Northern Projects Ltd., Kolkata V. ACIT, Circle - 4, Kolkata, Kolkata

CO 120/KOL/2008

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 1267 (ITAT-KOLKATA)
• Duration Of Justice: 6 year(s) 9 month(s) 29 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 14-08-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 28-10-2010
• Assessment Year: 2002-2003
• Appeal Filed On: 16-10-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DAVID Z CHAWNGTHAL ITA NO K; DR ADHIR KR BAR
• Keywords: Commercial expediency
• Section: 142(1); 10AA; 80HHC; 234B; 37(1); 10B; 147; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA [BEFORE SHRI MAHAVIR SINGH, JM & SHRI B. P. JAIN, AM] I.TA NOS.1760 & 1819/KOL/2009 ASSESSMENT YEAR: 2006-07 DCIT CIRCLE-4 KOLKATA VS. NORTHERN PROJECTS LTD. (PAN: AAACN 8504D) NORTHERN PROJECTS LTD. VS. ASST. COMMISSIONER OF I NCOME TAX CIRCLE-4, KOLKATA (APPELLANT) (RESPONDENT) & ITA NO.1380 & 1775/KOL/2008 ASSESSMENT YEARS: 2003-04 AND 2002-03 NORTHERN PROJECTS LTD. VS. DY. COMMISSIONER OF INC OME TAX CIRCLE-4, KOLKATA DCIT, CIRCLE-4, KOLKATA VS. NORTHERN PROJECTS LTD. (APPELLANT) (RESPONDENT) & C.O. N O.120/KOL/2008 (A/O ITA NO .1775/KOL/2008) ASSESSMENT YEAR: 2002-03 NORTHERN PROJECTS LTD. VS. ASST. COMMISSIONER O F INCOME TAX CIRCLE-4, KOLKATA (CROSS OBJECTOR) (RESPONDENT) ITA NO.939/KOL/2009 ASSESSMENT YE ARS: 2005-06 NORTHERN PROJECTS LTD. VS. ASST. COMMISSIONER O F INCOME TAX CIRCLE-4, KOLKATA (APPELLANT) (RESPONDENT) DATE OF HEARING: 02.07.2015 DATE OF PRONOUNCEMENT: 14.08.2015 FOR THE REVENUE: DR. ADHIR KR. BAR, CIT, DR & SHRI DAVID Z. CHAWNGTHAL, ADDL. CIT-DR 2 ITA NO. 1818, 1760, 2829/K/2009, 1380, 1775 & 939/K/2008 & CO NO. 120/K/2008 NORTHERN PROJECTS LTD. AYS. 06-07, 03-04, 02 -03 & 05-06 FOR THE ASSESSEE/CROSS OBJECTOR: S/SHRI R.P. AGARW AL & J.M. THARD, ADVOCATE ORDER PER BENCH: THESE FIVE APPEALS - THREE BY ASSESSEE AND TWO BY R EVENUE AND ONE CROSS OBJECTION BY ASSESSEE, ARE ARISING OUT OF ORDERS OF CIT(A)-IV KOLKATA IN APPEAL NOS.225/CIT(A)-IV/07-08; 46/CIT(A)-IV AND 158/CIT(A )-IV KOLKATA DATED 30.07.2009, 23.05.2008 & 29.01.2008. ASSESSMENTS W ERE FRAMED BY ACIT/DCIT, CIRCLE-4, KOLKATA U/S 143(3)/147 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE ORDERS DATED 28.12.2007, 28.03.2 006 & 20.12.2007 FOR ASSESSMENT YEARS 2005-06, 2003-04 AND 2002-03 RESPECTIVELY. 2. THE FIRST COMMON ISSUE IN ASSESSEES CO NO.120/K OL/2008 ARISING OUT OF ITA NO.1775/KOL/2008 FOR AY 2002-03; IN ITA NO. 1380/KO L/2008 FOR AY 2003-04; IN ITA NO. 939/KOL/2009 FOR AY 2005-06 AND ITA NO. 181 9/KOL/2009 FOR AY 2006-07 IS AGAINST THE ORDER OF CIT(A) DENYING THE EXEMPTIO N U/S 10B OF THE ACT IN RESPECT TO TEA BLENDED AND EXPORTED BY IT, BY HOLDING THAT EVE N THOUGH ASSESSEE-COMPANY IS A 100% EXPORTED ORIENTED UNIT (EOU FOR SHORT) BUT MER ELY ENGAGED IN TRADING ACTIVITY IN PURCHASE AND SALE OF TEA AND THERE WAS NO PROCES SING OR BLENDING OUT OF ACTIVITIES CARRIED OUT BY IT. FOR THIS, ASSESSEE IN ONE CO AND THREE APPEALS HAVE RAISED COMMON GROUNDS AND GROUND AS RAISED IN ITA NO. 1380/KOL/20 08 FOR AY 2003-04 IS BEING REPRODUCED:- 1. A) THAT THE LD. CIT(A) ERRED IN HOLDING THAT TH E