L.J.International Limited, CHENNAI V. DCIT, CHENNAI

ITA 1142/CHNY/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64395 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 12-09-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 23-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR S MOHARANA
• Assessee Lawyers: R MEENAKSHISUNDARAM
• Keywords: Rectification of order; Retrospective amendment
• Section: 143(3); 10AA; 10B; 263; 154

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL B BENCH, CHENNAI. BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER & SHRI S.S. GODARA, JUDICIAL MEMBER I.T.A. NO.1142/MDS/2012 ASSESSMENT YEAR : 2007-08 L.J. INTERNATIONAL LIMITED, 60, RUKMANI LAKSHMIPATHY SALAI, EGMORE, CHENNAI 600 008. [PAN:AAACT1149C] VS. THE DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE II(4), CHENNAI 600 034. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R.MEENAKSHISUNDARAM, ADVOCATE RESPONDENT BY : DR. S. MOHARANA, CIT DR DATE OF HEARING : 1 2 . 0 9 .201 2 DATE OF PRONOUNCEMENT : 05.10.2012 ORDER PER BENCH THIS ASSESSEES APPEAL HAS ARISEN FROM THE ORDER O F COMMISSIONER OF INCOME TAX, CHENNAI I, CHENNAI DATED 30.03.2012 IN C.NO. 218(44)/CIT- I/263/2011-12 FOR THE ASSESSMENT YEAR 2007-08 IN PR OCEEDINGS UNDER SECTION 263 OF THE INCOME TAX ACT 1961 [IN SHORT A CT]. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE IS A COMPANY ENGAGED IN THE BUSINESS OF PRODUCING AND EXPORTING TISSUE CULTURE PLANTS. REGARDING ASSESSMENT YEAR 2007-08, IT FILED ITS RET URN OF INCOME ON 29.09.2007 ADMITTING INCOME OF ` .1,35,58,850/-. AS THE RECORD OF THE CASE I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1 11 1142 142142 142/M/ /M/ /M/ /M/12 1212 12 2 REVEALS, THE ASSESSING OFFICER INITIATED SCRUTINY PROCEEDINGS AND SOUGHT DETAILS FROM THE ASSESSEE QUA DEDUCTION AND EXEMPTI ON INVOLVED UNDER SECTION 10A AND 10B WITH ALL NECESSARY PARTICULARS. THE ASSESSEE SUBMITTED ALL THE NECESSARY DETAILS SOUGHT FOR BY THE ASSESSI NG OFFICER. VIDE ORDER DATED 25.11.2009, THE ASSESSING OFFICER FINALIZED T HE ASSESSEES ASSESSMENT UNDER SECTION 143(3) OF THE ACT AS UND ER: INCOME RETURNED ` . 1,35,58,850/- AGRICULTURAL INCOME `. 7,41,316/- TAX PAYABLE THEREON ` . 40,67,655/- ADD: SURCHARGE @ 10% ` . 4,06,766/- EDUCATION CESS ` . 89,488/- ` . 45,63,909/- LESS: TDS ` .17,31,327/- AT ` .30,00,000/- ` . 47,31,327/- BALANCE REFUNDABLE ` . 1,67,418/- LESS: INT. U/S 234C `. 21,720/ - BALANCE REFUNDABLE `. 1,45,698/ - 3. THEREAFTER, ON 14.02.2011, THE ASSESSING OFFICE R ISSUED NOTICE TO THE ASSESSEE UNDER SECTION 154/155 OF THE ACT; PROPOS ING RECTIFICATION OF MISTAKE ALLEGED TO HAVE BEEN COMMITTED RE ASSESSEE S CLAIM UNDER SECTION 10B OF THE ACT QUA LIVE PLANTS PRODUCED BY THE ASSESSEE THROUGH TISSUE CULTURE AS IN HIS VIEW, THE SAME WAS CONCERNED WITH LIVE ARTICLE OR THINGS. THE ASSESSEE FILED REPLY TO THE SAID NOTICE ON 17.0 2.2011 AND TENDERED EXPLANATION IN SUPPORT OF THE ASSESSMENT FINALIZED. A PERUSAL OF THE PAPER BOOK REVEALS THAT THEREAFTER THE ASSESSING OFFICER DID NOT