TMI Blog2009 (10) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... er and General Power of Attorney holder residing in Ahmedabad. The applicant is being assessed to income tax in India as NRI by the Income-tax authorities in Ahmedabad. The applicant proposes to set up and promote a unit near Ahmedabad in the name of "Pioneer Fruit International" to produce fruit based drink mixes/concentrates derived from fruit juice through the various processes which are given in the Flow Chart appended to the application. The process involves various steps such as peeling, extraction of fruit oil, fruit pulping, screening, emulsifying, homogenizing, spray drying, addition of preservatives, colour and sweetness and packaging. The learned authorized representative of the applicant stated at the time of hearing that three products will be produced in the proposed plant : (1) fruit juice - either obtained from one or more than variety of fruits (normally packed in pouches for ready consumption) (2) Concentrates of juice which in the ordinary parlance are known as 'fruit syrups' consumed by mixing water, and (3) fruit powder obtained by spray-drying of homogenized juice. It is stated that the final product will be placed in packages compatible with the preservation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of an assessee includes any profits and gains derived from any business referred to in sub-sections [(3) to [(11), (11A) and (11B)]] (such business being hereinafter referred to as the eligible business, there shall, in accordance with and subject to the provisions of this section be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to such percentage and for such number of assessment years as specified in this section. (2) This section applies to any industrial undertaking which fulfils all the following conditions, namely : (i) it is not formed by splitting up, or the reconstruction, of a business already in existence: Provided that this condition shall not apply in respect of an industrial undertaking which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such industrial undertaking as is referred to in section 33B, in the circumstances and within the period specified in that section; (ii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose; (iii) it manufactures or produces any articl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e only aspect which needs some elaboration is whether the ingredient of processing is satisfied. Is it a business of processing (including preservation) of fruits? Whether the series of steps taken to produce fruit based drink mixes or concentrates or fruit powder amount to processing of fruits or do they cross the boundaries of processing as commonly understood? In other words, whether the finished / packaged product is the result of something that cannot be appropriately characterized as processing? Or, is it something more than processing? 7. The import of the expression 'processing' can be better understood by referring to the decisions of the Supreme Court interpreting the said expression occurring in the taxing enactments. In the case of Delhi Cold Storage P. Ltd. vs. CIT [1991, 191 ITR p.656], the Supreme Court was concerned with the question whether the assessee company running a cold storage could be held to be an industrial company for the purposes of Section 2(7)(c) of the Finance Act, 1973. An industrial company has been defined to mean a company which is mainly engaged in the manufacture or processing of goods and other activities specified therein. The questio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urchaser and obviously as a result of this blending, the quantities of ore mixed together in the course of loading through the mechanical ore handling plant experience change in their respective chemical and physical compositions, because what is produced by such blending is ore of a different chemical and physical composition. When the chemical and physical composition of each kind of ore which goes into the blending is changed, there can be no doubt that the operation of blending would amount to "processing" of ore within the meaning of Section 8(3)(b) and Rule 13." Earlier, it was observed that the blending of different qualities of ore did not amount to manufacture. 8. In the case of Commissioner of Wealth Tax vs. Mohini Rai [1999, 240 ITR pg.636], the Gujarat High Court observed that in order to characterize an operation as processing, it is necessary that the commodity must, as a result of the operation, experience some change. 9. The principle that runs through the above decisions is that notwithstanding the extent of processing and the changes that occur to the original commodity by reason of series of operations, it could still amount to processing of that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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