APPELLANT WAS NOT ENTITLED TO THE EXEMPTION DEDUCTION CLAIMED U/S. 10B OF THE I.T. AC T, 1961 IN RESPECT OF THE TEA BLENDED AND EXPORTED BY IT. B) WITHOUT PREJUDICE TO THE FOREGOING GROUND, THE LD. CIT(A) ERRED IN NOT GIVING ANY DECISION IN RESPECT OF THE GROUND NOS. 4, 5, 6 & 7 OF THE REVISED GROUNDS OF APPEAL TAKEN BEFORE HIM IN RESPECT OF THE OTHER ASP ECTS OF THE CLAIM U/S. 10B. THE SAID GROUNDS READ AS UNDER:- 4. THAT THE LEARNED DEPUTY COMMISSIONER ERRED IN ARBITRARILY ALLEGING AND/OR HOLDING THAT THE APPELLANT ASSESSEE COMPANY S 100% EOU UNIT AT COIMBATORE WAS MERELY ENGAGED IN THE TRADING ACTIVI TY IN THE PURCHASE AND SALE OF TEA, AND THAT THERE WAS NO PROCESSING, BLEN DING AND/OR OTHER ACTIVITY 3 ITA NO. 1818, 1760, 2829/K/2009, 1380, 1775 & 939/K/2008 & CO NO. 120/K/2008 NORTHERN PROJECTS LTD. AYS. 06-07, 03-04, 02 -03 & 05-06 CARRIED OUT AT ITS SAD UNIT, SO AS TO ENTITLE TO CL AIM DEDUCTION / EXEMPTION UNDER SECTION 10B OF THE SAID ACT. 5. THAT THE LEARNED DEPUTY COMMISSIONER ERRED IN AR BITRARILY ALLEGING THAT NO PROCESSING / BLENDING CHARGES, LABOUR / PERSONNE L EXPENSES ETC. HAD BEEN INCURRED BY THE APPELLANT COMPANY DURING THE YEAR U NDER APPEAL, AND THAT THE SO CALLED BLENDING ACTIVITY ALLEGEDLY CARRIED O N BY IT, DID NOT CONSTITUTE PROCESSING OF GOODS, SO AS TO BE COVERED WITHIN THE EXPRESSION MANUFACTURE OR PRODUCE ARTICLE OR THING WITHIN THE MEANING OF SECTION 10B OF THE SAID ACT. 6. THAT THE LEARNED DEPUTY COMMISSIONER ERRED IN WR ONGLY ALLEGING THAT NO DETAILS HAD BEEN FIELD BY THE APPELLANT COMPANY IN RESPECT OF LABOUR CHARGES IN SPITE OF SPECIFIC REQUISITION NO.6(D) MADE ON 29 .11.2005 VIDE NOTICE ISSUED UNDER SECTION 142(1) OF THE SAID ACT, EVEN WHEN SUC H DETAILS HAD BEEN DULY FILED BY THE APPELLANT ASSESSEE COMPANY ALONGWITH ITS LETTER DATED 09.12.2005. SINCE COMMON GROUNDS ARE RAISED IN ALL THESE APPEAL S AND ONE CO OF ASSESSEE AND ISSUE ARISING IS IDENTICAL, WE HAVE REPRODUCED THE GROUND AS RAISED IN AY 2003-04, WHEREFROM WE WILL TAKE THE FACTS AND ADJUDICATE THE ISSUE FOR ALL THE AYS. 3. BRIEFLY STATED FACTS ARE THAT ASSESSEE CLAIMED E XEMPTION U/S 10B OF THE ACT IN RESPECT OF 100% EOU AND IN SUPPORT OF ITS CLAIM, AS SESSEE FILED REPORT IN FORM NO. 56G U/S 10B OF THE ACT. BUT AO DENIED EXEMPTION TO THE ASSESSEE. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO ALSO C ONFIRMED THE ACTION OF AO AND DENIED THE EXEMPTION U/S 10B OF THE ACT BY OBSERVIN G IN PARA-4 AS UNDER:- 4. THE APPELLANT HAS MADE DETAILED SUBMISSIONS IN THE STATEMENT OF FACTS AND NOTES OF ARGUMENTS SUBMITTED ON 12.02.2007 IN PARAS-1 TO 63 THEREOF AT PAGES 4 TO29 OF THE PAPER BOOK. THE SUBMISSIONS MADE ARE VERY DETAILED AND HAVE REFERRED TO NUMEROUS DOCUMENTS COPIES OF WHICH ARE INCLUDED IN THE PAPER BOOK. REFERENCE HAS BEEN MADE OF VARIOUS COURT DECISIONS ALSO IN SUPPORT OF THE S UBMISSIONS MADE BY THE APPELLANT. I DO NOT CONSIDER IT NECESSARY TO DEAL WITH EACH AND EVERY CONTENTION OF THE AO AND THE SUBMISSIONS OF THE APPELLANT ON FACTS BECAUSE THE H ON'BLE SUPREME COURT IN A RECENT DECISION DELIVERED ON JULY 9, 2007 IN THE CASE OF CIT VS- TARA AGENCIES (2007) 292 ITR-444 (SC) HAS HELD THAT THE ACTIVITY