TaxTMI 
TaxTMI 
2013 (12) TMI 236
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....nd packaging of tea in its small scale industrial undertaking located at Kolhapur (Maharashtra). With respect to the profits of such industrial undertaking, the assessee claimed deduction under section 80-IA of the Act amounting to Rs. 4,51,283. In an assessment finalised under section 143(3) of the Act, dated December 27, 2006, the claim has been denied on the ground that the assessee does not fulfil the condition prescribed under section 80-IA(2)(iii) of the Act. The Commissioner of Income-tax (Appeals) however, allowed the claim of the assessee for the assessment year 1999-00. As per the Commissioner of Income-tax (Appeals) for the purposes of section 80-IA as it stood in the assessment year 1999-00, the assessee was an "industrial undertaking" as per the meaning prescribed in section 80-IA(12)(b) read with the Explanation to section 33B of the Act, which inter alia, included an undertaking engaged in processing of goods apart from an undertaking engaged in manufacture of goods. As per the Commissioner of Income-tax (Appeals), the assessee was engaged in an activity of processing, therefore, its industrial undertaking fell within the scope of section 80-IA of the Act and accord....
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....n sub-sections (1) and (2) of section 80-IA of the Act, an inescapable conclusion is that undertakings involved in processing of goods were also eligible for deduction under section 80-IA as it stood for the assessment year 1999-00. Apart from the aforesaid, it has been submitted on behalf of the assessee that the case is fully supported by the decision of the Special Bench of the Tribunal in the case of Madhu Jayanti International Ltd. v. Deputy CIT [2012] 18 ITR (Trib) 1 (Kol) [SB], inasmuch as the activity carried on by the assessee of blending of various teas is admittedly an activity of processing. In support, it was also pointed out that the hon'ble Supreme Court in the case of CIT v. Tara Agencies [2007] 292 ITR 444 (SC) has also affirmed that blending of tea amounts to processing. At this point, learned counsel has also referred to the following two judgments of the hon'ble Kerala High Court in the cases of Girnar Industries v. CIT [2011] 338 ITR 277 (Ker) and Tata Tea Ltd. v. Asst. CIT [2011] 338 ITR 285 (Ker) which have been followed by the Special Bench of the Tribunal in the case of Madhu Jayanti International Ltd. [2012] 18 ITR (Trib) 1 (Kol) and as per the assessee, ....
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....a for the purposes of section 10A/10B of the Act. The Special Bench held that for the purposes of section 10A/10B of the Act, expression "manufacture" included processing, blending and packaging of tea while under the common parlance such type of activity did not amount to "manufacture" or "production". In coming to such a conclusion it followed the judgments of the hon'ble Kerala High Court in the cases of Girnar Industries [2011] 338 ITR 277 (Ker) and Tata Tea Ltd. [2011] 338 ITR 285 (Ker). The penultimate para of the decision of the Special Bench which reads as under (page 41 of 18 ITR (Trib)) : "We, in view of the above, hold that when the products for which the assessee's unit is recognised as a 100 per cent. export-oriented undertaking are tea bags, tea in packets and tea in bulk packs and the assessee, which is exclusively engaged in blending and packing of tea for export, may not be manufacturer or producer of any other article or thing in common parlance. However, for the purpose of sections 10A, 10AA and 10B, we have to consider the definition of the word 'manufacture' as defined in section 2(r) of the Special ....
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.... of the Act. No doubt, the stand of the assessee to the effect that the impugned activity, i.e., blending of tea amounts to "processing" is quite justified, inasmuch as the same is also in line with the pronouncement of the hon'ble Supreme Court in the case of Tara Agencies [2007] 292 ITR 444 (SC) wherein similar activity has been held to be amounting to "processing" and not "production" or "manufacture". So however, the moot question is as to whether the same would entitle the assessee for deduction under section 80-IA of the Act as it stood for the assessment year 1999-00, which is the first year of the assessee's claim, as it is the year in which the industrial undertaking of the assessee has been set up. In this context, we may refer to section 80-IA as it stood for the assessment year 1999-00, which reads as under : "80-IA. Deduction in respect of profits and gains from industrial undertakings, etc. in certain cases.-(1) Where the gross total income of an assessee includes any profits and gains derived from any business of an industrial undertaking or a hotel or operation of a ship or developing, maintaining and operating any i....
