TMI Blog2019 (9) TMI 490X X X X Extracts X X X X X X X X Extracts X X X X ..... ng, preservation and packaging? - In the case of the assessee before us also, the question involved was whether the extraction of oil from the FFBs of oil palm is processing or not, and the AAR has held similar activity in the case of mango pulp or powder, to be so and hence the principle and ratio of decision of the AAR in the case of Delna Rustum Boyce Inre [ 2009 (10) TMI 23 - AUTHORITY FOR ADVANCE RULINGS] is definitely applicable in other similar cases also and we have to hold that the activities carried on by the assessee for extraction of oil from FFB s of oil palm, will amount to processing u/s 80IB(11A) of the Act. Preservation - As long as the assessee is maintaining the standards and is taking steps to maintain such standards, it can be said that it satisfies the condition of preservation. DR had relied upon the contention of the assessee before the A.O that the crude palm oil requires the least preservation as it is a durable commodity. But this contention of the assessee alone cannot mean that the assessee is not taking any steps for preservation of the oil. It is common knowledge that all items, particularly food items, have an expiry date unless they are prese ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich, the assessee had claimed deduction u/s 80IB(11A) of the Act. During the assessment proceedings u/s 143(3) of the Act, the A.O observed that the deduction u/s 80IB(11A) of the Act does not mention anything about manufacturing and trading of edible oil products. Therefore, the A.O asked the assessee to furnish the details of deduction claimed by it under Chapter-VIA. The assessee filed detailed submissions as to how the palm oil is extracted from fresh fruit bunches of oil palm plantations, the different processes involved therein and claimed that the assessee company is engaged in the business of processing, preservation and packaging of Oil extracted from Oil Palm fruits and therefore, is eligible for deduction u/s 80IB(11A) of the Act. 3. The AO observed that u/s 80IB(11A) of the Act, profits from the business of processing, preservation and packaging of fruits, vegetables, meat and meat products or poultry and dairy products and profit from the integrated business of storage and transportation of food grains alone are eligible. He observed that since the assessee is sourcing the oil palm fruits and after pressing the same, Palm Oil is extracted and that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant is in the business of possessing of palm oil. 3. The Learned CIT (A) erred in not considering that appellant company is in the business of processing of fresh fruit bunches by way of crushing and extracting crude palm oil. 4. The Learned CIT (A) erred in ignoring the fact that the company purchases fresh fruit bunches of palm fruits from the farmers which are considered as fruits, in terms of common parlance and commercial substance. 5. The Learned CIT (A) erred in not considering the fact that the palm fruit contains mesocarp, from which oil is extracted, which similar to mango pulp of the mango fruit and hence partakes the nature and character of fruit. 6. The learned CIT (A) erred in not understanding the nature of the business activity carried on by the Appellant and erroneously held it is manufacture of edible oil. 7. The Learned CIT (A)erred in not appreciating that the primary business activity of the appellant company is to press and extract the oil out of the Palm fruit which similar to the activity of extracting mango pulp or mango juice from mangoes and does not result in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that after reading the above, there is no doubt that the oil palm fresh fruit bunches are nothing but fruits which are grown on the oil palm trees. He countered the main objection of the AO that the activities involved in the conversion of oil pam fresh fruit bunches into palm oil are not processing, preservation and packaging and took us through the processes carried on by the assessee for converting fresh fruit bunches into the palm oil. The assessee in its paper book at Pages 107 to 112 has produced the flow chart of various processes to show that the assessee company sows the seeds from the domestic and international market and sows the same in the nursery managed and operated by it and subsequently sells one year old saplings from the nursery to identified farmers at a subsidized rate (which is reimbursed by the Govt. at a fixed rate in the form of subsidy to the assessee), who in turn plants the saplings in their land. Once the palm and fresh fruit bunches are grown, the same are harvested by the farmers and sold to the company at a fixed price which are again mashed for extraction of oil and the assessee sells the same. He explained the various processes involved in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gislature to promote oil industry by giving deduction u/s 80IB(11A) of the Act. He also relied upon the following case law in favour of his argument: 1. M/s Motipur Zamindari Co. (P) Ltd. Vs. The State of Bihar, 1962 AIR 660 (SC); 2. Ramavatar Budhaiprasad Vs. Asst. Sales Tax Officer, Akola, 1961 AIR 1325;; 3. P.A Thillai Chidambara Nadar Vs. State of Tamil Nadu, AIR 1958 SC 1644. 