PASS ANY ORDER I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1 11 1142 142142 142/M/ /M/ /M/ /M/12 1212 12 3 UNDER SECTION 154 OF THE ACT EITHER ACCEPTING ASS ESSEES EXPLANATION OR REJECTING IT. 4. ON 27.02.2011, THE COMMISSIONER OF INCOME TAX I SSUED NOTICE TO THE ASSESSEE UNDER SECTION 263 OF THE ACT FOR THE REA SONS STATED HEREIN BELOW: ON PERUSAL OF THE RECORDS, IT WAS FOUND THAT DURIN G ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAD ALLOWED EXEM PTION U/S. 10B TO THE TUNE OF ` .71,22,748/-. IT IS OBSERVED THAT THE ASSESSEE HAD CLAIMED EXEMPTION IN RESPECT OF A UNIT WHICH WAS ENGAGED IN RAISING TISSUE CULTURE PLANTS AND EXPORTING THE SAME. SINCE THE PR ODUCT IS LIVE PLANTS, IT CANNOT BE CONSIDERED AS ARTICLE OR THING FOR THE PURPOSES OF SECTION 10B OF THE INCOME-TAX ACT, 1961. AS SUCH THE INDUST RIAL UNDERTAKING OF THE ASSESSEE CANNOT BE SAID TO HAVE SATISFIED THE C ONDITIONS PRESCRIBED IN SUB-SECTION 2 OF SECTION 10B. THE ASSESSING OFFI CER DID NOT EXAMINE THE RELEVANT FACTS BEFORE ALLOWING THE CLAIM. AFTER RECEIVING THE NOTICE, THE ASSESSEE FILED A DE TAILED REPLY CONTAINING THE DETAILS OF ITS MANUFACTURING AND PRO DUCTION EXERCISE LEADING TO THE PRODUCTION OF PLANTS THROUGH TISSUE CULTURE TEC HNIQUE AND SUBMITTED FOLLOWING DOCUMENTS. (A) DETAILED NOTE EXPLAINING THE VARIOUS PROCESSES INVOLVED IN THE DEVELOPMENT OF PLANTS UNDER TISSUE CULTURE TECHNOLO GY. (B) CERTIFICATE ISSUED BY THE MINISTRY OF COMMERCE AND INDUSTRY CERTIFYING THE ASSESSEE'S UNIT AS EOU. (C) CERTIFICATE ISSUED BY THE AGRICULTURAL AND PROC ESSED FOOD PRODUCTS EXPORT DEVELOPMENT AUTHORITY. (D) EXTRACT FROM THE SPECIAL ECONOMIC ZONE ACT, 200 5. (E) EXTRACT FROM CHAPTER 6 OF THE FOREIGN TRADE POL ICY 20042009 ISSUED BY THE MINISTRY OF COMMERCE, GOVERNMENT OF I NDIA. I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1 11 1142 142142 142/M/ /M/ /M/ /M/12 1212 12 4 5. HOWEVER, THE COMMISSIONER OF INCOME TAX WAS NOT CONVINCED WITH ASSESSEES REPLY. THEREFORE, VIDE IMPUGNED ORDER, B Y EXERCISING JURISDICTION UNDER SECTION 263 OF THE ACT, THE CIT HAS ORDERED REVISION OF THE ASSESSEES ASSESSMENT FINALIZED BY HOLDING AS UNDER : 5. I HAVE CAREFULLY CONSIDERED THE EXPLANATION GI VEN BY THE ASSESSEE. THE CONTENTION OF THE ASSESSEE THAT RAISI NG TISSUE CULTURE PLANTS IS MANUFACTURE FOR THE PURPOSE OF CLAIMING D EDUCTION U/S 10B OF THE IT ACT IS NOT ACCEPTABLE. 6. THE WORD 'MANUFACTURE' IS DEFINED U/S 2(29BA) T O MEAN CHANGES IN A NON-LIVING PHYSICAL OBJECT OR ARTICLE OR THING . THOUGH, DEFINITION WAS INSERTED BY THE FINANCE (NO.2) ACT 2009, WITH R ETROSPECTIVE EFFECT FROM 1.4.2009, IT DID NOT IN ANY WAY, CONFER THE BE NEFIT TO THE ASSESSEE IN THE PAST AS DEDUCTION U/S 10B IS RESTRICTED TO A RTICLES OR THINGS ONLY. 7. TO BE ELIGIBLE FOR DEDUCTION U/S 10B, EXCEPTING COMPUTER SOFTWARE, THE ARTICLE OR THING SHOULD BE 'MANUFACTU RED AND THE MANUFACTURED ARTICLE OR THING' SHOULD BE EXPORTED. THE ASSESSEE HAS NOT FULFILLED THE FIRST CONDITION. AN 'ARTICLE' OR 'THING' EVEN BEFORE INSERTION OF SEC.2(29BA) CANNOT BE A LIVING ORGANIS M AND HENCE RAISING PLANT THROUGH TISSUE CULTURE CANNOT BE TERMED AS MA NUFACTURE. 8. THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS . RELISH FOODS (1999) 237 ITR 59 (SC), MUCH BEFORE THE INSERTION O F DEFINITION U/S 2(29BA), HAD HELD THAT CULTURING/LIVING THINGS LIKE PRAWNS IS NOT MANUFACTURE. 9. A SIMILAR VIEW WAS EXPRESSED BY THE HON'BLE SUP REME COURT IN THE CASE OF CIT VS. VENKATESWARA HATCHERIES PVT. LT D., (1999) 237 ITR 174 (SC). ONCE, THE APEX COURT HAS HELD THAT FOR TH E PURPOSE OF THE IT ACT, 1961, THE WORD 'MANUFACTURE' CANNOT CONSIDER ' LIVING THINGS' UNDER ITS AMBIT, PLACING RELIANCE ON ALLIED ACTS IS ILL F OUNDED AND IS NOT BACKED BY PROPER REASONS. 10. HAVING CONSIDERED THE ABOVE FACTS, I AM OF THE VIEW THAT THE ASSESSEE IS NOT ENTITLED TO DEDUCTION U/S 10B(2) OF THE, INCOME TAX ACT AND HIS CLAIM IS ELIGIBLE TO BE DISALLOWED. IN THE ABOVE CIRCUMSTANCES, THE ASSESSMENT ORDER PASSED U/S.143(3) OF INCOME TA X ACT IN THIS CASE I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1 11 1142 142142 142/M/ /M/ /M/ /M/12 1212 12 5 ON 25.11.2009 IS SET ASIDE. THE AO IS DIRECTED TO D ISALLOW THE CLAIM OF DEDUCTION U/S.10B (2) AND PASS CONSEQUENTIAL ORDER. THEREFORE, THE ASSESSEE IS AGGRIEVED AND IS IN APPE AL BEFORE US. 6. THE AR REPRESENTING THE ASSESSEE HAS MADE US TO GO THROUGH THE GROUNDS RAISING VARIOUS PLEAS OF JURISDICTION, LEGA LITY OF COMMISSIONER OF INCOME TAXS ORDER UNDER SECTION 263, ASSESSEES CL AIM OF EXEMPTION UNDER SECTION 10B OF THE ACT AS WELL AS NECESSARY PROVI SIONS OF ACT IN CONTENDING THAT THE COMMISSIONER OF INCOME TAX HAS WRONGLY REVISED THE ASSESSMENT FINALIZED BY THE ASSESSING OFFICER. IN S UPPORT THEREOF, HE HAS ALSO CITED CASE LAW 221 ITR 882 (KER.) TITLED AS CI T V. A.V. THOMAS AND THE DECISION OF THE SPECIAL BENCH OF ITAT, KOLKATA IN T HE CASE OF MADHU JAYANTI INTERNATIONAL LTD. VS. DCIT REPORTED AS [2012] 137 ITD 377 AND PRAYED FOR ACCEPTANCE OF THE APPEAL. 7. OPPOSING THE ARGUMENTS, THE DR HAD CHOSEN TO ST RONGLY SUPPORT THE COMMISSIONER OF INCOME TAXS ORDER BY RELYING ON VA RIOUS FINDINGS CONTAINED THEREIN AS WELL AS THE CASE LAW RELIED UP ON BY THE COMMISSIONER OF INCOME TAX I.E. CIT V. RELISH FOODS (1999) 237 I TR 59 (SC) AND CIT V. VENKATESHWARA HATCHERIES PVT. LTD. [1999] 237 ITR 1 74 (SC) AND PRAYED FOR UPHOLDING THE COMMISSIONER OF INCOME TAXS ORDER. 8. AFTER CONSIDERING THE RESPECTIVE STANDS ADOPTED BY BOTH THE PARTIES BEFORE US, WE FRAME THE FOLLOWING ISSUE FOR OUR APT ADJUDICATION: I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1 11 1142 142142 142/M/ /M/ /M/ /M/12 1212 12 6 WHETHER THE COMMISSIONER OF INCOME TAX HAS RIGHTLY REVISED THE ASSESSMENT FINALIZED BY THE ASSESSING OFFICER ON TH E GROUND THAT THE ASSESSEES UNIT ENGAGED IN PRODUCTION OF PLANTS THR OUGH THE TECHNOLOGY OF TISSUE CULTURE IS NOT ENTITLED FOR EX EMPTION UNDER SECTION 10B OF THE ACT. IF SO, WHETHER THE CITS ORDER DESE RVES TO BE MODIFIED OR CONFIRMED PER RESPECTIVE STANDS OF THE PARTIES? 