TaxTMI 
TaxTMI 
2011 (12) TMI 93
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....nbsp; The assessee is not an undertaking engaged in manufacture or production of articles or things. Conversion of standard gold into ornaments is not "manufacture" or "production" of articles or things. The assessee did not manufacture or produce articles/things. 3. For the sake of convenience, the two contentions have been discussed separately. 4. The factual matrix relevant for deciding the aforesaid appeals are as under:- ITA No. 1223/2011 (Lovlesh Jain) 5. This appeal pertains to the Assessment Year 2007- 08. 5.1 The facts as recorded by the Assessing Officer in the case of Lovlesh Jain are that the assessee had received gold supplied by Ramdan Jewellery, Dubai and the same after conversion into jewellery was "exported" by the assessee to Ramdan Jewellery, Dubai. Ramdan Jewellery, Dubai continued to remain the legal owner of the gold and had not sold the gold to the assessee and no sale consideration for purchase of gold was paid. The assessee was paid conversion charges or production/manufacturing charges for converting the gold into jewellery. The Assessing Officer held that the assessee was not manufacturing ornaments/ jewellery and was not an exporter as he ....
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....n Taj Fire Works Industries [2007] 288 ITR 92. 6.3 The tribunal has upheld the view taken by the CIT(Appeals) and held that the primary gold was put to mechanical, physical and chemical process before it was converted into gold jewellery. The primary gold was melted by applying heat, mixed with copper through chemical process poured into dyes or drawn into wires etc. by physical and mechanical process. These dyes and wires were soldered/flattened through human labouror and mechanical process to make gold ornaments/jewellery. It was further held that the requirement of Section 10B is that the assessee should have exported articles or things. It was observed that the assessee for the purpose of said deduction, had taken value of the jewellery exported and from the same reduced the cost of the material, which was provided by the customer. The tribunal has relied upon the decision of the Madras High Court in Taj Fire Works Industries (supra). ITA 458/2010 (Shashi Kant Mittal) 7. The present appeal pertains to the assessment year 2004-05. The factual position remains the same but in the present case the raw/standard gold was sent by Conrich Jewellery (LLC), Deira, Dubai, UAE, a....
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....erent chemical composition or attributes comes into existence. The term "manufacture or production" used in Section 10A and 10B have to be given strict and restrictive interpretation. 10. The word "manufacture" can be given, both a wider as well as a narrower connotation. In wider sense, it simply means to make, fabricate or bring into existence an article or product either by physical labour or by mechanical power. Given a narrower connotation it means transforming of the raw material into a commercial product/commodity or finished product which has a new, separate entity but this does not necessarily mean that the material by which the commodity is manufactured must lose its identity. The latter connotation has been accepted and applied with some moderation/clarification in several decisions, keeping in view the context in which the word "manufacture" has been used. The Supreme Court in Graphic Company India Limited v. Collector of Customs [2001] 1 SCC 549 and Union of India v. Delhi Cloth and General Mills Company Limited AIR 1963 SC 791 has held that manufacture has to be understood to mean transformation of goods into a new commodity commercially distinct and separate, and ....
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....ol. 29 p.23 as under:- 'Manufacture has been defined as a manner of adapting natural materials by the hands of man or by man-made devices or machinery and as the making of an article or material by physical labour or applied power'; but the practice is to accept as 'manufacture' a wider range of industrial activities than such a definition would suggest. It includes articles made in situ as well as articles made in a factory. 15. The Supreme Court of the United States of America has defined the term 'manufacture' a century ago in Anheuser-Busch Brewing Assn. v. United States (1907) 52 L Ed. 336. The definition has been followed in subsequent American, English and Indian cases. The definition reads as under: Manufacture implies a change, but every change is not manufacture, and yet every change in an article is the result of treatment, labour and manipulation. But something more is necessary. ..There must be transformation; a new and different article must emerge, .having a distinctive name, character or use." 12. As noticed above, Section 10A/10B is applicable when an undertaking manufactures, or is engaged in production of articles or things. The term "production" has a l....
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....the word "manufacture" has a wider and a narrower connotation. In the wider sense it simply means to make, or fabricate or bring into existence an article or a product either by physical labour or by power. The word "manufacture" in ordinary parlance would mean a person who makes, fabricates or brings into existence a product or an article by physical labour or power. The other shade of meaning which is the narrower meaning implies transforming raw materials into a commercial commodity or a finished product which has an entity by itself, but this does not necessarily mean that the materials with which the commodity is so manufactured must lose their identity. Thus both the words "manufacture" and "produce" apply as well to the bringing into existence of something which is different from its components. One manufactures or produces an article which is necessarily different from its components." 13. The difference in the words 'manufacture', 'production (to produce)' and 'process' was examined by the Supreme Court in Commissioner of Income Tax, Kerala v. Tara Agencies [2007] 6 SCC 429. On the question of what is meant by the term 'production', it has been elucidated and explained ....
