TaxTMI 
TaxTMI 
2018 (7) TMI 1733
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.... the claim for deduction made by the assessee under Section 80IB of the Act, on the ground that the petitioner/appellant is not engaged in any manufacturing activity and instead, it was only doing trading of mushroom powders in capsules. The appeals filed before the Commissioner of Income-tax Appeals [CIT(A)], did not yield any results to the assessee and the order of the Assessing Officer was confirmed citing the same reasons. Thereafter, the assessee preferred appeals before the Tribunal and the Tribunal concurred with the views expressed by the Assessing Officer and CIT(A) and dismissed the appeals. 3. The assessee's case is that the Central Excise Department raised demands for the relevant years and the assessee had paid the central excise duty before the due date for filing of the returns and that the Central Excise demand was paid under protest, as the petitioner was contesting the valuation and showed it as assets in its accounts filed under the Income Tax Act. In the return of income, the said amount was not claimed as a deduction, as the assessee had paid the amount to the Central Excise Department under protest and preferred appeals before the Central Excise 3 authorit....
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....tin capsules, no new and distinct or separate product comes into existence and even there is no change in the basic identity of the product and taste of the product. The ITAT referred to the dictionary meaning of the word "manufacture'' or ''production" as they were not defined under the Income Tax Act at that relevant point of time, since Section 2BA stood inserted by the Finance Act No. 2 of Act, 2009 with retrospective effect from 01. 04. 2000. To be noted, the assessment years which we are concerned are 2003-2004 and 2004-2005. Further, the Tribunal opined that the mushroom powder can be consumed in bulk form nakedly without being put into any enclosure or it can be consumed without putting into the gelatine capsules. Further, putting the mushroom powder into the capsule is for the purpose of smoothening its marketability, which is nothing but a process which does not amount to manufacture or production of a thing or article so as to fulfill the conditions stipulated for availing the benefit under Sec. 80IB of the Act. 6. The learned counsel for the assessee placed reliance on the decision of the Hon'ble Supreme Court in Aspinwall & Co. Ltd. Vs. Commissioner of Income-tax re....
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....om powder can be consumed in bulk form nakedly without being put into any enclosures or by putting into the gelatine capsules. We find that there is no material, based on which, such finding was recorded by the Tribunal and to say the least, it is the personal opinion of the Tribunal. The Tribunal lost sight of a very important fact that the assessee has obtained licences from various statutory authorities namely licence in Form-25-D issued by the Government of Pondicherry, Food and Drug Administrative Department. This licence authorises the petitioner to manufacture/sale of Ayurvedic drugs including Siddha and Unani Drugs. The manufacturing process has to be supervised by the technical staff as in the licence and the names of the drugs are (a) Reishi Gano (RG), Capsule and (2) Ganocelium (GL), Capsule. Its packing size are 4,10,15,20,30,60,90 & 100. The licence contains various conditions. There is an annexure to licence, which states the list of Ayurvedic Proprietory Preparation, which has been permitted and the composition of the capsule which is as follows : 1. REISHI GANO (RG) Each capsule contains, CHATRAKH : 250 mg (Ganoderma) ....
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....t time. As pointed out earlier, the order passed by the Tribunal rejecting the claim under Section 80IB is based on its personal opinion and not borne out by any records. Recently, the Hon'ble First Bench of this Court, in the case of M/s. Chettinad Builders P. Ltd. , Vs. The Deputy Commissioner of Income Tax in TCA. No. 261 of 2017, has considered a similar term, the word "manufacture". The assessee therein was engaged in the preparation of ready mix concrete and it was pointed out that preparation of ready mix concrete resulted in transformation of stone, chips, sand, cement, fly ash and other articles into a new and distinct object having a different name, character and use, and once the ready mix concrete is prepared, the ingredients used lose its original character and never can be restored to its original character. So far as the product dealt by the petitioner is concerned, mushroom powder was put in the gelatine capsules and the process of manufacture has been described by the assessee, during his submission made before the Assessing Officer. This submission has been outrightly rejected by the Assessing Officer as well as CIT(A) and ITAT, largely based upon the statement gi....