9. WE HAVE HEARD BOTH PARTIES AT LENGTH AND ALSO P ERUSED THE RELEVANT FINDINGS, MATERIALS AVAILABLE IN THE PAPER BOOK AS WELL AS CASE LAW CITED BY BOTH PARTIES. ADMITTEDLY, THE ASSESSEE IS IN THE BU SINESS OF PRODUCTION AND EXPORT OF TISSUE CULTURED PLANTS. ITS UNIT IS EXPOR T ORIENTED BEING APPROVED BY THE MINISTRY OF COMMERCE AND INDUSTRY, GOVERNMENT O F INDIA. IN THE PAPER BOOK OF THE CASE, THE ASSESSEE HAS ALSO ENCLOSED TH E SAID CERTIFICATE AT PAGE 19 & 20. WE NOTICE THAT SINCE THE ASSESSEES U NIT IS ESTABLISHED IN THE STATE OF KERALA, DISTRICT ERNAKULAM, THE STATE GOVE RNMENT HAS ALSO GRANTED NECESSARY PERMISSION UNDER THE PROVISIONS OF FACTOR Y ACT, 1948. 10. COMING TO THE DETAILS OF ASSESSEES ALLEGED M ANUFACTURING AND PRODUCTION ACTIVITY OF TISSUE CULTURE, WE NOTICE FROM THE PAPER BOOK THAT THE MODERN DAY TECHNOLOGY OF TISSUE CULTURE IS A MULTIF ACETED ACTIVITY WITH THE HELP OF LATEST BIOTECHNOLOGICAL TOOLS, WHEREIN FROM ONE MOTHER PLANT THE MANUFACTURER/PRODUCER CAN GET THOUSANDS OF PLANT WI THIN A SHORT SPAN OF TIME; WITH LIMITED SPACE AND MINIMUM OTHER REQUIREM ENTS. IN THE PAPER BOOK, I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1 11 1142 142142 142/M/ /M/ /M/ /M/12 1212 12 7 WE FIND THAT THE ASSESSEE HAS HIGHLIGHTED FOLLOWING STEPS IN THE TISSUE CULTURE ACTIVITY, WHICH ARE REPRODUCED HEREIN BELOW : MANUFACTURING PROCESS OF TISSUE CULTURE PLANTS: STEPS INVOLVED A) INITIATION / EXPLANT: CUT-OUT PLANT TISSUE AND PLACE IN TISSUE CULTURE CO NTAINER. THE FIRST STEP IS TO OBTAIN WHAT IS CALLED AN EXPLANT. THIS M EANS TO SIMPLY CUT-OUT A VERY SMALL PIECE OF LEAF OR STEM TISSUE, OR EVEN ISOLATE INDIVIDUAL CELLS, AND PLACE THEM IN A TISSUE CULTURE CONTAINER. THE T ISSUE HAS TO BE STERILIZED SO IT WILL NOT HAVE ANY CONTAMINATING BA CTERIA OR FUNGUS. IT IS THEN PLACED INSIDE THE TISSUE CULTURE CONTAINERS ON A GEL CALLED AGAR. IN THE AGAR IS DISSOLVED ALL THE SUGAR, NUTRIENTS AND HORMONES THE PLANT NEEDS. EXPLANTS CAN BE PIECES OF ANY PART OF THE PL ANT (LEAVES, STEMS, FLOWERS, ETC.), OR EVEN INDIVIDUAL ISOLATED CELLS. B) MULTIPLICATION: TISSUE GROWS AND PRODUCES SMALL PLANTS THE TISSUE WILL BEGIN TO GROW. IT MAY MAKE A BIG BL OB OF TISSUE CALLED CALLUS, OR IT MAY MAKE NEW SHOOTS DIRECTLY FROM THE EXPLANT TISSUE THAT WAS INSERTED IN THE CONTAINER. A MASS OF CALLUS TIS SUE IS FORMED THAT IS JUST STARTING TO MAKE NEW PLANTLETS. C) RAPID MULTIPLICATION BY TRANSFER OF CULTURES ONCE THE PLANTLETS START DEVELOPING, SOME CAN BE RE MOVED AND PLACED IN NEW TISSUE CULTURE CONTAINERS. THUS, ANOTHER 'FORES T'' OF PLANTS IS PRODUCED. THIS RESULTS. IN A RAPID MULTIPLICATION O F THE CULTURES AND MANY THOUSAND OF PLANTS CAN BE PRODUCED IN A FEW MO NTHS. SOME OF THE SMALL PLANTLETS CAN BE REMOVED AND TRANSFERRED TO N EW TISSUE CULTURE CONTAINERS. THESE WILL PRODUCE MORE SHOOTS AND FILL THE CONTAINER: D) TRANSPLANTING WHEN THE PLANTLETS ARE LARGE ENOUGH, THEY CAN BE RE MOVED FROM THE TISSUE CULTURE CONTAINER AND TRANSFERRED INTO POTS WITH POTTING SOIL. WHEN THE SMALL PLANT CLONES ARE REMOVED FROM THE CU LTURE CONTAINERS, THEY MUST BE