Asst. Commissioner of Income tax Cir. 1(1), Panaji V. Ramacanta Velingkar Minerals., Panaji

ITA 22/PAN/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79641 (ITAT-PANAJI)
• Duration Of Justice: 4 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 17-04-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 16-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B BARTHAKUR LD
• Assessee Lawyers: PRAMOD B DES
• Keywords: Business income; Transfer pricing; International transaction; Retrospective amendment; Cost of acquisition; Competent authority; Benefit of exemption; Revised return
• Section: 10AA; 80HHC; 10B; 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI P. K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER [ ITA NOS. 21/PNJ/2014 (ASSESSMENT YEAR - 2008 - 09 ITA NO 22/PNJ/214 (ASSESSMENT YEAR - 2009 - 10) THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE - 1 (1), PANAJI , GOA (APPELLANT) VS. RAMACANTA VELINGKAR MINERALS SHOP NO.14, 1 ST FLOOR, NAVELKAR TRADE CENTRE, PANAJI - GOA . PAN:AA IFR9028H (RESPONDENT) C.O. NO. 14 [ C /PNJ/2014 OUT OF ITA NO.22/PNJ/2014 (ASSESSMENT YEAR - 2009 - 10) RAMACANTA VELINGKAR MINERALS SHOP NO.14, 1 ST FLOOR, NAVELKAR TRADE CENTRE, PANAJI - GOA. PAN:AAIFR9028H (OBJECTOR) VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE - 1(1), PANAJI, GOA (RESPONDENT) APPE LLANT BY : SHRI B.BARTHAKUR LD. DR. RESPO NDENT BY : SHRI PRAMOD B. DESPANDE , CA SHRI SATISH R. DHUME, CA DATE OF HEARING : 17/04 /2014 DATE OF PRONOUNCEMENT : 30 /05 /2014 O R D E R PER: D.T. GARASIA BOTH THE APPEALS HAVE BEEN FILED BY THE DEPARTMENT AGAINST THE ORDERS OF CIT(A) PANAJI DATED 24.10.2013 & 25.10.2013 FOR A.Y.2008 - 09 AND 2009 - 10 RESPECTIVELY, AND C.O HAS BEEN FILED BY THE ASSESSEE FOR A.Y.2009 - 10 . 2 . ITA NOS.21 &22/PNJ/2014 , C.O. NO.14/PNJ/2014 (A.YS.2008 - 09 &2009 - 10) ACIT VS. RAMACANTA VELINGKAR MINERALS 2. THE FOLLOWI NG GROUNDS ARE RAISED BY THE DEPARTMENT IN ITA NO.21/PNJ/2014 : 1. THE ORDER OF THE LEARNED CIT(A) IS OPPOSED TO LAW AND FACTS OF THE CASE. 2. THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITIONS ON ACCOUNT OF DISALLOWANCE OF RS.4.85 CRORES AND IN HOLDING THAT THE PROCESSING PLANT (EOU) IN ITSELF WAS MANUFACTURING IRON ORE ERRONEOUSLY PRESUMING THAT THE PROCESSING PLANT WAS BLENDING IRON ORE, WHEN THE ASSESSEE COULD NOT PROVE WITH MATERIAL FACT THAT IT INCURRED EXPENDITURE FOR MANUFACTURING ACTIVITY AT THE PLANT. 3. ON THE FACTS AND CIRCUMSTANCES, THE LD.CIT(A) GROSSLY ERRED IN NOT CONSIDERING THE FACT THAT ASSESSEE BY UNDER PRICING ITS PURCHASES FROM SISTER CO NCERNS INCREASED THE PROFIT & HENCE, AVAILED ENHANCED EXEMPTION U/S. 10B AND SIMULTANEOUSLY REDUCED TAXABLE INCOME OF ITS SISTERS CONCERNS BY SUCH UNDER PRICING. 2.1 THE GROUNDS ARE RAISED IN ITA NO. 22/PNJ/2014 WHICH READ AS UNDER. 1. THE ORDER OF THE LEARNED CIT(A) IS OPPOSED TO LAW AND FACTS OF THE CASE. 2. THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITIONS ON AC COUNT OF DISALLOWANCE OF RS.4.63 CRORES AND IN HOLDING THAT THE PROCESSING PLANT (EOU) IN ITSELF WAS MANUFACTURING IRO N ORE ERRONEOUSLY PRESUMING THAT THE PROCESSING PLANT WAS BLENDING IRON ORE, WHEN THE ASSESSEE COULD NOT PROVE WITH MATERIAL FACT THAT IT INCURRED EXPENDITURE FOR MANUFACTURING ACTIVITY AT THE PLANT. 3. LD. CIT (A) HAS ERRED IN ALLOWING CLAIM OF THE ASSES SEE U/S. 10B IN FACT EOU IS NOT AN INDEPENDENT SELF - SUFFICIENT UNIT AS HELD IN THE CASE OF CANARA WIRE AND WIRE PRODUCTS LTD. VS. CIT(KAR) 196 ITR 426 AND CIT VS. ORIENT PAPER MILLS LTD.(SC) 176 ITR 110. 3. ON THE FACTS AND CIRCUMSTANCES, THE LD.CIT(A) G ROSSLY ERRED IN NOT CONSIDERING THE FACT THAT ASSESSEE BY UNDER PRICING ITS PURCHASES FROM SISTER CONCERNS INCREASED THE PROFIT & HENCE, AVAILED ENHANCED EXEMPTION U/S. 10B AND SIMULTANEOUSLY REDUCED TAXABLE INCOME OF ITS SISTERS CONCERNS BY SUCH UNDER PRI CING. 3. THE SHORT FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE EXPORT OF IRON ORE CONCENTRATE FINES. IT IS AN APPROVED 100% EXPORT ORIENTED UNIT (ECU) AND HAS RECEIVED AN APPROVAL FROM SEEPZ SPECI AL ECONOMIC ZONE VIDE LETTER DT .04 - 09 - 2006 (NO.PER:15(2006)/IA II/30/06 - 07/6639) FOR MANUFACTURING IRON ORE CONCENTRATE FINES UP TO ANNUAL CAPACITY OF 1,90,000 MT. FOR THE PURPOSE OF EXPORT. THE ASSESSEE IS ALSO REGISTERED WITH CENTRAL EXCISE