of poultry feed could be individually used for different purposes, but the end product at the end of integrated production process was known to trade by its distinct commercial name as 'poultry feed'. It could only be consumed by only one class of consumer i.e. poultry none else. It was the claim of the Assessee the end product was known as poultry feed in the trade, commerce and industry and was considered as separate and distinct from various materials consumed in the process of its production. The Assessee also pleaded that poultry feed manufacturing industry was notified by the Central Government to be eligible for claiming de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ible Industrial undertaking to be engaged in 'manufacture of production of an article'. The said section however, does not define the expression manufacture or production of an article . In fact this expression is not defined in the Act also. The Ld. CIT (A) extensively analysed meaning of the said expression with reference to judicial decisions discussed in his order. The test laid down by the Courts is whether the emerging new product is known to the trade, industry and commerce by its own name having its own application use and has a market of its own. Applying the criteria as laid down in these judicial decisions we find that in physical appearance, colour and shape the. Poultry feed vastly differs from the input materials. The poultry feed is manufactured in a scientific and systematic manner with the use and assistance of sophisticated plant and machinery acquired at a substantial cost. Poultry feed is recognised not only by trade and commerce but also by the statutory authorities under Central Excise, Sales Tax etc as independent products Applying the ratio laid down in judicial decisions discussed in the order of CTT(A) we have no hesitation in holding that the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue cannot hold the poultry .feed industry as manufacturing industry if situated in North Eastern states and a 'processing industry if situated in any other states Such an interpretation will only lead to an absurd legal position. 18. For the reasons as set out herein before therefore we do not find any infirmity in the order of CIT(A) holding the assessee to be engaged in manufacture or production of an article We are therefore of the considered opinion that the assessee satisfies the conditions of Sec 80- IB(2) (iii) of the Act and is therefore eligible for deduction u/s 80IB We therefore uphold the order of CIT (A) directing A 0 to allow deduction u/s 80 IB to the assessee. 10. In Assessee s own case this Tribunal in ITA No.2227/Kol/2010 for AY 2007-08 by order dated 20.3.2013 allowed similar claim of the Assessee. From perusal of the said decisions of this Tribunal, it is apparent that this Tribunal has categorically held in the case that the assessee is engaged in manufacturing of poultry feeds and that the assessee is engaged in the manufacture or production of an article. 11. The learned DR however submitted that in the decisions rendered by the Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd such factor is missing in the case of the Assessee. It was also submitted that the activity carried out by the Assessee was mere mixing together of different ingredients, without involving any change in the chemical composition of the ingredients and therefore, the decisions rendered on this issue have overlooked this aspect. It was submitted that the decision rendered in Assessee s own case did not consider the decision of the Hyderabad Bench of ITAT in the case of Venkateswara Feeds (supra) and therefore the decision requires reconsideration. 13. The learned counsel for the Assessee while relying on the order of the CIT(A) and decision of the Tribunal in Assessee s own case in AY 2005-06 also submitted that in the case of Amrit Feeds (supra), the Hon ble ITAT had considered and distinguished the decision rendered in the case of Venkateswara Feeds (supra) by ITAT Hyderabad Bench. 14. We have given a careful consideration to the rival submissions. In the case of Amrit Feeds (supra), the Tribunal considered the decision rendered in the case of Venkateswara Feeds (supra) and held that the assessee in that case had claimed deduction under section 80IB on the activity of m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings of the CIT(A): I have considered the finding of the AO in the assessment order and the written submission filed by the AR along with different case laws on this issue. I have considered the Hon 'ble Supreme Court's decision in the Pandian Chemical's case (supra) and I have also considered the decision of the Supreme Court in the case of ACG Associated Capsules (P) Ltd vs CIT (343 ITR 89. I think, even though the said decision was rendered in the context of provisions of section 80HHC, yet in my opinion the principle laid down in that decision has equal application in the assessee's case as well. I further find that on similar facts the ITAT, Kolkata in the case of DCIT vs BMW Industries Limit (TA No.2115/Kol/2007) dated 29th February 2008 had similarly held that for the purpose of computation of deduction u/s 8IB, the interest income was liable to be netted off against interest expenses and only the net interest expenditure was required to be allowed in arriving at qualifying profits of the eligible undertaking u/s 80IB of the Act. I also find that the principle of netting off of interest income against interest expense has been upheld by jurisdictional Ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ii) A Amount Expenditure of Interest 39,822 B Average Investment Value of 25,74,500 As on 01.04.2012 25,74,500 As on 31.03.2013 25,74,500 C Average of Total Assets 30,48,44,037 As on 01.04.2012 25,70,92,556 As on 31.03.2013 35,25,95,519 A x B/C 336 (iii) % of Average Value of Investment i.e. B 12,872 Total (i+ii+iii) 13,208 Amount already disallowed by assessee in computation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c investments as they are admittedly made only for the purpose of obtaining controlling interest in the said companies and not for the purpose of earning dividend income which is exempt. Hence they would stand differently from other regular investments. 15. The CIT(A) accepted the contention of the Assessee as above and deleted the addition made by the AO with the following observations: I have considered the finding of the AO and the written submission filed by the AR during the appellate proceeding. I find that the assessee has made investments primarily in the group companies which are engaged in the same line of business. The investment in shares of the group associate companies has not produced tax-free dividend income in all cases. The Jurisdictional Calcutta High Court in the case of CIT vs REI Agro Ltd (ITA No.220 of 2013) has held that no disallowance u/s 14A is permissible where the investments have produced any tax free income during the relevant previous year. The same view has also been expressed by the Delhi High Court in the case of CIT vs Holeim India Pvt Ltd (272 CITR 282), Gujarat High Court in the case of CIT vs Cortech Energy Pvt Ltd (223 taxman 130) A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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