TaxTMI 
TaxTMI 
2013 (3) TMI 147
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....he interest of the Revenue and thereby setting aside the said assessment order under section 263 of the said Act. 2. That the Ld. CIT failed to appreciate that the Assessment Order passed under section 143(3) of the said Act by the Ld. A.O on 31.03.2005 for the Assessment Year 2002-03 was not erroneous in law and consequently, was not prejudicial to the interest of the Revenue and as such, the Ld. CIT had no jurisdiction to interfere with the said assessment order, dated 31.03.2005, of the Ld. A.O." The assessee has also raised additional ground, which is alternative ground and reads as under: "That without prejudice to the appellant's/the petitioner's claim for exemption under section 10B of the Income Tax Act, 1961, the Ld. CIT erred in not considering the deduction under the provisions of section 80HHC of the Act while directing the Assessing Officer to recompute the assessed income by adding back the exemption claimed by the appellant/the petitioner under section 10B of the Act through her order dated 27.03.2007, passed under section 263 of the Act." 3. Brief facts are that assessee is engaged in blending of different varieties of tea and packaging of the same. Asses....
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....ent, stacking and container stuffing, pre-packing inspection for export etc. The assessee's submission mentions that it purchases tea from Auction Centers, rather than itself engaging in the activity of manufacturing the freshly plucked leaves into finished tea. c) The assessee has made an analysis of the statutory provisions of Section 10B. It has mainly been highlighted that prior to the amendment of the Section by the Finance Act, 2000, w.e.f 1.4.2001, the Section contained an Explanation which defined "Manufacture" to include any process, or assembling, or recording of programs on any disc, tape, perforated media or other information storage device. Even while acknowledging that the entire Section 10B has been "substituted" by the new provisions introduced through the Finance Act, 2000, the assessee hasgone on to claim that "The expressions 'manufacture' and/or' 'produce' have not been defined in the Income Tax Act, 1961 in any exhaustive manner. For the purposes of Section 10B of the said Act, an inclusive definition has been given in respect of the said two words. The expression 'manufacture' for the purposes of Section 10B has been defined to include inter alia any 'process....
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....ering the submissions of the assessee that the facts of this case are identical with the judgment of Hon'ble Calcutta High Court in the case of Apeejay Pvt. Ltd. Vs. CIT (1994) 206 ITR 367 (Cal) and Brook Bond India Ltd. Vs. U.O.I 269 ITR 232, hence following these two judgments CIT, Central-II, Kolkata set aside the assessment by holding the assessment framed u/s. 143(3) of the Act vide order dated 31.03.2005 as erroneous and prejudicial to the interest of revenue and directed the Assessing Officer to disallow deduction u/s. 10B of the Act by giving following findings vide para 9 and 10 as under: "9.To conclude, since the facts and circumstances of the assessee's case are identical with the cited decision of Apeejay Pvt. Ltd. (206 ITR 367, Cal) and Brooke Bond India Ltd. Vs. CIT (2004) 269 ITR 232 (Cal), I hereby hold that the ratio of these two cases, being decisions of the jurisdictional High Court, are fully applicable to the assessee. For the said reason, I reiterate that the activity of the assesee cannot be said to be manufacture or production of any article or thing, which is a necessary prerequisite for claim of benefit u/s. 10B. 10. As an undeserved benefit in the form ....
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....f the Act with effect from February 10, 2006. He explained that Department's stand is that manufacture or production had a liberal meaning under the definition clause contained in section 10B until its deletion with effect from assessment year 2001-02 which covered even processing and, therefore, blending and packing of tea for export was treated as manufacture or production of an article qualifying for exemption. However, once the definition clause is deleted, "processing" does not qualify for exemption from the assessment year 2001-02 onwards and so much so, the assessee's activity being only processing not amounting to manufacture or production, is not entitled to exemption under section 10B of the Act. He relied on the decision of Hon'ble Supreme Court in the case of CIT Vs. Tara Agencies (2007) 292 ITR 444 (SC) and also on Hon'ble Calcutta High Court decisions in the cases of Apeejay Pvt. Ltd. and Brook Bond India Ltd. (supra). 6. We have heard rival submissions and gone through facts and circumstances of the case. We find that Hon'ble Kerala High Court in the case of Tata Tea Ltd. (supra) and Girnar Industries Ltd. (supra) has considered exactly the same issue of claim of e....
