AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2014 (9) TMI 569
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.... as it was 7th Assessment Year and Unit-II for Wire Harness eligible for 100 % deduction as being 5th Assessment Year. It was noted that the Assessee is basically into the production of Lift Control Boxes in Unit-I and Wire Harness in Unit-II is engaged not in manufacturing or production of any article or thing but was engaged merely in processing. The Assessing Officer was also of the opinion that the Unit-II was not a separate unit for commercial production and therefore, on the basis that it was not having separate electrical connection, it was having common building, there were common employees, sale bill was common, took the view that Unit-II was also not an independent and separate Unit. Therefore, he disallowed the deduction claimed by the assessee u/s 80IB in respect of Unit-II. When the matter was pending before the CIT(A), the Assessing Officer re-opened the assessment for the Assessment Year 2004-05 to 2007-08. During the Assessment Year 2009-10 also the deduction claimed by the assessee u/s 80IB in respect of Unit-II was disallowed on the basis of finding given in Assessment Year 2008-09. When the matter went before the CIT(A), CIT(A) by his common order after noting th....
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....the claim allowed to the assessee u/s 80IB in respect Unit-II during the Assessment Year 2005-06 vide order dated 4.5.2010 was disallowed by the Assessing Officer vide his order passed u/s 143(3) r.w. 147 dated 2.12.2011 which was also under appeal before us. The CIT(A) while deciding the issue whether the assessee is eligible for deduction u/s 80IB in respect of Unit-II got influenced by the assessment order for the Assessment Year 2005-06 dated 4.5.2010 which no more remains in existence once the assessment for the Assessment Year 2005-06 got re-opened. We also noted that the Assessing Officer has disallowed the claim of the assessee u/s 80IB in respect of Unit-II on the pretext that the Unit-II is not engaged in production or manufacturing of article or a thing and secondly the Unit-II is not an independent Unit. In our opinion, the CIT(A) should have given his findings on merit whether the assessee is engaged in the manufacturing or production of article or thing or whether the Unit-II is eligible as an independent unit u/s 80IB or not. The CIT(A) while allowing the claim of the assessee, we noted that, merely got influenced by the assessment order for the assessment year 2005-....
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....ves from one floor to another at the wish of the operator. On the other hand wire-harness is used to take the Electrical commands of the entire lift. It's a important part of the Lift. For anyone installing a lift system, it is possible that Control Panels are purchased from one company and wire-harness is purchased from another. These two products have not only different nomenclature, but also different manufacturing technology and different usage. Thus, what I have understood from the assessment order and the submission of the appellant and personal discussion with the Director of the appellant company is that, through there is unity of management and control, and the plots are adjacent to each other, having common electricity connection and common administrative and marketing & sales staff. Still unit-II can not be said to be just expansion or extension of unit-I. Unit-I was created to manufacture Control-Panels, whereas unit-II was created to produce wire-harnesses. These two products require different technology, different machines and different set of skilled manpower. Had unit-II also manufactured the same item as that of unit-I, it would have been extension of the existing....
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....g of wire harness which is completely different product than the control panels. The workers and employees working in Unit-I & Unit-II are different. There are separate and different excise codes for both the products. The Unit-I was started in F.Y 2001-02. Provident Fund, ESI are paid for workers and employees engaged in manufacturing at Unit-I and Unit-II separately. Common bills are never issued for two different products. For this attention was drawn towards the bills. Both products are sold independently even though wire harness can also be used for lifts. The manufacturing process of both units is different. In respect of wire harness, Unit-II, it was contended that it consists of four processes; first process consists of wire cutting and stripping, second process consists of wire bundling and taping, third process consists of crimping and hardware connecting section and last process is testing. It is not just assembling of the raw materials but manufacturing of wire harness. Raw material and the product which gets manufactured had distinct identity and are separately marketable. Both have different utility. Product so manufactured can no more be regarded to be raw material. ....
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.... plant or plants, in any part of India : Provided that the condition in this clause shall, in relation to a small scale industrial undertaking or an industrial undertaking referred to in sub-section (4) shall apply as if the words "not being any article or thing specified in the list in the Eleventh Schedule" had been omitted. Explanation 1.- For the purposes of clause (ii), any machinery or plant which was used outside India by any person other than the assessee shall not be regarded as machinery or plant previously used for any purpose, if the following conditions are fulfilled, namely :- (a) such machinery or plant was not, at any time previous to the date of the installation by the assessee, used in India ; (b) such machinery or plant is imported into India from any country outside India ; and (c) no deduction on account of depreciation in respect of such machinery or plant has been allowed or is allowable under the provisions of this Act in computing the total income of any person for any period prior to the date of the installation of the machinery or plant by the assessee. Explanation 2.- Where in the case of an industrial undertaking, any machinery or plant or any par....