AUTHORITY AND HAS BEEN ISSUED CERTI FIC ATE OF REGISTRATION FOR OPERATING AN EXPORT ORIENT UNDERTAKING UNDER REGISTRATION NO. 3 . ITA NOS.21 &22/PNJ/2014 , C.O. NO.14/PNJ/2014 (A.YS.2008 - 09 &2009 - 10) ACIT VS. RAMACANTA VELINGKAR MINERALS AAIFR9O28HXM001 . ASSESSEE PURCHASES RUN - OF - MINES (I.E. ROM) FROM THE MINE OWNERS I.E. ITS SISTER CONCERN AND OTHERS WHICH CONSTITUTES A RAW MATERIAL FEED TO ITS BENEFI CIATION I CONCENTRATOR PLANT. THE ASSESSEE HAS CLAIMED A DEDUCTION U/S 10B AMOUNTING RS.4,85,30,680/ - .IN THE FORM 3CD REPORT, FURNISHED U/S 44AB OF THE ACT. THE ASSESSEE FIRM IS ENGAGED IN MINING AND CONTRACT BUSINESS. AO TRIED TO KNOW HOW THE FIRM IS EL IGIBLE FOR DEDUCTION U/S 10B OF THE ACT. THE ASSESSEE WAS GIVEN SHOW CAUSE NOTICE, IN REPLY TO SHOW CAUSE NOTICE THE ASSESSEE CONTENDED TH AT ASSESSEE IS 100% EOU UNIT HAS NEVER ENGAGED IN MINING AND CONTRACT BUSINESS AS IT HAS NEITHER EXPERTISE NOR MACHIN ERY T O CARRY ON THIS ACTIVITIES. THE ASSESSES FIRM BELONGS TO VELINGKAR FAMILY WHICH HAS BEEN ENGAGED IN SIMILAR ACTIVITY FOR OVER A DECADE AND HAS SUCCESSFULLY BEEN OPERATING A 100% EOU. THE ASSESSING OFFICER HAS VERIFIED THE PROJECT REPORT WHICH WAS SU BMITTED TO PROVE THAT ASSESSEE IS UNDERTAKING MANUFACTURING ACTIVITIES IN THE YEAR. THE ASSESSEE SUBMITTED THAT PROJECT REPORT WHICH DESCRIBED THE PRODUCTION DETAILS WHICH READ AS UNDER: S. NO. PARTICULARS AS DESCRIBED IN THE PROJECT REPORT 1. RAW MATERIAL/INPUT LOW GRADE SILICIOUS MAGNETIC ROM OF MORE THAN 32% FE CONTENT. CRUDE ORE. ORE DUMPS, WASTE AND REJECTS. 2. POTENTIAL SUPPLIERS V.S. VELINGKAR, OTHER SMALL MINE OWNERS WITH ACCUMULATED STOCK. 3. OUTPUT TARGETED IRON ORE CONCENTRATE FINES WITH +58% FE CONTENT 4. EXPECTED RECOVERY OF OUTPUT/FINISHED PRODUCT 33% 5. POTENTIAL BUYERS EXPORT MARKETS, ESPECIALLY CHINA PURCHASE DATA: S. NO. NAME OF THE PARTY (SELLER) AS PER INVOICES QUANTITY (MT) GRADE DESCRIPTION AS PER INVOICES 1 MR. RAMACANTA V.S. VELINGKAR* 36,534 52.48 IRON ORE FINES 2 MR. RAMACANTA V.S. VELINGKAR* 27,761 53.5 IRON ORE FINES 3 MR. RAMACANTA V.S. VELINGKAR* 3385 54.3 IRON ORE LUMPY 4 MR. RAMACANTA V.S. VELINGKAR* 19,067 53.2 IRON ORE FINES 5 MR. RAMACANTA V.S. VELINGKAR* 1,003 53.8 IRON ORE LUMPY 4 . ITA NOS.21 &22/PNJ/2014 , C.O. NO.14/PNJ/2014 (A.YS.2008 - 09 &2009 - 10) ACIT VS. RAMACANTA VELINGKAR MINERALS 6 MR. RAMACANTA V.S. VELINGKAR* 5,000 53.9 IRON ORE FINES 7 M/S VELINGKAR BROTHERS 54,780 52.7 ROM FINES THE ASSESSING OFFICER HAS VERIFIED THE PURCHASE INVOICES TO FIND OUT THE NATURE OF MATERIAL PURCHASED BY THE ASSESSEE FOR THE PLANT FEED. THE FOLLOWING TABLE PRESENTS THE LIST OF PURCHASES MADE FROM THE SISTER CONCERN, FROM WHOM THE ASSESSEE HAD MADE ALMOST ALL THE PURCHASES. SL. NO. NAME OF THE PARTY (SELLER) AS PER INVOICES QUANTITY (MT) GRADE DESCRIPTION AS PER INVOICES 1 MR. RAMACANTA V.S. VELINGKAR 36,534 52.48 IRON ORE FINES 2 MR. RAMACANTA V.S. VELINGKAR* 27,761 53.5 IRON ORE FINES 3 MR. RAMACANTA V.S. VELINGKAR* 3385 54.3 IRON ORE LUMPY 4 MR. RAMACANTA V.S. VELINGKAR* 19,067 53.2 IRON ORE FINES 5 MR. RAMACANTA V.S. VELINGKAR* 1,003 53.8 IRON ORE LUMPY 6 MR. RAMACANTA V.S. VELINGKAR* 5,000 53.9 IRON ORE FINES 7. M/S VELINGKAR BROTHERS 54,780 52.7 ROM FINES THE ASSESSING OFFICER HAS COLLECTED THE INFORMATION FROM PUR CHASE INVOICE. ASSESSING OFFICER WAS OF THE VIEW THE ASSESSEE HAS PURCHASED IRON ORE FINES, IRON ORE LUMPY AND ROM FINES DURING THE YEAR. THIS PROJECT REPORT SHOWS THAT THE ASSESSEE REQUIRES LAW GRADE S I LICEOUS ROM . THE ASSESSING OFFICER HAS FOUND THAT ASSESSEE HAS ACT UALLY OPERATED THE PLANT BY USING ONLY ROM/ MINERAL WASTE/ ORE DUMPS ETC AS THE FEED AS AGAINST THE FINES/LUMPY/ROM FINES AS MENTIONED IN THE INVOICES, IT TURNS OUT THAT SUCH A CLAIM IS ASSESSEE IS BOGUS. THE ASSESSING OFFICER HAS ALSO VERIFIED THE WORKING OF RAW MATERIAL PURCHASES, PLANT FEED, PRODUCTION, SALES ETC HAVE BEEN WORKED OUT AS UNDER: FEED (MT) OPERATING + PURCHASES CLOSING BALANCE FEED TO PLANT BALANCE FEED TO PLANT 152530 240 152290 5 . ITA NOS.21 &22/PNJ/2014 , C.O. NO.14/PNJ/2014 (A.YS.2008 - 09 &2009 - 10) ACIT VS. RAMACANTA VELINGKAR MINERALS CONVERSION OR RECOVERY (O/P TO I/P) O/P (SALES + CLOSING FINISHED GOODS GOODS) 47500MT + 59000MT I/P (FEED - CLOSING FEED) 152530 MT 240 MT O/P TO I/P 106500 152290 0.70 GOING BY THIS WORKING IT THE