TMI Blog2011 (8) TMI 1358X X X X Extracts X X X X X X X X Extracts X X X X ..... /s 80IB holding that (a) the assessee was not a small scale industrial unit since the value of its plant and machinery as on 31.3.2005 exceeded ₹ 1 crore (b) the assessee was engaged in processing and trading of milk and milk products and has not manufactured or produced any article or thing. Relying upon various judgements of the apex court and other courts, the A.O. has concluded that the assessee was not engaged in manufacture or production of any article or thing since the assessee merely makes the milk procured by it marketable by enhancing its self life but the output remains the same as the input does not undergo any significant change in its characteristics. 3. The assessee preferred an appeal before the CIT(A) with the submission that the assessee had been subjected to scrutiny assessment from the assessment year 1999-2000 onwards and the issue had been considered in depth by the department, including through directions issued by the Additional CIT u/s 144A of the Act before being allowed. It was further contended that as per the provisions of the Act, the deduction to an eligible industry was granted for a period of 10 years continuously and once granted in an in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee was allowed deduction u/s 80IB in the initial years after making a detailed examination by the assessing officer. Therefore, once the deduction is allowed in initial years, it cannot be disallowed in subsequent years. In support of this proposition, the assessee has placed a reliance upon the following judgements: 1. CIT Vs. Paul Brothers (1995) 216 ITR 548 (NAG) 2. Micro Instruments Co. Vs. ITO (2008) 12 DTR (Chd) (Trib) 501 3. ITO Vs. Essential Motto (2009) 17 DTR (Chd) (Trib) 281 4. M.M. Patel Sons Pvt. Ltd. Vs. ITO (1982) 1 ITD 82 5. Janak Dehydration Pvt. Ltd. Vs. ACIT 134 TTJ 1 (Ahd) 6. Saurashtra Cement Chemical Industries Ltd. Vs. CIT 123 ITR 669 8. With regard to the production of pasteurized milk, the Ld. Counsel for the assessee has submitted that the assessee has procured the milk from different places and in order to make it more hygienic with different percentage of fat contents, it has to undergo different process of boiling and cooling and therefore the final product is entirely different product other than the milk procured from different places. Thus, the process of pasteurization and standardization of milk amounts to manufacture or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at every assessment year is an independent assessment year and rule of res judicata would not apply to the income tax proceedings. Therefore, in each assessment year the issues are to be examined independently in the light of relevant legal provisions. When it has been held by the appellate authorities that pasteurization of milk does not amount to a manufacture or production of articles or things, the assessing officer has rightly disallowed the deduction claimed u/s 80IB of the Act. The Ld. D.R. further contended that for the assessment year 2002-03, the assessment originally framed allowing the claim of deduction was reopened and deduction u/s 80IB was disallowed by the A.O. The Ld. D.R. further contended if in any of the assessment year error is committed and claim is wrongly allowed, the assessing officer is within his jurisdiction to rectify the error and disallow the claim. Pasteurisation of milk is simply purification of milk without changing its characteristics. Pasteurised milk remain the same milk as it was procured. Only the strength of fats and percentage of purity was improved. With regard to the registration of small scale industries, the Ld. D.R. has submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the impugned unit in the asst. yr. 2001-02 and the same was allowed. In this assessment year, i.e. 2003-04 the claim of the assessee was in continuation of the claims made in the earlier assessment years for the impugned assessment year falls within the number of assessment years as specified in the section in which the claim is eligible. It is also a pertinent fact position that the claim allowed to the assessee in the initial assessment year of 2001-02 and thereafter in the asst. yr. 2002-03 has not been withdrawn. There is no contravention from the Revenue either at the stage of the proceedings before the lower authorities or even before the Tribunal. Thus, factually speaking the claim of the assessee for deduction under s. 80IB stands admitted in the initial assessment year and also thereafter upto the assessment year prior to the year under consideration. On this factual matrix, there is no justification for the AO to deny the claim of the assessee for deduction under s. 80IB. The implication of the earlier assessment made for the initial assessment year under s. 143(3) is that the assessee has fulfilled the conditions prescribed in the said section. Thereafter, it is not ope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aim under s. 80J for the year under reference, when such claim had been accepted in the earlier assessment year, which assessment had not been disturbed. 