8. The learned Counsel for the assessee objected to the argument raised by the Revenue under Rule 27 stating that the said rule is applicable only where a decision has been taken by the CIT (A) on an issue against the respondent before him and the Revenue has not filed any cross appeal / cross objection against the order of the CIT (A) on the issue decided against them. Since there was no finding either by the AO or the CIT (A) on the issue now raised by the revenue under Rule 27, it cannot be raised before the ITAT under Rule 27. He further submitted that the Revenue cannot raise an objection which was not raised by the AO in an appeal filed by the assessee before the ITAT. Therefore, he prayed for the rejection of the Revenue s object ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was initially brought into the statue book by the Financial Act of 2001 w.e.f 01.02.2002 by granting deduction in a case of the integrated business of handling, storage and transportation of food grains. By virtue of the Finance Act of 2004, the undertaking deriving profits from the business of processing, preservation and packaging of fruits or vegetables was also brought under the purview sub Sec. 11A of 80IB of the Act w.e.f 01.04.2005. To understand the intention of the legislature, it is pertinent to consider the Finance Minister s speech while introducing the Finance Bill 2004. In para 103 of his speech he had stated as under: In order to promote agro-processing industries, I propose to amend Section 80IB of the Act to allow a deduction of 100% for 5 years and 25 % of profits for the next 5 years in the case of new agro-processing industries set up to process, preserve and package fruits and vegetables . 12. In the memorandum explaining the amendments brought in by Finance Bill (No.2 of 2004) it has been explained as under: Under the existing provision of Sec. 80IB, deduction is available in respect of profi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her the fruits have to be edible in its raw or ripe form only. The Ld. DR had submitted that the Oil Palm could not be eaten either in raw or ripe form and therefore, it cannot be considered as a fruit. Further, he had also placed reliance upon various case laws which have been cited supra to the effect that only such fruits which are brought to the table as fruits can be considered as fruits. The oldest case referred to by the Ld. DR the case of Ramavtar Budhaiprasad (supra), in which the Hon ble Supreme Court was considering whether betel leaves were vegetables within the meaning of Central Provisions and Sales Tax Act of 1947. In the said case, the contention of the petitioner was that u/s 6 r.w Second Schedule of Sales Tax Act, betel leaves were not taxable. Under Section 6 of the Act, articles mentioned in the said schedule were exempt from Sales Tax and articles not mentioned therein were taxable. There were two Items in the schedule, namely Item -6, vegetables] and item 36 betel leaves but subsequently Item 36 was omitted by an amendment of the Act. The Hon ble Supreme Court held that the use of two distinct and two different items i.e vegetable and betel leaves and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parlance has to be adopted . 16. Referring to the above, the Hon ble Supreme Court held that the coconut would be a fruit in the botanical sense but unless it can be said to a fresh fruit, it will no fall within the exemption notification. It was also held that because it is available in vegetable market, it would not become a vegetable because it cannot be used as a substantial article of fruit on the table. It was held that fresh fruits and vegetables being house hold articles for every day use for the table, they will have to be construed in the popular sense, meaning the sense in which every house holder will understand them. 17. Thus, according to the Ld. DR, the fruits and vegetables have to be understood as understood by a common man and the classification by the Governments as fresh fruit bunches of oil palm, will not cover the term fruit mentioned in Section 80IB(11A) of the Act. However, we find that the all the decisions relied upon by the Ld. DR are relating to exemptions under the sales tax. Whether the interpretation given to the items under sales tax can also be applied to the Income Tax Act is the question before us. The sales t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence a change. After considering these judgments, the AAR has held that processing of fruits does not mean that the end product also should be in the form of fruit or in the form of slices only. It was held that the expression should not be confined to minimum process that will not change the identity of the fruit. Let us therefore examine the applicability of the said decision to the case of assessee before us. 19. In the case of Delna Rustum Boyce Inre reported in (2009) 185 Taxmann 180 (Del.), the AAR was considering the case of an assessee, a non-resident, who proposed to set up and promote a unit to produce fruit-based drink mixes/concentrates derived from fruit juices through various processes involving various steps, such as peeling, extraction of fruit oil, fruit pulping, screening, emulsifying, homogenizing, spray drying, addition of preservatives, color and sweetness and packaging and the said assessee had sought direction from the AAR on the question whether the profit of her proposed undertaking would be eligible for deduction u/s 80IB(11A) of the Act. The AAR, after considering various decisions of the Hon'ble Supreme Court on the word processing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income Tax (International Taxation) vs. Dun Bradstreet Information Services India (P) Ltd reported in (2012) 20 Taxmann.com 695 (Bom.) wherein it was held as under: Held that the Authority for Advance Rulings held that the sale of very same business information reports by the subsidiaries of Dun and Bradstreet US in Spain, the Europe and the UK to the assessee did not attract the provisions of