TaxTMI 
TaxTMI 
2015 (2) TMI 292
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.... order dated 14.6.2010 passed by the Income Tax Appellate Tribunal, Ahmedabad in ITA No. 1479 & 1480, 1481/Ahd/2007 for AY 1999-00, 2002-03 & 2003-04. 1.3 In Tax Appeal No. 215/2007, 217/2007 & 218/2007, the Revenue has challenged the judgment and order dated 16.2.2006 passed by the Income Tax Appellate Tribunal, Ahmedabad in ITA No. 1894, 1983 and 615/Ahd/2000 for AY 1997-98, 1994-95 and 1996-97. 1.4 In Tax Appeal No. 1706/2007, the Revenue has challenged the judgment and order dated 30.12.2005 passed by the Income Tax Appellate Tribunal, Ahmedabad in ITA No.1601/Ahd/2001 for AY 1998-99. 1.5 In Tax Appeal No. 1100/2007, the Revenue has challenged the judgment and order dated 19.1.2007 passed by the Income Tax Appellate Tribunal, Ahmedabad in ITA No. 2317/Ahd/2006 for AY 2003-04. 1.6 In Tax Appeal No. 935/2009, the Revenue has challenged the judgment and order dated 6.10.2008 passed by the Income Tax Appellate Tribunal, Ahmedabad in ITA No. 1668/Ahd/2008 for AY 2003-04. 1.7 In Tax Appeals Nos. 936/2009 and Tax AppealNo. 937/2009, the Revenue has challenged the judgment and order dated 25.4.2008 passed by Income Tax Appellate Tribunal, Ahmedabad in ITA No. 1448 & 1449/Ahd/2004 ....
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....ing expenses relating to certified seeds ?" 2.6 While admitting Tax Appeal No. 215/2007 on 20.9.2007, this Court has framed the following substantial questions of law: (A) Whether on the facts and circumstances of the case, the Appellate Tribunal was right in holding that the activity of the respondent was a manufacturing activity with regard to trading of seeds ? (B) Whether on the facts and circumstances of the case, the Appellate Tribunal was right in allowing the processing charges on seeds incurred as handling and pesticide charges ?" 2.7 While admitting Tax Appeal No. 217/2007 on 20.9.2007, this Court has framed the following substantial questions of law: (A) "Whether on the facts and circumstances of the case, the Appellate Tribunal was right in holding that the reopening of assessment was bad in law ? (B) Whether on the facts and circumstances of the case, the Appellate Tribunal was right in holding that the activity of the respondent was a manufacturing activity with regard to trading of seeds ?" 2.8 While admitting Tax Appeal No. 218/2007 on 20.9.2007, this Court has framed the following substantial question of law: "Whether on the facts and circumstances of the c....
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....acturing activity ? 4. Learned counsel Mr. Soparkar appearing for the assessee while making his submissions has taken us through the process which is certified by the Director, Gujarat State Seed Certification Agency, Ahmedabad, which is produced in the additional paper-book, reads as under: "The field level activities mentioned in the enclosed note, are carried out by the growers under the supervision an guidance of staff of the producer i.e. M/s. New Nandi Seeds Corporation, Ahmedabad from sowing of foundation seed till harvest. The officers of Seed Corporation Agency, inspect the seed plot frequently and take the count to ascertain the purity of standing crop. All activities in respect of processing, packing and storage at Processing Plant of the producer i.e. M/s. New Nandi Seeds Corporation, where the growers are not in picture at all." 4.1 Mr. Soparkar has taken us through the number of notes which was submitted for production and storage of the Bajra seeds and also the table whereby Navbharat Seeds Pvt. Ltd. and process done by the Nandi Seeds Corporation has been narrated with the certificate issued by the Gujarat State Seed Certification Agency, Ahmedabad and pointed o....
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....t fit for human consumption, is a manufacture process. He has also relied on para-34, 35 and 40 of the above decision, which reads as under: "34. It was submitted by the first respondent that all the abovementioned stages of certification are as per the provisions of the Rules and that right from the inception to the time when the seed is sold in the market, it is done under regulation issued to govern each and every stage of seed production and certificates are only issued after the seed is found to achieve the minimum standards of genetic identity and genetic purity. It was also pointed out that no such certification standards exist for foodgrains sold by farmers to the Mandi Samiti. Thus, the production of seeds is an integrated process and needs to be regulated at every stage, right from the inception, in order to maintain genetic identity and genetic purity. 35. There is no nexus between whether the seed has been chemically treated or not and the levy of market fees. Since the seed is a separate commodity from grain, the same is not covered under Schedule I of the Adhiniyam and as such no market fee is leviable over the sale and/or purchase of the same. 40. Wheat seed conve....
