TMI Blog2001 (10) TMI 249X X X X Extracts X X X X X X X X Extracts X X X X ..... as under:-- "That the assessee has made a claim for allowance of deduction under section 80-I. The assessee company gets lenses manufactured from others, according to its own specifications and such lenses are exclusively manufactured for the assessee company. Lenses so purchases are chemically treated: (a) The lenses are immersed in a solution of 20% Sodium Hydroxide solution. This process continue for 24 hours. The temperature of the solution is kept around 35 degrees centigrades. (b) The lenses, so treated, are passed through another chemical solution of certain strength. The temperature of this solution is kept at 90 degrees centigrade. This process is done for a minimum period of 10 minutes. (c) After removal of the lenses from the boiling solution it is tested with other reagents for determination of pH. If the pH is higher than 6.5 to 7.0, it is again treated. (d) It is then immersed in another solution to preserve it's pH level and to maintain it's readiness for intraocular implantation to give eyesight to the patient." It was also claimed by the assessee that the words 'processing is covered by the term manufacture'. The reliance was also placed on various cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore the learned CIT(A) that the word 'manufacture included processing, therefore, the processing of the lense for implantation in the eye for recovery of lost eye sight to the patient was covered under section 80-I. It was further argued that it was not necessary that the assessee should have manufactured the articles itself. It could get the article manufactured by a third party under its supervision, direction and control. The rival contention of the Assessing Officer was that the manufacturing or processing should have been done in an article or thing but the human eye was not an article or thing in the commercial sense. After considering the rival contentions, the learned CIT(A) justified the stand taken by the Assessing Officer by observing as under:-- "14. So far deduction under section 80-I is concerned, the appellant's contentions do not convince. The benefit under section 80-I of the Act is admissible if the gross total income of an assessee includes any profits gains derived from an Industrial Undertaking or a Shipping or the business of a Hotel subject to certain conditions to be fulfilled. The appellant's contention is that the appellant was an Industrial Undertak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... making them ready for implantation, but they remain the same commercial articles without any change. I, therefore, hold that the stand taken by the Assessing Officer is justified. The appellant is not entitled to deduction under section 80-I of the Act." 5. Being aggrieved, the assessee is in appeal before the Tribunal. The learned AR reiterated the arguments placed before the authorities below and also submitted that the assessee got the lenses manufactured from M/s. Bio Lense, Amritsar, with its own specifications and designs and the Lenses were got manufactured under the personal supervision of Dr. Daljit Singh. It was stressed that the lenses so manufactured were treated chemically and the process employed by the assessee made those lenses eligible to be used in the eyes of the patients and without applying various processes, the lenses were not worth using for implantation in the eyes. The ld. AR further argued that etymologically, the word 'Manufacturer' includes 'Processing'. Therefore, the assessee was eligible for the deduction under section 80-I. He relied on the decisions of various courts viz.: (i) Empire Industries Ltd.'s case (ii) Ujagar Prints case (iii) Sovr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee claimed the deduction under section 80-I only for the assessment years 1992-93 1993-94 but not for the initial assessment year 1991-92 and also succeeding assessment years i.e., 1994-95 onwards. The ld. DR emphasised that the assessee itself not considered eligible for deduction in the initial assessment year as well as in the succeeding assessment years then how it can be presumed that it was eligible only for two assessment years i.e., 1992-93 1993-94. He further argued that if the assessee was not an Industrial Undertaking for the assessment years 1991-92 and 1994-95 onwards then how it was an Industrial Undertaking for the assessment years 1992-93 1993-94 only. The ld. DR vehemently argued that any Industrial Undertaking is eligible for deduction under section 80-I if it manufactures or produces any article or thing. In the instant case, the assessee neither manufactured nor produced any article or thing so it was not eligible for the deduction under section 80-I and the Assessing Officer was right in disallowing the claim of the assessee in accordance with law and subsequently the ld. CIT(A) was justified in upholding the view of the Assessing Officer. He, theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ernment