OF BLEN DING OF TEA DOES NOT CONSTITUTE MANUFACTURE. THE HON'BLE COURT HAS ALSO HELD THAT THE WORD 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 M ANUFACTURE. IT ALSO TAKES IN ALL BY-PRODUCTS, INTERMEDIATE PRODUCTS AND RESIDUAL PRO DUCTS WHICH EMERGE IN THE COURSE OF MANUFACTURE OF GOODS. IN THEIR DECISION THE HON'BLE COURT IN PARA 70 AT P AGE 464 OF THE REPORT FINALLY HELD AS UNDER:- 4 ITA NO. 1818, 1760, 2829/K/2009, 1380, 1775 & 939/K/2008 & CO NO. 120/K/2008 NORTHERN PROJECTS LTD. AYS. 06-07, 03-04, 02 -03 & 05-06 WE ARE CLEARLY OF THE OPINION THAT THE RESPONDENT S ACTIVITY AMOUNTS TO PROCESSING ONLY AND THE ACTIVITY DOES NOT AMOUNT TO EITHER PRODUCTION OR MANUFACTURE . THIS DECISION RELATED TO A DEDUCTION CLAIMED U/S. 3 5B(1A) OF THE ACT FOR THE ASST. YR. 1979-80 WHEREIN ALSO THE ALLOWANCE OF DEDUCTION WAS PERMISSIBLE TO THE ASSESSEE WHO EXPORTED GOODS MANUFACTURED OR PRODUCED IN A SMALL SCALE INDUSTRIAL UNDERTAKING OWNED BY THE ASSESSEE. THE TERMINOLOGY USED FOR ALL OWANCE OF DEDUCTION U/S. 10B ALSO REQUIRES THAT THE DEDUCTION WILL BE ADMISSIBLE ONLY IN RESPECT OF THE UNDERTAKING WHICH MANUFACTURES OR PRODUCES AN ARTICLE OR THING. THE AFORESAID DECISION OF THE APEX COURT HAS SET AT REST THE CONTROVERSY AS TO WHETHER BLENDING OR TEA AMOUNTS TO MANUFACTURE OR PRODUCTION OF ARTICLE OR THING, BY H OLDING THAT BLENDING OF TEA DOES NOT AMOUNT TO MANUFACTURE OR PRODUCTION OF ANY ARTI CLE OR THING. THE APPELLANT IS THEREFORE, NOT ENTITLED TO THE DEDUCTION / EXEMPTIO N CLAIMED U/S. 10B IN RESPECT OF THE TEA EXPORTED BY THEM. SINCE THE APPELLANTS CLAIM F OR DEDUCTION U/S. 10B IS HELD TO BE NOT ADMISSIBLE FOR THE BASIC REASON THAT BLENDING O F TEA DOES NOT AMOUNT TO MANUFACTURE OR PRODUCTION OF A ARTICLE OR THING. I DO NOT CONSIDER IT NECESSARY TO DEAL WITH THE OTHER FACETS OF THE GROUNDS RAISED BY THE APPELLANT IN THIS REGARD. THE DENIAL OF THE DEDUCTION U/S/. 10B BY THE AO IS UPHELD. AGGRIEVED, NOW ASSESSEE IS IN APPEAL BEFORE. 4. AT THE OUTSET, LD. COUNSEL FOR ASSESSEE, SHRI R. P. AGARWAL, SENIOR ADVOCATE STATED THAT THE ISSUE NOW STANDS COVERED BY THE ORD ER OF SPECIAL BENCH OF ITAT KOLKATA IN THE CASE OF MADHU JAYANTI INTERNATIONAL LTD. V. DY. CIT (2012) 137 ITD 377 (KOL) (SB) AND HE REFERRED TO RELEVANT PARA 35 TO 37 OF THE ORDER, WHICH READS AS UNDER:- 35. WE FIND FROM THE ABOVE FACTS AND CIRCUMSTANCES AND CASE LAWS RELIED ON BY BOTH THE SIDES THAT THE ASSESSEE WAS EXCLUSIVELY ENGAGED IN BLENDING, PACKAGING AND EXPORT OF TEA BAGS, TEA PACKETS AND BULK TEA PACKS. THE ASSESSEES DIVISION ENJOYS RECOGNITION AS A 100% EOU, WHICH IS GRANTED BY THE DEVELOPMENT COMMISSIONER, MINISTRY OF COMMERCE & INDUSTRY, GOVT. OF INDIA. TH E ASSESSEE CLAIMED EXEMPTION U/S. 10B OF THE ACT FOR AYS 2000-01 ONWARDS, WHICH WAS GRANTED UPTO THE AY 2003- 04. HOWEVER, FOR THE AY 2004-05, EXEMPTION WAS DECL INED FOR THE REASONS THAT BY THE FINANCE ACT 2000, THE DEFINITION OF MANUFACTURE W HICH INCLUDED PROCESSING CONTAINED IN SECTION 10B OF THE ACT WAS DELETED W.E .F. 01.04.2001. THE ARGUMENT OF THE DEPARTMENT IS THAT MANUFACTURE OR PRODUCTION HA D LIBERAL MEANING UNDER THE DEFINITION CLAUSE CONTAINED IN SECTION 10B