15. The similar view was taken by the Tribunal in the case of ITO Vs. Essential Moto (supra) in which the Tribunal has held that deduction u/s 80IA having been allowed in initial assessment year i.e. 1997-98 in assessment u/s 143(3) with a specific finding that assessee fulfilled all the conditions of section 80IA which stands undisturbed, A.O. could not have reopened the assessment for the assessment year 1998-99 and subsequent years for withdrawing said deduction. Further, A.O. having allowed identical claims in section 80IA in assessment u/s 143(3) for earlier year and also subsequent assessment year could not have reason to believe in the absence of any fresh facts or change of law that income escaped assessment on account of relief u/s 80IA, hence, reopening was on mere change opinion and invalid. Similar view was also expressed by the Tribunal Nagpur Bench in M.M. Patel Sons Vs. ITO (supra) in which it was held that relief to assessee u/s 80HH and 80J having been allowed in the initial assessment year and the said all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after this judgement, the word manufacture and production was further interpreted by the apex court and various High Courts. 17. In the case of India Cine Agencies Vs. CIT (supra), their Lordship of the apex court have held that conversion of jumbo rolls of photographic films into small rolls in desired size amounts to a manufacture or production eligible for deduction u/s 80HH and 80I of the Act. While dealing with the issue, their Lordship have defined the word manufacture by holding that manufacture implies a change but every change is not manufacture yet every change of an article is the result of a treatment, labour and manipulation. Naturally manufacture is an end result of one or more processes through which the original commodities are made to pass. The nature and extent of processing may vary from one class to another. There may be a several stages of processing, a different account of processing at each stage. With each process suffered, the original commodity experience a change. Whenever a commodity undergoes a change as a result of some operation performed on it or in regard to it, such operation would amount to processing of the commodity. But it is only when the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... option of other method to render the product marketable are also a part of productions. The deduction u/s 80IB is to be allowed when the assessee is engaged in the activities of manufacture or production. Admittedly, the assessee is engaged in processing and trading of milk and milk products. The bulk of milk is being procured from different places and after its pasteurization, it was packed in small packets for its marketing and the packing from bulk material to retail package amounts to a production as per the judgement of the Hon ble Supreme Court in the case of India Cine Agencies (supra). Therefore, once the revenue in the initial year has accepted the claim of the assessee and allowed deduction u/s 80IB which has to be allowed consecutively for 10 succeeding years, the revenue should not have taken a view contrary to the earlier view in succeeding year to disallow the claim of the assessees. Admittedly, there is no change in the legal proposition. Therefore, we are of the view that revenue was not justified in taking a contrary view in succeeding years. We therefore, set aside the order of the CIT(A) in all these cases and direct the A.O. to allow the claim of deduction u/s 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... audit report was filed subsequently, the claim of the additional depreciation should have been examined by the A.O. in accordance with law. We, therefore, set aside the order of the CIT(A) in this regard and direct the A.O. to re-examine the claim of additional depreciation as per provisions of law. 25. So far as the issue of industrial undertaking is concerned, we find that assessee was registered as a SSI with the concerned authorities and certificate to this effect is also placed on record. Nothing is placed on record by the revenue that the registration granted to the assessees as a SSI was ever withdrawn by the concerned authorities. Moreover, it is also noticed that at the time of grant of registration as a SSI, the requisite conditions were also fulfilled. We therefore of the view that until and unless the registration granted as a SSI by the concerned authorities is not withdrawn, the assessee should be treated as a small scale industrial undertaking. The small scale industrial undertaking is defined in clause (g) of sub-section 14 of section 80IB, according to which small scale industrial undertaking means an industrial undertaking recognized as SSI u/s 11B of the Indu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny manufacturing or processing activity but appears to be mainly a chilling unit and a trading company. In the case of M/s. Pragati Milk Products Pvt. Ltd., the Director s report of the year ended 31.3.2006 shows that the company has leased out its factory building and plant and machinery to its holding company M/s. Tirumala Dairy Pvt. Ltd., and had only shown receipt of other income on account of this. In this case also, therefore, the company is not seen to be engaged in manufacturing or processing activity as required by the section. In the case of M/s. Janakirama Dairy Pvt. Ltd., the Auditor s report u/s 115JB for the A.Y. 2005-06 shows the company as engaged in the business of chilling and selling milk. Again, therefore, no manufacturing or processing activity is seen to be carried on by this company also. As brought out by the Assessing Officer, the provisions of section 72A(7)(aa) defines an industrial undertaking as one which is engaged in the manufacture or processing of goods. Section 72A(i) read with Rule 9C of the IT Rules, specifies a situation where a company owning an industrial undertaking amalgamates with another company. Since, in this case, neither the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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