Tea blending not manufacturing under Income-tax Act; relief denied under section 80J.

The court held that blending tea did not amount to manufacturing or producing articles under section 80J(4)(iii) of the Income-tax Act, 1961. The assessee's activity was deemed as processing, not manufacturing, and therefore, the relief under section 80J was denied. The decision favored the Revenue, affirming the Tribunal's denial of relief to the assessee. AJIT K. SENGUPTA J. concurred with the judgment.

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Issues Involved:
1. Whether the assessee could be said to be manufacturing or producing articles within the meaning of section 80J(4)(iii) of the Income-tax Act, 1961.

Summary:

Issue 1: Manufacturing or Producing Articles u/s 80J(4)(iii)
The primary issue was whether the assessee, engaged in blending different types of tea and selling the blended tea, could be considered as manufacturing or producing articles within the meaning of section 80J(4)(iii) of the Income-tax Act, 1961, thereby qualifying for the relief under that section.

Facts:
The assessee, a limited company, derived income from business and other sources and was involved in buying, blending, and selling tea. For the assessment year 1980-81, the assessee claimed relief u/s 80J, asserting that it was engaged in the manufacture or production of articles.

Income-tax Officer's Decision:
The Income-tax Officer denied the relief, stating that the assessee was not an industrial undertaking manufacturing or producing any article but was merely blending tea, which did not qualify as manufacturing or producing under section 80J.

Commissioner of Income-tax (Appeals) Decision:
The Commissioner of Income-tax (Appeals) reversed the Income-tax Officer's decision, holding that the assessee was an industrial undertaking engaged in the manufacture or production of articles and directed the Income-tax Officer to allow the relief under section 80J.

Tribunal's Decision:
The Tribunal upheld the Income-tax Officer's decision, relying on the cases of Nilgiri Ceylon Tea Supplying Co. v. State of Bombay and G. A. Renderian Ltd. v. CIT, concluding that blending tea was a processing activity, not manufacturing or producing. Thus, the assessee was not entitled to relief under section 80J.

Court's Analysis:
The court reviewed various precedents and definitions of "manufacture" and "production." It noted that the blending of tea did not result in a new, distinct commodity but remained tea, thus constituting processing rather than manufacturing or producing. The court referenced multiple cases, including Chrestien Mica Industries Ltd. v. State of Bihar and Chowgule and Co. Pvt. Ltd. v. Union of India, to distinguish between processing and manufacturing.

Conclusion:
The court concluded that the assessee's activity of blending tea did not constitute manufacturing or production of articles within the meaning of section 80J(4)(iii). Therefore, the Tribunal was justified in denying relief under section 80J. The question was answered in the affirmative and in favor of the Revenue, with no order as to costs.

Separate Judgment:
AJIT K. SENGUPTA J. concurred with the judgment.

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