ITO WD 3(4), THANE V. ULHAS GOPAL KARLE, THANE

ITA 2033/MUM/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1781 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-12-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2011-2012
• Appeal Filed On: 08-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAURABH DESHPANDE
• Assessee Lawyers: DEEPAK TIKEKAR
• Section: 143(3); 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'F' BENCH, MUMBAI BEFORE SHRI JASON P. BOAZ, ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN , JUDICIAL MEMBER ITA NO. 2033/MUM/2015 (ASSESSMENT YEAR: 2011-12) INCOME TAX OFFICER - 3(4) VS. SHRI ULHAS GOPAL KARLE 6 TH FLOOR, ASHAR IT PARK ROAD NO. 16Z, WAGLE INDUSTRIAL ESTATE THANE (W) 400604 204, KALIKA TOWER OPP. PRATAP CINEMA KOLBAD ROAD THANE (W) 400601 PAN AFYPK0221L APPELLANT RESPONDENT APPELLANT BY: SHRI SAURABH DESHPANDE RESPONDENT BY: SHRI DEEPAK TIKEKAR DATE OF HEARING: 29.11.2016 DATE OF PRONOUNCEMENT: 01.12.2016 O R D E R PER JASON P. BOAZ, A.M. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)- 2, THANE DATED 16.01.2015 FOR A.Y. 2011-12. 2. THE FACTS OF THE CASE, BRIEFLY, ARE AS UNDER: - 2.1 THE ASSESSEE, PROP. M/S. ORGANOCHEM PRODUCTS (H P) BASED AT VILLAGE AMBOTA, DIST. SOLON, PARWANOO, HIMACHAL PRADESH IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF NUTRITIONAL FOO D SUPPLEMENTS, AGRO PRODUCTS, VETERINARY FEED SUPPLEMENTS, ETC. FOR A.Y . 2011-12 THE ASSESSEE FILED HIS RETURN OF INCOME ON 29.09.2011 DECLARING INCOME OF ` 12,70,164/- AFTER CLAIMING DEDUCTION OF ` 94,43,597/- UNDER SECTION 80IC OF THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT'). THE RETURN WAS PROCESSED UNDER SECTION 143(1) OF THE ACT AND THE CASE WAS SUBSEQUENTLY TAK EN UP FOR SCRUTINY. THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF TH E ACT VIDE ORDER DATED 02.01.2014 WHEREIN THE ASSESSEES INCOME WAS DETERM INED AT ` 1,07,13,762/-, IN VIEW OF THE ASSESSING OFFICER (AO ) DISALLOWING THE ITA NO. 2033/MUM/2015 SHRI ULHAS GOPAL KARLE 2 ASSESSEES CLAIM FOR DEDUCTION OF ` 94,43,597/- UNDER SECTION 80IC OF THE ACT, AS HE WAS OF THE VIEW THAT THE ACTIVITIES CARR IED OUT BY THE ASSESSEE IN ITS UNIT AT HIMACHAL PRADESH DID NOT AMOUNT TO MANU FACTURING ACTIVITY AS ENVISAGED BY THE PROVISIONS OF SECTION 80IC OF THE ACT AND THE BUSINESS CARRIED OUT IN ITS UNIT AT HIMACHAL PRADESH WAS DUE TO THE RE-CONSTRUCTION OF ITS ALREADY EXISTING BUSINESS AT BADLAPUR UNIT. 2.2 AGGRIEVED BY THE ORDER OF ASSESSMENT DATED 01.0 1.2014 FOR A.Y. 2011- 12, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT (A)-2, THANE. THE LEARNED CIT(A) ALLOWED THE ASSESSEES APPEAL VIDE T HE IMPUGNED ORDER DATED 16.01.2015, BY HOLDING THAT, SINCE THE UNIT A T PARWANOO, HIMACHAL PRADESH WAS CARRYING ON MANUFACTURING ACTIVITIES AND ALSO THAT THIS UNIT WAS NOT SET UP BY RECONSTITUTION/SPLITTING UP OF T HE EXISTING BUSINESS OF THE ASSESSEE, THE ASSESSEE WAS ENTITLED TO THE DEDU CTION CLAIMED UNDER SECTION 80-IC OF THE ACT. 3.1 REVENUE, BEING AGGRIEVED BY THE ORDER OF THE CI T(A)-2, THANE DATED 16.01.2015 FOR A.Y. 2011-12, HAS PREFERRED THIS APP EAL RAISING THE FOLLOWING GROUNDS: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A)-2, THANE HAS ERRED IN ALLOWING THE D EDUCTION U/S 80IC OF THE I.T. ACT, OVERLOOKING THE FACT THAT THE CONDITIONS LAID DOWN IN SECTION 80IC OF I.T. ACT ARE NOT SATISFIED BY THE ASSESSEE. 2. THE APPELLANT PRAYS THE ORDER OF THE LD. CIT(A)- 2, THANE MAY BE VACATED AND THAT OF THE ASSESSING OFFICER BE RESTOR ED. 3. