2011 (3) TMI 1798

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....(3)(ii) of the Act was rightly denied by the Assessing Officer. It was further submitted that making of Dal from Chana, Tuvar and Masoor is not manufacturing activity and no new item, article or thing is coming into existence, therefore, no manufacturing is involved. Reliance was placed upon the decision in Acqua Minerals Private Limited v. DCIT; 96 ITD 417 (Ahd) and DXN Hurbal Manufacturing (India) Private Limited v. ITO (110 ITD 99 (Chennai), CWT v. Devasahayam; 236 ITR 885 (Mad), CIT v. Gem India Mfg. Co.; 249 ITR 307 (SC) and CIT v. Relish Foods; 237 ITR 79 (SC). 3. On the other hand, the crux of arguments on behalf of the assessee is that a highly specialized process with the aid of machinery is involved for manufacturing of Dal out of gram, moong, urad, masur, etc. as commercially new and distinct end product comes into existence. The ld. Counsel for the assessee also invited our attention to the process involved for which our attention was invited to page 3 (para D) of the impugned order. The ld. Counsel for the assessee also relied upon the cases which have been dealt with in the impugned order especially pages 5 to 7. Further reliance was placed upon the decision in ITO....

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.... (4) Drying - In this process Oiled and watered batch is kept for drying for about 24 hours. (5) De-husking - This process is main milling process and in this process cover of gram, masoor, etc. is removed. This is done with the help of a plant consisting rollers and elevators etc. In this process approximately 50% of de-husking is done. (6) Repetition of process no. 3, 4 and 5 is done again to 100% de-husking. (7) Splitting - This also a Milling process and in this process de-husked material is broken to pulses. This process also needs skill, knowledge and experience. (8) Drying - Pulses are then sent to machine dryers for drying. Sometimes Sun drying is also done.  (9) Sorting - This is an important process. This is done with the help of a machine called 'SORTEX MACHINE'. This process removes un-husked seeds and also stones any foreign material, sub-standard dal etc. It up grades quality of the product. It sorts equal size of pulses and removes churi (small and broken pieces). This is a by product generated out of the manufacturing process. For this purpose, the assessee uses specially imported machine from Japan and are fully ....

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....uct has a different name and is identified by the byers and sellers as a different product and is bought and sold as a distinct product from its raw material, one can say that it is a manufactured product. There may be some room for debate as to whether this test is fully satisfied by edibles that come as end products from the raw materials out of which they are made. But the expression "produce" has to be taken in a more liberal sense than manufacture. If the end product is different, that by itself would suffice to meet the requirement of producing. For granting deduction u/s 80IA the department is expected to study the actual process undertaken by the assessee. Section 80IA comes in Chapter VIA. That chapter in any way is a Code by itself. It provides for special deductions. 7. Our aforesaid observation can also be understood with the help of various judicial pronouncements. Since it is the appeal of the revenue, therefore, we tend to discuss the cases relied upon by the learned CIT DR. In the case of CWT v. Devasahayam (supra) the Hon'ble Madras High Court has deliberated upon the meaning of industrial undertaking wherein there was preparation of sweetmeats and biscuits whic....

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....n Tata Consultancy Services Vs. State; 271 ITR 401, United States vs. International Paints Company (35 CCPS 87, CAD 76) and Gramophone Company of India Limited v. Collector of Custom; 114 ELT 770 (SC) and affirmed the decision of the Hon'ble Delhi High Court in 293 ITR 353. In another case the Hon'ble Apex Court in India Cine Agencies Vs. CIT; 308 ITR 98 (SC) wherein the jumbo films were converted/cut into small flat rolls of desired size were held to be production within the meaning of section 80HH and 80I of the Act. While coming to this conclusion, the Hon'ble Court reversed the decision of Hon'ble Madras High Court in India Cine Agencies; 261 ITR 491 and CIT v. Computer Graphics Limited; 285 ITR 84 and considered the decision in CIT v. Singareni Colleries Company Limited; 221 ITR 48 (AP) (para 9), CIT v. Univmine Private Limited; 202 ITR 825 (Del) (para 9), CIT v Venkateswara Hatcheries; 237 ITR 174; Empire Industries Limited v. Union of India; 162 ITR 846 (SC), India Cine Agencies; 261 ITR 491 (Mad), Khalsa Brothers Vs. CIT; 217 ITR 185 (Cal), Kores India Limited (2005); 1 SCC 385 among others. The Chandigarh Bench of the Tribunal in the case of Smt. Kusum Prop. Kapoor Stone C....