TMI Blog2021 (10) TMI 143X X X X Extracts X X X X X X X X Extracts X X X X ..... xport import policy should be considered. The law is now well-settled that in case of ambiguity in an exemption provision the benefit has to go to the revenue.- Decided against assessee. - ITAT 129 of 2016 IA NO: GA/1/2016 (Old No: GA/1248/2016), ITA 34 of 2014 - - - Dated:- 30-9-2021 - HON BLE MR. JUSTICE RAJESH BINDAL, CHIEF JUSTICE (ACTING) HON BLE MR. JUSTICE RAJARSHI BHARADWAJ, JUDGE Appellant(s) Through : Mr. Soumen Bhattacharjee, Advocate Mr. P.K. Bhaumick, Mr. Debasish Chowdhuri, Advocates Respondent(s) Through : J.P. Khaitan, Senior Advocate Ms. Swapna Das, Mr. Siddharth Das, Pratyush Jhunjhunwala, Advocates Mr. Arati Agarwal, Mr. Avra Mazumder Ms. Rosy Banerjee, Advocates O R D E R 1. This order will dispose of two appeals bearing Nos. ITAT 129 of 2016 and ITA 34 of 2014. 2. ITA 34 of 2014 has been filed against the order passed by the Income Tax Appellate Tribunal, A Bench, Kolkata (for short the Tribunal ) in I.T.A. No. 698/Kol/ 2009 for the Assessment Year 2004-05 raising the following substantial questions of law. A) Whether in the facts and circumstances of the instant case the Learned Tribunal erred in not appreciating that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ears 2002-03, 2003-04, 2005-06, appeal pertaining to assessment 2005-06 is dismissed as withdrawn. The legal issues for the assessment years 2002-03, 2003-04 in ITAT 129 of 2016 are being considered. 5. In our view, the substantial question of law which arises for determination in the present appeals needs to be reframed, as under: i) Whether in the facts and circumstances of the case the assessee will be entitled to exemption under Section 10B of the Income Tax Act for business of blending of tea being carried on by it by taking aid from provisions of other statutes and the policies? 6. The learned Counsel for the revenue submitted that while allowing the claim of the assessee, the Tribunal had followed its earlier order in the case of the assessee in ITA No. 1189/Kol/2008 decided on November 23, 2012 which in turn was passed on the basis of a Special Bench order passed by the Tribunal in Madhu Jayanti International Ltd. Vs. D.C.I.T., Circle-I, Kolkata, I.T.A. No. 1463/Kol/2007 decided on July 20, 2012. He further submitted that Section 10B of the Act as it existed at the relevant time provided that the exemption is available to an assessee who is engaged in manufac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the fact that the term manufacture had not been defined in the provision. Section 10B should not be interpreted with the aid of any other provision either in the Act or under the Special Economic Zones Act, 2005 (for short the SEZ Act ) as it has to be considered independently. All the exemption provisions operate in their own field. 10. In response, Mr. J.P. Khaitan, learned Senior Counsel for the assessee submitted that the assessee in the case in hand is a 100% export oriented unit. It buys tea of different varieties in bulk. With the help of machines and assistance of experts the same is cleaned, tested, blended and then packed for export. The manufacturing activities of the assessee started in the previous year ending March 31, 2002. 11. Taking us to the historical background of grant of exemptions to different types of industries, he referred to provisions of Section 10A of the Act which was inserted with effect from April 01, 1981. It was with respect to newly established industrial undertakings in the Free Trade Zones. The provision provided that the profits and gains derived by the assessee from an industrial undertaking to which the Section applied, shall not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the Special Economic Zones. It provided for definition of manufacture as given in Section 2(r) of the SEZ Act, which includes processing as part of the manufacture. 16. He further referred to insertion of sub-section 7(B) in Section 10A of the Act vide SEZ Act w.e.f. February 10, 2006 with respect to the units as referred to in Section 2(ZC) of the SEZ Act upto March 31, 2006. Reference was also made to substitution of Section (1A) in Section 10A of the Act, which increases the period for which the exemption could be availed of from seven to ten years. 17. While referring to the aforesaid scheme of the Act, Mr. Khaitan, learned Senior Counsel for the assessee submitted that the idea behind addition of the aforesaid provisions in the Act was to promote exports. Even if for a short duration definition of manufacture was not provided to include processing, the meaning should be taken from the provisions as were existing prior to the substitution of the section as it was in continuation and the benefit should accrue to even the assesses who had set up their units after April 01, 2001. He further submitted that Section 2 (29BA) of the Act which defines manufacture , does no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to add definition of manufacture after substitution of Section 10B in the Act w.e.f. April 01, 2001, the Parliament knew that whatever was existing prior to that still continues. The definition of manufacture as was available under relevant provisions of the Income Tax Act was taken from Export and Import Policy for the years 2002-07. 