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTE R ANY GROUND/GROUNDS, WHICH MAY BE NECESSARY. 3.2.1 FROM A PERUSAL OF THE GROUND RAISED (SUPRA), WE FIND THAT THE ONLY ISSUE BEFORE US FOR ADJUDICATION IN THIS APPEAL IS WHETHER OR NOT THE ASSESSEE IS ENTITLED TO BE ALLOWED DEDUCTION CLAIME D UNDER SECTION 80-IC OF THE ACT. IN THIS REGARD, WE HAVE HEARD BOTH PARTIES IN THE MATTER AND IT HAS BEEN FAIRLY AGREED TO THAT THIS ISSUE HAS BEEN CONS IDERED BY A COORDINATE BENCH OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FO R ASSESSMENT YEARS 2009-10 AND 2010-11 AND THE COORDINATE BENCH IN ITS ORDER IN ITA NO. 2369/MUM/2013 AND 973/MUM/2014 DATED 08.10.2015 HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE, I.E. THAT THE ASSE SSEE WAS ENTITLED TO BE ITA NO. 2033/MUM/2015 SHRI ULHAS GOPAL KARLE 3 ALLOWED DEDUCTION UNDER SECTION 80IC OF THE ACT SIN CE THE UNIT AT PARWANOO, HIMACHAL PRADESH WAS CARRYING ON MANUFAC TURING ACTIVITIES AND ALSO THAT THIS UNIT AT PARWANOO WAS NOT SET UP BY RECONSTRUCTION/ SPLITTING UP OF THE EXISTING BUSINESS OF THE ASSESS EE. IN ITS ORDER (SUPRA) THE COORDINATE BENCH HAS DECIDED THE ISSUE AS UNDER : - 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE, AN INDIVIDUAL, IS A PROPRIETOR OF M/S. ORGANOCHEM P RODUCTS (HP) AT PARWANOO IN THE STATE OF HIMACHAL PRADESH. THE CONC ERN OF THE ASSESSEE IS ENGAGED IN MANUFACTURING AND SALE OF NU TRITIONAL FOOD SUPPLEMENTS, AGRO PRODUCTS AND VETERINARY FEED SUPP LEMENTS, ETC. THE ASSESSEE CLAIMED RS.2,55,90,230/- AS DEDUCTION U/S 80IC OF THE ACT, IN RESPECT OF PROFIT EARNED FROM MANUFACTURING ACTIVITIES. THE LD. ASSESSING OFFICER DISALLOWED THE CLAIMED DEDUCTION ON FOLLOWING GROUNDS:- (A) THAT THERE IS NO MANUFACTURING ACTIVITY CARRIED OUT BY THE ASSESSEE AS THE ASSESSEE IS MERELY MIXING UP THE INGREDIENTS/RAW MATERIAL. (B) THE ENTERPRISE IS FORMED BY SPLITTING UP OR REC ONSTRUCTION OF AN EXISTING BUSINESS AND THUS, HAS NOT FULFILLED THE C ONDITIONS PROVIDED FOR CLAIMING DEDUCTION U/S 80IC OF THE ACT . IN VIEW OF THE ABOVE, THE LD. ASSESSING OFFICER DI SALLOWED THE CLAIMED DEDUCTION U/S 80IC OF THE ACT BY OBSERVING THAT THE ASSESSEE IS MERELY MIXES VARIOUS INGREDIENTS, REQUIRED FOR F INAL PRODUCTS, WITH THE HELP OF MACHINERIES AND THE FINAL PRODUCT/FINIS H PRODUCT IS FILLED IN POUCHES, THUS, NO MANUFACTURING PROCESS IN INVOLVED , THEREBY THE ASSESSEE IS NOT ENTITLED FOR THE CLAIMED DEDUCTION. 2.2. ON APPEAL BEFORE THE LD. COMMISSIONER OF INCO ME TAX (APPEALS), THE CLAIM OF THE ASSESSEE WAS ALLOWED AN D THE WHOLE PROCESS WAS HELD TO BE MANUFACTURING, AGAINST WHICH THE REVENUE IS AGGRIEVED AND IS IN APPEAL BEFORE THIS TRIBUNAL. SINCE, IDENTICAL ISSUES ARE INVOLVED IN BOTH THE AP PEALS, THEREFORE, THESE CAN BE DISPOSED OFF BY THIS COMMON AND CONSOLIDATED ORDER. BEFORE COMING TO ANY CONCLUSION, WE ARE EXPE CTED TO ANALYZE THE PROCESS ADOPTED BY THE ASSESSEE, WHICH IS REPRO DUCED/ SUMMARIZED HEREUNDER:- ITA NO. 2033/MUM/2015 SHRI ULHAS GOPAL KARLE 4 ITA NO. 2033/MUM/2015 SHRI ULHAS GOPAL KARLE 5 THE ABOVE PROCESS OF THE ASSESSEE NEEDS ANALYSIS WH ICH IS FURTHER ELABORATED AS UNDER:- 1) 'NATURAMORE PROTEIN SUPPLEMENT (VANILLA FLAVOUR) ' 'THESE MATERIALS ARE CHARGED IN THE RIBBON BLENDER AND MIXED THOROUGHLY FOR ABOUT 30 MINUTES TO GET A UNIFORM PR EMIX. ' 'EXCIPIENTS LIKE MALTODEXTRIN, SOYA PROTEIN ISOLATE , PREMIX, SUGAR ARE WEIGHED USING BLALANCE, AS PER THE FORMULA. ' 'WEIGHED EXCIPIENTS ARE CHARGED IN THE BLENDER AND MIXED THOROUGHLY, 15 MINUTES IN EACH DIRECTION (TOTAL 30 MINUTES).' 