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....ffee beans have an independent identity distinct from the raw material from which it was manufactured. A distinct change comes about in the finished product. The submission of learned counsel for the Revenue that the assessee was doing only the processing work and was not involved in the manufacture and producing of a new article cannot be accepted. The process is a manufacturing process when it brings out a complete transformation in the original article so as to produce a commercially different article or commodity. That process itself may consist of several processes. The different processes are integrally connected which results in the production of a commercially different article. If a commercially different article or commodity results after processing then it would be a manufacturing activity. The assessee after processing the raw berries converts them into coffeee beans which is a commercially different commodity. Conversion of the raw berry into coffee beans would be a manufacturing activity." 4.6 In that view of the matter, Mr. Soparkar learned counsel has contended that it is manufacturing process. Mr. Soparkar learned counsel has also sought reliance on the following....
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....t be damaged at germination level. But seeds remain the same. There is neither genetic or any other irreversible chemical change takes place in the seeds purchased by assessee. The various case laws relied on by assessee do not help the assessee because issue in those case was that good grains were changed into seeds as held by the Hon. Supreme Court in the judgment dated 28.11.2003 in Case No. Appeal (Civil) 6301 of 2001 in the case of Krishi Utpadan Mandi Samiti & Ors. v. Pilibhit Pantnagar Beej Ltd. & Anr.(s) as under:- "It is undoubtedly true that food grains per se could be used as seeds for being sown and achieving germination, but in that form they retain the dual utility of being food grains as well as seeds. By process of coating and applying insecticides, other chemicals and poisonous substances to the good-grain meant to be utilised as seeds, one of its basic character, i.e. its consumption as food by human beings or animals or for extraction for the like purpose, gets irretrievably lost and such processed seeds become a commodity distinct from food grains as commonly understood. That distinction was borne in mind by the High Court in allowing the writ petition of the r....
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....r his statement itself, total number of workers employed works out to about 33, which is much more than minimum number of workers i.e. 10, prescribed under Section 80(2)(iv) of the Income Tax Act, 1961. Even otherwise, we state that on an average over the year we are employing more than 30 workers in our processing units at Isnapur. We have already furnished list of employees consisting of approximately 75 persons vide our letter dated 4th February, 1993 i.e. during the original assessment proceedings. We have with us vouchers, evidencing the payment made to these persons by way of wages. Labour employed through contractors form part of number of workers employed in the unit. This is supported by the decision of the Gujarat High Court in the case of CIT v. V. Narania & Co. (252 ITR 884). Further there can be no hard and fast rules by which one can determine whether there has been substantial compliance with the prescribed limit of at least 10 workers employed in the undertaking even though number of workers employed during some part of the previous year may be less than 10. This is supported by the decisions of (I) CIT v. Sawyers's Asia Ltd. (1980) [122 ITR 259] (Bom) (ii)CIT ....
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....rfering in the business of the Company in certified seeds and from demanding and realizing market fee on the transaction of unprocessed or processed certified seeds. The case set up by the Company was that the business of the Company is to purchase "breeder seeds" from the Agricultural Research Institute and thereafter to produce "certified seeds". The first step of production is to distribute these breeder seeds to the listed and scheduled farmers. The breeder seeds are sown and are germinated under strict supervision of the statutory Seed Certification Agency, set up under the Seeds Act, 1966. The harvest is selected carefully under supervision of the Agency. The lots which do not conform to specifications are rejected. The standardized seeds so obtained are called "foundation seeds". These foundation seeds are thereafter again supplied to the listed farmers varietywise within intimation to the Agency. The farmers sow these foundation seeds which are also supervised by the Agency. This crop is thus germinated under strict supervision of the Agency and the lots rejected are not taken back by farmers. After harvesting the approved standardized certified seeds, the lots are fumigate....
