TaxTMI 
TaxTMI 
2019 (9) TMI 490
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....d trading of edible oil products. Therefore, the A.O asked the assessee to furnish the details of deduction claimed by it under Chapter-VIA. The assessee filed detailed submissions as to how the palm oil is extracted from fresh fruit bunches of oil palm plantations, the different processes involved therein and claimed that the assessee company is engaged in the business of processing, preservation and packaging of Oil extracted from Oil Palm fruits and therefore, is eligible for deduction u/s 80IB(11A) of the Act. 3. The AO observed that u/s 80IB(11A) of the Act, profits from the business of processing, preservation and packaging of fruits, vegetables, meat and meat products or poultry and dairy products and profit from the integrated business of storage and transportation of food grains alone are eligible. He observed that since the assessee is sourcing the oil palm fruits and after pressing the same, Palm Oil is extracted and that the residue after extraction is only palm fibre which is not usable or consumable, the question of preservation and packaging of fruits does not arise in the case of the assessee. He held that the nomenclature of fruits given to 'oil palm' alone cann....
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....gnoring the fact that the company purchases fresh fruit bunches of palm fruits from the farmers which are considered as fruits, in terms of common parlance and commercial substance. 5. The Learned CIT (A) erred in not considering the fact that the palm fruit contains mesocarp, from which oil is extracted, which similar to mango pulp of the mango fruit and hence partakes the nature and character of fruit. 6. The learned CIT (A) erred in not understanding the nature of the business activity carried on by the Appellant and erroneously held it is manufacture of edible oil. 7. The Learned CIT (A)erred in not appreciating that the primary business activity of the appellant company is to press and extract the oil out of the Palm fruit which similar to the activity of extracting mango pulp or mango juice from mangoes and does not result in a new; produce to be called a " Manufacturing activity" 8. The Learned CIT(A) erred in not appreciating that the Mill division of the appellant company subjects the FFB's to different activities such as sterilization, stripping, oil purification drying etc which run as continuous process, resulting in extraction of....
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.... assessee for converting fresh fruit bunches into the palm oil. The assessee in its paper book at Pages 107 to 112 has produced the flow chart of various processes to show that the assessee company sows the seeds from the domestic and international market and sows the same in the nursery managed and operated by it and subsequently sells one year old saplings from the nursery to identified farmers at a subsidized rate (which is reimbursed by the Govt. at a fixed rate in the form of subsidy to the assessee), who in turn plants the saplings in their land. Once the palm and fresh fruit bunches are grown, the same are harvested by the farmers and sold to the company at a fixed price which are again mashed for extraction of oil and the assessee sells the same. He explained the various processes involved in this activity. It is submitted that after collection of fresh fruit bunches, they are transferred to fruit cages and the cages are then moved into a sterilizer in the rotating drums. Thereafter, they are stripped and pressed and the oil is extracted and filtered through oil mesh and such oil is separated from water and stored in tanks. Another byproduct of the processing is Palm Kernel....
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....8. The learned Counsel for the assessee objected to the argument raised by the Revenue under Rule 27 stating that the said rule is applicable only where a decision has been taken by the CIT (A) on an issue against the respondent before him and the Revenue has not filed any cross appeal / cross objection against the order of the CIT (A) on the issue decided against them. Since there was no finding either by the AO or the CIT (A) on the issue now raised by the revenue under Rule 27, it cannot be raised before the ITAT under Rule 27. He further submitted that the Revenue cannot raise an objection which was not raised by the AO in an appeal filed by the assessee before the ITAT. Therefore, he prayed for the rejection of the Revenue's objections about the allowability of deduction u/s 80IB(11A) on the ground that the assessee is not eligible for such deduction at all. 9. Having regard to the rival contentions and the material on record, we find that the basic grievance of the assessee is that though it is eligible for deduction u/s 80IB(11A) of the Act, the same has been denied by the AO on an erroneous understanding that the assessee is not involved in the processing, preservation a....