'SIEVED BLEND IS THEN SENT TO PACKAGING LINE WHERE IT IS FILLED MANUALLY IN POUCHES AND WEIGHED AS PER REQUIREMENT. ' ITA NO. 2033/MUM/2015 SHRI ULHAS GOPAL KARLE 6 2) 'GAYATRI 'S ALOEVERA JUICE (NON FIBROUS) MANUFAC TURING PROCESS NO.1 ' 'THE MIXTURE IS MIXED THOROUGHLY FOR 20 MINS WITH A HOMOGENIZER SO THAT THE POWDERS DISSOLVE COMPLETELY IN THE WATE R' '1 KG OF ALOEVERA 200 X POWDER IE. SPRAY DRIED ALOE VERA EXTRACT IS ADDED TO THE VESSEL AND STIRRED WELL WITH THE HOMOG ENIZER FOR 20 MINS' 'THE ALOEVERA JUICE IS THEN FILLED MANUALLY IN PLAS TIC BOTTLES, FOILED BY HEAT SEALING LABELLED MANUALLY, SHRINKWRAPPED IN THE SHRINK TUNNEL, PUT IN MASTER CARTONS. CARTONS ARE THEN STR APPED WITH NYLON TAPES AND BOPP TAPES. ' 3) 'GAYATRI'S ALOEVERA JUICE (FIBROUS) MANUFACTURIN G PROCESS NO.2' 'THE MIXTURE IS MIXED THOROUGHLY FOR 20 MINS WITH A HOMOGENIZER SO THAT THE POWDERS DISSOLVE COMPLETELY IN THE WATE R' 'THE MIXTURE IS THEN HEATED FOR 20 MINS AT 70 DEGRE E C TO KILL MICROBES. IT IS THEN ALLOWED TO COOL AND THEN 200G OF CITRIC ACID ARE ADDED TO IT. THE MIXTURE IS THEN MIXED WITH A HOMO GENIZERFOR 20 MINUTES. ' 'THE FIBROUS ALOEVERA JUICE IS THEN FILLED MANUALLY IN PLASTIC BOTTLES, FOILED BY HEAT SEALING LABELLED MANUALLY, SHRINKWRAPPED IN THE SHRINK TUNNEL, PUT IN MASTER CARTONS. CARTON S ARE THEN STRAPPED WITH NYLON TAPES AND BOPP TAPES. ' 4) 'HERBOMINERAL POWDER FOR PETS' 'THE MIXTURE IS MIXED THOROUGHLY FOR 20 MINS IN A R IBBON BLENDER' 'THE BLENDED MIXTURE IS THEN SIEVED FOR ELIMINATING ANY FOREIGN PARTICLES AND COLLECTED IN A STORAGE VESSEL. ' 'THE POUCHES ARE ,FILLED IN PLASTIC JARS WHICH ARE LABELED MANUALLY, SHRINKWRAPPED IN THE SHRINK TUNNEL, PUT I N SHIPPER CARTONS WHICH ARE FINALLY STRAPPED WITH NYLON TAPES AND BOPP TAPES MANUALLY ' 5) 'BIOFIT BIO-95 ADJUVANT' 'THE MIXTURE IS MIXED THOROUGHLY FOR 30 MINS WITH A HOMOGENIZER SO THAT THE MATERIAL GETS DISSOLVE COMPLETELY SO AS TO GET A UNIFORM BLEND' 'THE BLENDED MATERIAL IS THEN FILLED IN PLASTIC BOT TLES WITH A LIQUID FILLING MACHINE. THE BOTTLES ARE CAPPED MANUALLY AN D LABELED MANUALLY' 'THE BOTTLES ARE THEN PASSED THROUGH SHRINK TUNNEL AND PACKED IN CARTONS. THE CARTONS ARE THEN STRAPPED MANUALLY WITH NYLON TAPES AND BOPP TAPES. ' 6) 'BIOFIT CATTLE FEED CONCENTRATE (BIOFIT CFC) ' ITA NO. 2033/MUM/2015 SHRI ULHAS GOPAL KARLE 7 'THESE MATERIALS ARE CHARGED IN A RIBBON BLENDER AN D MIXED THOROUGHLY FOR ABOUT 30 MINS TO GET UNIFORM PREMIX' 'EXCIPIENTS LIKE DICALCIUM PHOSPHATE, HERBS, TALC A ND SOYA POWDER AND PREMIX ARE WEIGHED USING BALANCE, AS PER FORMUL A' 'WEIGHED EXCIPIENTS AND THE PREMIX ARE CHARGED IN T HE BLENDER AND MIXED THOROUGHLY, 15 MINUTES IN EACH DIRECTION (TOTAL 30 MINUTES). ' 'THE FINAL RESULTANT BLEND IS THEN COLLECTED IN STO RAGE VESSEL AND SENT JOR SIEVING TO ELIMINATING ANY FOREIGN PARTICL ES. ' 'SIEVED BLEND IS THEN SENT TO PACKAGING LINE WHERE IT IS FILLED MANUALLY IN PRINTED POUCHES AND WEIGHED AS PER REQ UIREMENT. ' THE POUCHES ARE THEN PUT IN SHIPPER CARTONS WHICH A RE FINALLY STRAPPED WITH NYLON TAPES AND BOPP TAPES MANUALLY' 7. THE APPELLANT IN RESPONSE TO THIS DISALLOWANCE H AS FILED DETAILED SUBMISSIONS ON THE MANUFACTURING PROCESS U NDERTAKEN BY HIM. EXTRACTS OF THE SUBMISSIONS ARE REPRODUCED AS UNDER- INPUT- MANUFACTURING PROCESS- OUTPUT AFTER SETTING UP THE MANUFACTURING UNIT AS AFORESAI D, THE ASSESSEE ACTUALLY CARRIED OUT MANUFACTURE/PRODUCTION OF ITEM S BY EMPLOYING A PROCESS WHICH IS GIVEN IN DETAIL (SUMMA RIZED ABOVE) NOTE ON MANUFACTURING ACTIVITIES 1. THE ABOVE MENTIONED FINISHED PRODUCTS ARE SCIENT IFICALLY WELL BALANCED FORMULATIONS AND HAVE BEEN WIDELY ACCEPTED BY SEVERAL CUSTOMERS AS BRANDED PRODUCTS AS THEY HAVE SHOWN EX CELLENT RESULTS. 