TaxTMI 
TaxTMI 
2009 (8) TMI 676
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....ending can be treated as a manufacturing activity only after the definition clause of "manufacture" contained in Section 2(r) of the Special Economic Zones Act, 2005 is incorporated in the provisions of Section 10AA of the Income Tax Act with effect from 10-2-2006. Even though first appeal was allowed by the C.I.T.(Appeals) holding that the subsequent amendment is clarificatory in nature, on further appeal filed by the department, the Tribunal reversed the order of the C.l.T.(Appeals) and confirmed disallowance on the ground that blending and export of tea by the assessee qualifies for benefit only after incorporation of the definition clause of "manufacture" from the Special Economic Zone Act in Section 10AA of the Income Tax Act. It is against this order of the Tribunal the assessee has filed the appeal. We have heard Senior Counsel Sri. Firoze Bandhya Rujina appearing for the appellant-assessee and Senior Standing Counsel Sri. P.K.R. Menon appearing for the respondents. 2. The short question that arises for consideration is whether blending and packing of tea for export in the industrial unit in the Special Economic Zone amount to manufacture or production of an article quali....
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....id ten consecutive assessment years : Provided further that where an undertaking initially located in any free trade zone or export processing zone is subsequently located in a special economic zone by reason of conversion of such free trade zone or export processing zone into a special economic zone, the period often consecutive assessment years referred to in this sub-section shall be reckoned from the assessment year relevant to the previous year in which the undertaking began to manufacture or produce such articles or things or computer software in such free trade zone or export processing zone : Provided also that for the assessment year beginning on the 1st day of April, 2003, the deduction under this sub-section shall be ninety per cent, of the profits and gains derived by an undertaking from the export of such articles or things or computer software : Provided also that no deduction under this section shall be allowed to any undertaking for the assessment year beginning on the 1st day of April, 2010 and subsequent years. (1A) Notwithstanding anything contained in sub-section (1), the deduction, in computing the total income of an undertaking, which begins to man....
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..... Manufacture, for the purpose of this Policy, shall also include agriculture, aquaculture, animal husbandry, floriculture, horticulture, pisciculture, poultry, sericulture, viticulture and mining." It is worthwhile to refer to the definition of "manufacture" contained in Section 2(r) of the Special Economic Zones Act, 2005, which is incorporated later under Section 10AA of the Income Tax Act with effect from 10-2-2006. It reads as follows : S.2(r) "Manufacture" means to make, produce, fabricate, assemble, process or bring into existence, by hand or by machine, a new product having a distinctive name, character or use and shall include processes such as refrigeration, cutting, polishing, blending, repair, remaking, re-engineering and includes agriculture, aquaculture, animal husbandry, floriculture, horticulture, pisciculture, poultry, sericulture, viticulture and mining." We notice from the above two definition clauses that though both the definition clauses are very similar, blending is not specifically stated in the definition clause of "manufacture" contained in the EXIM Policy, whereas blending is specifically covered by Section 2(r) of the Special Economic Zones Act.....
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....riented units located in Free Trade Zones/Special Economic Zones mainly to augment Foreign Exchange Earnings. In fact, it is pertinent to note that though Section 10A did not contain a definition for "manufacture", definition of the said term contained in Section 2(r) of the Special Economic Zones Act, 2005 is incorporated in Section 10AA with effect from 10-2-2006. Admittedly the said definition covers blending also. Therefore, blending and packing of tea done by the appellant-assessee qualifies for exemption under Section 10AA from 10-2-2006 onwards. The question to be considered is whether the benefit is available to the appellant-assessee for the year 2004-2005 for the reason that the then existing provision Section 10A did not contain a definition clause. Admittedly Section 10A also provides for exemption in respect of goods manufactured or produced and sold by units in the Free Trade Zone. Going by the decision of the Supreme Court above referred, the exemption clause has to be considered with reference to the object with which it is enacted. Nobody can have doubt that exemption to industries in the Free Trade Zone is granted based on the EXIM Policy framed by the Government ....