TRANSPLANTED INTO SOME TYPE OF ACCLIMA TION CONTAINER OR KEPT UNDER A MIST SYSTEM UNTIL THEY ACCLIMATE TO TH E AMBIENT I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1 11 1142 142142 142/M/ /M/ /M/ /M/12 1212 12 8 ENVIRONMENT. AFTER ACCLIMATION, THE YOUNG PLANTS CA N BE TRANSPLANTED AND GROWN IN POTS IN A GREENHOUSE TO PRODUCE NEW PL ANTS. THE ENTIRE TISSUE CULTURING PRODUCTION PROCESS IS B EING CARRIED OUT IN A HIGHLY STERILIZED ENVIRONMENT. ENTRY PROTOCOLS OF M AN AND MATERIAL ARE STRICTLY CONTROLLED AND DONE UNDER EXTREME HYGIENIC CONDITIONS. THE PROCESS OF INITIATION / MULTIPLICATION IS PERFORMED BY THE TRAINED MANPOWER IN AN EQUIPMENT CALLED LAMINAR FLOW BENCHE S (LFB'S). THE MANUFACTURING PROCESS OF TISSUE CULTURE PLANTS REQU IRES QUALITY INPUT MATERIALS AND ADEQUATE TRAINED PERSONNEL TO WORK IN THE TISSUE CULTURE FACTORY (USUALLY CALLED TISSUE CULTURE LABORATORY). THE PLANTS ONCE MULTIPLIED WILL BE MOVED INTO GROWT H CHAMBERS / GROWTH ROOMS WHICH ARE SUPPORTED / EQUIPPED WITH TH E FACILITY OF PROVIDING THE LIGHT AND TEMPERATURE REQUIRED FOR TH E GROWTH OF THE PLANTS. THE REQUIREMENTS OF TEMPERATURE AND LIGHTS FOR EACH VARIETY OF PLANTS MAY VARY AND THIS IS CATERED TO BY THE SUPPO RT OF LIGHTING AND COOLING SYSTEMS. 11. SO FAR AS THE PROVISIONS OF ACT ARE CONCERNE D, WE NOTICE THAT SECTIONS 10A, 10AA,10B AND 10BA PROVIDE INCENTIVES TO CONCERNED ASSESSEE ENGAGED IN VARIOUS BUSINESSES IN NEWLY EST ABLISHED UNDERTAKINGS IN FREE TRADE ZONE, SEZ AND 100% EXPORT ORIENTED UN DERTAKINGS AND SO ON. IN THE INSTANT APPEAL, THE PRINCIPAL REASON CITED B Y THE COMMISSIONER OF INCOME TAX FOR DENYING THE ASSESSEE DEDUCTION UNDER SECTION 10B OF THE ACT IS THAT THE ASSESSEES ACTIVITY OF PRODUCING PLANTS THROUGH TISSUE CULTURE DOES NOT AMOUNT TO MANUFACTURING EXERCISE. THEREFOR E, LIMITING OUR SCOPE OF ADJUDICATION, WE FIND THAT THE LEGISLATURE BY WAY O F FINANCE ACT, 1988 HAD INSERTED SECTION 10B IN THE ACT FOR PROVIDING IMP ETUS TO EXPORT ORIENTED UNDERTAKINGS. IN THE SAID PROVISION, SECTION 10B(2) (1) CONTAINED INTER ALIA, ONE OF THE CONDITION FOR THE CONCERNED ASSESSEE THA T IT MANUFACTURES OR I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1 11 1142 142142 142/M/ /M/ /M/ /M/12 1212 12 9 PRODUCES ANY ARTICLE OR THING. FURTHER, IN THE EXP LANATION TO THE ABOVE STATUTORY PROVISIONS, CLAUSE 3(A) EXPLAINED THE ACT IVITY OF MANUFACTURING TO INCLUDE IN ANY PROCESS. AS THE LEGISLATIVE HISTOR Y OF THE PROVISIONS INDICATE, SECTION 10B WAS SUBSTITUTED BY THE FINANCE ACT, 200 0 W.E.F. 01.04.2001. WE FIND THAT THE SUBSTITUTING PROVISIONS FURTHER ENWID ENED THE SCOPE OF CONDITIONS ENUMERATED IN THE SECTION 10B(2)(I), WHI CH THIS TIME READ TO BE IT MANUFACTURES OR PRODUCES ANY ARTICLE OR THINGS OR C OMPUTER SOFTWARE. HOWEVER, THE LEGISLATURE DID NOT DEFINE THE WORD M ANUFACTURE INCLUDING ANY PROCESSING EXERCISE ALIKE THE SUBSTITUTED PROVI SION (SUPRA). THEREAFTER, THE FINANCE ACT, 2003 W.E.F. 01.04.2004 ADDED EXPLA NATION 4 TO SECTION 10B WHICH STATED THAT MANUFACTURE OR PRODUCE WOULD ALS O INCLUDE