TMI Blog1990 (10) TMI 119X X X X Extracts X X X X X X X X Extracts X X X X ..... ticle or thing. 3. In the assessment for 1984-85, there was a claim for deduction of Rs. 30,000 in respect of technical consultancy fees paid to M/s. Srirang Consultancy Services, Nasik. It would appear that proper evidence had not been laid before the Inspecting Asstt. Commissioner (asst.). In the first appeal, evidence was sought to be let in which the Commissioner(A) declined to allow. The disallowance was sustained. 4. On further appeal to the Tribunal, the assessee is pressing its claim which it had lost before the authorities below. In the appeal for 1984-85, there is a new ground reading that the assessee should be taxed at the rate applicable to an industrial company. 5. One must first know the processing operations conducted by the assessee on the raw tobacco with which it starts. Raw tobacco (angad) is stripped off the midrib by manual labour. It is then sand-screened to control the moisture content. The raw tobacco is fed into a vibratory feeder and it is conveyed into a pneumatic pick up duct where heavy stems and stones will drop down. In the pick up duct, the tobacco is lifted up by suction and discharged into first Tower Classifier. In this Tower Classifier, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... age from an American judgment quoted with approval by the Supreme Court in several decisions runs thus : " 'Manufacture' implies a change, but every change, is not manufacture and yet every change of an article is the result of treatment, labour and manipulation. But something more is necessary and there must be transformation ; a new and different article must emerge having a distinctive name, character or use. " In Anwarkhan Mehboob Co. v. State of Bombay [1960] 11 STC 698 (SC), a firm was purchasing tobacco in the State of Bombay and was dispatching the same to the State of Madhya Pradesh for being manufactured into beedies. But before such dispatch, the tobacco was subjected to a process leading to beedi patti, a commercially different article. The question was whether the tobacco was turned into a commercially different article called beedi patti. As their Lordships observed, anybody could go to the market and purchase the article known as raw tobacco or that he could also go and purchase the article known as beedi patti. This itself was sufficient, in their Lordships' view, to prove that the raw tobacco and beedi patti are commercially different articles. Their Lordships ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mechanically, and the product which came out was by itself a different commercially recognised article which could be sold or exported in that form and that commercially cashew kernel is recognised as being different from cashewnut. 13. The Bombay High Court has in the case of Shree Mulchand Co. Ltd. v. CIT [1986] 162 ITR 764/24 Taxman 188 dealt with a case of an assessee who was receiving raw wool, processing the same as a result of which dirt, grease and other vegetable matter were eliminated and the wool dried in the sun, opened and blended uniformly for sale. The character of wool was held to have undergone a change as a result of the operations so as to bring about a new commercial commodity even though what was purchased and sold was wool itself. The assessee was, therefore, held to be a manufacturer entitled to be classified as an industrial company for purposes of concessional rate of tax. 14. The judgment of the Gujarat High Court in CIT v. Lakhtar Cotton Press Co. (P.) Ltd. [1983] 142 ITR 503 is also in point. Here cotton received in bulk was subjected to ginning and mechanically pressed into small units and packed into commercially acceptable bales. It was held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to find whether the change or the series of changes brought about by the application of processes take the commodity to the point where, commercially, it can no longer be regarded as the original commodity but is, instead, recognised as a distinct and new article that has emerged as a result of the processes. The principles are clear. But difficulties arise in their application in individual cases. There might be borderline cases where either conclusion with equal justification may be reached. Insistence on any shart or intrinsic distinction between 'processing' and 'manufacture', we are afraid, results in an over-simplification of both and tends to blur their interdependence in cases such as the present one. " 18. Though the rule is well known, each case must be decided with reference to its facts. Fortunately, the present is not a borderline case and a firm conclusion is easily approachable. By subjecting tobacco to treatment beedi patti is produced. By ginning cotton, pure cotton is obtained or pressed cotton is produced. Raw wool subjected to processing to eliminate dirt, grease and other vegetable matter resulted in production of pure wool. Leather is said to be manufactured ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid to be produced is one listed in the Eleventh Schedule and there was no need to get into the wider area. Without making a reference to the Eleventh Schedule, the authorities below concluded that it is not an industrial undertaking engaged in the manufacture or production of an article or thing. So, this is not a case where the reliefs could be denied on the reason suggested for the revenue. 21. Record indicates some relevant facts. The assessee is having a mechanised tobacco processing plant which is even patented. It is registered as a small scale industrial unit by the Government of Karnataka as per the certificate issued on 15-7-1982. The most vital is the schedule of assets which formed part of the balance sheet as at 30-4-1983 which shows that the cost of the machinery employed, even as on 1-5-1982, was Rs. 4,04,220. The machinery purchased in 1983-84 was of the value of Rs. 1,03,453.50. It is certain that the aggregate value of the machinery and plant was below the limit placed in Explanation to section 32A(2) or Explanation 3 to section 80-I(2) read with section 80HHA(8). For the foregoing, we hold that the assessee was entitled to the reliefs under sections 32A, 80HHA ..... X X X X Extracts X X X X X X X X Extracts X X X X
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