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....peech while introducing the Finance Bill 2004. In para 103 of his speech he had stated as under: "In order to promote agro-processing industries, I propose to amend Section 80IB of the Act to allow a deduction of 100% for 5 years and 25 % of profits for the next 5 years in the case of new agro-processing industries set up to process, preserve and package fruits and vegetables". 12. In the memorandum explaining the amendments brought in by Finance Bill (No.2 of 2004) it has been explained as under: "Under the existing provision of Sec. 80IB, deduction is available in respect of profits and gains of undertakings engaged in refining or production of mineral oil, undertakings engaged in developing and building housing projects and those engaged in the integrated business of handling, storge and transportation of food grains, etc. The agro based industry in the courtry is an important source of employment, especially in the rural areas. The Bill, therefore, propose to provide hundred percent deduction for five years and twenty fire percent for the next five years (thirty percent, in the case of a company) from profits derived by undertakings, engaged in the....
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....n the said case, the contention of the petitioner was that u/s 6 r.w Second Schedule of Sales Tax Act, betel leaves were not taxable. Under Section 6 of the Act, articles mentioned in the said schedule were exempt from Sales Tax and articles not mentioned therein were taxable. There were two Items in the schedule, namely Item -6, 'vegetables] and 'item - 36 betel leaves' but subsequently Item - 36 was omitted by an amendment of the Act. The Hon'ble Supreme Court held that the use of two distinct and two different items i.e vegetable and betel leaves and subsequent removal of betel leaves from the schedule were indicative of the legislative intention of not exempting betel leaves from taxation. I was held that the word 'vegetable' must be interpreted not in the technical sense but in it popular sense as understood in common language that is denoting a class of vegetables which are grown in a kitchen garden or in a farm and are used for the table. This judgement was followed by the Hon'ble Supreme Court in the case of M/s Mothipur Zamindari Pvt Ltd (supra). In this case, the case the petitioner was a producer of sugar cane, which according to him green vegetable and was exempt from t....
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....according to the Ld. DR, the fruits and vegetables have to be understood as understood by a common man and the classification by the Governments as 'fresh fruit bunches' of oil palm, will not cover the term 'fruit' mentioned in Section 80IB(11A) of the Act. However, we find that the all the decisions relied upon by the Ld. DR are relating to exemptions under the sales tax. Whether the interpretation given to the items under sales tax can also be applied to the Income Tax Act is the question before us. The sales tax is levied by the state governments while income tax is levied on the income of the assessee by the Central Government. The Sales Tax Act defines or specifies items which are exempt from sales tax and has accordingly exempted fruits and vegetables from the levy of sales tax and in some state Acts, has also specified specific fruit or vegetable as exempt from tax. Therefore, the decisions in interpreting the items in Sales Tax may not strictly ipso facto apply to the reference of similar items in Income Tax Act. The intention of the legislature for giving the exemption u/s 80IB(11A) of the Act is to promote agro processing industries as is evident from the Finance Minister....
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....arious processes involving various steps, such as peeling, extraction of fruit oil, fruit pulping, screening, emulsifying, homogenizing, spray drying, addition of preservatives, color and sweetness and packaging and the said assessee had sought direction from the AAR on the question whether the profit of her proposed undertaking would be eligible for deduction u/s 80IB(11A) of the Act. The AAR, after considering various decisions of the Hon'ble Supreme Court on the word "processing" has held as under: "10. Processing and preservation are two distinct expressions used side by side. Processing may be for the limited purpose of preservation of fruits without bringing about much change in the form of the fruit. But, 'processing' in the context in which it occurs ought not to be confined only to the operations that would ensure the preservation of fruits as they are or in the form of slices. In other words, the expression should not be confined to minimal processing that would not change the identity of the fruit. If processing and preservation is to be confined only to fruits as such and not to the derivatives from the fruits, the benefit intended to be given to agroproces....
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.... Taxman 273 (AAR) New Delhi wherein it was held as under: "52. There is another aspect of this matter. Advance rulings are judgments in personam and not in rem. Section 245S of the Income-tax Act, 1961, lays down as under : "245S. (1) The advance ruling pronounced by the authority under Section 245R shall be binding only- (a) on the applicant who had sought it ; (b) in respect of the transaction in relation to which the ruling had been sought ; and (c) on the Commissioner and the income-tax authorities subordinate to him, in respect of the applicant and the said transaction. (2) The advance ruling referred to in Sub-section (1) shall be binding as aforesaid unless there is a change in law or facts on the basis of which the advance ruling has been pronounced." Thus, Sub-section (2) of Section 245S has limited the binding nature of the ruling to the case of the applicant in respect of the transaction in relation to which the advance ruling is sought and to the Commissioner and authorities subordinate to him only in respect of the applicant and the transaction involved. This is not to say that a principle of law laid down ....