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....dhra Pradesh & Ors. reported in [(2005) 6 SCC 292 ]. The assessee sought to distinguish the decision of the Gujarat High Court in State of Gujarat Vs. Kosan Gas Company reported in [(1992) 87 STC 236]. While answering the question, the Hon'ble Supreme Court pointed out that on a reading of the aforesaid provisions of the Act, it becomes clear that after reading these provisions that an assessee whose process amounts either to "manufacture" or "production", i. e. , one of these two and not both would become entitled to the benefit enshrined therein. Noting the type of activity done by the assessee/Hindustan Petroleum Corporation, it was held by the Assessing Officer not amounting to manufacture, as it does not being into existence new identifiable and distinguishable case. It was pointed out that no distinction was drawn between manufacture and production and the matter was not looked into from the angle as to whether the aforesaid provisions would amount to production or not. The decision of the Gujarat High Court in Kosan Gas Company case was distinguished by observing that the case was decided in the context of the Gujarat Sales Tax Act, 1969, which defines manufacture under Sect....
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....Tribunal dismissed the appeal of the Revenue. 7. As rightly pointed out by the Tribunal in paragraph 5 of its order, the assessee has actually paid the said amount as excise duty in the relevant previous year for enabling them to move the goods out of their factory. This payment was made pursuant to an order passed by this Court. The fact that the assessee has taken up the matter on appeal to the Supreme Court on their litigation with the Department of Central Excise, would not make the payment a non payment. The heading, under which, the assessee has incurred expenditure is only a duty payment. Therefore, the Tribunal was right in holding that the assessee satisfied both the statutory provisions of Section 37 and 43B. 8. Mr. J. Narayanasamy, learned Standing Counsel pointed out that even the third ground raised by the Department to the effect that the assessee failed to produce any order of excise duty or demand notice of any other statutory authorities for proving the liability was not considered by the Tribunal. 9. But, we do not think that the Department can ask for anything more than the factum of payment. The actual payment of the amount was not dis....
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....ld unsustainable. 18. We may note that even as per statement given by the employee of the petitioner to the officials of the Department when they inspected the unit, the process involved in the production activity was described. The same has been quoted in paragraph No. 6 of the order passed by the Tribunal, which would clearly show that the bulk powders are filled in the power hopper and the empty gelatine capsules are filled in capsules hopper of semi-automatic filling machine, and the filling machine would be operated by machine operators and it will be set in such a manner to achieve the weight required for filing each capsules, that the prescribed weight for RG capsule is 270 mg and GL capasule is 450 mg. During production process, it should be ensured that the temperature and humidity are within the limits and the weight of the filled capsules are within the 16 limit. Simultaneously, quality control would carry out necessary tests like disintegration test, microbiological test, moisture content test, stability test, weight test parameters and specification test etc, of the filled capsules, for which, separate records are maintained in the production department. Thereafter,....
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....degree of setting fluffiness due to agitation and processing pattern. Hence, administration of drug in capsule form is required. The assessee also demonstrated the various advantages of putting the drug in capsule form and thus submitted, the preparation of capsule is very important activity of the manufacturing process. 21. The Department stated that the assessee was importing bulk mushroom powder and putting it in gelatine capsules. As per the agreement with the foreign company, the foreign company has exclusive expertise and know how in respect of the product and the foreign company is fully guarded itself in the product said to be manufactured by the assessee. 22. Upon hearing all these submissions, the Tribunal came to the conclusion that the activity does not bring any new article or product and the mushroom powder even after capsulation remains the same and if it is removed from the capsule, the mushroom powder emerges out of it. It is not known as to how the Tribunal rendered such a finding as there was no material available before the Tribunal that there is no change in the composition of the drug on capsulation. As already pointed out, the Tribunal gave a finding wh....
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....cess of manufacture is commercially a distinct commodity, can be of consumption as such containing a requisite amount of ingredients in the appropriate percentage, preserved in proper form as contained in the licence issued under the authorised enactments as well as the technical logo shared by the foreign company. 25. For the above reasons, the Question No. 1 is in favour of the assessee and against the Revenue. 26. Question No. 2 is framed by the order dated 20. 03. 2007, is to the effect that whether ITAT was right in denying the claim under Section 43B, in fact, the question of payment itself was not disputed. The Assessing Officer rejected the claim on the ground that the payment was not made at the time of filing the return, but was made only during the course of assessment and that such step could not have taken unless the revised return had been filed. To that effect, the Assessing Officer, referred to the decision of the Supreme Court in Goetze (India) Ltd. , Vs. Commissioner of Income Tax reported in [(2006) 157 Taxman 1 (SC)] and same was the view taken by CIT(A). However, ITAT proceeded on a slightly different angle, not on the ground that the petitioner had not f....