CUTTING AND POLISHING PRECIOUS STONE AND SEMI PRECIOUS STONE. BUT, AS ALREADY CLARIFIED, THE WORD MANUFACTURE OR PRODUCE DID NOT FIND ANY DEFINITION IN SECTION 10B. DURING ALL THIS, THE ASSESSEE FILED ITS RETURN IN QUESTION PERTAINING TO THE ASSESSMENT YEAR 2007-08. THEREAFTER, THE FINANCE (N O. 2) ACT OF 2009, THE LEGISLATURE HAS CHOSEN TO INCORPORATE DEFINITION OF THE WORD MANUFACTURE IN SECTION 2(29BA) OF THE ACT AS UNDER: (29BA) MANUFACTURE, WITH ITS GRAMMATICAL VARIATI ONS, MEANS A CHANGE IN A NON-LIVING PHYSICAL OBJECT OR ARTICLE O R THING. (A) RESULTING IN TRANSFORMATION OF THE OBJECT OR AR TICLE OR THING INTO A NEW AND DISTINCT OBJECT OR ARTICLE OR THING HAVING A DIFFERENT NAME, CHARACTER AND USE; OR (B) BRINGING INTO EXISTENCE OF A NEW AND DISTINCT O BJECT OR ARTICLE OR THING WITH A DIFFERENT CHEMICAL COMPOSITION OR INTE GRAL STRUCTURE. I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1 11 1142 142142 142/M/ /M/ /M/ /M/12 1212 12 10 IT IS ALSO FOUND THAT THE SAID DEFINITION HAS BEEN INCORPORATED IN THE ACT BY THE LEGISLATURE WITH RETROSPECTIVE EFFECT I.E. W.E.F. 01.04.2009. MEANING THEREBY THAT THE LEGISLATURE ITSELF HAS THO UGHT IT APPROPRIATE NOT TO INCORPORATE THE DEFINITION WITH RETROSPECTIVE EFFEC T FOR THE PERIOD PRECEDING 01.04.2009. THIS ULTIMATELY IMPLIES THAT THE SAID D EFINITION DOES NOT COVER THE ASSESSEES CASE RE ASSESSMENT YEAR 2007-08. THEREFO RE, THE ASSESSEES EXPORT BUSINESS ACTIVITY HAS TO BE JUDGED UNDER SEC TION 10B(2) OF THE ACT INDEPENDENT OF THE DEFINITION UNDER SECTION 2(29BA) OF THE ACT. SO, WE DEEM IT PROPER TO DECIDE THE ISSUE IN HAND PARTICULARLY, WHETHER THE ASSESSEES TISSUE CULTURE ACTIVITY AMOUNTS TO MANUFACTURE OR PRODUCES AS PROVIDED UNDER SECTION 10B(2)(I) OF THE ACT. 12. AS ALREADY STATED HEREIN ABOVE, THE OTHER CORR ESPONDING PROVISIONS OF VARIOUS EXEMPTED INCOME PROVIDED IN SECTION 10A AND SECTION 10AA OF THE ACT ALSO CONTAIN SIMILAR PROVISIONS. AFTER PERUSI NG THE SAID PROVISIONS, WE FIND THAT IN SECTION 10A, THE WORD MANUFACTURE OR PRODUCE HAS NOWHERE BEEN SPECIFICALLY DEFINED. WHEREAS, IN THE OTHER CO RRESPONDING PROVISIONS I.E. SECTION 10AA OF THE ACT PERTAINING TO SEZS UNIT, THE LEGISLATURE HAS DULY DEFINED THE WORD MANUFACTURE IN SUB-SECTION 9(III) OF THE ACT AS (III) MANUFACTURE SHALL HAVE THE SAME MEANING AS ASSIGNED TO IT IN CLAUSE (R) OF SECTION 2 OF THE SPECIAL ECONOMIC ZON ES ACT, 2005. I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1 11 1142 142142 142/M/ /M/ /M/ /M/12 1212 12 11 IN THE ABOVE REPRODUCED PROVISION, SINCE THE LEGI SLATURE HAS ITSELF DEFINED MANUFACTURE TO BE THE SAME UNDER SECTION 2(R) OF THE SEZS ACT, WE ALSO DEEM IT APPROPRIATE TO REPRODUCE THE SAID P ROVISIONS HEREIN BELOW: (R) MANUFACTURE MEANS TO MAKE, PRODUCE, FABRICAT E, ASSEMBLE, PROCESS OR BRING INTO EXISTENCE, BY HAND OR BY MACH INE, A NEW PRODUCT HAVING A DISTINCTIVE NAME, CHARACTER OR USE AND SHA LL INCLUDE PROCESSES SUCH AS REFRIGERATION, CUTTING, POLISHING, BLENDING , REPAIR, REMAKING, RE- ENGINEERING AND INCLUDES AGRICULTURE, AQUACULTURE, ANIMAL