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.... of various hybrid seeds of different crops such as hybrid Bajra, hybrid cotton, hybrid Jowar, hybrid maize and hybrid castor etc. The activities of the company comprises of following: 1. Production of hybrid seeds 2. Processing of hybrid seeds 3 Testing and quality control 4 Marketing of seeds Ours is a registered partnership firm constituted as per partnership deed Dt. 12.11.1980, having main office at 6741, Relief Road (now at 1- Patel Society, Gulbai Tekra, Ellisbridge, Ahmedabad-6). We deal in Hybrid Bajra, Hybrid Cotton, Wheat and Mustard Seed. The business activities are same as those of Navbharat Seeds Pvt Ltd. as it is necessary for seed production and marketing of the Commodity i.e. 'PROCESSED SEED.' Thus the activities viz: 1. Production of Hybrid Seeds 2. Processing of Hybrid Seeds 3. Testing and Quality Control 4. Marketing of Seeds Are the basic and essential for all seed producing companies No comment required from Seed Certification Agency. This fact is confirmed in the enclosed certificate dated 24th February 2003 issued by Gujarat State Seed Certification Agency. 2 All the above activities are conducted as per the "Indian Mini....
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....ar some portion of the cost of foundation seed so supplied. No comment required from State Seed Certification Agency. 3.3 Actually, it is not a sale but only an account adjustment for joint venture of seed production. Each and every seed plot so organized is to be registered with Government Seed Certification Agency in the name of Company as main producer and farmer as subproducer. The registration procedure of seed plots with State Certification Agency is same for everybody. We have to submit before the Seed Certification Agency with empty containers and tags to establish, the authentic source of foundation seed supplied to growers. The mandatory requirement of submission/ varification of source of foundation seed is narrated in Para-1 of the enclosed certificate of GSCCA. 3.4 (c) Technical guidance; After distribution of foundation seeds, company's technical staff give guidance to the farmer about the planting of male and female plants in rows (planting ratio) and inspect the seed plots so organized time to time. Company's technical staff supervises the work of regueing, crossing and other cultivation practices asper the crop. Rogueing, in seed producing good yield....
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....ean the seed We use mechanised grader Machines for cleaning and separating Stems, Gloom, Light weight, small and broker seed. This is a mandatory requirement, described under point No. 3 of the certificate 4.3 (C) Gravity separator: To upgrade the quality of seed Gravity Separator is not of much use in case of Bajra seed. 4.4 (d) Slurry separator: To treat the seed with chemicals for protection against inspects & micro-organisms. We use the same type of Slurry Treator for treating Bajra and other seed. Castor Seed, being soft and larger in size, will brake in Slurry Treator hence the treatment has to be done manually. This procedure of seed treatment is described under point No. 3 in the enclosed certificate of GSSCA. 5 On receipt of the raw seed from the farmer's field the seeds are dried and tested for moisture content. Afterwards the seeds are cleaned on Air Screen cleaner. This process removes immature seed, dust particles, plant materials, off size seed diseased or insect damaged seed etc. After basic cleaning the seeds are upgraded on gravity separator to improve the quality of seed by using weight component difference between seeds. The seed then treat....
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....s tested by Government notified laboratory. In respect of labeled (non-certified) seed, we have to perform these t4ests on our own. This is described in point no. 3 of the enclosed certificate. 8 (4) Marketing: 8.1 The Seed on getting satisfactory test results are marked with blue tag (Enclosure II) issued by Gujarat State Seed Certification Agency. As per Seed Act, 1966 the seed container and tag must have following on the tag and bag: "DO NOT USE FOR FOOD, FED AND OIL PURPOSE. POISON TREATED WITH 1% PMS FUNGICIDE." The same type of tags are issued by the supervising officer of Strate Certification Agency who supervises the processing activities at our processing plant. Such tags are individually signed by the officer and then stitched along with another tag of producing company, to the seed container (cloth bag) and a seal bearing monogram of the certification agency and an identification of the officer is fixed with the container. The treatment of poisonous pesticide is mandatory and hence this warning is also compulsory to be printed in RED ink on each container. This is a mandatory requirement by....
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....e Hon'ble Supreme Court at page 327, which reads as under: "The word "manufacture" has not been defined in the Act. In the absence of a definition of the word "manufacture" it has to be given a meaning as is understood in common parlance. It is to be understood as meaning the production of articles for use from raw or prepared materials by giving such materials new forms, qualities or combinations whether by hand labour or machines. If the change made in the article results in a new and different article then it would amount to a manufacturing activity." 8.1 In that view of the matter, we are of the opinion that the contention raised by the department that it is not a manufacturing process, is devoid of merit and the same is required to be rejected. We are fortified in our view by the decision of the Hon'ble Supreme Court in the case of Aspinwall and Co. Ltd. v. Commissioner of Income-Tax, reported in [2001] 251 ITR 323. 8.2 Apart from that, the Tribunal itself in subsequent year has accepted the same in one of the assessment year which is a lead matter for AY 1992-93. It seems that the department has accepted the judgment and has not challenged the judgment of the Tribu....