OF THE A CT UNTIL ITS DELETION WHICH COVERS EVEN PROCESSING AND, THEREFORE, BLENDING AND PACKAG ING OF TEA FOR EXPORT WAS TREATED AS MANUFACTURE OR PRODUCTION OF AN ARTICLE QUAL IFYING FOR EXEMPTION. WE ARE OF THE CONSIDERED VIEW THAT THE CONTENTION OF THE ASSE SSEE THAT THE SCHEME OF INCOME TAX EXEMPTION AVAILABLE TO UNITS IN THE SEZ U/S. 10A OF THE ACT AND UNITS IN THE FREE TRADE ZONE PROVIDED U/S. 10AA OF THE ACT AND THE EX EMPTION AVAILABLE TO 100% EOU U/S. 10B OF THE ACT ARE VERY SIMILAR IN NATURE AND THE WORDINGS OF THE STATUTORY PROVISIONS ARE SIMILAR IN NATURE IS CORRECT. WE FIN D THAT HONBLE KERALA HIGH COURT ALSO CONSIDERED THE JUDGMENT IN THE DECISION OF SUP REME COURT IN TARA AGENCIES, (SUPRA) RELIED ON BY THE LD. CIT, DR, WHEREIN HONB LE SUPREME COURT CLEARLY HELD 5 ITA NO. 1818, 1760, 2829/K/2009, 1380, 1775 & 939/K/2008 & CO NO. 120/K/2008 NORTHERN PROJECTS LTD. AYS. 06-07, 03-04, 02 -03 & 05-06 THAT BLENDING OF TEA DOES NOT AMOUNT TO MANUFACTUR E OR PRODUCTION OF AN ARTICLE, BUT IS ONLY PROCESSING. WE FIND THAT THE ASSESSEE W AS EXCLUSIVELY ENGAGED IN BLENDING AND PACKING OF TEA FOR EXPORT AND WAS NOT MANUFACTU RING OR PRODUCING ANY OTHER ARTICLE OR THING. IT WAS RECOGNISED AS A 100% EOU D IVISION AND THE DEPARTMENT HAD NO CASE THAT THE ASSESSEES UNIT ENGAGED IN EXPORT OF TEA BAGS AND TEA PACKETS WAS NOT A 100% EOU. IF EXEMPTION WAS DENIED ON THE GROU ND THAT PRODUCTS EXPORTED WERE NOT PRODUCED OR MANUFACTURED IN THE INDUSTRIAL UNIT OF THE ASSESSEES 100% EOU, IT WOULD DEFEAT THE VERY OBJECT OF SECTIONS 10 B OF THE ACT. 36. WE, IN VIEW OF THE ABOVE, HOLD THAT WHEN THE PR ODUCTS FOR WHICH THE ASSESSEES UNIT IS RECOGNIZED AS A 100% EOU ARE TEA BAGS, TEA IN PACKETS AND TEA IN BULK PACKS AND THE ASSESSEE IS EXCLUSIVELY ENGAGED IN BLENDING AND PACKING OF TEA FOR EXPORT MAY NOT BE MANUFACTURER OR PRODUCER OF ANY OTHER AR TICLE OR THING IN COMMON PARLANCE. HOWEVER, FOR THE PURPOSE OF SECTION 10A, 10AA AND 10B, WE HAVE TO CONSIDER THE DEFINITION OF THE WORD MANUFACTURE A S DEFINED IN SECTION 2(R) OF SEZ ACT, EXIM POLICY, FOOD ADULTERATION RULES, 1955, TE A (MARKETING) CONTROL ORDER, 2003, ETC. WE ALSO FIND THAT THE DEFINITION OF MAN UFACTURE AS PER SECTION 2(R) OF THE SEZ ACT, 2005 IS INCORPORATED IN SECTION 10AA OF TH E INCOME-TAX ACT WITH EFFECT FROM 10.02.2006. HONBLE KERALA HIGH COURT IN THE C ASE OF GIRNAR INDUSTRIES (SUPRA) HAD HELD SUCH AMENDMENT IN SECTION 10AA TO BE OF CLARIFICATORY IN NATURE. THE DEFINITION OF MANUFACTURE UNDER THE SEZ ACT, EXIM POLICY, FOOD ADULTERATION RULES AND TEA (MARKETING) CONTROL ORDER IS MUCH WID ER THAN WHAT IS THE MEANING OF THE TERM MANUFACTURE UNDER THE COMMON PARLANCE , AND IT INCLUDES PROCESSING, BLENDING, PACKAGING ETC. IN VIEW OF THE ABOVE AND R ESPECTFULLY FOLLOWING THE DECISION OF HONBLE KERALA HIGH COURT IN THE CASE OF GIRNAR INDUSTRIES (SUPRA) AND TATA TEA LIMITED (SUPRA), WE HOLD THAT THE ASSESSEE IS ENTIT LED FOR EXEMPTION UNDER SECTION 10B OF THE ACT ON ACCOUNT OF BLENDING OF TEA. SIMIL ARLY, IN OUR VIEW, THE INDUSTRIAL UNITS ENGAGED IN THE VERY SAME ACTIVITY I.E. BLENDI NG, PACKING AND EXPORT OF TEA IN THE FREE TRADE ZONE SHALL ALSO BE