may, by notification in the Official Gazette, specify with reference to any particular industrial undertaking; (iv) in a case where the industrial undertaking manufactures or produces articles or things, the undertaking employs ten or more workers in a manufacturing process carried on without the aid of power. In the instant case, the assessee failed to establish that any article or thing was manufactured or produced by it. The only claim of the assessee was that it processed lenses and the word 'process' is included in the manufacturing. In the instant case, it is crystal clear that no change occurred in the lenses after applying the various process. So it cannot be said that any new article or thing emerged by applying various processes by the assessee. Accordingly we are of the view that no deduction under section 80-I was allowable to the assessee as the conditions laid down in section 80-I(2)(iii) were not fulfilled. The observations of the Hon'ble Supreme Court in the case of Ujagar Prints relied upon the ld. AR were that: 'The processes of bleaching, dyeing, printing, sizing, shrink-proofing, water-proofing, rubberising and organic processing carried on in res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as manufacture or production of article or thing within the meaning of section 32A of the Act. But the issue involved in the instant case is not of bleaching, dyeing and printing of grey cloth and moreover, the process claimed by the assessee cannot be equated with the dyeing, printing and singeing. Hence the facts of the present case can also not to be equated with that of M/s. Sovrin Knit Works. Similarly, in the case of Peerless Consultancy Services (P.) Ltd.'s, the Hon'ble Calcutta High Court discussed the word 'Process' used in the definition of Industrial Company within the meaning of Section 2(7)(c) of the Finance Act, 1981 and never discussed section 80-I which is involved in the present case. In the case of Nu-Look (P.) Ltd, the Hon'ble Delhi High Court held that: "when the assessee made ready-made garments it used its own cloth to make the clothes or garments and in the case of its customers who brought their own cloth, the assessee did the same thing by making garments for the customers but out of customer's cloth : there was essentially no difference in the two activities. The making of clothes or garments to the order of the customers was also manufacturing o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he instant case, there is no evidence that after applying the various processes, the lense used by the assessee change its nature. Hence, the case law relied on by the learned AR is distinguishable. The Hon'ble Supreme Court in the case of Indian Poultry v. CIT [2001] 250 ITR 664 (SC) observed as under: "From the decision of the High Court to the effect that rearing chicken to broilers did not amount to manufacture and, therefore, the assessee, which carried on the business of rearing chicks to broilers by applying scientific process and technology, was not entitled to the special deduction under section 80-HH of the Income tax Act, 1961, the assessee preferred an appeal to the Supreme Court. The Supreme Court dismissed the appeal." The Hon'ble Supreme Court in the aforesaid case laid down the ratio that by applying scientific process and technology was not entitled to the special deduction under section 80HH 80-I of the Income-tax Act, 1961. In the present case also, the assessee applied scientific process and technology but by applying those processes, the nature of the lense did not change. Hence it can safely be said that no manufacturing activity was involved in the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of the opinion that the processes employed by the assessee on Lense could not be considered as manufacturing activity. In the present case after the processes, input and output remained the same i.e., the thing obtained after the process was Lense which was not different from the Lense put to various processes. It is also worth mentioning that for the purpose of manufacturing, a new product will have to come into existence as per the ratio laid down by the Hon'ble Supreme Court in the case of CIT v. Venkateswara Hatcheries (P.) Ltd [1999] 237 ITR 174 and CIT v. Relish Foods [1999] 237 ITR 59 (SC). In another excise case of J G. Glass Industries Ltd. v. Union of India [1992] 62 ELT 291 (Bom.) the Hon'ble Supreme Court dealt with a issue where the company was engaged in the process of screen printing of empty glass bottles. The Hon'ble Supreme Court observed that 'if the product could serve a purpose even without printing and there is no change in the commercial product after the printing is carried out, the process cannot be said one of the manufacture'. The benefit under section 80-I is available where the Industrial Undertaking manufactures or produces an article or thing comme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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