ASSESSEE HAS PRODUCED CONVERSION ABOUT 70% IS BEING PRODUCED BY THE PLANT. THE ASSESSEE OWN REPORT SAYS THAT A CONVERSION IS 33% CAN BE ACHIEVED. THIS CLEARLY POINTS TO THE FACT THAT THE ASSESSEE HAD IN FACT PURCHASED ONLY FINES/ LUMPY/ ROM FINES /ROM FINES AS MENTIONED IN ALL THE INVOICES. ONCE AG AIN TO VERIFY THE CLAIM OF THE ASSESSEE THAT THE EXPORTS HAVE ACTUALLY BEEN DONE ONLY OUT OF THE FINISHED GOODS MANUFACTURED BY THE PLANT, THE MONTH - WISE PLANT FEED DATA WAS GOT FROM THE ASSESSEE, AND THE ABOVE CONVERSION RATIO WAS USED TO FIND OUT THE MO NTHLY PRODUCTION OF IRON ORE CONCENTRATE FINES THAT WAS EXPORTED. THE SALES DATA PRODUCED AS UNDER: MONTH - WISE RECONCILIATION OF STOCK PRODUCTION - SALES GIVEN THE AVERAGE CONVERSION RATIO OF 70% (MT) MONTH FEED TO PLANT WASTAGE PRODUCTION CUMM PRODCTN DA TE SALES APR - 07 6330 1903.3 4426.7 4426.7 NIL MAY - 07 30582 9195.3 21386.7 25813.4 NIL JUNE - 07 14454 4346.0 10108.0 35921.5 NIL SEP - 07 2211 664.8 1546.2 37467.7 NIL OCT - 0 7 12279 3692.0 8587.0 46054.7 OCT 10: 47,500 NOV - 07 15318 4605.8 10712.2 56766.9 NIL DEC - 07 21717 6529.8 15187.2 71954.1 NIL JAN - 08 21951 6600.1 15350.9 87305.0 NIL FEB - 08 15444 4643.6 10800.4 98105.3 NIL MAR - 08 12006 3609.9 8396.1 106501.4 NIL 152292 45790.60 106501.40 106501.4 6 . ITA NOS.21 &22/PNJ/2014 , C.O. NO.14/PNJ/2014 (A.YS.2008 - 09 &2009 - 10) ACIT VS. RAMACANTA VELINGKAR MINERALS TH E ASSESSEE HAS EXPORTED 47,500MT OF IRON ORE CONCENTRATES OF ABOUT 58% GRADE, WITH THE SHIPMENT DATE AND ASSESSEE HAS LOADED DATE VESSEL AND THE APPROPRIATE AUTHORITY AT THE PORT HAS PASSED THE MATERIAL OF 47,500MT FOR SHIPMENT. THE ASSESSING OFFICER HAS ALSO VERIFIED THE PROJECT REPORT AS SUBMITTED BY THE ASSESSEE WITH THE ACTUAL PRODUCTION FIGURE WHICH WAS CARRIED OUT BY THE ASSESSEE. THE ASSESSING OFFICER HAS ALSO VERIFIED THE QUANTUM OF THE MATERIAL REQUIRED FOR PR ODUCTION WHICH THE PURCHASE BY THE ASSESSEE AND FROM THIS VERIF ICATION IT WAS FOUND THAT ASSESSEE HAS NOT CARRIED OUT ANY MANUFACTURING ACTIVITIES. THE ASSESSING OFFICER HAS ALSO VERIFIED THE PROJECT REPORT AND ACTUAL PERCENTAGE OF PRODUCTION CARRIED OUT BY THE ASSESSEE. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE HAS NOT CARRIED OUT ANY MANUFACTURING ACTIVITIES AS CLAIMED BY THE ASSESSEE. THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION U/S. 10B OF THE INCOME TAX ACT. THE ASSESSING OFFICER WAS OF THE VIEW THAT ASSESSEE IS NOT CARRIED OUT ANY MANUFACTURING ACTIVI TIES RIGHT FROM THE MONTH OF MARCH 2007 TILL SEPTEMBER, 2007 AND ASSESSEE HAS NOT PROCESSED 53,557 MT OF IRON ORE. THE ASSESSEE FIRM DID CARRY OUT MANUFACTURING OR PRODUCTION ACTIVITIES DURING THE YEAR AS STATED IN THE ASSESSMENT YEAR. THEREFORE, AO HAS DI SALLOWED THE CLAIM U/S. 10B AMOUNTING TO RS. 4,85,30,680/ - 3.1 THE MATTER CARRIED TO CIT(A) AND CIT(A) HAS ALLOWED THE CLAIM BY OBSERVING AS UNDER: 5.4 I HAVE GONE THROUGH THE ASSESSMENT ORDER AND SUBMISSION OF THE APPELLANT. THE AO DISALLOWED THE CLAIM OF THE APPELLANT WITH A CONCLUSION THAT DURING THE Y EAR UNDER CONSIDERATION THE ASSESSEE DID NOT UNDERTAKE ANY PRODUCTION ACTIVITY AND INDULGED IN TRADIN G ACTIVITY ONLY. ON THE ANALYSIS OF DETAILS AND DOCUMENTS SUBMITTED BY THE APPELLANT, THE A.O. FOUND THAT THE APPELLANT WAS SHOWING OUTPUT OF FURNISHED PRODUCT AT 77% COMPARED TO 33% AS ENVISAGED IN THE PROJECT REPORT. ON THE OTHER HAND, THE APPELLANT CONT ENDED THAT THEY ARE A RECOGNISED 100% EOU, THEY HAVE INCURRED PRODUCTION AND ELECTRICITY EXPENSES AND IN ORDER TO SUPPORT THEIR CONTENTION, THEY FURNISHED COPIES OF THE THEIR MANUFACTURING ACCOUNT, WHICH HAS NOT BEEN FOUND TO BE FALSE BY THE A.O. IF FACT, IN SUBSEQUENT PARAS, THE A.O., NOT BEING CONFIDENT OF HIS CONCLUSION, HIMSELF WRITES IN THE ASSESSMENT ORDER THAT IN THE EVENT OF ASSESSEE FINDING A RELIEF BY AN ORDER OF AN APPELLATE AUTHORITY, WITH RESPECT TO THE ABOVE 7 . ITA NOS.21 &22/PNJ/2014 , C.O. NO.14/PNJ/2014 (A.YS.2008 - 09 &2009 - 10) ACIT VS. RAMACANTA VELINGKAR MINERALS DISALLOWANCE. THEREFORE IN VIEW O F THE FACTS OF THE INSTANT CASE AND RESPECTFULLY RELYING ON THE DECISION OF JURISDICTIONAL TRIBUNAL OF PANAJI, IN MY OPINION, THE 100% EOU APPELLANT IS ELIGIBLE FOR CLAIM OF DEDUCTION U/S 10B AND THE A.O. IS DIRECTED TO ALLOW THE SAME. ACCORDINGLY, THIS GR OUND OF APPEAL OF THE APPELLANT IS ALLOWED. 