TMI Blog2021 (5) TMI 152X X X X Extracts X X X X X X X X Extracts X X X X ..... id object or product i.e. LPG is known to the trade and commerce by its separate distinctive commercial name and it has a different character and its end use is also different. Accordingly provisions of Section 2(29BA) of the Act and also the ratios laid down by the Supreme Court in several decisions, we have no hesitation in holding that the assessee was engaged in manufacture or production of an article or thing and therefore it was eligible for claiming additional depreciation u/s 32(1 )(iia) - Decided against revenue. TDS u/s 195A - dividend distributed to non-resident shareholders - HELD THAT:- In the instant case, the incidence of tax on dividend income is borne by the company paying dividend income by virtue of statute and not by way of any agreement and as such, the rigor of section 195A of the Act would not be applicable. In any event, it may be stated that even if the payment is to be grossed up, yet the rate specified in DTAA (if more favourable) would be applicable to gross up the said payment. Thus, in conclusion, it may be stated that the rate of tax payable on dividend distributed to non-resident shareholders would depend upon the relevant Article of the DTAA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ains from industrial undertakings, etc., after certain dates (Manufacture) - Whether process of bottling of gas into cylinders for domestic use by complex technical process undertaken in plant with machinery amounts to production or manufacture of gas cylinders for purposes of deduction under sections 80-I, 80-IA and 80HH - Held, yes [Paras 17 18] [In favour of assessee] 2.2. This Bench of the Tribunal in the case of D.C.I.T, Cir-10(1), Kolkata vs. M/s. Indian Oil Petronas Pvt. Ltd. in ITA No.1930/Kol/2016 order dated 15.03.2019 on the very same issue held as follows: 19. After giving our thoughtful consideration to the submission of the parties and perusing the judicial decisions relied upon by the Ld. Counsel, we note that the contentions put forth by the AO are not well founded and the AO did not bring on record any sufficient material or technical information to dislodge the submissions made by the assessee. From the assessee's audited accounts and other materials reported in the audited accounts, we find that in production of LPG: propane butane are principal raw materials. From the audited accounts, we note that during the relevant year, the assessee was eng ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... distinct products. Merely because all the three products in themselves are considered as source of energy or power and these are consumed by different end users for providing energy, such fact in itself does not lead to conclusion that all three products are one and the same. Had that been the case then both scientifically as well as commercially these three products would have been known by three distinct different names or chemical terminologies. The question as to whether the blending of two different gases i.e. propane butane for producing LPG constitutes 'production' or 'manufacture'. For that we rely on the judgment of the Hon'ble Supreme Court in the case of CIT Vs Sesa Goa Ltd (271 ITR 331) and CIT Vs India Cine Agencies Ltd (308 ITR 98). In the latter judgment, the Hon'ble Supreme Court referred to its earlier judgment and the findings of the Apex Court having bearing on the assessee's case was as follows: 3. In Black's Law Dictionary (5th Edition), the word manufacture' has been defined as, the process or operation of making goods or any material produced by hand, by machinery or by other agency; by the hand, by machinery, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1944 (in short the Excise Act) and Central Excise Rules, 1944 (in short the 'Excise Rules') and Central Excise Tariff Act, 1985 (in short the 'TariffAct). The stand of the revenue was that it amounted to manufacture , contrary to what has been pleaded in these cases. This Court held that it amounted to manufacture. 9. The matter can be looked at from another angle. In CIT v. Sesa Goa Ltd [2004J 271 ITR 3311, this Court considered the meaning of word 'production. The issue in that case was whether the extraction and processing of iron ore amounted to manufacture or not in view of the various processes involved and the various processes would involve production within the meaning of section 32A of the Act. It was inter alia observed as under: ... There is no dispute that the plant in respect of which the assessee claimed deduction was owned by it and WDS installed after 31-3-1976, in the assessee's industrial undertaking for excavating, mining and processing mineral ore Mineral ore is not excluded by the Eleventh Schedule. The only question is whether such business is one of manufacture or production of ore. The issue had arisen before different High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s under