ENTITLED TO ENJOY TAX EXEMPTION UNDER SECTION 10A OF THE ACT. 37. ACCORDINGLY, WE ANSWER THE QUESTION REFERRED IN FAVOUR OF THE ASSESSEE BY HOLDING THAT THE ASSESSEES WHO ARE IN THE BUSINESS OF BLENDING AND PROCESSING OF TEA AND EXPORT THEREOF, IN 100% EOUS ARE MANUFACTURER/ PRODUCER OF THE TEA FOR THE PURPOSE OF CLAIMING EXEMPTION U/S. 10B OF THE ACT. FURTHER, ASSESSEES WHO ARE IN THE BUSINESS OF BLENDING AND PROCESSING OF TEA IN RESPE CT OF UNDERTAKINGS IN FREE TRADE ZONES ARE MANUFACTURER/PRODUCER OF TEA FOR THE PURP OSE OF CLAIMING EXEMPTION U/S. 10A OF THE ACT. WE HAVE EXAMINED AND DISCUSSED THE FACTS IN THE CASE OF MADHU JAYANTI INTERNATIONAL LTD. AND FOUND THAT THERE IS BLENDING OF TEA AND CONSEQUENTLY THE ASSESSEE IS ELIGIBLE FOR EXEMPTION U/S. 10B OF THE ACT AS PRAYED FOR. THEIR APPEAL FOR THE AY 2004-05 IS ALLOWED. AS REGARDS OTHER APP EALS AND THAT OF THE INTERVENERS, THE MATTERS ARE RESTORED BACK TO THE DIVISION BENCH , WITH DIRECTIONS TO DECIDE THOSE APPEALS IN THE LIGHT OF PRINCIPLE LAID DOWN HEREIN, SO FAR AS THE CLAIM FOR RELIEF U/S. 10A OR 10B OF THE ACT IN ACCORDANCE WITH LAW. WHEN A QUERY WAS PUT TO LD. SENIOR ADVOCATE IN TERM OF THE DECISION OF SB OF ITAT KOLKATA IN THE CASE OF MADHU JAYANTI INTERNATIONAL LTD.(SUPRA), AS TO, WHETHER THERE IS A BLENDING OR NOT AND BLEND SHEETS WERE PRODUCED BEFORE THE AO OR NOT, HE REPLIED BY REFERRING TO AOS REMAND REPORT NO. ACIT, CIRCLE -4/MISC/06-07/KOL/1227 DATED 6 ITA NO. 1818, 1760, 2829/K/2009, 1380, 1775 & 939/K/2008 & CO NO. 120/K/2008 NORTHERN PROJECTS LTD. AYS. 06-07, 03-04, 02 -03 & 05-06 06/03/2007, WHICH IS GIVEN IN ASSESSEES PAPER BOOK AT PAGES 255 TO 263 AND PARTICULARLY HE DREW OUR ATTENTION TO FOLLOWING PAR A OF THE REMAND REPORT, WHEREIN THE AO HAS DISCUSSED THE FACT AS UNDER:- THE FACTS OF THE CASE AS THEY EMERGE FROM THE RE CORDS AS WELL AS THE ASSESSEES SUBMISSION IN THE FORM OF A PAPER BOOK ARE THAT T HE APPELLANT COMPANY PURCHASES TEA FROM AUCTION CENTRES LOCATED IN VARIOUS PARTS O F THE COUNTRY AND THEN THE TEAS OF DIFFERENT QUALITIES / GRADES AS SELECTED ARE LAID D OWN ON THE FLOOR OF THE WAREHOUSE. THEREAFTER, THE TEA OF ONE TYPE/GRADE ARE MIXED/BLE NDED WITH ANOTHER TYPE/GRADE OF TEA TO ACHIEVE THE REQUIRED STANDARD OF TEA ON TH E BASIS OF BLENDSHEETS AS SELECTED BY EXPERTS. SUBSEQUENTLY, AFTER COMPLETION OF EACH BLEND THE TEA IS THEN PACKED, AS PER BUYERS REQUIREMENT IN THE PACKING MATERIALS PROCUR ED FROM DIFFERENT SUPPLIERS AND EVEN IMPORTED AND THEN STUFFED IN CONTAINERS FOR ON WARD TRANSMISSION TO PORT FOR SHIPMENT TO OVERSEAS BUYERS. IN THE BACKGROUND OF THESE FACTS, THE ASSESSEE HAS PLEADED THAT SUCH MIXING / BLENDING /PACKING AMOUNTS TO PROCESSING OF GOODS. MENTIONING FURTHER THAT THE EXPRESSIONS MANUFACTURE AND / OR PRODUCE HAVE NOT BEEN DEFINED IN THE INCOME TAX ACT 1961 IN AN EXHAUSTIVE MANNER, THE ASSESSEE HAS ARGUED IN ITS PAPER BOOK HAT FOR THE PURPOSES OF SECTION 100B OF THE INCOME TAX ACT 1961 AN EXCLUSIVE DEFINITION HAS BEEN GIVEN IN RESPECT OF THE SAID TWO WORDS AND THAT THE EXPRESSION MANUFACTURE HAS BEEN DEFINED TO INCLUDE INTER ALIA ANY PROCESS FO R THE PURPOSES OF SECTION 10B OF THE INCOME TAX ACT 