2. MOST OF THE RAW MATERIALS ARE NOT EASILY CONSUMA BLE OR THEY ARE NOT MEANT FOR DIRECT CONSUMPTION IN ISOLATION WHERE AS RESULTANT FINISHED PRODUCTS MENTIONED IN SR.1 AND SR.2 ARE ME ANT FOR DIRECT CONSUMPTION BY HUMAN BEINGS. WHEREAS FINISHED PRODU CTS MENTIONED IN SR. NO. 4 AND 5 IS SPECIFICALLY MEANT FOR VETERINARY USE THOUGH SOME OF THE RAW MATERIALS FROM WHICH IT IS PRODUCED MAY BE CONSUMED BY HUMAN BEING. SR. NO. 3 IS AN AGR O-ADDITIVE. THIS WOULD EMPHASIZE THAT RAW MATERIALS USED IN MAN UFACTURING OF FINISHED PRODUCTS ARE TOTALLY DIFFERENT AND DIST INCT FROM RESULTANT FINISHED PRODUCTS. 3. THE RAW MATERIALS MENTIONED ABOVE ARE GENERIC IN NATURE HAVING DIFFERENT PROPERTIES SUCH AS PARTICLE SIZES, COLOUR, ODOUR, BULK DENSITY, PH VALUE ETC. THEY ALSO HAVE DIFFEREN T CHEMICAL STRUCTURES. WHEREAS THE FINISHED PRODUCTS ARE PROPR IETARY FORMULAE HAVING ALTOGETHER DIFFERENT AND DISTINCT P ROPERTIES. 4. THE RAW MATERIALS ONCE BLENDED CANNOT BE BROUGHT BACK TO THE ORIGINAL SHAPE OR ORIGINAL CHARACTER FROM THE FINIS HED PRODUCTS BY APPLYING ANY PROCESS WHATSOEVER. ITA NO. 2033/MUM/2015 SHRI ULHAS GOPAL KARLE 8 5. THE USAGE OF THE FINAL PRODUCT IS COMPREHENSIVE AND NO SINGLE INGREDIENT CAN GIVE THIS COMPREHENSIVE BROAD SPECTR UM OF RESULTS WHICH THE FINAL PRODUCT IS INTENDED TO GIVE. 6. THE MANUFACTURING PROCESS INVOLVES USE OF LABOUR , MACHINERY AND POWER. 7. THE MACHINERIES USED IN MANUFACTURING PROCESS AR E NAMELY RIBBON BLENDERS, S.S. REACTION VESSELS, ELECTRONIC BALANCE, SHRINK TUNNEL, SIEVING PLATES, HOMOGENIZERS, HEATING EQUIP MENTS, HEAT SEALING MACHINES, CARTON STRAPPING MACHINES. 8. THE FACTORY EMPLOYS AROUND 8 TO 10 SEMI-SKILLED WORKERS WHO CARRY OUT MANUFACTURING ACTIVITIES. THE PRODUCTION IS SUPERVISED BY PROPRIETOR HIMSELF ASSISTED BY MANAGER MR. VIREN DER SINGH. THE LIST OF EMPLOYEES WITH DESIGNATION FOR OCT.2009 (AS A SAMPLE) 9. THE PRODUCTION IS CARRIED OUT WITH THE AID OF PO WER AND COPIES OF ELECTRICITY BILLS FOR THE PERIOD APRIL 2009 TO M ARCH 2010 THE MANUFACTURING STEPS INVOLVED IN NUTSHELL ARE AS UNDER- A) THE RAW MATERIALS ARE ANALYZED FOR PHYSICAL PROP ERTIES B) THE APPROPRIATELY WEIGHED MATERIALS ARE CHARGER! IN RIBBON BLENDER OR REACTION VESSEL, AS APPLICABLE FOR SPECI FIED TIME, BOTH CLOCK WISE AND ANTI CLOCK WISE DIRECTION, TO GET UN IFORM BLEND THROUGH MULTIPLE DRY BLENDING PROCESS. IN CASE OF P RODUCT SR. NO. 2, HEATING PROCESS IS ALSO INVOLVED. C) THE RESULTANT BLEND IS SIEVED OR FILTERED USING SIEVING PLATES OR FILTER CLOTH TO REMOVE UNWANTED PARTICLES. D) THE RESULTANT BLEND IS THEN PACKED IN POUCHES, B OTTLES, AND JARS, LABELED APPROPRIATELY AND FINALLY PACKED IN S HIPPER CARTONS. IF THE WHOLE PROCESS IS ANALYZED, WE FIND THAT THE END PRODUCT IS OUTCOME OF COMBINATION OF EMPLOYMENT OF MAN AND MACHINE AND DEFINITELY THE END PRODUCT IS DIFFERENT FROM RAW MA TERIAL. THE RAW MATERIAL WHICH IS IN A SPECIFIED PERCENTAGE OF QUA NTITY IS MIXED THOROUGHLY FOR A SPECIFIED PERIOD WITH A HOMOGENIZE R AND AFTER ADDING, THE DRIED ALOEVERA EXTRACT, THE COMPOSITION IS STIRRED WELL AGAIN FOR A SPECIFIED PERIOD