the Department of Revenue collects substantial amount of excise duty on the footing that the assessee is engaged in manufacture of an article or product. In the context as to whether the definition of 'manufacture or production' employed for levy of Central Excise should also be employed under the Income-tax Act. 1961, as it was examined by the Supreme Court in the case of ITO Vs Arihant Tiles Marbles Ltd (320 ITR 79). We note that in the process of blending of butane propane which is carried out in scientific manner with use and aid of sophisticated plant machinery, transformation is brought about and entirely new product by the name LPG is obtained. The said object or product i.e. LPG is known to the trade and commerce by its separate distinctive commercial name and it has a different character and its end use is also different. Accordingly provisions of Section2(29BA) of the Act and also the ratios laid down by the Supreme Court in several decisions, we have no hesitation in holding that the assessee was engaged in manufacture or production of an article or thing and therefore it was eligible for claiming additional depreciation u/s 32(1 )(iia) of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o pronouncement of judgement of these issues by the ITAT. The legal position is that such legal claims can be made by the assessee at any stage of proceedings. The entire exercise of assessments and appeals should ultimately result in determining the correct taxable income of the assessee. Thus we admit the additional ground raised in the Cross Objections. 7. We have heard rival contentions on these additional grounds on merits. On careful consideration of the facts and circumstances of the case, perusal of the papers on record, orders of the authorities below as well as case law cited, we hold as follows. 8. As per the provisions of section 195 of the Income-tax Act, 1961 (hereinafter referred to as the Act ), any person responsible for paying to a non-resident any income chargeable to tax under the provisions of the Act, shall deduct tax at source at the rates in force . 8.1. As per the provisions of section 2(37A) of the Act, the term rates in force means the rates specified in the Act or rates specified in the relevant Double Taxation Avoidance Agreement (hereinafter referred to as DTAA ), whichever is more beneficial to the assessee. 8.2. In the instant case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evant decision of the Hon ble Calcutta High Court and held that DDT is leviable on the entire amount of dividend, even if it is distributed partly out of agricultural income. Following points emerge on an analysis of the Supreme Court ruling. The Hon ble Supreme Court referred to its earlier decision in the case of Bacha Guzdar to hold that dividend distributed by a company is not impressed with the character of its own income. Thus, the levy of DDT by the Parliament on the entirety of the dividend, even if distributed wholly or partly out of agricultural income, is valid under the Constitution of India. 8.8. The dividend is still taxable as income, though the incidence of tax has shifted from the shareholder, to the company paying the dividend. Once the Hon ble Supreme Court has held that dividend connotes income, the logical conclusion is that as per section 4 of the Act, the said income should be chargeable to tax in the hands of the person earning such income. 8.9. We now consider whether the earlier ruling of Hon ble Supreme Court in the case of Godrej Boyce Manufacturing Co reported in 394 ITR 449 (SC) runs counter to the later ruling in the case of Tata Tea Limited ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the earlier ruling in the case of Godrej Boyce does not actually or in substance, convey any contrary or contradictory view, as expressed by the Hon ble Supreme Court in the case of Tata Tea in the context of the issue on hand. viii) Further, another interesting point to note is that both the rulings, as above, were rendered by coterminous benches (two judges) of the Supreme Court, with one judge, namely Hon ble Mr. Justice Ashok Bhushan, being common in both the benches. 8.10. The section 195A of Act, provides that where, pursuant to any agreement or arrangement, the withholding tax on any income is to be borne by any person to whom the income is payable so that the recipient of any income receives the income free of tax then such income shall be grossed up by such amount. 8.11. In the instant case, the incidence of tax on dividend income is borne by the company paying dividend income by virtue of statute and not by way of any agreement and as such, the rigor of section 195A of the Act would not be applicable. 8.12. In any event, it may be stated that even if the payment is to be grossed up, yet the rate specified in DTAA (if more favourable) would be applicable to g ..... X X X X Extracts X X X X X X X X Extracts X X X X
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