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.... 80-IA clearly prescribes that the section shall apply to any industrial undertaking which fulfils all the conditions prescribed therein, viz., the conditions contained in clauses (i) to (v) thereof. One such condition contained in clause (iii) of sub-section (2) of section 80-IA mandates that the industrial undertaking should "manufacture" or "produce" any article or thing. Therefore, in terms of clause (iii) of sub-section (2) of section 80-IA an industrial undertaking ought to manufacture or produce any article or thing in order to qualify for deduction under section 80-IA of the Act. Ostensibly, as noticed earlier, the activity of blending of tea undertaken by the assessee-industrial undertaking does not amount to manufacture or production and therefore, the assessee's industrial undertaking violates the condition prescribed in clause (iii) of sub-section (2) of section 80-IA of the Act. On this aspect, the plea raised by the assessee is that as it qualifies to be an "industrial undertaking" referred to in sub-section (1) of section 80-IA read with clause (b) of sub-section (12) of section 80-IA, it should be held entitled for deduction under section 80-IA of the Act. According....
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....the unit should fall in the expression "industrial undertaking" for the purposes of sub-section (1) of section 80-IA of the Act alone, rather section 80-IA(1) itself prescribes that the exemption is available to an industrial undertaking, "to which this section applies" which reflects the import of the fulfilment of condition prescribed in sub-section (2) of section 80-IA of the Act. In this background, the conditions prescribed in sub-section (2) of section 80-IA of the Act has to be read harmoniously and therefore, in the present case, clause (iii) of sub-section (2) of section 80-IA cannot be ignored while examining the assessee's claim of deduction under section 80-IA of the Act. On a clear interpretation of section 80-IA of the Act, as it stood for the assessment year 1999-00, the assessee's activity amounts to processing only and it does not amount to either manufacture or production and since the term "processing" has not been included in section 80-IA on account of clause (iii) of sub-section (2) of section 80-IA of the Act, the assessee is not entitled for deduction under section 80-IA of the Act. The Commissioner of Income-tax (Appeals), in our view, clearly fell in error....
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....short "CIT"), by invoking section 263 of the Act and in this background, there was justifiable information with the Assessing Officer to reopen the assessment for the impugned assessment year. The relevant discussion by the Commissioner of Income-tax (Appeals) in this regard is contained in para 18 of the impugned order which reads as under : "I have considered the submissions. According to the existing provisions, all the returns have to be processed under section 143(1) and if any tax or interest is due, an intimation is sent specifying the tax demand or if any refund is due it is granted to the assessee. It is further provided that the acknowledgment of the return shall be deemed to be an intimation under section 143(1) if neither any sum is payable nor refundable. Only in cases where the Assessing Officer has reasons to believe that there is a wrong claim made in the return, he may resort to assessment of the income under section 143(3). In the case, the time limit for issue of notice under section 143(2) has already expired, the Assessing Officer can resort to a notice under section 148 to assess or reassess the income. It is i....
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....l submissions carefully. In the context of the assumption of jurisdiction by issuance of notice under section 148 of the Act, the sum and substance of the arguments raised before us is that there was no fresh material or a rational belief that certain income had escaped assessment on account of allowance of deduction under section 80-IA of the Act. At the time of hearing, reliance has been placed on the judgment of the hon'ble Bombay High Court in the case of Indivest Pte. Ltd. [2013] 350 ITR 120 (Bom), to point out that in the absence of tangible material or a rational belief, the assessment could not be reopened under section 147/ 148 of the Act. It was put across to learned counsel in the course of hearing that the aforesaid proposition could be examined only on perusal of the reasons recorded by the Assessing Officer pursuant to section 147 of the Act, a copy of which was not on record. However, the point sought to be made was that prior to issuance of notice under section 148 of the Act dated March 30, 2006 for the instant assessment year, the assessment for the assessment year 2003-04 was completed by the Assessing Officer wherein the claim of the assessee for deduction under....