TaxTMI 
TaxTMI 
TaxTMI 
2021 (10) TMI 143
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....d in not appreciating that the business of the assessee did not involve any manufacturing process and thus the deduction of 3,72,40,380/- ought to have been disallowed under Section 10B of the said Act? B) Whether in the facts and circumstances of the instant case the Learned Tribunal ought to have appreciated that the said Commissioner correctly applied the provisions of Section 263 of the said Act and suitably revised the order dated 15.12.2006 passed by the assessing officer inasmuch as the same had been found to be erroneous?" 3. ITAT 129 of 2016 has been filed against the order passed by Income Tax Appellate Tribunal 'C' Bench, Kolkata in I.T.A. No. 1777/Kol/2008 I.T.A. No. 1379/Kol/2008 and I.T.A. No. 1761/Kol/2009 for the assessment years 2002-03, 2003-04 and 2005-06, respectively raising the following substantial questions of law. "A) Whether on the facts and in the circumstances of the case the learned Tribunal was justified in law to allow the benefits of Section 10B to the assessee; B) Whether on the facts and in the circumstances of the case the Learned Tribunal was justified in making a statement being patently wrong that the appeal of the revenue is dismissed a....
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.... of any commodity. Blending of tea has been held to be a non-manufacturing activity as no new marketable commodity comes into existence. The Court should not take support from any other provision in the Act or any other statute or policy of the State to interpret the provision in taxing statute. Whatever has been provided for in the relevant section i.e. Section 10B of the Act, only that has to be seen. It does not fall within the domain of the Court to add or read any words in a statute. No power is conferred on the Courts to legislate. In support of the argument, reliance was placed upon judgment of Hon'ble the Supreme Court in Mohan Kumar Singhania v. Union of India, AIR 1992 SC 96. 7. Further relying upon a Constitution Bench judgment of Hon'ble the Supreme Court in Commissioner of Customs (Import), Mumbai Vs. M/s. Dilip Kumar And Company & Ors., (2018) 9 SCC 1, it was submitted that exemption provisions are to be construed strictly. The burden to prove its applicability is on the assessee and in case of any ambiguity, the benefit thereof goes to the revenue and the assessee cannot claim the same. The judgments of the Kerala High Court in Tata Tea Ltd. Vs. Assistant Commission....
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....f the condition was that the assessee should begin to manufacture or produce articles after the provision came into force. Keeping in view the fact that the manufacturers, who were engaged in export activities, were to be granted the benefits, definition of 'manufacturer' was added in the Section vide Finance Act, 1987, w.e.f. April 01, 1981 to include processing. 12. Section 10B was added in the Act w.e.f. April 01, 1989. It provided for special benefits to the newly established hundred per cent export oriented undertakings which were set up to manufacture or produce any article. In this provision as well the term 'manufacture' was defined to include processing. The aforesaid provisions provided that the benefit shall be available to an assessee for a period of five years. However, vide amendment effective from April 01, 1989 the period was increased to 10 years from the previous year in which the undertaking began to manufacture or produce articles. 13. The aforesaid provision was substituted by Finance Act, 2000 w.e.f. April 01, 2001. It provided for exemption of tax for a period of 10 years beginning from the assessment year in which the undertaking began to manufacture or pr....
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....ll in Sections 10A, 10B it clearly provides that the manufacture will include processing as well. The intention of the Parliament is further evident from addition of Explanation 4 to Section 10A and 10B which include cutting and polishing of precious and semi-precious stones as manufacturing or production of articles. Both these Explanations were added w.e.f. April 01, 2004. This also establishes the intention of the Government to provide benefits to the export oriented industries. 18. 'Hundred per cent export oriented undertaking' has been defined in Section 10B of the Act to mean an undertaking, which has been approved by the Board appointed in this behalf by the Central Government in exercise of power conferred under Industries (Development and Regulation) Act, 1951. Reference was also made to the Import and Export Policy for the years 1985-88 which also has reference to the aforesaid Board. The list of eligible industries as has been provided with resolution of the Government of India, Ministry of Commerce dated December 31, 1980, includes packaged tea. It is the same board which has been referred to in Section 10B of the Act. Further reference was made to the Export and Impor....