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....ver, senior counsel appearing for the assessee has relied on a recent Division Bench judgment of this court in I. T. A. No. 100 of 2009, dated August 17, 2009, in the case of GirnarIndustries v. CIT ([2011] 338 ITR 277 (Ker)) declaring eligibility for exemption from payment of tax in respect of the income from the same activity carried on by a unit in the special economic zone at Kakkanad for the assessment year 2004-05. The contention of counsel for the assessee is that the scheme of income-tax exemption available to units in the special economic zone under section 10A and units in the free trade zone provided under section 10AA and the exemption available to 100 per cent. export oriented units under section 10B are very similar in nature and the wordings of the statutory provisions are similar in nature and so much so, going by the earlier Division Bench judgment of this court the assessee is entitled to exemption under section 10B in respect of the profit derived by it from the 100 per cent. export oriented unit. Senior counsel for the assessee also stated that the assessee's case on the facts is better because the assessee is not only engaged in packing of blended tea in retail....
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....reted reasonably and in consonance with justice adopting a purposive approach. The contextual meaning has to be ascertained and given effect to. A provision for deduction, exemption or relief should be construed reasonably and in favour of the assessee." 3. In this context we notice that the decision of the Supreme Court in Tara Agencies' case [2007] 292 ITR 444 (SC) abovereferred to was on the assessee's entitlement for weighted deduction on export markets development allowance provided under section 35B(1A) of the Act which is no longer in the statute. In our view, the scheme of deduction of export markets development allowance earlier available and the scheme of exemption on export profits are different in nature. It may be noticed that exemption on export profit is available even to merchant exporters by virtue of the provisions contained under section 80HHC of the Income-tax Act. Besides the exemption available on profits earned in export business by traders, specific provisions are incorporated in sections 10A, 10AA and 10B providing for exemption to the entire profits earned by industrial units in free trade zones, special economic zones and industries which are declared 10....
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.... defines it as an undertaking which has been approved as a 100 per cent. export oriented undertaking by the Board appointed in this behalf by the Central Government in exercise of powers conferred by section 40 of the Industries (Development and Regulation) Act, 1951, and the Rules made under that Act. It is pertinent to note that the products for which the assessee's unit is recognised as a 100 per cent. export oriented unit are tea bags, tea in packets and tea in bulk packs. In fact, the assessee is exclusively engaged in blending and packing of tea for export and is not manufacturing or producing any other article or thing. Still it is recognised as a 100 per cent. export oriented unit by the concerned authority within the meaning of that term contained in the definition clause of section 10B of the Income-tax Act and the Department has no case that the assessee's unit engaged in export of tea bags and tea packets is not a 100 per cent. export oriented unit. So much so, in our view, if exemption is denied on the ground that products exported are not produced or manufactured in the industrial unit of the assessee's 100 per cent. export oriented unit, the same would defeat the ver....
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....rts etc. etc. We also find that the Hon'ble Kerala High Court in Tata Tea Ltd. (supra) has considered the decision of Hon'ble Supreme Court in the case of Tara Agencies (supra). Whether in such circumstances CIT can revise the assessment framed u/s. 143(3) of the Act dated 31.03.2005 for the AY 2002-03 by invoking the provisions of section 263 of the Act. First of all, as argued by assessee's counsel Shri R. Salarpuria that the AO has considered the issue in details and now after the decision of Hon'ble Kerala High Court in the case of Tata Tea Ltd. (supra), the issue has become highly debatable and two views are possible on this issue. For this, Ld. Counsel for the assessee referred to the revision order of CIT wherein he admitted that the assessee is engaged in the activity of blending, packaging and export of tea but according to CIT this cannot be described as 'manufacture or produce of any article or thing' and at the most this can be described as a process or blending. As Hon'ble Kerala High Court has taken note of the fact that the definition of manufacture contained in section 2 (r) of the Special Economic Zones Act, 2005 was incorporated in section 10AA of the Act w.e.f. 1....
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....d that this phrase 'prejudicial to the interest of revenue', where one of the possible views is taken by the AO, has been interpreted as under: "The phrase "prejudicial to the interests of the Revenue" has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue. For example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of Revenue; or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue, unless the view taken by the Income-tax Officer is unsustainable in law. It has been held by this court that where a sum not earned by a person is assessed as income in his hands on his so offering, the order passed by the Assessing Officer accepting the same as such will be erroneous and prejudicial to the interests of the Revenue. Rampyari Devi Saraogi v. CIT [1968] 67 ITR 84 (SC) and in Smt. Tara Devi Aggarwal v. CIT [1973] 8....