3.2 . THE DR SUBMITTED THAT THE ASSESSEE HAS SUBMITTED 3CD REPORT DURING THE ASSESSMENT PROCEEDING WHEREIN HE HAS MENTIONED THAT ASSESSEE FIRM IS ENGAGED IN MINING AND CONTRACT BUSINESS. MOREOVER, THE ASSESSING OFFICER HAS ALSO VERIFIED THE PROJECT REPORT AS SUBMITTED BY THE ASSESSEE WITH THE AC TUAL PRODUCTION FIGURE CARRIED OUT BY THE ASSESSEE. THE ASSESSING OFFICER HAS ALSO VERIFIED THE QUANTITY OF THE MATERIAL REQUIRED FOR PRODUCTION WHICH P URCHASE MADE BY THE ASSESSEE. F ROM THIS VERIFICATION THE ASSESSING OFFICER HELD THAT ASSESSEE HAS NOT CARRIED OUT ANY MANUFACTURING ACTIVITY. THE LEARNED DR SUBMITTED THAT THE ASSESSEE HAS PURCHASED THE GOODS FROM SISTER CONCERNED AND IT WAS DIRECTLY EXPORTED . THE ASSESSEE H AS NOT CARRIED OUT ANY MANUFACTURING OF ROM AS CLAIMED BY HIM. THE CIT(A) IS NOT JUSTIFIED IN HIS ACTION. 3.3 . THE LEARNED AR RELIED UPON THE WRITTEN SU BMISSION FILED WRITTEN SUBMISSION WHICH READ AS UNDER: THE FACTS OF THE ISSUE ARE AS FOLLOWS: THE ASSESSEE SET UP A 100% EXPORT ORIENTED UNIT FOR MANUFACTURE OF IRON ORE CONCENTRATE FINES. ASSESSEE OBTAINED PERMISSION FROM GOVT. OF INDIA, DEVELOPMENT COMMISSIONER, SEEPZ SPECIAL ECONOMIC ZONE, MINISTRY OF COMMERCE AND INDUSTRY DATED 04 - 09 - 2006. THE ASSESSEE W AS ENTITLED FOR EXEMPTION U/S 10 B OF THE ACT, AND CLAIMED DEDUCTION OF 4,85,30,680. THE ASSESSING OFFICER DENIED THE EXEMPTION ON ACCOUNT OF FOLL OWING REASONS: I) RECOVERY - TO - FEED RATIO EXCEEDED THAN THE RATIO AS PER PROJECT REPORT; (PAGE 4 OF THE ASSESSMENT ORDER) II) SMALL DIFFERENCE OF 1446 TONS IN PRODUCTION AND SALES; (PAGE 5 OF THE ASSESSMENT ORDER) AND III) EXPENSES ON RUNNING OF PLANT WERE NOT RECORDED. (PAGE 7 OF THE ASSESSMENT ORDER). HOWEVER, ALL THE ASSUMPTIONS OF THE ASSESSING OFFICER WERE WRONG. THE ASSESSEE HAD FURNISHED HIS SUBMISSIONS OBJECTING THE ADDITION ON RECORDS OF CIT - A VIDE LETTER DATED 15 APRIL 2013 AS PER COPY ATTACHED HEREWITH. THE LEARNED CIT - A CONSIDERED ALL THE OBJECTIONS AND DETAILS PLACED ON RECORD WHILE EXAMINING THE ISSUE. (PAGE 14 PARA OF THE CIT - A ORDER). HE FURTHER EXAMINED WHETHER ACTIVITY OF THE ASSESSEE WAS ELIGIBLE FOR EXEMPTION U/S 10 B. AFTER CONSIDERING ALL FACTS AND DETAILS HE HELD THAT THE 8 . ITA NOS.21 &22/PNJ/2014 , C.O. NO.14/PNJ/2014 (A.YS.2008 - 09 &2009 - 10) ACIT VS. RAMACANTA VELINGKAR MINERALS ASSESSEE WAS 100% EOU AND ELIGIBLE FOR CLAI M OF DEDUCTION U/S 10B. (PAGE 17 - PARA 5.4 OF THE CIT - A ORDER). D. THE ASSESSEE SUBMITS THAT THE ISSUE IS COVERED BY THE DECISION OF HONBLE ITAT IN THE CASE SESA GOA LTD V JCIT ITA NO.72/ PNJ/ 2012 VIDE PARA 43.12 (PAGE 141), PARA 45.8 (PAGE 153) AND PARA 45.9 (PAGE 153) AND CONCLUSION ON PAGE 154. THE ASSESSEE REQUEST YOUR HONOURS TO CONSIDER ABOVE SUBMISSION WHILE DECIDING THIS ISSUE. 3.4 . WE HAVE HEARD THE RIVAL CONTENTION OF BOTH THE PARTIES. LOOKING TO THE FACTS OF THE CIRCUMSTANCES OF THE CASE, WE FIND THAT THE ASSESSEE HAS PURCHASED A RUN OF MINE (ROM) I.E., MATERIAL EXTRACTED FROM MINE ON AS IS WHERE IS BASIS, WHICH INCLUDES LOT OF IMPURITIES SUCH AS MUD, SILICA, SULFUR, LIMESTONE, ETC.THE RUN OF MINE (ROM) IS CRUDE ORE AND PRACTICALLY OF NO USE ON AS IS WHERE IS BASIS UNLESS THE SAME IS PROCESSED AND MADE SUITABLE FOR STEEL MAKING INDUSTRY. MAGNETITE ORE IS FOUND IN BANDED IRON FORMATIONS (BIFS) I.E. METAMORPHOSED SEDIMENTARY ROCKS COMPOSED PREDOMINANTLY OF MAGNETITE AND SILICA WHICH ARE EXCAVATED FROM MINES. THE ORE IS EXTRACTED BY OPEN CAST METHOD OF MINING FOR WHICH MINING BENCHES ARE PREPARED. THE BOTTOM LAYER OF THE BENCHES CONSIST OF MINERALIZED MATERIAL WHICH IS EXTRACTED BY USING RIPPER - DOZER AND EXCAVATOR AND IS CARTED FROM PIT B OTTOM (MOUTH) TO PIT HEAD BY USING TRUCKS/DUMPERS. THE ORES EXTRACTED FROM THE CRUST OF EARTH (I.E. PIT BOTTOM OF MINES) AND NOT SUBJECTED TO ANY PROCESSES L IKE BENEFICIATION ARE CALLED RUN - OF - MINES ORES (ROM). THIS ROM. IS TRANSPORTED FROM PITHEAD TO TH E BENEFICIATION PLANT WHERE IT IS FURTHER PROCESSED . THE MANUFACTURING PROCESS UNDERTAKEN BY THE ASSESSEE IN THE IRON ORE PRODUCTION THE RUN OF MINE (ROM) IS IN A VERY CRUDE FORM A LOT OF WASTE MATERIAL CALLED IMPURITIES ACCOMPANIES THE IRON ORE A VER Y LOW GRADE IRON ORE CANNOT BE USED IN METALLURGICAL PLANTS AND NEEDS TO BE UPGRADED TO INCREASE THE IRON CONTENT AND REDUCE THE GANGUE CONTENT . IN THE CASE OF THE ASSESSEE, IRON ORE CONCENTRATES ARE MANUFACTURED, BY THE PROCESS OF MAGNETIC SEPARATION USI NG HIGH INTENSITY MAGNETIC SEPARATOR WHICH INCREASE THE IRON 9 . ITA NOS.21 &22/PNJ/2014 , C.O. NO.14/PNJ/2014 (A.YS.2008 - 09 &2009 - 10) ACIT VS. RAMACANTA VELINGKAR MINERALS CONTENT THROUGH CONCENTRATION. THE RUN - OF - MINES ORE I. E . ROM IS TRANSPORTED TO BENEFICIATION PLANT BY TIPPER/TRUCKS AND FED TO THE PROCESSING PLANT TO THE FEEDER WHERE IT IS FED TO THE FEEDER B OX AND UN IFORMLY MIXED WITH WATER AND ASSIMILATED TO FORM AN UNIFORM PULP . THIS MIXTURE IS FED TO THE HIGH INTENSITY MAGNE TIC SEPARATES INTO THE, PRODUCT WHICH CONTAINS PURE IRON ORE CONCENTRATE FINES AND THE OTHER UNWANTED MATERIAL I.E. GANGUE IN THE FO RM OF TAILINGS. THUS, ALL THE ACTIVITIES MENTIONED IN 2.2 FOR THE MANUFACTURE OF IRON ORE CONCENTRATE FINES ARE UNDERTAKEN BY THE ASSESSEE WITH THE HELP OF ITS CONCENTRATE PLANT COMPRISING OF HIGH INTENSITY WET DRUM MAGNETIC SEPARATOR . ASSESSEE THUS MANUFACTURES IRON ORE CONCENTRATE FINES BY PROCESSING ROM (53%) FEED THEREBY SEGREGATING MAGNETITE ORE FROM THE GANGUE AND CONVERTING A CRUDE IRON ORE INTO IRON ORE CONCENTRATE FINES UPGRADING THE IRON CONTENT TO AROUND 58%. THE ASSESSEE CARRIES ON VARIOU S PROCESSING ACTIVITIES ON THIS CRUDE ORE SUCH AS CRUSHING OF ROCKS , SCREENING, WASHING, STACKING, LOADING IN BARGES, RIVER TRANSPORTATION AND EXPORT OF PROCESSED IRON ORE. THE RAW MATERIAL USED IN THESE WORK IS COMMONLY KNOWN AS RUN OF MINE (ROM) AND FINI SHED PRODUCT WHICH COMES OUT IS CALLED IRON ORE FINE FINES WHICH IS EXPORTED BY THE ASSESSEE. WE FIND THAT CIT(A) HAS HELD THAT THE ASSESSING OFFICER HAS FOUND THAT IN THE PROJECT REPORT THE ASSESSEE CA RRIED OUT PRODUCTION AT 33% OUT PUT OF FI NISHED PRODUC T WHILE THE ASSESSEE HAS CARRIED OUT FI NISHED PRODUCT 77%. THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS NOT CARRIED OUT ANY PRODUCTION ACTIVITIES. BUT THE CIT(A) HAS VERIFIED THE CLAIM AND HE WAS OF THE VIEW THAT ASSESSEE HAS CARRIED OUT PRODUCTION AN D MANUFACTURING ACTIVITIES. WE FIND THAT DURING THE COURSE OF ASSESSMENT PROCEEDING THE ASSESSEE HAS SUBMITTED THAT ASSESSEE FIRM IS ENGAGED IN MANUFACTURING OF MINES AND ASSESSEE IS A 100% EOU. WE FIND THAT CIT(A) HAS ALSO VERIFIED AND HELD THAT ASSESSEE HAS PURCHASED THE RAW MATERIALS FROM HIS SISTER CONCERN BUT THE AO HAS PROCESSED THE IRON ORE FINES/ LUMPY AND HE HAS EXPORTED THE SAME MATERIAL. 10 . ITA NOS.21 &22/PNJ/2014 , C.O. NO.14/PNJ/2014 (A.YS.2008 - 09 &2009 - 10) ACIT VS. RAMACANTA VELINGKAR MINERALS THEREFORE, ASSESSEE HAS CARRIED OUT MANUFACTURING ACTIVITIES AND ASSESSEE IS ENTITLED FOR DEDUCTION U/S. 10B. THE TRIBUNAL IN THE CASE OF SESA GOA LTD VS. JCIT RANGE PANAJI IN ITA NO. 72/PNJ/2012 WHEREIN THE SIMILAR PROCESS CARRIED OUT BY THE SESA GOA LTD. WAS TREATED AS MANUFACTURING ACTIVITIES BY THE TRIBUNAL, THE ASSESSEE HAS ALSO UNDERTAKEN THE SAME PROCESS, T HEREFORE, IT IS TREATED AS MANUFACTURING ACTIVITIES. THE TRIBUNAL HAS HELD THE SIMILAR ACTIVITIES AS MANUFACTURING ACTIVITIES BY OBSERVING AS UNDER: 43. PROVISION OF SEC. 10A OF THE ACT WHICH DEALS WITH THE SPECIAL PROVISIONS IN RESPECT OF THE NEWLY ESTABLISHED UNDERTAKINGS IN FREE - TRADE ZONE, ETC., AND SEC. 10AA OF THE ACT WHICH DEALS WITH THE SPECIAL PROVISIONS IN RESPECT OF THE NEWLY ESTABLISHED UNITS I N SPECIAL ECONOMIC ZONES; AND ALSO SEC. 10B OF THE ACT WHICH DEALS WITH THE SPECIAL PROVISIONS IN RESPECT OF THE NEWLY ESTABLISHED 100% EXPORT ORIENTED UNDERTAKINGS WERE INSERTED BY THE FINANCE ACT, 1988 W.E.F. 01/04/1989. SEC. 10B PROVIDES THAT ANY PROFIT S AND GAINS DERIVED BY AN ASSESSEE FROM A 100% EOU SHALL NOT BE INCLUDED IN THE TOTAL INCOME OF THE ASSESSEE. THIS PROVISION APPLIES TO ANY UNDERTAKING WHICH MANUFACTURES OR PRODUCES ANY ARTICLE OR THING. EXPLANATION (I) TO SEC. 10B PROVIDES THAT THE EXPRE SSION 100% EXPORT ORIENTED UNIT MEANS AN UNDERTAKING WHICH HAS BEEN APPROVED BY THE BOARD APPOINTED IN THIS BEHALF BY THE CENTRAL GOVERNMENT IN EXERCISE OF THE POWERS CONFIRMED BY SEC. 14 OF THE INDUSTRIES (DEVELOPMENT ®ULATION) ACT, 1951 AND THE RILE S MADE THERE UNDER. EXPLANATION (III) WHICH WAS THERE AT THE TIME OF THE SAID SEC. 10B DEFINED THE WORD MANUFACTURE FOR THE PURPOSE OF THE SAID SECTION TO INCLUDE ANY (A) PROCESS OR (B) ASSEMBLING OR (C) RECORDING OF PROGRAMME ON DISC, TAPE, PERFORATE D MEDIA OR OTHER INFORMATION STORAGE DEVICE. THUS, PROCESS WAS INCLUDED WITHIN THE WORD MANUFACTURE FOR THE PURPOSE OF SEC. 10B. EXPLANATION (IV) OF THE SAID SEC. 10B FURTHER PROVIDED THAT THE WORD PRODUCE FOR THE PURPOSE OF SAID SECTION, IN RELATION T O ANY ARTICLE OR THING SHALL INCLUDE PRODUCTION OF COMPUTER PROGRAMME. CBDT VIDE ITS CIRCULAR NO. 528 DATED 16/12/1988 176 ITR ST. 154 EXPLAINED THE [PROVISIONS ENACTED BY THE FINANCE ACT, 1988 UNDER PARA 8.2 OF THE CIRCULAR. IN THIS CIRCULAR, CBDT HAD CL EARLY EXPLAINED THAT THE SAID NEW SEC. 10B HAD BEEN INSERTED IN THE STATUTE BOOK WITH A VIEW TO PROVIDE FURTHER INCENTIVE FOR EARNING FOREIGN EXCHANGE SO AS TO SECURE THAT THE INCOME OF A 100% EOU SHALL BE EXEMPT FROM TAX FOR A PERIOD OF FIVE CONSECUTIVE A SSESSMENT YEARS FALLING WITHIN THE BLOCK OF EIGHT ASSESSMENT YEARS. THE EXEMPTION PROVIDED UNDER THIS NEW SECTION WAS SIMILAR TO THE ONE PROVIDED UNDER SEC. 10A OF THE ACT TO INDUSTRIAL UNDERTAKING OPERATING UNDER THE FREE - TRADE ZONE. IT WAS ALSO CLARIFIED THEREIN THAT THE EXPRESSION MANUFACTURE FOR THE PURPOSE OF BOTH SECTIONS 10A AND 10B OF THE SAID ACT WOULD INCLUDE ANY PROCESSING OR ASSEMBLING OR RECORDING OF PROGRAMME ON DISC, TAPE, PERFORATED MEDIA OR OTHER INFORMATION STORAGE DEVICE. 43.1 THIS DE FINITION OF MANUFACTURE WAS REMOVED WHEN SEC. 10A AND 10B OF THE ACT WERE AMENDED BY THE FINANCE ACT, 2001 W.E.F. 01/04/2001. SECTIONS 10A AND 10B OF THE ACT WERE FURTHER AMENDED BY THE FINANCE ACT, 2003 W.E.F. 01/04/2004 AND THE DEFINITION OF MANUFACTU RE WAS INSERTED AS UNDER: - 11 . ITA NOS.21 &22/PNJ/2014 , C.O. NO.14/PNJ/2014 (A.YS.2008 - 09 &2009 - 10) ACIT VS. RAMACANTA VELINGKAR MINERALS EXPLANATION (IV) FOR THE PURPOSE OF THIS SECTION, MANUFACTURE OR PRODUCE SHALL INCLUDE THE CUTTING AND POLISHING OF PRECIOUS AND SEMI - PRECIOUS STONES. 43.2 THE EOUS WERE ALLOWED TO SELL 25% PRODUCTION WITHIN THE COUNTRY. WITH A VIEW TO RATIONALIZE THE CONCESSION AND TO PHASE THESE OUT BY THE END OF THE ASSESSMENT YEAR 2009 - 10, THE PROVISIONS OF SEC. 10A AND 10B WERE SUBSTITUTED BY THE NEW PROVISIONS BY THE FINANCE ACT, 2000. CBDT VIDE CIRCULAR NO. 794 DATED 09/08/2000 245 ITR ST. 21, 34 - 35 UNDER PARA 15.3 EXPLAINED THAT THE DEDUCTION U/S 10B WOULD BE GRANTED IN RESPECT OF PROFITS AND GAINS DERIVED BY AN UNDERTAKING WHICH MANUFACTURES OR PRODUCES ARTICLE OR THINGS OR COMPUTER SOFTWARE AND DERIVED PROFITS AND GAINS FROM THE EXPORTS THEREOF. THE SAID EXEMPTION WAS AVAILABLE FOR A PERIOD OF 10 CONSECUTIVE YEARS IN A GRADED MANNER. THE NEW PROVISIONS CONTAINED THE FOLLOWING ADDITIONAL CONDITIONS: I . THE SALE PROCEEDS OF ARTICLES OR THINGS OR COMPUTER SOFTWARE EXPORTED OUT OF INDIA, SHOULD BE RECEIVED IN OR BROUGHT INTO INDIA WITHIN A PERIOD OF 6 MONTHS FROM THE END OF THE PREVIOUS YEAR OR WITHIN SUCH FURTHER PERIOD AS THE COMPETENT AUTHORITY MAY ALLOW SUB - SECTION (3); II . THE PROFITS DERIVED FROM THE EXPORT OF ARTICLES OR THINGS OR C OMPUTER SOFTWARE SHALL BE THE AMOUNT WHICH BEARS TO THE PROFITS OF THE BUSINESS, THE SAME PROPORTION, AS THE EXPORT TURNOVER IN RESPECT OF SUCH ARTICLE OR THINGS OR COMPUTER SOFTWARE BEARS TO THE TOTAL TURNOVER OF BUSINESS SUB - SECTION (4); III . THE ASSESSEE MUST FURNISH IN THE PRESCRIBED FORM NO. 56G, ALONG WITH HIS RETURN OF INCOME, THE REPORT OF A CHARTERED ACCOUNTANT CERTIFYING THAT THE DEDUCTION HAS BEEN CORRECTLY CLAIMED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 10B SUB - SECTION (5); IV . WHERE THE ASSESSEE AVAILS OF THE BENEFITS OF SECTION 10A OR SECTION 10B, IT WILL NOT BE ELIGIBLE FOR OTHER TAX EXEMPTIONS AVAILABLE UNDER OTHER PROVISIONS OF THE ACT DURING THE PERIOD OF 10 YEARS SUB - SECTION (6); V . MANUFACTURE SHALL HAVE THE SAME MEANING AS ASSIG NED TO IT IN CLAUSE (R) OF SECTION 2 OF THE SPECIAL ECONOMIC ZONES ACT, 2005. 43.3 SUBSEQUENTLY, SPECIAL ECONOMIC ZONE ACT, 2005 WAS PASSED BY THE PARLIAMENT IN MAY, 2005, WHICH WAS BROUGHT INTO EFFECT W.E.F. 23/06/2005. SECTION 2(R) OF SPECIAL ECONOMIC ZONE ACT DEFINES THE EXPRESSION MANUFACTURE AS UNDER: - MANUFACTURE MEANS TO MAKE, PRODUCE, FABRICATE, ASSEMBLE, PROCESS OR BRING INTO EXISTENCE, BY HAND OR BY MACHINE, A NEW PRODUCT HAVING A DISTINCT NAME, CHARACTER OR USE AND SHALL INCLUDE PROCESSES SUCH AS REFRIGERATION, CUTTING, POLISHING, BLENDING, REPAIR, REMAKING, RE - ENGINEERING AND INCLUDES AGRICULTURE, 12 . ITA NOS.21 &22/PNJ/2014 , C.O. NO.14/PNJ/2014 (A.YS.2008 - 09 &2009 - 10) ACIT VS. RAMACANTA VELINGKAR MINERALS AQUACULTURE, ANIMAL HUSBANDRY, FLORICULTURE, HORTICULTURE, PISCI CULTURE, POULTRY, SERICULTURE, AVICULTURE AND MINING. 