1961. PLACING RELIANCE ON VARIOUS JU DICIAL PRONOUNCEMENTS, THE ASSESSEE HAS PLEADED THAT THE ACTIVITY OF BLENDING CARRIED OUT BY IT LEADS TO PRODUCTION OF TEA AND IS, THEREFORE, ELIGIBLE FOR BENEFIT OF DEDUCTION U/S. 10B OF THE INCOME TAX ACT 1961. IN VIEW OF THE ABOVE REMAND REPORT OF AO, LD. COUNS EL FOR ASSESSEE ARGUED THAT ASSESSEE HAS SUBMITTED COMPLETE PROCEDURE OF BLENDI NG OF TEA ALONG WITH BLEND SHEETS DURING THE REMAND PROCEEDINGS AND ONCE THE AO HAS A DMITTED THAT THERE IS BLENDING AND THIS IS EXACTLY IN LINE WITH ORDER OF ITAT KOLK ATA SPECIAL BENCH IN THE CASE OF MADHU JAYANTI INTERNATIONAL LTD. (SUPRA). ON QUERY FROM THE BENCH, LD. CIT-DR SHRI ADHIR KUMAR BAR RELIED ON THE ORDER OF AO. 5. WE FIND THAT FACTUAL THERE IS A BLENDING OF TEA IN THE PRESENT CASE OF ASSESSEE AND ASSESSEE BEFORE AO DURING REMAND PROCEEDINGS HA VE PROVED THE COMPLETE PROCEDURE EXPLAINING THAT THERE IS BLENDING OF TEA. THIS IS EXACTLY IN LINE WITH THE ORDER OF ITAT KOLKATA SPECIAL BENCH IN THE CASE OF MADHU JAYANTI INTERNATIONAL LTD (SUPRA). HENCE, RESPECTFULLY FOLLOWING THE ORDER OF ITAT KOLKATA SPECIAL BENCH, IN 7 ITA NO. 1818, 1760, 2829/K/2009, 1380, 1775 & 939/K/2008 & CO NO. 120/K/2008 NORTHERN PROJECTS LTD. AYS. 06-07, 03-04, 02 -03 & 05-06 THE CASE OF MADHU JAYANTI INTERNATIONAL LTD. (SUPRA), WE FEEL THAT ISSUE IS NOW COVERED AGAINST REVENUE AND IN FAVOUR OF ASSESSEE. ACCORDINGLY, THIS ISSUE OF ASSESSEES CO AND APPEALS IS ALLOWED. 6. NEXT COMMON ISSUE IN REVENUES APPEAL IN ITA NO. 1775/KOL/2008 FOR AY 2002-03 AND ITA NO. 1760/KOL/2009 FOR AY 2006-07 IS AS REGARDS TO THE ORDER OF CIT(A) DELETING THE DISALLOWANCE COMMISSION PAYMENT . FOR THIS, REVENUE HAS RAISED IDENTICAL ISSUE AND THE GROUND RAISED IN ITA NO. 17 75/KOL/2008 FOR AY 2002-03, READS AS UNDER:- 4) THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE A SSESSEE, L. CIT(A) HAD ERRED IN DELETING THE DISALLOWANCE OF PAYMENT OF COMMISSION TO THE TUNE OF RS.80,76,921/-. THE ASSESSEE FAILED TO PRODUCE ANY EVIDENCE IN SUPPORT OF ITS CLAIM THAT THE PAYMENTS WERE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSI NESS EXPEDIENCY. 7. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. AT THE OUTSET, WE FIND T HAT ISSUE IS COVERED IN FAVOUR OF ASSESSEE AND AGAINST REVENUE EXACTLY ON IDENTICAL F ACTS AND CIRCUMSTANCES OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. RAJARANI EXPORTS P. LTD. (2014) 361 ITR 152 (CAL). FURTHER, WE FIND THAT HON'BLE JURISD ICTIONAL HIGH COURT HAS CONSIDERED THAT ASSESSEE MADE PAYMENT OF COMMISSION IN CONSIDE RATION OF SERVICES RENDERED. THE CIT(A) HELD THAT THE COMMISSION ON EXPORT ACTIV ITY WAS FULLY DISCLOSED IN ALL CORRESPONDENCE AND ACTIVITIES IN RELATION TO EXPORT , THE COMMISSION WAS PAID THROUGH BANKING CHANNELS WITH THE RESERVE BANK APPROVAL AND IT WAS PAID PURSUANT TO AN AGREEMENT APPROVED BY THE GOVERNMENT OF INDIA AND T HE UNITED NATIONS, THAT THE PAYMENT OF COMMISSION WAS FOR BUSINESS CONSIDERATIO N AND THERE WAS NO ILLEGALITY IN IT, THAT BESIDES THIS, NOTHING WAS BROUGHT ON RECOR D TO SHOW THAT THE TRANSACTION RELATING TO PAYMENT OF COMMISSION WERE NOT GENUINE OR THAT THE PAYMENTS WERE EXCESSIVE OR