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....emption under Section 10B of the Act. 21. It was further argued that the judgment of Hon'ble the Supreme Court in Tara Agencies' case (supra) will not be applicable in the case for the reason that there the definition of 'manufacture' had not been provided. It was taken in common parlance. Similarly in the judgments of this Court in Appeejay Pvt. Ltd. v. Commissioner of Income Tax, [1994] 206 ITR 367 (Cal) and Brooke Bond India Ltd. v. Commissioner of Income Tax, [2004] 269 ITR 232 (Cal) the provisions of Sections 80J and 32A of the Act, respectively did not have the definition of manufacture, hence, the ordinary meaning was taken. Judgment of Hon'ble the Supreme Court in Printers (Mysore) Ltd. and another v. Asstt. Commercial Tax Officer and others, (1994) 2 SCC 434 was cited to state that even same word in the Section can have different meanings when used at different places. Reliance was placed upon Commissioner of Income Tax v. Venkateswara Hatcheries (P.) Ltd. and others, [1999] 237 ITR 174 (SC) to submit that legislative history of the words with respect to their meaning is also relevant. Constitution Bench judgment of Hon'ble the Supreme Court in M/s Dilip Kumar and Company....
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....it is hereby declared that the profits and gains derived from on site development of computer software (including services for development of software) outside India shall be deemed to be the profits and gains derived from the export of computer software outside India. Explanation 4.-For the purposes of this section, "manufacture or produce" shall include the cutting and polishing of precious and semi-precious stones." SCHEME OF VARIOUS PROVISIONS OF THE INCOME TAX ACT 24. Section 10A was added in the Act vide Finance Act, 1981 w.e.f. April 01, 1981. It provides for exemption to the newly established industrial undertakings in Free Trade Zones. It was also made applicable to any unit commencing production on or after 1st day of April, 1994 in any electronic hardware or software technology park. Free Trade Zone for the purpose of this Section was also defined in Explanation (i). The concession under this Section is available to an industrial undertaking engaged in manufacture or production of articles or things. The term manufacture has also been defined to include even processing or assembling. In Explanation (iii) the aforesaid definition of manufacture was added vide Finance ....
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....ion of the definition of manufacture in Section 10B cannot be said to be omission to call for indulgence of this Court to use the tools of interpretation to read that definition in the section. Wherever doubt was found, the Parliament itself clarified the same. 27. Section 10C was added in the Act vide Finance Act, 1999, w.e.f. April 01, 1999. It provides for exemption to certain industrial undertakings in North- Eastern Region. In any integrated infrastructural development centre or industrial growth centre located in North-Eastern Region the exemption was given to the industrial undertaking engaged in manufacture or production of articles or things effective from April 01, 1998. The term 'manufacture' has not been defined in the aforesaid section. 28. Section 10AA was added in the Act in terms of amendment made vide the SEZ Act, 2005, w.e.f. February 10, 2006. It provides for certain exemptions to the newly established units in the Special Economic Zones. The benefit under the aforesaid provision is available to the unit who is engaged in manufacture or production of articles. The period of benefit was also specified. The meaning of the word 'manufacture' has been taken from Se....
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....urt. These read as under: "1. This Constitution Bench is set up to examine the correctness of the ratio in Sun Export Corporation. v. Collector of Customs (1997) 6 SCC 564 (hereinafter referred to as 'Sun Export case', for brevity), namely, the question is - What is the interpretative rule to be applied while interpreting a tax exemption provision/notification when there is an ambiguity as to its applicability with reference to the entitlement of the assessee or the rate of tax to be applied? 2. In Sun Export case (supra), a three-Judge Bench ruled that an ambiguity in a tax exemption provision or notification must be interpreted so as to favour the assessee claiming the benefit of such exemption. Such a rule was doubted when this appeal was placed before a Bench of two Judges. The matter then went before a three- Judge Bench consisting one of us (Ranjan Gogoi, J.). The three-Judge Bench having noticed the unsatisfactory state of law as it stands today, opined that the dicta in Sun Export case (supra), requires reconsideration and that is how the matter has been placed before this Constitution Bench." 34. It was further observed in the aforesaid judgment that when the w....
