TMI Blog1999 (7) TMI 99X X X X Extracts X X X X X X X X Extracts X X X X ..... d 'manufacture' should bring into existence a new substance i.e., a new article or thing must emerge with a distinctive name, character and identity. According to the appellant the CIT(A) did not consider the activity adopted by the appellant-firm as production. According to the dictionary meaning of the said word is creation of utilities having value in exchange. 3. We have heard the learned representative for the appellant-firm Shri J.J. Madan and the learned representative for the Department Shri Shaji P. Jacob. Their arguments are taken into consideration. 4. Shri Madan advanced an argument that the appellant-firm is a registered firm under the Indian Partnership Act, 1932. The appellant-firm was entitled to the benefit provided under section 80-I of the Income-tax Act, 1961. But the Assessing Officer refused to give such deduction on the ground that the assessee's business involved only 'processing' and not 'manufacture or production of an article or thing not specified in the Eleventh Schedule'. The assessee is engaged in the manufacture of feeds like poultry Feed, Cattle Feed etc. and also trading the same. The business of the appellant-firm according to the learned repr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpared to the creation of a medicinal pill or tablet which is referred to as 'manufacture'. According to the learned representative the CIT(A) held the entire exercise as processing instead of manufacture, denying the assessee the benefit of section 80-I of the Income-tax Act, 1961. The Assessing Officer considered various High Courts and Supreme Court's decisions. But according to the learned representative for the appellant the said decisions are entirely in respect of processing alone and not regarding manufacture. According to him those cases have no relevance whatsoever to the facts and circumstances of the assessee's case. He submitted that the case law followed by the Assessing Officer has no relevance to the case under consideration. He finally submitted that the Assessing Officer as well as the CIT(A) have taken an erroneous view for not allowing deduction under section 80-I of the Income-tax Act. 7. As section 80-I of the Income-tax Act, 1961 is involved in this appeal, therefore, it has become necessary to look into the said provisions. The head note of section 80-I is 'Deduction in respect of profits sand gains from industrial undertakings after certain date, etc." Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here are other papers also on record being Part I. The Factories Act, 1948, wherein the definition of 'factory' is given. The factory means any premises including the precincts thereof wherein 10 or more workers are working or were working on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on with the aid of power, or is ordinarily so carried on, or wherein twenty or more workers are working, or were working on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on without the aid of power, or is ordinarily so carried on. There is a notification from Animal Husbandry, Fisheries and Forest Secretariat of the Government of Karnataka on record for issuing licence for manufacture and sale of poultry feed. In accordance with the said provisions person who commenced to carry on business of manufacture of poultry feed shall obtain a licence within a period of three months from the date of commencement of the order. The manufacturing of poultry feed without using electrical power and also by using electrical power is also given. The poultry feeds are manufactured for sale. Certai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The Madras High Court has held that the preparation of sweetmeats and biscuits does not constitute manufacture and the assessee was not entitled to exemption of wealth. In that case the qualities of the raw-materials used in preparation of sweetmeats and biscuits did not change even after preparation of the same. The sweetness of sugar used in it remained sweet only even after the preparation of the sweetmeats and biscuits. The taste of sweetness also did not change after preparation of the sweetmeats and biscuits. Therefore, he submitted that the preparation of cattle feeds stands on the same par and did not change its qualities and therefore, no manufacturing activity of a new article or thing is involved. 12. At this stage it appears quite proper to mention here that the sugar and other raw-materials used in preparation of the sweetmeats and biscuits could be eaten by human beings as well as animals and again they can be eaten by the human beings as well as the animals even after preparation. It is true that some of the raw-materials used in the manufacture of poultry feed and cattle feed can be eaten by both the human beings as well as the animals. The pertinent distinct f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a decision of the Supreme Court in the case of Builders Association of India v. Union of India [1994] 209 ITR 877/75 Taxman 658. In that case again construction of a dam, building, bridge, road and the like was a point for consideration. The Supreme Court held that the construction activity was not involved because a new article or thing was not manufactured and therefore, the Builders Association of India was not entitled for investment allowance on machinery and plant. That case stands on a different footing and the facts of that case are not pari materia with the facts of the instant appeal. He has also cited a decision of the Delhi Bench of ITAT in the case of B.R. Maheshwari Co. v. CIT However, that decision is not available. He has cited another decision of the Kerala High Court in the case of CIT v. Aspinwall Co. Ltd. [1997] 137 CTR (Ker.) 557. The Kerala High Court in that case has held curing of coffee is not a manufacturing activity and the assessee was not entitled to investment allowance under section 32A. In that case the Tribunal inspected the factory premises to have a firsthand knowledge of the operations carried on by the assessee-company. The Tribunal wanted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not amount to 'manufacture or production of textiles" within the meaning of Entry 23 of Sch. I to the Industries (Development and Regulation) Act, 1951, and hence, the assessee would not be entitled to the grant of tax credit certificate under section 280ZB of the Income-tax Act, 1961. This decision is also distinguishable on facts because the end-product in the instant appeal, manufactured by the appellant firm is eatable only by hens and cattles. The end-product is altogether a changed article or thing from its original qualities. He has also cited a decision from Chowgule Co. [1984] 47 STC 124. Even the CIT(A) has discussed about this decision stating that this case involved blending of different qualities of ore possessing different chemical and physical composition so as to produce ore of the contractual specification was held not to involve the process of manufacture. The facts of the case cited are not similar to the present case under consideration. 15. The sum and substance of the arguments advanced by the learned departmental representative is that no manufacturing activity is involved in the present case and the end-product did not changed from its original qualitie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unts to manufacture. According to him the judgment reported in 137 ITR has no relation whatsoever to Komarla Feeds. i.e., to the case of the appellant. That case relates to packing, wrapping, folding, stitching, ginning and pricing, which was therefore, considered by the Court as processing only. While referring to the decision of Karnataka High Court in Hotel Ayodya case he has submitted that according to the Karnataka High Court the hotel is not an industrial undertaking. The hotel is a trading concern as it is mainly intended for trading and not for production or manufacture. According to him this does not relate to the present case as the assessee is not a hotel. 17. The learned representative Shri Madan also submitted that the point involved in the case in Hind Nippon Rural Industries (P.) Ltd. (No. 2) v. CIT [1993] 201 ITR 588 (Kar.) is whether chipping, sizing and polishing of granite is 'manufacturing' or 'processing'. The Karnataka High Court in the above decision held that such activity did not amount to manufacture or processing of goods as the end-product is not commercially different product and consequently the process involved does not amount to manufacture. He dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... different commodity known by brand name Shanku has emerged as a result of the various processes which has culminated in the final product of mash and pellets in the instant case. He has distinguished the judgment of the Karnataka High Court in the case of V.M. Salgaocar Bros. (P.) Ltd.. It is held that the function of the iron-ore sizing and washing plant was to remove impurities from the ore by the hydraulic washing process and simultaneously segregating the ore on the basis of size. The iron ore remained commercially the same commodity. There was no change in the commercial nomenclature of the article nor was there any transformation or production of a new or different article. He submitted that mash and pellets manufactured by the appellant-firm have totally changed in size, shape appearance and usage from the original raw-material used in its manufacture. The transformation is complete with not the slightest resemblance to the original raw-materials involved. He submitted that the judgment of the Karnataka High Court in the case of Sri Ranganatha Enterprises v. CIT [1998] 232 ITR 568/ 100 Taxman 552, has no bearing whatsoever on the appellant's case. In that case the Karnataka ..... X X X X Extracts X X X X X X X X Extracts X X X X
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