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.... the course of manufacture of goods. 15. In CIT v. Emptee Poly Yarn (P.) Ltd. [2010] 320 ITR 665, the thermo mechanical process that converts partially oriented yarn into textured yarn, which is a new and a distinct product or article was regarded as manufacture as it brings about a structural change in the yarn itself. Partially oriented yarn cannot be used in warp or weft but texturized yarn can be used. It was held that the structure, the character, the use and the name of the product are indicia, which are to be taken into account while deciding the question whether the process amounts to "manufacture" or not. We have referred to the said decision, as the chemical composition of the partially oriented yarn and the textured yarn is similar, but the use, name and character of the yarn becomes different after texturizing. 16. In the present case, manufacture as well as production of goods, articles or things is covered under Section 10A/10B. The activity for converting gold bricks, biscuit or bars, into jewellery amounts to "production or manufacture" of a new article. The gold, silver or platinum in bar, biscuit or brick form, is converted by manual labour and by the use of....
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....2 to decide and interpret the provisions of the Act i.e. Income Tax Act. We have also taken into consideration how the term 'export' is understood in normal common parlance and in the commercial world. 20. Way back in 1958, the Supreme Court in the case of Central Indian Spinning and Weaving and Manufacturing Company v. Municipal Committee, Wardha 1958 (1) SCR 1002 had held that the word "export" has no special meaning, but it bears the ordinary dictionary meaning, which means "taking out of the country". In the said case the words "export" and "import", with reference to tax imposed by the Municipal Committee, were required to be interpreted. It was held that the words "exported from" means taking out of the municipal limits. Referring to the term "export" it was held that the same is opposite to the term "import", which means to bring in from a foreign or external source. Thereafter, it was elucidated and explained as under:- "'Import' is derived from the Latin word importare which means 'to bring in' and 'export' from the Latin word exportare which means to carry out but these words are not to be interpreted only according to their literal derivations. Lexico, logically th....
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....or the purposes of special deduction under that section there will be no export out of India; if two cumulative conditions are fulfilled, viz., (a) the transaction is one by way of sale or otherwise in a shop, etc. situated in India, and (b) it does not involve clearance in any customs station as defined in the Customs Act. Since, in that case, the transaction of counter sales involved customs clearance it was held that there was export out of India. In the case of Ram Babu and Sons vs. Union of India: 1996 (222) ITR 606(M), the Allahabad High Court had already taken this view and further observed that it is the transaction which should involve clearance at customs station, if it is to be an export out of India. If the goods are required to be cleared from the customs station either by the purchaser or the seller it would be an export out of India. It is, thus, clear that if, ultimately, that articles or goods are taken from India to outside India through customs clearance, the goods can be said to have been exported out of India In this view of the matter, we hold that the goods were exported out of India as contemplated under s 80HHC 22. The words "export" and "import? have be....
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....f other persons from the use or handling of the thing.... But every owner does not possess all the rights set out above - a particular owner's powers may be restricted by law or by an agreement he has made with another.' (Refer to G.W. Paton on Jurisprudence, 4th Edn., pp. 517-18.) While dealing with the concept of possession and enumerating the illustrative cases and rules in this respect, Paton says at p. 577 in clause (x): 'To acquire possession of a thing it is necessary to exercise such physical control over the thing as the thing is capable of, and to evince an intention to exclude others:....' Reference in this connection has been made to the case of Tubantia: Young v. Hichens and of Pierson v. Post. It would thus be seen that where the possession of a property is acquired, with a right to exercise such necessary control over the property acquired which it is capable of, it is the intention to exclude others which evinces an element of ownership. To the same effect and with a more vigorous impact is the subject dealt with by Dias on Jurisprudence, (4th Edn., at p. 400): 'The position, therefore, seems to be that the idea of ownership of land is essentially ....
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....ing to the definition clause as well as the clauses of the Imports (Control) Order, 1955 and Export- Import Policy, the Supreme Court in UOI v. Sampat Raj Dugar, 1992(62) E.L.T. 163(S.C), examined the question of ownership with reference to the term 'importer' and it was held as under:- "19. ... The definition of 'importer' in Section 2(26) of the Customs Act is not really relevant to the question of title. It only defines the expression 'importer'." 27. The aforesaid observations are apposite when we examine the question of 'ownership' of a person who exports the goods. 28. The Supreme Court in the case of Sea Pearl Industries v. Commissioner of Income Tax, Cochin [2001] 247 ITR 578 (SC) examined the word "export", which is used in Section 80HHC of the Act. In this case reference was made to Section 2(18) of the Customs Act, 1962, which defines the term "export" as taking out of India to a place outside India. It was held that the said definition does not prescribe the idea of ownership within the word "export". Thus, for the purpose of 80HHC, assessee should be an exporter of goods, but this does not require that the assessee must be the owner of the goods as well. It wa....
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....d] 29. The Supreme Court relied upon their earlier decision in Mineral and Metal Trading Corp. v. R.C. Mishra [1993] 201 ITR 851, wherein with reference to the words "sale proceeds" and who was the actual beneficiary/recipient, it was observed;- "Secondly, the phrase "sale proceeds ... receivable by the assessee" in Section 80-HHC, sub-section (2), cannot be construed to mean "sale proceeds ultimately received". Payment for the export was by the letter of credit. The letter of credit being in favour of the export house, the foreign exchange was "receivable" by it. That the export house may have chosen to transfer the foreign exchange to a third party under some independent arrangement would not make the third party the exporter. Whatever be the internal arrangement between the export house and the appellant, as far as the Income Tax Authorities were concerned, the export house would clearly be the exporter." [Emphasis supplied] 30. The expression used in Section 10A(1) is, "the deduction of such profit and gains as are derived by an industrial undertaking from export." Similarly expression used in Section 10B(1) is "a deduction of such profit and gains as are derived by a ....