UNREASONABLE, THAT THE VOLKER COMMITTE E REPORT HAD DISCUSSED THE UTILISATION OF MONEY BY THE RECIPIENT OF THE COMMIS SION AND STATED THAT NEITHER THE ASSESSEE NOR THE GOVERNMENT OF INDIA WAS INVOLVED I N PARTING WITH SOME OF THE FUNDS SO RECEIVED AS COMMISSION UNDER A PACT BETWEEN THE IRAQ GOVERNMENT AND THE UNITED 8 ITA NO. 1818, 1760, 2829/K/2009, 1380, 1775 & 939/K/2008 & CO NO. 120/K/2008 NORTHERN PROJECTS LTD. AYS. 06-07, 03-04, 02 -03 & 05-06 NATIONS. THE TRIBUNAL HELD THAT THE ASSESSEE WAS CO NCERNED WITH COMMERCIAL EXPEDIENCY OF THE PAYMENT AND NOT WITH THE ACTUAL C OSTS INCURRED IN RENDERING THE SERVICES FOR WHICH THE PAYMENT WAS MADE. HONBLE CA LCUTTA HIGH COURT CONFIRMED THE ORDER OF TRIBUNAL IN THE CASE OF CIT VS. RAJARA NI EXPORTS P. LTD. (2014) 361 ITR 152 (CAL) BY OBSERVING AS UNDER: AGGRIEVED BY THE ORDER OF THE COMMISSIONER (APPEAL S) THE REVENUE PREFERRED AN APPEAL BEFORE THE TRIBUNAL. THE TRIBUNAL DISMISSED THE APPEAL HOLDING, INTER ALIA, AS FOLLOWS: THE ASSESSEE HAS MADE PAYMENT FOR COMMISSION AND H AS BEEN RENDERED SERVICES IN CONSIDERATION OF THE SAME. AS A MATTER OF FACT, IT IS NOT EVEN THE REVENUES CASE THAT NO SERVICES HAVE BEEN RENDERED AT ALL. THE FACT THAT SERVICES HAVE BEEN RENDERED BY A PARTY OTHER THAN T HE AGENT TO WHOM COMMISSION IS PAID IS WHOLLY IMMATERIAL SO FAR AS D EDUCTIBILITY IN THE HANDS OF THE ASSESSEE IS CONCERNED. AS FOR THE POSITION THAT THE PAYMENT WAS HIGHLY EXC ESSIVE VIS--VIS THE LOCAL COSTS, EVEN IF THAT BE SO, THAT ASPECT OF THE MATTE R DOES NOT AFFECT THE DEDUCTIBILITY IN THE HANDS OF THE ASSESSEE EITHER. THE ASSESSEE IS CONCERNED WITH COMMERCIAL EXPEDIENCY OF THE SAID PAYMENT AND NOT WITH WHAT ARE THE ACTUAL COSTS INCURRED IN RENDERING THE SERVICES FOR WHICH THE PAYMENT IS MADE. AS WE HAVE SEEN EARLIER IN THIS ORDER, FROM T HE EXTRAS OF THE VOLKER COMMITTEE REPORT ITSELF, IT WAS ABSOLUTELY NECESSAR Y FOR THE ASSESSEE TO MAKE THE IMPUGNED PAYMENTS AND, IN ANY EVENT, THE COMMER CIAL EXPEDIENCY OF THESE PAYMENTS HAS NOT EVEN BEEN CALLED INTO QUESTION BY THE ASSESSING OFFICER. THE CASE OF THE REVENUE IS CONFINED TO INVOKING THE EXP LANATION TO SECTION 37(1). THE OBJECTIONS TO THE SAID COMMISSION PAYMENT ARE, THEREFORE NOT SUSTAINABLE IN LAW, SO FAR AS DEDUCTIBILITY UNDER S ECTION 37(1) IS CONCERNED. THE DEPARTMENT HAS COME UP IN APPEAL. MRS. SMITA DA S DE, LEARNED ADVOCATE, APPEARING IN SUPPORT OF THE APPEAL, COULD NOT SATIS FY US AS TO WHY WERE THE FINDINGS INDICATED ABOVE AS RECORDED BY THE COMMISSIONER (AP PEALS) AND THE TRIBUNAL INCORRECT EITHER ON FACT OR IN LAW. THERE IS, AS SUCH, NO REA SONS WHY THE APPEAL SHOULD BE ENTERTAINED. 8. WE FIND THAT THIS ISSUE STANDS COVERED IN FAVOUR OF ASSESSEE AND AGAINST REVENUE AND RESPECTFULLY FOLLOWING THE JUDGMENT OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF RAJARANI EXPORTS P. LTD. (SUPRA) WE CONFIRM THE ORDER OF CIT(A) IN DELETING THE DISALLOWANCE. 