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....ified that the expression "manufacture‟ for the purpose of both sections 10A and 10B of the said Act would include any processing or assembling or recording of programme on disc, tape, perforated media or other information storage device. This definition of "manufacture‟ was removed when sec. 10A and 10B of the Act were amended by the Finance Act, 2001 w.e.f. 01/04/2001. Sections 10A and 10B of the Act were further amended by the Finance Act, 2003 w.e.f. 01/04/2004 and the definition of "manufacture‟ was inserted as under:- "Explanation (iv) - For the purpose of this section, "manufacture or produce' shall include the cutting and polishing of precious and semi-precious stones." The provisions of Sec. 10A & 10B were substituted by the new provisions by the Finance Act, 2000 and simultaneously provisions of Sec. 80I were substituted by Sec. 80IA and 80IB. U/s 10B the word "manufacture‟ has been defined as under : "manufacture" shall have the same meaning as assigned to it in clause (r) of section 2 of the Special Economic Zones Act, 2005. Subsequently, Special Economic Zone Act, 2005 was passed by the Parliament in May, 2005, which was brought into effect ....
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....#8223;, albeit, in connection with the Bihar Sales Tax Act, 1947. The definition was adopted from the meaning ascribed to the word "production" in the Oxford English Dictionary, as meaning "amongst other things that which is produced; a thing that results from any action, process or effort, a product; a product of human activity or effort". For the wide definition of the word "production‟, it has to follow that mining activity for the purpose of production of mineral ores would come within the ambit of the word "production‟ since ore is "a thing‟, which is the result of human activity or effort. 4.4 According to Webster International English Dictionary, the verb "produce" means to bring forward, beget, etc. The juxtaposition of the word "manufacture" with "agriculture‟ and "horticulture‟ is significant and cannot be lost sight of. The intention in employing the word "produced" obviously was to introduce an element of volition and effort involving the employment of some process for bringing into existence some goods. 4.5 The Hon'ble Kerala High Court had the occasion to consider whether assessee is engaged in the manufacture or production of an articl....
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.... purpose of incorporation of section 2(r) of the Special Economic Zones Act, 2005, into section 10AA of the Income-tax Act is to provide a liberal meaning to the word "manufacture" which takes in even blending, refrigeration, etc. It was noticed by this court that the definitions of "manufacture" contained in the above definition clauses are very liberal which takes in even processing like blending. The contention of the counsel for the assessee is that the purpose of removal of the definition of "manufacture" from section 10B was not to provide a restricted meaning for that term contained in the main section because if that was so, then the Legislature would have only modified the definition clause. Further, the definition of 100 per cent export oriented unit even after the amendment is retained in the said section, which 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 & Regulation) Act, 1951, and the Rules made under that Act. It is pertinent to note the products for which the assessee's uni....
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....e very object of section 10B. The Hon'ble high court took the view that the decision of the Hon'ble Supreme Court in Tara Agency‟s case 292 ITR 444 will not apply even though Hon'ble Supreme Court in that case has held that blending of tea does not amount to manufacture or production of an article but is only processing. Thus, the Hon'ble Kerala high court in the case of Tata Tea Ltd. (supra) gave the clear cut finding impliedly that even if the assessee is engaged in processing and is recognized as 100% EOU, it will be entitled for exemption claimed u/s 10B of the Act. 4.6 We noted the decision of Hon'ble Special Bench in the case of Madhu Jayanti International Ltd. and Others Vs. DCIT wherein the question for consideration and decision of the Special Bench was: "Whether on the facts and in the circumstances of the case, the Assessees, who are in the business of blending & processing of tea and export thereof, can be said to be "Manufacture/Producer" of the tea for the purpose of Section 10A/10B of the I.T. Act, 1961?" The brief facts in the case of Madhu Jayanti International Ltd. in ITA No. 1463/Kol/2007 were that the assessee was engaged in the business of manufacturin....
