TMI Blog1995 (5) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer was erroneous and prejudicial to the interest of the revenue. He, therefore, issued a notice dated 5-11-1992 which reads as under : " --- (1) Your claim to deduction under section 80-I has been granted without proper scrutiny and application of mind. The business of confectionary is specifically covered under Eleventh Schedule which debars the assessee from the benefit under section 80-I. Whether the assessee comes under the exception granted to small scale industries has not been properly verified. In fact, the very issue relating to applicability of the Eleventh Schedule has not been examined at the assessment stage. (ii) The Assessing Officer also failed to examine whether bakery can come within the meaning and definition of 'Industrial Undertaking' for the purposes of section 80-I. (iii) The Assessing Officer did not examine whether the assessee fulfils the criteria laid down in section 80-I(2)(iv) in relation to the manufacturing activity and number of employees on its pay-roll." 3. The relevant portion of the notice served on 5-3-1993 reads as under : " Your contentions regarding applicability of provisions of section 80-I of the Income-tax Act, 1961 will b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hdrawing the deductions allowed to the assessee under sections 80-I and 32AB of the Income-tax Act, 1961. 6. Shri S.E. Dastur, the learned Counsel for the assessee appeared before us. It was vehemently contended that the condition precedent for assuming jurisdiction under section 263 of the Act did not exist. Our attention was invited on the contents of items those listed in the Eleventh Schedule. This is as under : "Confectionary and Chocolates." 7. Shri Dastur argued that cakes and savouries cannot be construed to be confectionary and as such, the items produced by the assessee are not coming within the ken of Eleventh Schedule. As such the assessee is entitled to the benefit as contemplated under sections 80-1 and 32AB. 8. In order to explain the meaning of cake, the learned counsel adverted to the Webstor's Third New International Dictionary, Volume one "Unabridged Edition" page 313. The meaning as given in the Dictionary is reproduced here as under : '(A) CAKE 1.a Any of a variety of breads, usu. small in size and typically round and flat in shape as--- (1) a flat mass of dough sometimes unleavened, shaped round or oval by hand and baked with a crust on both side ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th sugar, syrup, or the like ; to make into a confection; to mix, make up as a condiment or seasoned delicacy. We find that in the same Dictionary, the words "confectionary preparation" are defined as a sweetmeat. The word 'sweetmeat' is defined in the Webster's Encyclopaedic Unbridged Dictionary as sweet delicacy, prepared with sugar, honey or the like, as preserves candy, or formerly cakes or pastry. 10. In order to explain the meaning of the word 'confectionary' the learned Counsel relied on the ratio in the case of CCE v. Popcorn House Ltd. [1968] 3 All E.R. 782. It was held in this case that confectionary means any food normally eaten with the fingers and made by a cooking process, other than baking, which contains a substantial amount of sweetening matter. The learned Counsel read the following portion of the judgment :--- "Applying that principle of construction to this taxing Act, I have to ask myself : What do the words 'Similar confectionery' (including drained, glace or crystallized fruits) means ? and those words follow the words 'Chocolates' and 'sweets'. It was suggested that the words 'similar Confectionary' may well be nothing more than words put in ex abundanti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r items of plant and machinery which were not directly engaged in the manufacturing process are to be excluded. Reliance was placed on the decision of the Tribunal rendered in the case of Indian Communication Network Ltd v. IAC [1994] 50 ITD 411 (Delhi). 13. Shri Sharma, the learned Departmental Representative appeared before us. Relevant documents and papers were produced. The Id. D.R. vehemently contended that the assessee was engaged in the manufacturing of confectionary items. According to Shri Sharma, cake comes within the ambit of the word 'confectionary'. A cake was produced before us to demonstrate that covering of the cake which contains creamy and other layers are not part of the baked item. Our attention was invited on the certificate of registration wherein the assessee's manufacturing activities include inter alia, items of confectionary. As such, according to the learned Departmental Representative, it cannot be said that the assessee was not engaged in the manufacture of confectionary items. Shri Sharma referred to the Concise Oxford Dictionary which defines the word 'confection' as "dish or delicacy made with sweet ingredients, 2 mixing, compounding". The same Dic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot ; (2) industrial undertakings, other than small scale industrial under takings, not engaged in the business of construction, manufacture or produce any article or thing specified in the list in Schedule Eleventh...." 17. In Schedule Eleventh, item 6 is listed as under : "Confectionary and chocolate" The CIT found that the assessee is engaged in the business of confectionary. He also noted that the benefit of section 32AB and section 80-I were given to the assessee by the Assessing Officer. The order of the Assessing Officer was, therefore, found to be erroneous and prejudicial to the interest of the revenue. The CIT assumed the jurisdiction under section 263 of the Act and directed the Assessing Officer to withdraw the benefits as given under sections 32AB and 80-I. 18. It is, therefore, necessary to enquire whether the items manufactured by the assessee could be construed to be 'confectionary'. Admittedly assessee is manufacturing, cakes savouries, et hoc genus omne. In "Word Origins and their Romantic Stories" by Wilfred Funk, on page 346, the word 'Confetti' is given. We reproduce the relevant portion from the said book : "CONFETTI: was once candy Confetti i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not sugar. These are manufactured out of the baking process. Therefore, these items are not coming within the ambit of the connotation of the word 'Confectionary'. Therefore, the case of the assessee is not failing within the ken of the Eleventh Schedule. On that basis, the assessee is entitled to get the benefit of sections 32AB and 80-I. 21. Coming to the next question, whether the assessee can be construed to be small scale industrial undertaking, we find that this point is adjudicated by the Tribunal in the case of Indian Communication Network Ltd. Tribunal held that the aggregate value of plant and machinery should be determined in the like manner as done by the Directorate of Industries. In order to apply this ratio and to find out whether the assessee comes within the ambit of small scale industrial undertaking, it is sine qua non to make the necessary enquiry. But in view of our finding given apropos the question whether the items manufactured by the assessee come under Eleventh Schedule. This point has now become only academic. Therefore, we decline to comment over the same. 22. We direct the AO to give consequential relief in regard to the interest charged under s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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