section 195. Since the decision of the Authority for Advance Rulings related to the very same business information reports imported by the assessee and no fault in the decision of the Authority for Advance Rulings was pointed out, there was no reason to interfere with the decision of the Tribunal . ii) Cyril Eugene Pereira vs. CIT reported in (1999) 105 Taxman 273 (AAR) New Delhi wherein it was held as under: 52. There is another aspect of this matter. Advance rulings are judgments in personam and not in rem. Section 245S of the Income-tax Act, 1961, lays down as under : 245S. (1) The advance ruling pronounced by the authority under Section 245R shall be binding only- ( a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thus, sub-section (2) of section 245S has limited the binding nature of the ruling to the case of the applicant in respect of the transaction in relation to which the advance ruling is sought and to the Commissioner and authorities subordinate to him only in respect of the applicant and the transaction involved. This is not to say that a principle of law laid down in a case will not be followed in future. The Act has made the ruling binding in the case of one transaction only and the parties involved in that case in respect of that transaction. For other transactions and for other parties, the ruling will be of persuasive nature. The Authority, thus, held that the advance ruling of the Authority is binding in the case of one transaction only and the parties involved in respect of that transaction and for other parties, the ruling will be of persuasive nature. The Authority, however, has clarified that this is not to say that a principle of law laid down in a case will not be followed in future. This decision of the Authority in Cyril Eugene Pereira, In re.(supra) has been taken note of by this Court in Union of India Anr. v. Azadi Bachao Andolan Anr. [2003] 263 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee before the A.O that the crude palm oil requires the least preservation as it is a durable commodity. But this contention of the assessee alone cannot mean that the assessee is not taking any steps for preservation of the oil. It is common knowledge that all items, particularly food items, have an expiry date unless they are preserved in the required conditions. Therefore, we are satisfied that the assessee is also preserving the palm oil extracted from the fresh fruit bunches of oil palm fruits, after the process of pressing and extraction of oil . 25. The third condition to be satisfied is packaging. The assessee is preserving and maintaining the palm oil in large containers / tanks. As rightly pointed out by the learned Counsel for the assessee, packaging can be varied and includes the simple boxes to large container/vessel. Since the assessee is involved in large scale operation, it has to store the extracted oil in tanks. Therefore, we are satisfied that all the three processes necessary for claiming deduction u/s 80IB(11A) are satisfied by the assessee. 26. The last objection of the Revenue is that the end product is not a fruit but it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly on the grounds decided in favour of the respondent but also on grounds decided against it. However, Rule 27 of the said Rules would not extend to permitting the respondent to expand the scope of an appeal and assail the decision on issues, which are not subject matter of the appeal. In CIT vs. Edward Keventer (Successors) Pvt. Ltd (supra), this court had reiterated that it would not be open to a respondent to travel outside the scope of the subject matter of the appeal under the guise of invoking r 27 13. The learned counsel for the Revenue has referred to the decision of the Supreme Court in National Thermal Power Corporation Ltd. vs. Commissioner of Income Tax: 229 ITR 383 (SC) in support of the contention that it is open for the Tribunal to consider all questions of law where no investigation into facts are necessary. We find that the aforesaid decision is wholly inapplicable to the facts of the present case. It is trite law that the Tribunal may, under Section 254(1) of the Act, pass such orders as it thinks fit; nonetheless, the decision must be in respect of the subject matter of the dispute. Indisputably, the Tribunal can examine all questions which r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 84 (ITAT Pune); 5) Hukumchand Mills Ltd., [1967] 63 ITR 232 (SC). 32. In the case of Mcorp Global (P) Ltd., (supra) the Hon ble Supreme Court was considering the case of an assessee, where the A.O in the original assessment had granted depreciation in respect of 42,000 bottles only on the ground that till end of financial year, only 42,000 bottled were received by the assessee and the remaining bottles were received after 31.03.1991. On appeal, the CIT(A) after formulating user test, remanded the matter to the A.O, who on remand, held that all 5,46,000 bottles stood dispatched before 31.03.1991 and therefore the assessee was entitled to 100% depreciation on all the 5,46,000 of the bottles and said finding of the A.O was not in challenged by the Revenue Authority. In the appeal against the order of the CIT(A), the Tribunal held that the transaction in question was only a financial arrangement and not a lease and therefore the depreciation claimed by the assessee could not be allowed. The Hon ble Supreme Court was considering whether when the A.O in original assessment order had granted depreciation in respect of 42,000 bottles, the Tribunal could take back the said ..... X X X X Extracts X X X X X X X X Extracts X X X X
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