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....esting that literal rule dehors the strict interpretation nor one should ignore to ascertain the interplay between "strict interpretation" and "literal interpretation". We may reiterate at the cost of repetition that strict interpretation of a statute certainly involves literal or plain meaning test. The other tools of interpretation, namely, contextual or purposive interpretation cannot be applied nor any resort be made to look to other supporting material, especially in taxation statutes. Indeed, it is well settled that in a taxation statute, there is no room for any intendment; that regard must be had to the clear meaning of the words and that the matter should be governed wholly by the language of the notification. Equity has no place in interpretation of a tax statute. Strictly one has to look to the language used; there is no room for searching intendment nor drawing any presumption. Furthermore, nothing has to be read into nor should anything be implied other than essential inferences while considering a taxation statute." 36. The discussion in Para 55 in the judgment regarding the stages at which rule of strict interpretation is to be applied and in case of ambiguity the b....
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....al basis for our conclusion. We may now consider the decisions which support our view." 37. After elaborate discussions on all the issues, the reference to the Constitution Bench was answering in the following terms: "66. To sum up, we answer the reference holding as under: 66.1. Exemption notification should be interpreted strictly; the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification. 66.2. When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessee and it must be interpreted in favour of the Revenue. 66.3. The ratio in Sun Export case (supra) is not correct and all the decisions which took similar view as in Sun Export case (supra) stands over-ruled." 38. In Union of India & Anr. v. Deoki Nandan Aggarwal, AIR 1992 SC 96, Hon'ble the Supreme Court opined that it is not the duty of the Court either to enlarge the scope of the legislation or the intention of the legislature when the language of the provision is plain and unambiguous. The Cour....
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....ed in the manufacturing, the assessee was held to be not entitled to the deductions. The relevant paras thereof are extracted below: "53. ...In view of the specific language of the statutes in Nilgiri case and Chowgule case, the term "processing" has been specifically incorporated in the statute, therefore, the assessees were justifiably held to be entitled to the benefit. 54. Undoubtedly, the facts of Nilgiri case are identical to the facts of the present case and the ratio of Nilgiri case is fully applicable to this case. But we have to bear in mind a significant difference in the language employed in Section 8 of the Bombay Sales Tax Act, 1953 in Nilgiri case and the language of Section 35B(1A) of the Income Tax Act in the present case. The difference is that the term "processing" which has been specifically incorporated in Nilgiri case has been specifically omitted in the present case. Similarly, in Chowgule case the term "processing" has been incorporated in the statute and the activities of the assessees both in Chowgule and Nilgiri cases were held to be processing and, in these respective cases, the assessees were held to be entitled to the benefit under the respective s....
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....A of the Act as it was not engaged in manufacturing of any article. It was also a case where blending of tea was involved. The same was held to be not a manufacturing activity. The term 'manufacture' was not defined in Section 32A of the Act. To similar effect is the judgment of this Court in Appeejay Pvt. Ltd.'s case (supra) where the assessee was held to be not entitled to any benefit under Section 80J of the Act. It was also a case where the assessee was engaged in blending of tea. It was not held to be manufacturing activity. The judgment of Hon'ble the Supreme Court in Printers (Mysore) Ltd. & Anr.'s case (supra) does not come to the rescue of the assessee as the facts of the case are quite different. It was a case under the Central Sales Act where the term 'goods' was found to be having different meaning though used in the same section at different places. The case in hand does not fall in that category. 43. The Income Tax Act had been held to be a complete code. Reference can be made to para no. 5 in T.K. Ginarajan v. The Commissioner of Income Tax reported as (2013) 9 SCC 270 and para no. 55 in Innoventive Industries Limited v. ICICI Bank and Another reported as (2018) 1 S....