20. Judgment of Hon ble the Supreme Court Chairman, Indore Vikas Pradikaran v. Pure Industrial Coke and Chemicals Limited, (2007) 8 SCC 705 was referred to submit that in the absence of any context indicating a contrary intention, the same meaning would be attached to the word used in the later legislation as is given in the earlier statute. There is no ambiguity in this. In addition to the two judgments of the Kerala High Court, which are against the department in Tata Tea Limited s and Girnar Industries cases (supra), he referred to a judgment of this Court in Principal Commissioner of Income Tax v. A.P. Export, [2019] 410 ITR 168 (Cal). In that case as well, the assessment year in question was 2004-05. The assessee was engaged in purchase of readymade garments and after carrying out some activity thereon was exporting the same. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovided that where in computing the total income of the undertaking for any assessment year, its profits and gains had not been included by application of the provisions of this section as it stood immediately before its substitution by the Finance Act, 2000, the undertaking shall be entitled to the deduction referred to in this sub-section only for the unexpired period of aforesaid ten consecutive assessment years : Provided further that for the assessment year beginning on the 1st day of April, 2003, the deduction under this sub-section shall be ninety per cent of the profits and gains derived by an undertaking from the export of such articles or things or computer software: Provided also that no deduction under this section shall be allowed to any undertaking for the assessment year beginning on the 1st day of April, 2012 and subsequent years : Provided also that no deduction under this section shall be allowed to an assessee who does not furnish a return of his income on or before the due date specified under sub-section (1) of section 139. (2) This section applies to any undertaking which fulfils all the following conditions, namely :- (i) it manufactur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticles. The term manufacture was defined even to include processing or assembling in Explanation (3). The benefit under the aforesaid provision was available for ten assessment years. 26. The aforesaid provision was substituted vide Finance Act, 2000 w.e.f. April 01, 2001. The units already availing benefit under the provisions before substitution were allowed to continue to avail the same for the balance period. The term manufacture was not defined in the substituted provisions as was available before its substitution to include even the processing. Explanations to this Section define certain terms used therein wherever meaning whereof had to be taken from any other law or scheme. In the aforesaid Section Explanation (3) was added in the Section which begins with the words - for removal of doubt . It is to treat the profits and gains derived from on site development of computer software outside India as income deemed to be derived from export of computer software outside India. Further Explanation (4) was added vide Finance Act, 2003, w.e.f. April 01, 2004 to define manufacture or produce to include cutting and polishing of precious and semi precious stones. The afo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons were added. The application of provisions of Section 10AA was to the newly established units in Special Economic Zones. In this Section the term manufacture was defined to have the same meaning as provided for in the SEZ, Act. 31. Section 10C of the Act has its application only with reference to the industrial undertakings set up in the North Eastern Region. In any integrated infrastructural development centre or industrial growth centre located in North- Eastern Region, the exemption was given to the industrial undertaking engaged in manufacture or production of articles or things effective from April 01, 1998. The term manufacture has not been defined in the aforesaid Section. 