HUSBANDRY, FLORICULTURE, HORTICULTURE, PISCICULTURE, POULTRY, SERICULTURE, VITICULTURE AND MINING. IN OUR OPINION, AND MORE SO, IN VIEW OF THE FACTS THAT IN THE IMPUGNED ASSESSMENT YEAR, THERE IS NO SPECIFIC DEFINITION OF WORD MANUFACTURE OR PRODUCE, WE HOLD THAT DEFINITION OF MANUFACTURE CONTAINED IN THE CORRESPONDING PROVISIONS OF SECTION 10AA OF THE AC T WOULD ALSO APPLY QUA THE ASSESSEES CASE VIS-A-VIZ ITS MANUFACTURING ACT IVITY. WHILST COMING TO THIS CONCLUSION, WE FIND SUPPORT FROM THE ITAT KOLKATA S PECIAL BENCHS DECISION CITED BY THE ASSESSEE, WHEREIN IT HAS BEEN OBSERVED AS FOLLOWS: 35. WE ARE OF THE CONSIDERED VIEW THAT THE CONTENTION OF THE ASSESSEE 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 A ND THE EXEMPTION AVAILABLE TO 100% EOU U/S. 10B OF THE ACT ARE VERY SIMILAR IN NATURE AND THE WORDINGS OF THE STATUTORY PROVISIONS ARE SI MILAR IN NATURE IS CORRECT. .. 36. WE, IN VIEW OF THE ABOVE, HOLD THAT WHEN THE P RODUCTS 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 E XCLUSIVELY ENGAGED IN BLENDING AND PACKING OF TEA FOR EXPORT MAY NOT BE M ANUFACTURER OR PRODUCER OF ANY OTHER ARTICLE OR THING IN COMMON PA RLANCE. HOWEVER, FOR THE PURPOSE OF SECTION 10A, 10AA AND 10B, WE HAVE T O CONSIDER THE I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1 11 1142 142142 142/M/ /M/ /M/ /M/12 1212 12 12 DEFINITION OF THE WORD MANUFACTURE AS 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 DEF INITION OF MANUFACTURE AS PER SECTION 2(R) OF THE SEZ ACT, 2 005 IS INCORPORATED IN SECTION 10AA OF THE INCOME-TAX ACT WITH EFFECT FROM 10.02.2006. HONBLE KERALA HIGH COURT IN THE CASE OF GIRNAR INDUSTRIES (SUPRA) HAD HELD SUCH AMENDMENT IN SECTION 10AA TO BE OF CLARIFICATO RY IN NATURE. THE DEFINITION OF MANUFACTURE UNDER THE SEZ ACT, EXIM POLICY, FOOD ADULTERATION RULES AND TEA (MARKETING) CONTROL ORDE R IS MUCH WIDER THAN WHAT IS THE MEANING OF THE TERM MANUFACTURE UNDER THE COMMON PARLANCE, AND IT INCLUDES PROCESSING, BLENDING, PAC KAGING ETC. IN OUR OPINION, THOUGH THE SPECIAL BENCH HAD DEAL T WITH THE CASE OF ASSESSMENT YEARS 2003-04 AND 2005-06, BUT AT THE SA ME TIME, BEING CONSCIOUS OF THE FACT THAT IN THE SAID ASSESSMENT Y EARS AND WELL UPTO 2009, THERE WAS NO DEFINITION OF MANUFACTURE, THEREFORE , WE DEEM IT APPROPRIATE TO APPLY THE SAID DEFINITION CONTAINED IN SECTION 10AA OF THE ACT QUA THE PRESENT CASE OF ASSESSMENT YEAR 2007-08 FALLING UND ER SECTION 10B(1) OF THE ACT. WE CONCLUDE, IN THE LIGHT THEREOF, THAT THE ASSESSEES BUSINESS ACTIVITY OF TISSUE CULTURE IS MANUFACTURE OR PRODUCES WITH IN THE MEANING OF SECTION 10B(2)(I) OF THE ACT AND COMMISSIONER OF INCOME T AX HAD WRONGLY HELD THAT SINCE ASSESSEES PRODUCE IS PLANT, WHICH IS A LIVELY OBJECT, THEREFORE, IT IS COVERED BY SECTION 2(29)BA) OF THE ACT. IN OUR OPINION, THE COMMISSIONER OF INCOME TAX HAS NOT PROCEEDED ON THE CORRECT FACTUAL AND LEGAL INTERPRETATION OF SECTION 2(29BA) OF THE ACT QUA FACTS AND CIRCUMSTANCES OF THE INSTANT CASE. AS ALREADY EXPLA INED HEREINABOVE, THE TISSUE CULTURE IS A