43.4 THIS DEFINITION WA S ADOPTED BY THE LEGISLATURE IN SECTION 10AA W.E.F. 10/02/2006 AS ADOPTED BY THE SPECIAL ECONOMIC ZONES ACT, 2005 BY INSERTING EXPLANATION 1(III) TO SECTION 10AA OF THE ACT WHICH READS AS UNDER: - III) MANUFACTURE SHALL HAVE THE SAME MEANING AS ASSIGNED T O IT IN CLAUSE (R) OF SECTION 2 OF THE SPECIAL ECONOMIC ZONE ACT, 2005. AS PER THE SAID DEFINITION PROCESS IS INCLUDED IN MANUFACTURE. SUBSEQUENTLY, BY THE FINANCE ACT, 2009 W.E.F 1.4.2009, CLAUSE (29BA) WAS INSERTED IN SECTION 2 OF THE INCOME TAX ACT, 1961DEFINING THE EXPRESSION MANUFACTURE AS UNDER: MANUFACTURE, WITH ITS GRAMMATICAL VARIATIONS, MEANS A CHANGE IN A NON - LIVING PHYSICAL OBJECT OR ARTICLE OR THING, - ( A ) RESULTING IN TRANSFORMATION OF THE OBJECT OR ARTICLE OR THING INTO A NEW AND DISTINCT O BJECT OR ARTICLE OR THING HAVING A DIFFERENT NAME, CHARACTER AND USE OR ( B ) BRINGING INTO EXISTENCE OF A NEW AND DISTINCT OBJECT OR ARTICLE OR THING WITH A DIFFERENT CHEMICAL COMPOSITION OR INTEGRAL STRUCTURE. 43.5 IN CHOWGULE & CO. PVT. LTD. VS. UNION OF IND IA (1981) 1 SCC 653 HONBLE SUPREME COURT, AFTER CONSIDERING THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN NILGIRI CEYLON TEA SUPPLYING CO. VS. STATE OF BOMBAY (1959) 10 STC 500 (BOM.), CLEARLY OBSERVED ON THE QUESTION WHETHER THE BLENDING OF ORE, WHILST LO ADING IT IN THE SHIP BY MEANS OF THE MECHANICAL ORE HANDLING PLANT, CONSTITUTED MANUFACTURE OR PROCESSING OR ORE FOR SALE WITHIN THE MEANING OF SECTION 8(3)(B) AND RULE 13 OF THE CENTRAL SALES TAX ACT, 1956. DEALING WITH THIS QUESTION, THEIR LORDSHIPS HEL D AND OBSERVED AT PAGES 659 AND 660 OF THE REPORTS AS UNDER: - IT STILL REMAINS TO CONSIDER WHETHER THE ORE BLENDED IN THE COURSE OF LOADING THROUGH THE MECHANICAL ORE HANDLING PLANT CAN BE SAID TO UNDERGO PROCESSING WHEN IT IS BLENDED. THE ANSWER TO THI S QUESTION DEPENDS UPON WHAT IS THE TRUE MEANING AND CONNOTATION OF THE WORD PROCESSING IN SECTION 8(3)(B) AND RULE 13. THIS WORD HAS NOT BEEN DEFINED IN THE ACT AND IT MUST THEREFORE BE INTERPRETED ACCORDING TO ITS PLAIN NATURAL MEANING. WEBSTERS DICTI ONARY GIVES THE FOLLOWING MEANING OF THE WORD PROCESS: TO SUBJECT TO SOME SPECIAL PROCESS OR TREATMENT, TO SUBJECT (ESPECIALLY RAW MATERIAL) TO A PROCESS OF MANUFACTURE, DEVELOPMENT OF PREPARATION FOR THE MARKET ETC.; TO CONVERT INTO MARKETABLE FORM AS LIVESTOCK BY SLAUGHTERING, GRAIN BY MILLING, COTTON BY SPINNING, MILK BY PASTEURIZING, FRUITS AND VEGETABLES BY SORTING AND REPACKING. 13 . ITA NOS.21 &22/PNJ/2014 , C.O. NO.14/PNJ/2014 (A.YS.2008 - 09 &2009 - 10) ACIT VS. RAMACANTA VELINGKAR MINERALS WHERE THEREFORE ANY COMMODITY IS SUBJECTED TO A PROCESS OR TREATMENT WITH A VIEW TO ITS DEVELOPMENT OR PREPARATION FOR THE MARKET, AS, FOR EXAMPLE, BY SORTING AND REPACKING FRUITS AND VEGETABLES, IT WOULD AMOUNT TO PROCESSING OF THE COMMODITY WITHIN THE MEANING OF SECTION 8(3)(B) AND RULE 13. THE NATURE AND EXTENT OF PROCESSING MAY VARY FROM CASE TO CASE; IN ONE CASE THE PROCESSING MAY BE SLIGHT AND IN ANOTHER IT MAY BE EXTENSIVE; BUT WITH EACH PROCESS SUFFERED, THE COMMODITY WOULD EXPERIENCE A CHANGE. WHEREVER A COMMODITY UNDERGOES A CHANGE AS A RESULT OF SOME OPERATION PERFORMED ON IT OR IN REGARD TO IT, SUCH OPERATION WOULD AMOUNT TO PROCESSING OF THE COMMODITY. THE NATURE AND EXTENT OF CHANGE IS NOT MATERIAL. IT MAY BE THAT CAMPHOR POWDER MAY JUST BE COMPRESSED INTO CAMPHOR CUBES BY APPLICATION OF MECHANICAL FORCE OR PRESSURE WITHOUT ADDITION OR ADMIXTURE OF ANY OTHER MATERIAL AND YET THE OPERATION WOULD AMOUNT TO PROCESSING OF CAMPHOR POWDER AS HELD BY THE CALCUTTA HIGH COURT IN OM PRAKASH GUPTA VS COMMISSIONER OF COMMERCIAL TAXES [16 STC 935 (CAL)]. WHAT IS NECESSARY IN ORDER TO CHARACTERIZE AN OPERATION AS PROCESSIN G IS THAT THE COMMODITY MUST AS A RESULT OF THE OPERATION, EXPERIENCE SOME CHANGE. HERE, IN THE PRESENT CASE, DIVERSE QUANTITIES OF ORE PROCESSING DIFFERENT CHEMICAL AND PHYSICAL COMPOSITIONS ARE BLENDED TOGETHER TO PRODUCE ORE OF THE REQUISITE CHEMICAL A ND PHYSICAL