32. The term manufacture as such has been defined in the Act in Section 29(BA), however, it was added w.e.f April 01, 2009. ITAT 129 of 2016 CASE LAW 33. The question as to the interpretation tools to be applied while interpreting a tax exemption provision/notification, when there is an ambiguity as regards its applicability or entitlement of the assessee, was referred to be considered by a Constitution Bench of Hon ble the Supreme Court in M/s Dilip Kumar and Company Ors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd inconvenience cannot be the basis to alter the meaning to the language employed by the legislation. This is especially so in fiscal statutes and penal statutes. Nevertheless, if the plain language results in absurdity, the court is entitled to determine the meaning of the word in the context in which it is used keeping in view the legislative purpose. Not only that, if the plain construction leads to anomaly and absurdity, the court having regard to the hardship and consequences that flow from such a provision can even explain the true intention of the legislation. Having observed general principles applicable to statutory interpretation, it is now time to consider rules of interpretation with respect to taxation. 35. In para 29 of the aforesaid judgment it was opined that strict interpretation of a statute certainly involves literal or plain meaning test. The other tools of interpretation, namely contextual or purposive interpretation cannot be applied nor any resort is made to look to other supporting material, especially in taxation statutes. It is well-settled that in a taxation statute, there is no room for any intendment. Regard has to be given to the clear meaning of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee may warrant visualising different situations. For instance, if there is ambiguity in the subject of tax, that is to say, who are the persons or things liable to pay tax, and whether the Revenue has established conditions before raising and justifying a demand. Similar is the case in roping all persons within the tax net, in which event the State is to prove the liability of the persons, as may arise within the strict language of the law. There cannot be any implied concept either in identifying the subject of the tax or person liable to pay tax. That is why it is often said that subject is not to be taxed, unless the words of the statute unambiguously impose a tax on him, that one has to look merely at the words clearly stated and that there is no room for any intendment nor presumption as to tax. It is only the letter of the law and not the spirit of the law to guide the interpreter to decide the liability to tax ignoring any amount of hardship and eschewing equity in taxation. Thus, we may emphatically reiterate that if in the event of ambiguity in a taxation liability statute, the benefit should go to the subject/assessee. But, in a situation where the tax exemption has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent kinds of tea does not fall within the ambit of manufacturing. In the aforesaid case, it was further opined that it is the bounden duty and obligation of the Court to interpret the statute as it is. It is contrary to all rules of construction to read words into a statute, which the legislature in its wisdom has deliberately not incorporated. 41. In the aforesaid case the issue regarding weighed deduction under Section 35B(1A) of the Act was under consideration. The benefit was available to an exporter of goods manufactured or produced in any small scale undertakings. The term manufacture was not defined as such either in the aforesaid Section especially or even in the Act. Distinguishing the earlier judgment of Hon ble the Supreme Court in Chowgule and Co. P. Ltd. v. Union of India, [1981] 1 SCC 653 and also in the Bombay High Court judgment in Nilgiri Ceylon Tea Supplying Co. v. State of Bombay, [1959] 10 STC 500, it was opined that the term manufacture having not been defined to include processing, the assessee will not be entitled to the deductions. In view of the specific language of the statutes examined in Nilgiri s and Chowgule s cases (supra) where the ter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in its wisdom has not used the term processing in Section 35B(1A) of the Act, it would be erroneous to incorporate the word in the section and then interpret the statute. In this view of the matter Chowgule case and Nilgiri case dealt with by this Court in Chowgule case are clearly distinguishable because of the language of the statutes. 57. The intention of the legislature has to be gathered from the language used in the statute which means that attention should be paid to what has been said as also to what has not been said. 62. Therefore, the legal position seems to be clear and consistent that it is the bounden duty and obligation of the court to interpret the statute as it is. It is contrary to all rules of construction to read words into a statute which the legislature in its wisdom has deliberately not incorporated. 63. On clear construction and interpretation of Section 35B(1A) of the Act, we are clearly of the opinion that the respondent's activity amounts to processing only and the activity does not amount to either production or manufacture . The term processing has not been included in Section 35B(1A) of the Act, therefore, the respondent i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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