MODERN DAY ADVANCED TECHNOLOGY OF THE 21 ST CENTURY, WHICH HAS REDEFINED THE CONCEPT A PLANTS GROWTH. I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1 11 1142 142142 142/M/ /M/ /M/ /M/12 1212 12 13 WE ALSO NOTICE THAT THE COMMISSIONER OF INCOME TAX HAS PLACED RELIANCE ON THE CASE LAW OF HONBLE SUPREME COURTS DECISION OF RELISH FOODS AND VEKATESHWARA HATCHERIES PVT. LTD. (SUPRA). IN OUR H UMBLE OPINION, THE SAID CASE LAW IS NOT APPLICABLE QUA THE ASSESSEES ACTIV ITY OF PLANT PRODUCTION THROUGH TISSUE CULTURE AS WE FIND THAT IN THOSE CAS ES, THERE WAS NO ULTIMATE MANUFACTURE OR PRODUCTION AS IN THE FIRST CASE THE COMMODITY WAS SHRIMP, WHICH WAS NOT PRODUCED. THEREFORE, THEIR LORDSHIPS OF THE HONBLE SUPREME COURT DID NOT ACCEPT THE ASSESSEES ARGUMENT THEREI N THAT THE SAME AMOUNTED TO ANY MANUFACTURE OR PRODUCTION ACTIVITY. 13. SIMILARLY, IN THE CASE OF VENKATESHWARA HATCHE RIES PVT. LTD.(SUPRA), KEEPING IN VIEW THE PECULIAR BUSINESS ACTIVITY OF T HE ASSESSEE, THE HONBLE APEX COURT HAD OBSERVED THAT THERE WAS NO MANUFACTU RE OR PRODUCTION SINCE THE CHICKS WERE MERELY HATCHED WHICH DID NOT AMOU NT TO MANUFACTURE OR PRODUCE. CONTRARY TO THE FACTS OF THOSE CASES, IN T HE INSTANT CASE THE ASSESSEE IS INVOLVED IN TISSUE CULTURE, WHICH CAN I N NO WAY BE CALLED ANY ACTIVITY OTHER THAN MANUFACTURE OR PRODUCE BECAUS E ONE MOTHER PLANT IS TISSUE CULTURED, WHICH GIVES RISE TO PRODUCTION OF VOLUMINOUS NUMBER OF PLANTS BY ARTIFICIAL PROCESSES AND STAGES (SUPRA). HENCE, WE HOLD THAT THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE BEFORE US ARE ALTOGETHER DIFFERENT THAN THOSE BEFORE THE HONBLE APEX COURT. ACCORDINGLY, IN OUR CONSIDERED OPINION, THE ASSESSING OFFICER DID NOT C OMMIT ANY ERROR I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.1 11 1142 142142 142/M/ /M/ /M/ /M/12 1212 12 14 PREJUDICIAL TO THE INTEREST OF REVENUE IN GRANTING THE ASSESSEE DEDUCTION UNDER SECTION 10B OF THE ACT SO AS TO GIVE RISE T O EXIGIBILITY OF COMMISSIONER OF INCOME TAXS JURISDICTION UNDER SEC TION 263 OF THE ACT. 14. IN THE LIGHT OF ABOVE DISCUSSION, WE ARE OF TH E OPINION OF THE ASSESSING OFFICER IN FINALIZING THE ASSESSMENT HAD RIGHTLY GR ANTED THE ASSESSEE DEDUCTION UNDER SECTION 10B OF THE ACT. IT WAS ON E OF THE POSSIBLE VIEW AS PER LAW, WHICH COULD NOT BE REVISED BY CIT UNDER SE CTION 263 OF THE ACT. CONSEQUENTLY, ONCE WE HAVE HELD THAT THE ASSESSEES UNIT IS ENTITLED TO BE TREATED TO BE A QUALIFYING UNIT UNDER THE PROVISION OF SECTION 10B(2)(1) OF THE ACT, OUR CONCLUSION IS THAT THE ORDER OF THE COMM ISSIONER OF INCOME TAX REVISING THE ASSESSMENT DOES NOT WITHSTAND THE TEST OF THE LAW. IN VIEW OF THE SAME, WE ACCEPT THE ASSESSEES APPEAL AND NULLIFY T HE CITS ORDER DATED 30.03.2012 PASSED UNDER SECTION 263 OF THE ACT RE VISING THE ASSESSMENT ORDER DATED 25.11.2009 (SUPRA). 15. ALLOWED. ORDER PRONOUNCED ON FRIDAY, THE 5 TH OF OCTOBER, 2012 AT CHENNAI. SD/ - SD/ - (N.S. SAINI) ACCOUNTANT MEMBER (S.S. GODARA) JUDICIAL MEMBER CHENNAI, DATED, THE 05.10.2012 VM/- TO: THE ASSESSEE//A.O./CIT(A)/CIT/D.R.