TMI Blog1989 (11) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... iled note about its activities. It is stated that the company purchase foundation seeds and sell it to farmers for growing hybrid seeds. The company renders technical advice and managerial guidance. After the produce is harvested the samples are collected and tested for purity, viability and moisture content. If samples are approved, the seeds are purchased. If seeds are than graded and claimed by mechanical process and sorted out in three categories, they are then treated with mixture of chemicals and mixed mechanically as a result of which chemical mixed is coated on seeds. The seeds are then packed. 4. It is claimed that their work is covered by processing of goods and therefore they are eligible, for deduction under section 80-I. 5. From the above facts, it is seen that there is no manufacture or processing activity is involved. Raw material and finished produce remains the same it seeds. Besides growing of foundation seeds on field is done by farmers. It cannot be taken as an activity of the company. The company has sold foundation seeds and has purchased hybrid seed. This activity is only a trading activity. The activity of the company only starts from purchase of hybri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l. The learned DR at the outset supported the order of the ITO. He in fact made submissions thereafter on lines identical to those as had weighed with the ITO in rejecting the claims of the assessee. He highlighted the fact that the assessee was not engaged in any processing or manufacturing activity and all that it did was to purchase and sell seeds. According to him the fact that some consultation and guidance was provided to the farmers in the growing of the seeds did not make any difference whatsoever since this by itself did not bring into existence any processing or manufacturing activity. He made an impassioned plea for the rejection of both the claims and the confirmation of the order of the I.T.O. 5. The learned counsel for the assessee, on the other hand, strongly supported the order of the CIT(A). At the outset he invited our attention to para 2 of the order of the CIT(A) (already reproduced earlier) for the submission that the facts stated therein had not been challenged on behalf of the Revenue. His subsequent arguments proceeded on lines identical to those as had been advanced before the first appellate authority. It was the submission that the company was engaged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said sections stood duly complied with and there was no dispute between the parties on that score. According to the learned counsel even if the activities of the company were categorised under the term processing it would still be entitled to the claims in question. The learned counsel in support of the facts of the case and his own submissions placed reliance on the following authorities : (i) Tarai Development Corpn.v. CIT [1979] 120 ITR 342 (All.). (ii) CIT v. Marwell Sea Foods [1987] 166 ITR 624/34 Taxman 52 (Ker.). (iii) G.A. Renderian Ltd. v. CIT [1984] 145 ITR 387 (Cal.). (iv) Hemsons Industries v. ITO [1987] 23 ITD 364 (Hyd.). (v) Marwell Sea Foods v. ITO [1981] 11 TTJ (Coch.) 22. (vi) Raj Kumar Singh Co. v. ITO [1986] 24 TTJ (All.) 458. (vii) Bajoria Family Trust v. First ITO [1985] 21 TTJ (Nag.) 277. 7. The learned DR in his reply contended that even on the presumption that the assessee was carrying on a processing activity, the crucial thing to be seen was whether it was engaged in any manufacturing or production activity. According to him the activities of manufacture and production assumed importance vis-a-vis the provisions of sections ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seeds (2) Processing of hybrid seeds (3) Testing and quality control (4) Marketing of seeds. All the above activities are conducted as per the Indian Minimum Seeds Certification Standards stipulated by Central Seed Certification Board, Department of Agriculture and Co-operation, Ministry of Agriculture, Government of India. The company is producing, processing and marketing certified seeds. Gujarat State Seeds Certification Agency inspect the seed production field, processing plant and test seeds in notified Government laboratories and issue tags for each and every bag. (1) Production of Hybrid Seeds. (a) Company is producing hybrid seeds through its contract growers. Contract growers are selected according to yield potentiality of the area, availability compact area irrigation facility and plots having no isolation problem (isolation distance). The contract is entered into with each and every sub-producer in the beginning of season. Accounting period for this is 1-10-81 to 30-9-82. However agreement with sub-producer has got to be entered into before commencement of the season concerned. Accordingly two specimen agreements dt. 26-5-81 and 2-6-81 which were eff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e seed, dust particles, plant materials, offsize seed diseased or insect damaged seed etc. After basic cleaning the seeds are upgraded on Gravity separator to improve the quality of seed by using weight component difference between seeds. The seed then treated with 1% mercurial fungicides and DDT in Slurry Seed Treater. This is done to protect seed against seed home and soil borne micro-organisms. In case of hybrid cotton seed raw hybrid seed is treated in a tank with concentrated H2SO4. This process will dissolve fuzz, lint and wax of seed coat. After that with lime solution the seed is neutralised. These process will make the seed free flowing. The same seed is then run on Air Screen Cleaner, Gravity separator and slurry treater to improve the quality of seed. (3) Testing and quality control : At each and every stage of seed production and processing technical staff of the company take appropriate quality control measures. The seed processed as above will be treated for. (a) moisture content (b) germination (c) physical purity (d) genetic purity These testing is done by Gujarat State Seed Testing Laboratories (Government owned) as well as company's own ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or by the sub-producer. 8. Sub-producer will co-operate and follow the instructions given for maintaining the purity of the above referred seed production, by the Seed Certification Agency and officials of the main producer. 9. Sub-producer will bring the seed of cotton at his cost for ginning and arrange for ginning and grading under supervision of main producer. 10. 5 samples each of 150 grams will be drawn from the seed for testing, out of which 3 samples will be for certification Agency, and one sample each for main producer and sub-producer. 11. The seed, meeting certification standards and obtaining the certification tag, would come to the share of main producer and other portion of the crop would go to the share of sub-producer. 12. Certification charges would be borne by the main producer. However, if the seed is not meeting the standard, the main producer will be entitled to get the reimbursement towards the expenses incurred at the rate of ₹ 5 per kg. from the sub-producer. 13. Sub-producer would be entitled to get an amount towards expenses incurred on rent of land, towards his labour and other expenses incurred from the main branch at the rate of ..... 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