TaxTMI 
TaxTMI 
2019 (3) TMI 1104
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....d in infrastructure development, etc. and deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings, also. 3. The crux of the matter and the substantial question of law raised in the present appeals filed by the Revenue is: "Whether in the facts and in circumstances of the case, the Income Tax Appellate Tribunal was right in holding that conversion of Paddy into Rice is a manufacturing activity and therefore, the Assessee is entitled to deduction u/s 80 IA/IB of the Act in respect of the profit from such activity or not?" 4. The requirement stipulated in the said provision is that the Industrial undertaking should fulfil inter alia the following condition: "It manufactures or produces any article or thing, not being any article or thing specified in the list in the Eleventh Schedule, or operates one or more cold storage plant or plaints, in any part of India" (Section-80-IA) 5. Admittedly, the process of dehusking of Paddy, and conversion into Rice with the help of labour and machines undertaken by the Assessee does not fall in the negative Eleventh Schedule, to the Act, but the quest....
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....ly the primary product as it actually grows, but also a product which undergoes a simple operation so as to make it more Saleable or more useable. The Rice and the husk though separated remain as they were produced and hence continue to be `agricultural product' or `product of agriculture'. 30. As the Hon'ble Apex Court has held that conversion of Paddy into Rice is not a distinct operation and the Rice and husk remain in their natural form as a result of dehusking and are covered by the term ' agricultural product'. 31.Therefore, we hold that the test of manufacture has been failed as the goods are not manufactured goods as per Section 2 (f) of Central Excise Act, accordingly the question of excisability does not arise. Therefore, the Issue No. 1 is answered in favour of the appellants." 7. The learned counsel further brought to the notice of the Court that the SLP filed against the said order of CESTAT was dismissed by the Hon'ble Supreme Court on 03.04.2017 in Civil Appeal No.D5237 of 2017 reported in [2017 (354) E.L.T. A57 (S.C.)] . 8. Mr.M.Swaminathan, the learned counsel for the Appellant/Revenue also relied on the decision of t....
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....r.A.S.Sriraman, urged before us that the provisions of 80 IA/80 IB of the Act are not restricted to the word of 'Manufacture' but it employs the words "Manufacture or production". He submitted that the word "production" is wider in ambit and scope and it has a wider connotation than the word "manufacture" and if any different commercial article comes into existence by the process of industrial activity undertaken by the Assessee, then the Assessee would be entitled to such benefit under Section 80 IA/80 IB of the Act. He also submitted that even dehusking of Paddy with the help of labour and machinery brings into existence, a different commercial article and one could not eat the Paddy as such in the place of Rice, without dehusking the same. Therefore, as soon as a different commercial article is brought into existence, the same falls in the definition "Manufacture". He drew the attention of this Court to the definition of the word "Manufacture" as inserted in the Act by the Finance (No.2) Act, 1998, with effect from 01.04.2009, which reads as under: '(29BA) "manufacture" with its grammatical variations means a change in a non-living physical object or article....
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....in this Court was called upon to consider whether betel leaves could be considered as vegetables. Dictionary meaning showed that betel leaves are a class of vegetables, but yet this Court ruled that the word "vegetable" should be construed in its popular sense, meaning that sense which people conversant with the subject-matter with which the statute is dealing, would attribute to it. On that basis this Court came to the conclusion that betel leaves could not be considered as vegetables. In Commissioner of Sales Tax, Madhya Pradesh, Indore v. Jaswant Singh Charan Singh ., this Court held that the word "coal" included "charcoal" on the ground that in ordinary parlance "coal" includes "charcoal". In State of Punjab v. Chandu Lal Kishori Lal [1970] 25 S.T.C. 52 (S.C.); ., the question was whether "cotton" included "cotton seeds". This Court held that they were two distinct commercial goods though before the seeds were separated both the cotton and the seeds were part of one commodity. 4. In support of their contention that the meaning given in the commercial circles is not of the essence and what is of essence is the identity of the goods, the learned Counsel for the ....
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.... two different things in ordinary parlance. Hence quite clearly when Paddy is dehusked and Rice produced, there has been a change in the identity of the goods. In this view it is not necessary for us to refer to the decisions of some of the High Courts read to us at the time of hearing. " 13. He further relied upon the decision of the Hon'ble Supreme Court in Income Tax Officer Vs. Arihant Tiles & Marbles P Ltd.,[2010 320 ITR 79 (SC)], wherein a three Judge Bench of the Hon'ble Supreme Court dealt with the provisions of Section 80-IA itself and dealt with the activity of the conversion of marble blocks into slabs and tiles. While holding that the process undertaken by the Assessee, to be eligible for such deduction, the Supreme Court relied upon its earlier views in the case of CIT Vs. Sesa Goa Ltd., [ (2004) 271 ITR 331 SC] and also CIT Vs.N.C.Budharaja and Company and another [1993 114 CTR (SC) 420] and held that the word "production" is wider in ambit and it has a wider connotation than the word "manufacture". It was held that while every manufacture can constitute production, but every production need not amount to manufacture. The word "production", when used in jux....
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.... husked Paddy and Rice are two different articles having different value, what can be the reason to deny them the benefit under Section 80 IA and 80 IB of the Act. We see no reason, much less any justifiable reason, for denial of the said benefit to the Assesee before us. 17. We find that the definition of the word "Manufacture" though was not available in the Assessment Years before us upto 2003-2004, but the said definition embodies the concept of transformation of object or article into different commercial article as was discussed in several judicial pronouncements from time to time. If a different commercial article comes into existence as understood by the persons who deal with those things, a different approach need not be taken by the Courts of law to hold otherwise. The dehusked Paddy and Rice obviously are not sold on the same rate nor can they be consumed for same purpose in the same form. Therefore, the process of dehusking of Paddy into Rice with the aid of labour and machinery is definitely an industry activity undertaken by the Assessee. The cases relied on by the learned counsel for the Revenue are not only in different contexts but finally resulted in giving ben....