TaxTMI 
TaxTMI 
2015 (8) TMI 845
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....edings u/s. 147 were validly initiated. For this, assessee has raised following ground no.1: "1. For that the Ld. CIT(A) erred in holding that the proceedings u/s. 147 were validly initiated. He erred in rejecting the grounds against the initiation of the proceedings u/s. 147 and passing of the order in pursuance thereof." 3. At the time of hearing Ld. counsel for the assessee Shri R. P. Agarwal, Sr. Advocate made statement at Bar that he is not pressing this ground. Hence, this ground is dismissed as not pressed. 4. The second issue in assessee's CO and the sole issue of appeal of assessee i. E. ITA No. 1818/K/2009 is against the order of CIT(A) denying the exemption u/s 10B of the Act in respect to tea blended and exported by it, by holding that even though assessee-company is a 100% Exported Oriented Unit (EOU for short) but merely engaged in trading activity in purchase and sale of tea and there was no processing or blending out of activities carried out by it. For this, assessee has raised following ground no.2 in its CO and ground no. 1 in its appeal: Ground for Cross Objection: "2. a) For that the Ld. CIT(A) erred in rejecting the ground Nos. 4, 5, 6 & 7 taken....
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....rse of manufacture of goods'. In their decision the Hon'ble court in para 70 at page 464 of the report finally held as under:- 'We are clearly of the opinion that the respondent's activity amounts to "processing" only and the activity does not amount to either "production" or "manufacture". This decision related to a deduction claimed u/s. 35B(1A) of the Act for the Asst. Yr. 1979-80 wherein also the allowance of deduction was permissible to the assessee who exported goods manufactured or produced in a small scale Industrial undertaking owned by the assessee. The terminology used for allowance of deduction u/s. 10B also requires that the deduction will be admissible only in respect of the undertaking which manufactures or produces an article or thing. The aforesaid decision of the Apex Court has set at rest the controversy as to - whether blending or Tea amounts to manufacture or production of article or thing, by holding that blending of Tea does not amount to Manufacture or production of any article or thing. The appellant is therefore, not entitled to the deduction / exemption claimed u/s. 10B in respect of the Tea Exported by them. Since the appellant's claim fo....
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.... 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, in view of the above, hold that when the products for which the assessee's unit is recognized as a 100% EOU are tea bags, tea in packets and tea in bulk packs and the assessee 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 Section 10A, 10AA and 10B, we have to consider the definition of the word "manufacture" as defined in Section 2(r) of SEZ Act, Exim Policy, Food Adulteration Rules, 1955, Tea (Marketing) Control Order, 2003, etc. ....
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.... remand report No. ACIT, Circle-4/MISC/06-07/Kol/1227 dated 06/03/2007, which is given in assessee's paper book at pages 255 to 263 and particularly he drew our attention to following para of the remand report, wherein the AO has discussed the fact as under:- "The facts of the case - as they emerge from the records as well as the assessee's submission in the form of a paper book - are that the appellant company purchases tea from auction centres located in various parts of the country and then the teas of different qualities / grades as selected are laid down on the floor of the Warehouse. Thereafter, the tea of one type/grade are mixed/blended with another type/grade of tea to achieve the required standard of tea - on the basis of Blendsheets as selected by experts. Subsequently, after completion of each blend the tea is then packed, as per buyers' requirement in the packing materials procured from different suppliers and even imported and then stuffed in containers for onward transmission to port for shipment to overseas buyers. In the background of these facts, the assessee has pleaded that such mixing / blending /packing amounts to processing of goods. Mentioning further ....
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....llowance of claim of deduction u/s. 80HHC, made by the AO based on the facts that the claim was not made by the assess3ee neither in the original return of income or in the return of income filed in response to notice u/s. 147 of the Act. For this, revenue has raised following ground no.2: "2. That under the facts and circumstances of the case, Ld. CIT(A) had erred in deleting the disallowance of claim of deduction u/s. 80HHC, made by the AO based on the facts that the claim was not made by the assess3ee neither in the original return of income or in the return of income filed in response to notice u/s. 147. Even the assessee did not produce the report from a Chartered Accountant, required in this regard." 10. At the time of hearing Ld. counsel for the assessee Shri R. P. Agarwal, Sr. Advocate made statement at Bar that he is not pressing this ground. Hence, this ground is dismissed as not pressed. 11. Next common issue in Revenue's appeal in ITA No. 1777/Kol/2008 for AY 2002-03 and ITA No. 1761/Kol/2009 for AY 2005-06 is as regards to the order of CIT(A) deleting the disallowance commission payment. For this, Revenue has raised identical issue and the ground vide ground n....
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.... As a matter of fact, it is not even the Revenue's case that no services have been rendered at all. The fact that services have been rendered by a party other than the agent to whom commission is paid is wholly immaterial so far as deductibility in the hands of the assessee is concerned. As for the position that the payment was highly excessive vis-à-vis the local costs, even if that be so, that aspect of the matter does not affect the deductibility in the hands of the assessee either. The assessee is concerned with commercial expediency of the said payment and not with what are the actual costs incurred in rendering the services for which the payment is made. As we have seen earlier in this order, from the extras of the Volker Committee report itself, it was absolutely necessary for the assessee to make the impugned payments and, in any event, the commercial expediency of these payments has not even been called into question by the Assessing Officer. The case of the Revenue is confined to invoking the Explanation to section 37(1). "The objections to the said commission payment are, therefore not sustainable in law, so far as deductibility under section 37(....