AND THEN FILLED UP IN THE REQUIRED POUCHES/BOTTLES AND HEAT SEALING LABELING IS DONE. THE ASSESSEE IS PAYING ELECTRICITY CHARGES FOR THE WHOLE PROCESS TH OUGH SOME OF THE PROCESSES ARE DONE MANUALLY ALSO. SO FAR AS, THE CO NTENTION OF THE LD. DR THAT THE ASSESSEE IS MERELY MIXING VARIOUS INGRE DIENTS, IS CONCERNED, IT IS NOT A MIXING SIMPLICITOR RATHER TH E RAW MATERIAL GOES THROUGH VARIOUS PROCESSES AND THE END PRODUCT IS KN OWN COMMERCIALLY DIFFERENT ARTICLE/THING/PRODUCT. THUS , IT CAN BE SAFELY CONCLUDED THAT IT IS A MANUFACTURING ACTIVITY CARRI ED OUT BY THE FIRM OF THE ASSESSEE. ITA NO. 2033/MUM/2015 SHRI ULHAS GOPAL KARLE 9 2.3. SO FAR AS, THE CONTENTION OF LD. DR AND ALSO OBJECTION OF THE LD. ASSESSING OFFICER THAT THERE WAS NO NEW ENTERPR ISE WAS SET UP BY THE ASSESSEE AND OLD MACHINERY WAS USED IS CONCERNE D, AS MENTIONED EARLIER, WE ARE NOT AGREEING WITH THIS AS SERTION OF THE LD. DR, AS EXPLAINED BY THE LD. COUNSEL FOR THE ASSESSE E THAT EARLIER PRODUCT WAS LIMITED AND THE ASSESSEE WAS CARRYING O UT MANUFACTURING ONLY IN ONE PRODUCT I.E. NUTRAMORE BY MANUALLY BLENDING AND EMPLOYING TWO OR THREE WORKERS AT A RE NTED FACTORY PREMISES AT BADLAPUR AND USED TO PRODUCE 80 KGS OF FINISHED PRODUCT PER DAY. THAT UNIT WAS CLOSED DOWN IN THE YEAR 200 6 AND ALL THE ASSETS WERE SCRAPED, POSSESSION OF THE FACTORY PREM ISES WAS HANDED OVER TO THE LANDLORD AND THEREAFTER NEW UNIT WAS SE T UP ON AN INDUSTRIAL PLOT AT PARWANOO (HIMACHAL PRADESH) AFTE R OBTAINING NECESSARY FRESH LICENCE FORM THE STATE GOVERNMENT. THE ENTIRE STAFF WAS NEWLY RECRUITED AND NEITHER ANY STAFF/MACHINERY FROM THE OLD UNIT WAS TRANSFERRED TO THE NEW UNIT AT PARWANOO. I T WAS EXPLAINED THAT IN THE NEW UNIT, THE FINAL PRODUCT IS PRODUCED AROUND 600 KG PER DAY. EXCEPT FOR ARGUING THAT OLD MACHINERY WAS USED , NO EVIDENCE WAS PRODUCED EITHER BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) OR BEFORE THIS TRIBUNAL BY THE REVENUE EV IDENCING THAT ANY OLD MACHINERY WAS USED, THEREFORE, WE FIND NO SUBST ANCE IN THE ASSERTION OF THE LD. ASSESSING OFFICER/DR, THUS, FR OM THIS ANGLE ALSO, THE REVENUE HAS NO CASE AT ALL. 2.4. SO FAR AS, THE GENERAL TESTS FOR MANUFACTURE/ PRODUCTION ARE CONCERNED, WE FIND THAT MANUFACTURING AND PROCESSIN G ARE NOT CLEARLY DEMARCATED FIELD. THE TEST OF MANUFACTURE LIES IN T HE ANSWER TO THE QUESTION WHETHER WHAT IS PROCESSED OR PRODUCED AS E ND PRODUCT IS COMMERCIALLY KNOWN AS A DIFFERENT PRODUCT FROM THE MATERIAL OUT OF WHICH IT WAS SO PRODUCED. THEREFORE, IF THE PRODUC T HAS A DIFFERENT NAME AND IDENTIFIED BY THE BUYERS AND SELLER AS A D IFFERENT PRODUCT AND IS SOLD AS A DIFFERENT PRODUCT FROM ITS RAW MAT ERIAL ONE CAN SAY THAT IT IS A MANUFACTURED PRODUCT. THE CASE OF THE ASSESSEE FIND SUPPORT FROM THE RATIO LAID DOWN IN THE CASE OF R.M . CHEMICALS PVT. LTD. (ITA NO.111/INDORE/2012) (ASSESSMENT YEAR 2003 -04) ORDER DATED 11/05/2012 (WHEREIN, ONE OF US I.E., JUDICIAL MEMBER, IS SIGNATORY TO THE ORDER). THE RELEVANT PORTION FROM THE AFORESAID ORDER IS REPRODUCED HEREUNDER FOR READY REFERENCE:- 3.5 FOR CLAIMING DEDUCTION U/S 80IB OF THE ACT, AS PER SUBSECTION (2), THE ANY INDUSTRIAL UNDERTAKING HAS TO FULFIL T HE CONDITIONS MENTIONED IN THE SECTION. AS PER SUB-CLAUSE (III) T HE ARTICLE SO MANUFACTURED SHOULD NOT BE IN THE LIST OF THE ELEVE NTH SCHEDULE AND THE PRODUCT SHOULD BE FROM A SMALL SCALE INDUST RIAL UNDERTAKING OR AN INDUSTRIAL UNDERTAKING REFERRED T O IN SUBSECTION (4). ON PERUSAL OF RECORD, UNDISPUTEDLY, FROM THE I NCEPTION STAGE ITSELF, THE ASSESSEE WAS REGISTERED AS A SMALL SCAL E INDUSTRY BY THE DIRECTOR OF INDUSTRIES ON 26.6.1995 (PAGE 32 OF THE PAPER BOOK) AND CONTINUED AS SUCH AS IS EVIDENT FROM ACKNOWLEDG MENT DATED ITA NO. 2033/MUM/2015 SHRI ULHAS GOPAL KARLE 10 15.4.2010 (PAPER BOOK PAGE 52), THEREFORE, THIS CON DITION OF THE SECTION IS ALSO SATISFIED BY THE ASSESSEE. 