9 ITA NO. 1818, 1760, 2829/K/2009, 1380, 1775 & 939/K/2008 & CO NO. 120/K/2008 NORTHERN PROJECTS LTD. AYS. 06-07, 03-04, 02 -03 & 05-06 9. THE NEXT ISSUE IN THE APPEAL IN ITA NO. 1380/K/2 008 FILED BY ASSESSEE IS AGAINST THE ORDER OF CIT(A) IN HOLDING THAT THE SUR PLUS OF RS.1,76,44,688/- ARISING FROM THE VALUATION OF FOREIGN CURRENCY BALANCE IN T HE EEFC ACCOUNT OF THE ASSESSEE AS ON 31.03.2003 WAS LIABLE TO BE INCLUDED IN THE T AXABLE INCOME OF THE ASSESSEE. FOR THIS, ASSESSEE HAS RAISED FOLLOWING GROUND NO.2: 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE THE LD. CIT(A) ERRED IN HOLDING THAT THE SURPLUS OF RS.1,76,44,688/- ARISIN G FROM THE VALUATION OF FOREIGN CURRENCY BALANCE IN THE EEFC ACCOUNT OF THE APPELLA NT AS ON 31.03.2003 WAS LIABLE TO BE INCLUDED IN THE TAXABLE INCOME OF THE APPELLANT. 10. AT THE TIME OF HEARING LD. COUNSEL FOR THE ASSE SSEE SHRI R. P. AGARWAL, SR. ADVOCATE MADE STATEMENT AT BAR THAT HE IS NOT PRESS ING THIS GROUND. HENCE, THIS GROUND IS DISMISSED AS NOT PRESSED. 11. THE NEXT ISSUE IN THE APPEAL IN ITA NO. 1775/K/ 2008 FILED BY REVENUE IS AGAINST THE ORDER OF CIT(A) IN ACCEPTING ASSESSEES CLAIM OF DEDUCTION U/S. 80HHC OF THE ACT FOR AN AMOUNT OF RS.2,78,06,945/- WHICH WAS NOT MADE IN THE RETURN OF INCOME OR ANY REPORT IN THE FORM NO. 10CCAC. FOR T HIS, REVENUE HAS RAISED FOLLOWING GROUND NO. 2: 2. THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE C ASE, LD. CIT(A) HAD ERRED IN ACCEPTING ASSESSEES CLAIM OF DEDUCTION U/S. 80HHC FOR AN AMOUNT OF RS.2,78,06,945/- WHICH WAS NOT MADE IN THE RETURN O F INCOME OR ANY REPORT IN FORM NO.10CCAC. 12. AT THE TIME OF HEARING LD. COUNSEL FOR THE ASSE SSEE SHRI R. P. AGARWAL, SR. ADVOCATE MADE STATEMENT AT BAR THAT HE IS NOT PRESS ING THIS GROUND. HENCE, THIS GROUND IS DISMISSED AS NOT PRESSED. NOW, WE ARE COMING TO THE CO NO. 120/K/2008 FILED BY ASSESSEE. 13. THE FIRST ISSUE IN THIS CO OF ASSESSEE IS AGAIN ST THE ORDER OF CIT(A) IN HOLDING THAT THE PROCEEDINGS U/S. 147 WERE VALIDLY INITIATE D. FOR THIS, ASSESSEE HAS RAISED FOLLOWING GROUND NO.1: 10 ITA NO. 1818, 1760, 2829/K/2009, 1380, 1775 & 939/K/2008 & CO NO. 120/K/2008 NORTHERN PROJECTS LTD. AYS. 06-07, 03-04, 02 -03 & 05-06 1. FOR THAT THE LD. CIT(A) ERRED IN HOLDING THAT T HE PROCEEDINGS U/S. 147 WERE VALIDLY INITIATED. HE ERRED IN REJECTING THE GROUNDS AGAIN ST THE INITIATION OF THE PROCEEDINGS U/S. 147 AND PASSING OF THE ORDER IN PURSUANCE THEREOF. 14. AT THE TIME OF HEARING LD. COUNSEL FOR THE ASSE SSEE SHRI R. P. AGARWAL, SR. ADVOCATE MADE STATEMENT AT BAR THAT HE IS NOT PRESS ING THIS GROUND. HENCE, THIS GROUND IS DISMISSED AS NOT PRESSED. 15. GROUND NO. 3 OF ASSESSEES CO IS IN RESPECT OF CHARGING OF INTEREST U/S. 234B AND 234C OF THE ACT. THIS ISSUE IS CONSEQUENTIAL I N NATURE, HENCE WE REFRAIN FROM DEALING WITH THE SAME. 16. IN THE RESULT, REVENUES APPEALS ARE DISMISSED AND C.O. OF ASSESSEE IS PARTLY ALLOWED. 17. ORDER IS PRONOUNCED IN THE OPEN COURT ON 14.08. 2015. SD/- SD/- (B.P. JAIN) 10/08/2015 (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 14 TH AUGUST, 2015 *DKP-P.S COPY OF THE ORDER FORWARDED TO: 1. ASSESSEE NORTHERN PROJECTS LTD. 6, OLD POST O FFICE STREET, 4 TH FLOOR KOLKATA-01 2 REVENUE ACIT, CIRCLE-4, AAYAKAR BHAWAN, P-7, CHO WRINGHEE SQUARE, 8 TH FLOOR, KOLKATA-700 069. 3. THE CIT(A), KOLKATA 4. 5. CIT KOLKATA DR, KOLKATA BENCHES, KOLKATA /TRUE COPY, BY ORDER, ASSTT. REGISTRAR .