TaxTMI 
TaxTMI 
2021 (1) TMI 167
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....oring that the taxation of such SEZs is decided wholly and solely by Income-tax Act and that SEZ Act does not have any bearing on the same? (C) Whether the Appellate Tribunal has erred in law in holding that the assessee is eligible for deduction with respect to income on account of currency fluctuation, interest income and that it is entitled to deduction under section10AA of Rs. 4,72,67,584/-? (D) Whether the Appellate Tribunal has erred in law and in holding that the assessee's claim of loss of Rs. 4,81,48,554/- shall increase the deduction under section 10AA by ignoring that the documentary evidences have not been furnished and that assessee's eligibility under section 10AA has been challenged? (E) Whether the Appellate Tribunal has erred in deleting the disallowance of Rs. 60,00,560/- made under section 36(1)(ii) by an inference that own funds had been utilized rather than by facts?" 3. It appears from the materials on record that the assessee is a Private Limited Company and is engaged in the business of dealing in fuel oil, high speed diesel and all types of petroleum products. The assessee has its process unit in the SEZ. Being in the SEZ, it claimed the ....
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.... appeal preferred by the Revenue. 9. The Revenue, being dissatisfied with the concurrent findings recorded by the two authorities, is here before this Court with the present appeal. 10. The first two questions proposed by the Revenue are in context with Section 10AA of the Act. The CIT (A), in its order, has explained in details the entire process of blending of oil. We may quote the relevant observations: "8.8 The appellant also described the process of blending of oil and it is clear that the appellant made import of various fuel oil in bulk and out of such imports little quantity shall be blended at Mundra Port. Further after blending the oil/fuel, the blended oil shall be re-exported as bunker fuel supply to foreign run vessels as per their requirement varying mainly in terms of Viscosity, sulfur and other parameters at ports of Gujarat. The appellant has hired 7 tanks of different capacity for Fuel Oil storage from APSEZ. The blending activity takes place at the time of import of cargo/new arrival. The product being imported has the specification of e.g. "B" Grade. The product of B Grade is received in tank which already have the product of A Grade, hence the specs of impo....
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....amounts to the blending as claimed by the assessee. In this connection we note that the assessee has imported various fuel oil in bulk which were blended in the tanks hired by it at Mundra port as evident from the submission of the assessee before the AO. The relevant extract of the submission of the assessee is reproduced as under: The assessee company has made import of various fuel oil in bulk and out of such imports few quantity shall be blended at Mundra Port. Thus it shall carry the process of blending at Mundra Port. Further after blending the oil/fuel, the same shall be re-exported as bunker fuel supply to foreign run vessels different vessels as per their requirement, varying mainly in terms of Viscosity, sulfur and other parameters at ports of Gujarat. The assessee company has hired 7 tanks of different capacity for Fuel Oil storage from APSEZ ITA no.1555/Ahd/2016 CO No.112/Ahd/2016 & others Asstt. Year 2010-11 The blending activity takes place at the time of import of cargo/ new arrival. The product being imported have the specification of i.g. "B" Grade. The product of B Grade is received in tank which already have the product of A Grade, hence the specs of Imp....
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....ing activity which is manufacture within the meaning as provided under SEZ Act. Accordingly, we hold that the assessee is engaged in the manufacturing activity. 8.4 it is also pertinent to take a note of the fact that the deduction under section 10AA is also available to the assessee engaged in providing any services. As such we are inclined to elaborate the services eligible for deduction under section 10AA of the Act." 12. In view of the concurrent findings recorded by the two authorities as regards the process of blending, we are of the view that both the first two questions, as proposed by the Revenue, cannot be termed as the substantial questions of law. In the aforesaid context, we may refer to a decision of the Supreme Court in India Cine Agencies vs. Commissioner of Income Tax, Madras, (2009) 308 ITR 98 (SC). In the case before the Supreme Court, the assessee was carrying on business of conversion of jumbo Rolls of photographic films into small flats and rolls in the desired sizes. The assessee claimed deductions under Sections 32AB, 80HH and 80-I of the Act. The lower authorities disallowed the claim of the assessee on the ground that the activity undertaken by it was ....
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....the manufactured product emerges. Therefore, each step towards such production would be a process in relation to the manufacture. Where any particular process is so integrally connected with the ultimate production of goods that but for that process processing of goods would be impossible or commercially inexpedient, that process is one in relation to the manufacture. (See Collector of Central Excise, Jaipur v. Rajasthan State Chemical Works, Deedwana, Rajasthan (1991 (4) SCC 473). 5. `Manufacture' is a transformation of an article, which is commercially different from the one, which is converted. The essence of manufacture is the change of one object to another for the purpose of making it marketable. The essential point thus is that, in manufacture something is brought into existence, which is different from that, which originally existed in the sense that the thing produced is by itself a commercially different commodity whereas in the case of processing it is not necessary to produce a commercially different article. (See M/s. Saraswati Sugar Mills and others v. Haryana State Board and others (1992 (1) SCC 418). 6. The prevalent and generally accepted test to ascertai....
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....d processing of iron ore amounted to manufacture or not in view of the various processes involved and the various processes would involve production within the meaning of Section 32A of the Act. It was inter alia observed as under: "There is no dispute that the plant in respect of which the assessee claimed deduction was owned by it and was installed after March 31, 1976, in the assessee's industrial undertaking for excavating, mining and processing mineral ore. Mineral ore is not excluded by the Eleventh Schedule. The only question is whether such business is one of manufacture or production of ore. -The issue had arisen before different High Courts over a period of time. The High Courts have held that the activity amounted to "production" and answered the issue in question in favour of the assessee. The High Court of Andhra Pradesh did so in CIT v. Singareni Collieries Co. Ltd. [1996) 221 ITR 48, the Calcutta High Court in Khalsa Brothers v. CIT [1996] 217 TTR 185 and CIT v. Mercantile Construction Co. [1994] 74 Taxman 41 (Cal) and the Delhi High Court in CIT v. Univmine (P.) Ltd, [1993] 202 ITR 825. The Revenue has not questioned any of these decisions, at least not succe....
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.... Company and Ors. (1994 Supp 1 SCC 280). Production or produce- The word `production' or `produce' when used in juxtaposition with the word `manufacture' takes in bringing into existence new goods by a process, which may or may not amount to manufacture. It also takes in all the byproducts, intermediate products and residual products, which emerge in the course of manufacture of goods. The expressions `manufacture' and `produce' are normally associated with movables articles and goods, big and small but they are never employed to denote the construction activity of the nature involved in the construction of a dam or for that matter a bridge, a road and a building. (See Moti Laminates Pvt. Ltd. and Anr. v. Collector of Central Excise, Ahmedabad (1995 (3) SCC 23). " 11. In Advanced Law Lexicon, 3rd Edn. by P. Ramanatha Aiyar, the expressions `production' and `manufacture' are described as under: "'Production' with its grammatical variations and cognate expressions; includes- (i) packing, labeling, relabelling of containers. (ii) re-packing from bulk packages to retail packages, and (iii) the adoption of any other method to render ....