3.6 THE DICTIONARY MEANING OF THE TWO TERMS I.E. SO APS AND DETERGENT ARE ALSO DIFFERENT ITEMS. THERE IS A GENE RIC UNITY IN THESE TERMS AND THE DISTINCT GENUS OR CATEGORY PRESENT IN THESE TERMS IN THEIR APPLICATION. THEREFORE, IT CAN BE SAID THAT S OAPS AND DETERGENT ARE TWO DIFFERENT ITEMS AND MORE SO DETER GENT IS NOT INCLUDED IN SCHEDULE 11, CONSEQUENTLY, DEDUCTION SH OULD NOT HAVE BEEN DENIED TO THE ASSESSEE. OUR VIEW IS FORTIFIED BY THE RATIO LAID DOWN IN THE CASE OF GENERAL MARKETING & MFG. CO. VS . STATE OF TAMIL NADU; 86 SCT 434 (MAD.), AMAR POLYFAB PVT. LT D. V.ACIT(2003) 1 SOT 426 (CHD.). IT IS PERTINENT TO M ENTION HERE THAT THE WORD SYNTHETIC DETERGENT WAS OMITTED FROM THE 1 1TH SCHEDULE W.E.F.1982. IN VIEW OF THESE FACTS, THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT. THE APPEAL OF THE AS SESSEE IS ALLOWED. 2.5. NOW, WE SHALL DEAL WITH THE ISSUE OF MANUFACT URING WITH THE HELP OF CERTAIN CASES WHICH ARE ANALYZED HEREUNDER: - I. MS DELNA RUSHTAM BOYCE (2009) 318 ITR 455 (AAR) NEW DELHI, WHEREIN THE ASSESSEE WAS DERIVING PROFIT FROM BUSIN ESS OF SQUEEZING OF JUICE FROM FRUITS AND VEGETABLES AND E TC WAS ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT TO BE HOLDING THE SAME TO BE MANUFACTURING. II. IDENTICALLY ESQUIRE TRANSLAND INDUSTRIES 344 ITR 30 8 (MAD.), WHEREIN, CONVERSION OF ELECTRIC STEEL IN TO LAMINAT ION WAS HELD TO BE MANUFACTURING FOR THE PURPOSES OF SECTION 80IB O F THE ACT. III. LIKEWISE, HONBLE GUJARAT HIGH COURT IN INNOVATIVE INDUSTRIES (2012) 207 TAXMAN 189 (GUJ.) HELD THAT PROCESS UNDE RTAKEN BY ASSESSEE IN PRODUCING AIR FRESHENER WOULD AMOUNT TO MANUFACTURING. IV. IN CIT VS BUSINESS INFORMATION PROCESSING SERVICES (2012) 345 ITR 548 (RAJ.) HELD THAT COMPUTER DATA PROCESSING A ND SALE OF COMPUTER STATIONERY AMOUNTS TO MANUFACTURING. V. THE HONBLE PUNJAB & HARYANA HIGH COURT IN CIT VS H SED CORPORATION LTD. HELD THAT ACTIVITY OF MANUFACTURIN G OF VOTER IDENTITY CARD AMOUNTS TO MANUFACTURE. VI. LIKEWISE, IN CIT VS ZAINAV TRADING PVT. LTD. 333 IT R 144 (MAD.) CONVERSION OF PAPER CORRUGATED SHEETS INTO PAPER BO XES WAS HELD TO BE MANUFACTURING. VII. LIKEWISE, THE HONBLE APEX COURT IN CIT VS VINBROS & COMPANY (2012) 210 TAXMAN 252 (SC) HELD THAT BLENDING AND B OTTLING INDIAN MANUFACTURE FOREIGN LIQUOR WOULD AMOUNT TO MANUFACTURING. VIII. IDENTICALLY, HONBLE APEX COURT, IN CIT VS EMPTEE P OLY YARN (P.) LTD. HELD THAT TWISTING OF YARN AMOUNTS TO MANUFACT URING. ITA NO. 2033/MUM/2015 SHRI ULHAS GOPAL KARLE 11 IX. HONBLE MADRAS HIGH COURT IN CIT VS BALAJI HOTELS & ENTERPRISES LTD. 311 ITR 389 HELD THAT PRINTING OF PAPER LABELE S CONSTITUTES MANUFACTURING. X. THE HONBLE APEX COURT IN INDIA CINE AGENCIES VS DC IT 210 TAXMAN 253 (SC) HELD THAT EVEN CUTTING OF JUMBO FIL M ROLES INTO SMALL MARKETABLE SIZES AMOUNTS TO MANUFACTURING. XI. HONBLE ALLAHABAD HIGH COURT IN CIT VS SHIV OIL & D AL MILL 153 TAXMAN 127 HELD THAT REFINING OF OIL AMOUNTS TO MAN UFACTURING. XII. EVEN, BUYING TENDU LIVES AND TOBACCO AND THEREAFTER MAKING BIDI AMOUNTS TO MANUFACTURING (CIT VS