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....were also being governed by the Exim Policy prior to the enactment of SEZ Act, 2005. Clause (iii) of Explanation 1 to section 1OAA lays down that the expression "manufacture" shall have the same meaning as assigned to it in section 2(r) of the Special Economic Zones Act, 2005, which definition is as under: "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 husbandly, floriculture, horticulture, pisciculture, poultry, sericulture, viticulture and mining". In Exim Policy, the expression "manufacture" is defined, in paragraph 9.30 & 9.31 thereof almost in the same manner as in the Special Economic Zone Act, 2005, which is as under: "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, repacking, polishing and labeling. Manufacture, for th....
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....le Supreme Court in CIT V. Emptee Poly-Yarn Pvt. Ltd. (2010) "Green Tea" means the variety of manufactured tea commercially known as green tea; 320 ITR 665,667 (SC). 33. The Assessee Company carries out its operations of blending, packaging and export of tea bags, tea packets and bulk tea packs in its modern factory, well equipped with all imported and sophisticated automatic plant and machineries with the help of over 100 workmen engaged on contract basis through M/s. Trot Pvt. Ltd. The manufacturing'. operations are carried in its said factory situated at 19/4A, Munshiganj Road (under Falta Export Processing Zone), Kolkata. We find from facts of the case that the details of turnover of the assessee shows Bulk Tea (0.94%), Packet Tea and Tea Bags .(99.06%),. as. per different descriptions, brand names and varieties, as listed APR. Assessee Company is duly registered as a 100% EOU by the Government of India, Ministry of Industry, Department of industrial Policy and Promotion Secretarial for Industrial Approvals, ECU Section in the state of West Bengal for manufacture of Packet Tea, Tea Bags/Bulk Tea with annual capacity of 3110 Mt. in terms of Registration Certificate dated 26....
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....ssee that the scheme of income tax exemption available to units in the SEZ u/s. TOA of the Act and units in the free trade zone provided u/s, 10AA of the Act and the exemption available to 100% EOU u/s. 1OB of the Act are very similar in nature and the wordings of the statutory provisions are similar in nature is correct. We find that Hon'ble Kerala High Court also considered the judgment in-the decision of Supreme Court in Tara Agencies, supra relied on by the Ld. CIT, DR, wherein Hon'ble Supreme Court clearly held that blending of tea does not amount to 'manufacture' or 'production' of an article, but is only processing. We find that the assessee was exclusively engaged in blending and packing of tea for export and was not manufacturing or producing any other article or thing. It was recognised as a 100% EOU division and the Department had no case that the assessee's unit engaged in export of tea bags and tea packets was not a 100% EOU. If exemption was denied on the ground that products exported were not produced or manufactured in the industrial unit of the assessee's 100% EOU, it would defeat the very object of sections 10B of the Act. 36. We, ....
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....Their appeal for the AY 2004-05 is allowed. As regards other appeals and that of the interveners, the matters are restored back to the Division Bench, with directions to decide those appeals in the light of principle laid down herein, so far as the claim for relief u/s. 10A or 10B of the Act in accordance with law." From the reading of para 35 of the aforesaid judgment we noted that the Special Bench in this case clearly held that the assessee was engaged only in processing and was not engaged in the manufacture or production but had ultimately under para 36 it took the view in view of the fact that the definition of "manufacture‟ u/s 2(r) of the SEZ Act, 2005 which is incorporated in section 10AA w.e.f. 10/02/2006 includes "processing‟. Therefore, following the decision of Kerala High Court in the case of Girnar Industries and Tata Tea Ltd. (supra) held that the assessee is entitled for exemption u/s 10B of the Act on account of blending of tea. 4.7 We have also gone through the decision of Hon'ble Supreme Court in Indian Cine Agencies Vs CIT 308 ITR 98. In this case the question before the Hon'ble Supreme Court was: When the assessee was engaged in the activity of c....
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....te manufacture or production in terms of Section 80IA of the Income Tax Act, 1961. 23. Before concluding, we would like to make one observation. If the contention of the Department is to be accepted, namely that the activity undertaken by the respondents herein is not a manufacture, then, it would have serious revenue consequences. As stated above, each of the respondents is paying excise duty, some of the respondents are job workers and the activity undertaken by them has been recognized by various Government Authorities as manufacture. To say that the activity will not amount to manufacture or production under Section 80IA will have disastrous consequences, particularly in view of the fact that the assessees in all the cases would plead that they were not liable to pay excise duty, sales tax etc. because the activity did not constitute manufacture. Keeping in mind the above factors, we are of the view that in the present cases, the activity undertaken by each of the respondents constitutes manufacture or production and, therefore, they would be entitled to the benefit of Section 80IA of the Income Tax Act, 1961." In this case also, Hon'ble Supreme Court took the view that cutti....