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....on of the Authority in Cyril Eugene Pereira, In re.(supra) has been taken note of by this Court in Union of India & Anr. v. Azadi Bachao Andolan & Anr. [2003] 263 ITR 706 at 742] to hold that the advance ruling of the Authority is binding on the applicant, in respect of the transaction in relation to which the ruling had been sought and on the Commissioner and the income-tax authorities subordinate to him and has persuasive value in respect of other parties. However, it has also been rightly held by the Authority itself that this does not mean that a principle of law laid down in a case will not be followed in future". 22. From the above judgments, we find that though the decision of the AAR is not binding on the persons other than the applicant before it and the department when it is dealing with the case of that applicant, as held by the Hon'ble Supreme Court in the case of Columbia Sportswear Company (cited supra) the principle and the ratio laid down by the AAR is persuasive in the cases with similar facts. In the case of the assessee before us also, the question involved was whether the extraction of oil from the FFBs of oil palm is processing or not, and the AAR has held s....
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.... the assessee. 26. The last objection of the Revenue is that the end product is not a fruit but it is edible oil or kernels and shells which are not consumable goods, and hence it does not satisfy the condition of section 80IB(11A). In the case of Delna Rustum Boyce Inre, the AAR has also held that the end product need not remain in the same form as the raw material. It may be in the form of juice or cut fruits or even oil or powder. As long as the end product is derived from the fruits or vegetables, the assessee is eligible for deduction u/s 80IB(11A) of the Act. In these circumstances, we are satisfied that the oil palm is a fruit and that it undergoes different processes before extraction of oil, and the palm oil is preserved under adjusted temperature and they are packed in large container or tanks and therefore, the assessee is eligible for deduction u/s 80IB(11A) of the Act. The assessee's appeals are accordingly allowed. 27. The objections of the Revenue under Rule 27 of ITAT Rules cannot be entertained because under Rule 27, the respondent can only argue against the order of the CIT (A) on the grounds decided against the Revenue, even though it has not filed an appea....
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....l questions which relate to the subject matter of an appeal but, once an issue has attained finality and is not a subject matter of the dispute before the Tribunal, it would not be open for the Tribunal to reopen the issue on the pretext of examining a question of law. 29. The Coordinate Bench of this Tribunal, in the case of Tongani Tea Co. Ltd., (cited supra) also considered the scope and ambit of Rule 27 of ITAT Rules at para 11 of its order and has held as under: The ratio laid down in the various judicial pronouncements as discussed above makes it clear that the scope of Rule 27 of the ITAT Rules, 1963 is limited and the respondent in an appeal before the Tribunal can invoke the said Rule 27 of the ITAT Rules only to support the order appealed against on any of the grounds decided against him and cannot seek any further or more relief than what has been granted to him by the Ld. CIT(A). We therefore, find no mistake in the order of the Tribunal dated 2306.2017 (supra) is not granting such more relief to the assessee by relying on Rule 27 of the ITAT rules. In our opinion, there is thus no mistake much less a mistke apparent from record in the order of the Tribunal ....
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....cement and the relief granted by the A.O could not be withdrawn by the Tribunal and in holding so the Hon'ble Supreme Court has relied upon its earlier decision in the case Hukumchand Mills Ltd., (supra). Therefore, it is settled law that the assessee cannot be put to disadvantage only because he has appealed against the order of the CIT(A), meaning thereby that the relief granted by the AO cannot be withdrawn in an appeal filed by the assessee. The Income Tax Act has provided sufficient safeguards to secure the taxes due to it, even if there is a mistake committed by the AO, in the assessment order. U/s 147 the AO can reopen an assessment if he forms an opinion that there is an escapement of income or the CIT u/s 263, can revise the assessment order, if the assessment order is found to be erroneous or prejudicial to the interest of the Revenue. In the case before us, the Revenue has not resorted to any of these provisions and cannot do so now in an appeal filed by the assessee by relying on Rule 27 of ITAT Rules. The decision in the case of Veen Promoters Pvt Ltd in ITA No. 788/Hyd/2015 dated 17.09.2018 relied upon by the Revenue in support of these objections under Rule 27 is dis....