PRABHUDAS KISHORED AS TOBACCO PRODUCTS) 154 TAXMAN 404 (GUJ.). XIII. TOBACCO CURING WAS HELD TO BE MANUFACTURING IN CIT VS PREMIER TOBACCO PACKERS PVT. LTD. 284 ITR 222 (MAD.). XIV. HONBLE MADRAS HIGH COURT IN CIT VS P DAMODARAN (20 06) 282 ITR 466 (MAD.) HELD THAT CABLE JOINING KIT IS MANUF ACTURING. XV. HONBLE APEX COURT IN VIJAY SHIP BREAKING CORPORATI ON VS CIT 175 TAXMAN 77 HELD THAT EVEN SHIP BREAKING ACTIVITY WOULD ENTITLE TO DEDUCTION U/S 80 HH & 80IA OF THE ACT. XVI. THE HONBLE KARNATAKA HIGH COURT IN CIT VS DARSHAK LTD. 247 ITR 489 HELD THAT CONVERSION OF PLAIN GLASS WARE IN TO DECORATIVE GLASS WARE AMOUNTS TO MANUFACTURE. XVII. HONBLE CALCUTTA HIGH COURT IN ADDL. CIT VS A MUKHE RJEE & COMPANY LTD.113 ITR 718 EVEN HELD THAT BOOK PUBLISH ING ACTIVITY AMOUNTS TO MANUFACTURING. XVIII. IN CIT VS TATA LOCOMOTIVE AND ENGINEERING COMPANY L TD. (1968) 68 ITR 325 (BOM.) HELD THAT ASSEMBLING WORKS AMOUNT S TO MANUFACTURING. XIX. IN CIT VS KANAM LETEX INDUSTRIES PVT. LTD. 221 ITR 1 HELD THAT CONVERSION OF NATURAL LATEX INTO PRESERVED LATEX AM OUNTS TO MANUFACTURING. XX. IN TARAI DEVELOPMENT CORPORATION 120 ITR 342 HONBL E ALLAHABAD HIGH COURT EVEN HELD THAT PROCESSING OF S EEDS IS A PROCESS WHICH AMOUNTS TO MANUFACTURE OR PRODUCTION. XXI. HONBLE APEX COURT IN ITO VS ARIHANT TILES & MARVEL S PVT. LTD. (2010) 186 TAXMAN 439 HELD THAT CONVERSION OF MARVE LS BLOCKS INTO SLABS AND TILES AMOUNTS TO MANUFACTURING. XXII. LIKEWISE, IN CIT VS JANAKRAJ BANSAL 229 CTR (HP) 89 CONVERSION OF LIME STONE INTO LIME POWDER WAS HELD TO BE MANUF ACTURING ACTIVITY. XXIII. IN CIT VS M R GOPAL 58 ITR 598 (MAD.) HELD THAT CON VERSION OF BOULDERS INTO STONES IS A MANUFACTURING. ITA NO. 2033/MUM/2015 SHRI ULHAS GOPAL KARLE 12 XXIV. EVEN IN PUNAM CHANDRA PREM RAJ VS CIT 207 ITR 895 ( RAJ.) HIGH COURT HELD THAT GINNING OF COTTON IS PROCESS, THUS ENTITLED TO DEDUCTION. 2.6. THERE ARE CERTAIN CONTRA DECISIONS ALSO, WHIC H ARE DISCUSSED HEREUNDER:- A) ADDL. CIT VS SOUTHERN STRUCTURAL LTD. 110 ITR 164 ( MAD.) WHEREIN IT WAS HELD THAT PRODUCTION OF PROTO TYPE WILL NOT AMOUNT TO MANUFACTURING. B) HONBLE APEX COURT IN TAMILNADU STATE TRANSPORT COR PORATION LTD. VS CIT 252 ITR 883 (SC) HELD THAT TYRE RETREADING I S NOT MANUFACTURING. C) IN APPEEJY PVT. LTD. VS CIT 77 TAXMAN 208 (CAL.) IT WAS HELD THAT PACKING OF TEA IS NOT MANUFACTURING THUS NOT ENTITL E TO RELIEF. D) FOUNDATION WORK WAS NOT HELD TO BE CHARACTERIZED AS PRODUCTION OR MANUFACTURE IN CIT VS N.C. BUDDHA RAJA AND COMPA NY 204 ITR 412 (SC) E) IN CIT VS HINDUSTAN METAL REFINING WORKS PVT. LTD. 128 ITR 472 (CAL.) IT WAS HELD THAT GALVANIZATION IS NOT COVERE D WITHIN THE MEANING OF MANUFACTURING AND THUS NOT ENTITLED TO T HE DEDUCTION. F) REARING OF CHICKS WAS NOT HELD TO BE INDUSTRIAL UND ERTAKING AND THUS NOT ENTITLED TO DEDUCTION IN CIT VS VENKATESHA WARA HATCHERIES PVT. LTD 237 ITR 174 (SC), INDIAN POULTR Y VS CIT 116 TAXMAN 493 (SC) AND CIT VS JD FARMS (2010) 187 TAXM AN 151 (DEL.) G) IN CIT VS RELISH FOODS 237 ITR 59 (SC) HELD THAT PR OCESSING OF SHRIMPS COULD NOT BE SAID TO BE MANUFACTURING OR PR ODUCTION. H) LIKEWISE IN BHATSONS ACQUATIC PRODUCTS VS ACIT 329 ITR 67 (KER.) HELD THAT FISH PROCESSING DOES NOT AMOUNT TO MANUFA CTURE OR PRODUCTION. I) LIKEWISE IN CIT VS GITWAKO PHARMA (I.)(P) LTD. (201 1) 10 TAXMAN.COM 261 (DEL.) HELD THAT CONVERTING RAW FISH INTO TINNED FISH DOES NOT AMOUNT TO MANUFACTURING. J) LIKEWISE PREPARATION OF FOOD STUFFS/FOOD PACKET BY HOTEL DOES NOT AMOUNT TO MANUFACTURE IN INDIA HOTELS COMPANY LTD. VS ITO 245 ITR 538 (SC). K) LIKEWISE CONVERSION OF CHICORY ROOTS INTO CHICORY P OWDER WAS HELD TO BE NOT MANUFACTURING IN SACS EAGLES CHICORY VS CIT 255 ITR 178 (SC). IF THE AFOREMENTIONED JUDICIAL PRONOUNCEMENTS AND T HE FACTS AVAILABLE ON RECORD ARE KEPT IN JUXTAPOSITION AND A NALYZED WITH THE PROCESSING ACTIVITY DONE BY THE ASSESSEE, WE FIND T HAT THE RESULTANT END PRODUCT IS COMMERCIALLY KNOWN DIFFERENTLY IN THE TR ADING WORLD, ITA NO. 2033/MUM/2015 SHRI ULHAS GOPAL KARLE 13 THEREFORE, CERTAINLY IT CAN BE SAID THAT THE ACTIVI TY OF THE ASSESSEE AMOUNTS TO MANUFACTURE, CONSEQUENTLY, ENTITLED TO D EDUCTION U/S 80IC OF THE ACT, BECAUSE, MIXING VARIOUS INGREDIENTS IN A S PECIFIED MANNER AND THE NET RESULT COME INTO NUTRITIONAL FOOD SUPPLEMEN T, AGRO PRODUCTS AND VETERINARY FOOD SUPPLEMENT AMOUNTS, WHICH IS USED B Y THE PUBLIC AT LARGE FOR DIFFERENT PURPOSES AND IS COMMERCIALLY KN OWN DIFFERENTLY, THEREFORE, IT AMOUNTS TO MANUFACTURING. THE RESUL TANT END PRODUCT IS OUTCOME OF COMBINATION OF EFFORTS WITH THE HELP OF MEN AND MACHINE USING HOMOGENIZER. LIKEWISE, ALOEVERA JUICE IS EX TRACTED FROM THE ALOEVERA LEAVES WITH THE HELP OF MACHINES AND MEN A ND THE END PRODUCT IS ALOEVERA JUICE, WHICH IS OUTCOME OF VARIOUS PROC ESSES, THEREFORE, WHOLE ACTIVITY OF THE ASSESSEE ROUTS THROUGH VARIOU S PROCESSES, THUS, CERTAINLY AMOUNTS TO MANUFACTURING. THE CASE OF THE ASSESSEE FURTHER FIND SUPPORT FROM THE DECISION IN THE CASE OF RAMIT KUMAR SHARMA VS DIT (IT) (2009) 309 ITR 344 (AAR-NEW DELHI) WHEREIN THE ASSESSEE INTEND TO START A TRACTOR MANUFACTURING INDUSTRY IN THE STATE OF HIMACHAL PRADESH, WHEREIN, THE PRIMARY JOB WAS TO PROVIDE, M ILLING, TOOLING AND GRINDING OF SURFACE OF REAR COVER ETC, WHICH ARE IM PORTANT PART OF TRACTOR, IT WAS HELD THAT THE ACTIVITIES AMOUNTS TO MANUFACT URE OR PRODUCTION OF AN ARTICLE DIFFERENCE FROM RAW CASTINGS, THUS, ENTI TLED TO DEDUCTION U/S 80IC OF THE ACT. AS MENTIONED EARLIER IN MRS. DELN A RUSTOM BOYCE (SUPRA) PROCESSING, PACKAGING AND PACKING OF FRUITS AND VEGETABLES WERE HELD TO BE ELIGIBLE FOR DEDUCTION U/S 80IB OF THE A CT, THEREFORE, IT CAN BE CONCLUDED THAT THE END PRODUCT IS COMMERCIALLY KNOW N DIFFERENTLY, THEREFORE, THE ASSESSEE IS INVOLVED IN MANUFACTURIN G, CONSEQUENTLY, WE FIND NO INFIRMITY IN THE CONCLUSION DRAWN BY THE LD . FIRST APPELLATE AUTHORITY, RESULTANTLY, BOTH THE APPEALS OF THE REV ENUE ARE DISMISSED. FINALLY, THE APPEALS OF THE REVENUE ARE DISMISSED. 3.2.2 FOLLOWING THE AFORESAID DECISION OF THE COORD INATE BENCH IN THE ASSESSEES OWN CASE FOR A.Y'S 2009-10 AND 2010-11 D ATED 08.10.2015 (SUPRA), WE FIND NO REASON TO INTERFERE IN THE FIND ING RENDERED BY THE LEARNED CIT(A) IN HOLDING THAT THE ASSESSEE IS ENTI TLED TO BE ALLOWED DEDUCTION UNDER SECTION 80IC OF THE ACT, FOR THE RE ASONS STATED THEREIN AND AT PARA 3.2.1 OF THIS ORDER (SUPRA). CONSEQUENTLY, WE FIND NO MERIT IN THE GROUNDS NO. 1 TO 3 RAISED BY REVENUE, AND THEREFORE DISMISS THE SAME. 3. IN THE RESULT, THE REVENUES APPEAL FOR A.Y. 2011-` 12 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 ST DECEMBER, 2016. SD/ - SD/ - (SANDEEP GOSAIN) (JASON P. BOAZ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 1 ST DECEMBER, 2016 ITA NO. 2033/MUM/2015 SHRI ULHAS GOPAL KARLE 14 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -2, THANE 4. THE CIT - 2, THANE 5. THE DR, F BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.