COMPOSITION DEMANDED BY THE FOREIGN PURCHASER AND OBVIOUSLY AS A RESULT OF THIS BLENDING, THE QUANTITIES OF ORE MIXED TOGETHER IN THE COURSE OF LOADING THROUGH THE MECHANICAL ORE HANDLING PLANT EXPERIENCE CHANGE IN THEIR RESPECTIVE CHEMICAL AND PHYSICAL COMPOSITION, BECAUSE WHAT IS PRODUCED BY SUCH BLENDING IS ORE OF A DIFFERENT CHEMICAL AND PHYSICAL COMPOSITIONS. WHEN THE CHEMICAL AND PHYSICAL COMPOSITION OF EACH KIND OF ORE WHICH GOES INTO THE BLENDING IS CHANGED, THERE CAN BE NO DOUBT THAT TH E OPERATION OF BLENDING WOULD AMOUNT TO PROCESSING OF ORE WITHIN THE MEANING OF SECTION 8(3)(B) AND RULE 13. IT IS NO DOUBT TRUE THAT THE BLENDING OF ORE OF DIVERSE PHYSICAL AND CHEMICAL COMPOSITIONS IS CARRIED OUT BY THE SIMPLE ACT OF PHYSICALLY MIXING DIFFERENT QUANTITIES FOR SUCH ORE ON THE CONVEYOR BELT OF THE MECHANICAL ORE HANDLING PLANT, BUT TO OUR MIND IT IS IMMATERIAL AS TO HOW THE BLENDING IS DONE AND WHAT PROCESS IS UTILIZED FOR THE PURPOSE OF BLENDING. WHAT IS MATERIAL TO CONSIDER IS WHETHER T HE DIFFERENT QUANTITIES OF ORE WHICH ARE BLENDED TOGETHER IN THE COURSE OF LOADING THROUGH THE MECHANICAL ORE HANDLING PLANT UNDERGO ANY CHANGE IN THEIR PHYSICAL AND CHEMICAL COMPOSITION IS A RESULT OF BLENDING AND SO FAR AS THIS ASPECT OF THE QUESTION IS CONCERNED, IT IS IMPOSSIBLE TO ARGUE THAT THEY 14 . ITA NOS.21 &22/PNJ/2014 , C.O. NO.14/PNJ/2014 (A.YS.2008 - 09 &2009 - 10) ACIT VS. RAMACANTA VELINGKAR MINERALS DO NOT SUFFER ANY CHANGE IN THEIR RESPECTIVE CHEMICAL AND PHYSICAL COMPOSITIONS. THUS THE HON, BLE SUPREME COURT ACCEPTED THAT THERE IS CHANGE IN CHEMICAL COMPOSITIONS AFTER PROCESSING OF THE IRON ORE IN THIS CASE. FROM THE SAID DECISION OF THE APEX COURT, IT IS APPARENT THAT HONBLE APEX COURT HELD EVEN BLENDING OF IRON ORE FOR THE PURPOSE OF EXPORT INVOLVES CHANGE IN THE CHEMICAL AND PHYSICAL COMPOSITION OF IRON ORE. BUT IF WE LOOK TO THE FACTS IN THE IMPUGN ED CASE OF THE ASSESSEE, THE ASSESSEE IS NOT ONLY BLENDING IRON ORE BUT CARRYING OUT VARIOUS PROCESSES AS TO MAKE IRON ORE CALLED CRUDE ORE USEABLE TO ISPAT INDUSTRIES. THE ACTIVITY OF THE UNITS OF THE ASSESSEE FOR AMONA AND CHITRADURGA INVOLVED CONVERTING INPUT INTO OUTPUT CONSIST OF CRUSHING (CRUDE ORE CALLED ROM WHICH APPEARED TO BE PIECES OF ROCKS AS WE NOTED DURING THE COURSE OF HEARING ON THE BASIS OF SAMPLE SHOWN TO US) SCREENING, WASHING, STACKING, LOADING IN BARGES, RIVER TRANSPORTATION TO THE BOAT AND EXPORT IN SHIPS. THE FINISHED PRODUCT WHICH COMES OUT ARE CALLED LUMPS AND FINES WHICH ARE USED FOR ISPAT INDUSTRIES AND BROUGHT BY THE FOREIGN BUYERS. THE FINISHED PRODUCT TECHNICALLY AFTER PROCESSING HAD DIFFERENT NAME. AS SHOWN TO US DURING THE COU RSE OF HEARING WE NOTED THAT THE LUMPS AND FINES ARE ENTIRELY DIFFERENT FROM CRUDE ORE. DURING CONVERSION OF CRUDE ORE INTO LUMPS AND FINES, WASTE IS GENERATED WHICH IS CALLED TAILING AND DISCHARGED INTO TAILING POND. IN CODLI UNIT THESE TAILINGS WHICH ARE IN LIQUID FORM ARE CONVERTED INTO ULTRA FINE. IN OUR OPINION AS WE NOTED FROM THIS PHYSICAL SAMPLE ALSO CRUDE ORE IS ENTIRELY DIFFERENT FROM THE LUMPS AND FINE IN PHYSICAL APPEARANCE USED AND CHEMICAL COMPOSITIONS EVEN TECHNICALLY NAMES ARE ALSO DIFFEREN T, SIMILARLY WHAT COMES AS OUTPUT FROM THE INPUT IN CODLI UNIT THAT IS ALSO DIFFERENT IN PHYSICAL APPEARANCE AND CHEMICAL COMPOSITION. WE DO NOT AGREE WITH THE LEARNED D.R THAT THERE IS NOT ANY CHANGE IN PHYSICAL AND CHEMICAL COMPOSITION OF THE OUTPUT THAN THE INPUT AS IS BEING PROCESSED IN ALL THE THREE UNITS. IF WE GO TO SECTION 2(29BA) INSERTED W.E.F. 1.4.2009, WE FIND CLAUSE (B) OF THIS SECTION CLEARLY STATES THAT BRINGING INTO EXISTENCE OF NEW AND DISTINCT OBJECT OR ARTICLE OR THING WITH A DIFFERENT C HEMICAL COMPOSITION OR INTEGRAL STRUCTURE TANTAMOUNT TO MANUFACTURE. THE CRUDE ORE ONCE PROCESSED IS MADE MARKETABLE AND HAD A DIFFERENT CHEMICAL AND PHYSICAL COMPOSITION THAN THE ROM (CRUDE ORE) EVEN THOUGH IN COMMON PARALANCE BOTH MAY BE CALLED IRON OR E. IT IS NO MORE REMAINS AS CRUDE ORES. TAILING NO MORE REMAINS TAILING BUT CONVERTED INTO A POWDER. IN VIEW OF THIS CLAUSE AND THE DECISION OF SUPREME COURT IN THE CASE OF CHOWGULE & CO. (SUPRA), IT CAN BE HELD THAT THE ASSESSEE IS ENGAGED IN THESE UNITS IN MANUFACTURING. FURTHER, IN CIT VS N.C. BUDHARAJA & CO. (1993) 204 ITR 412 (SC), HONBLE SUPREME COURT FURTHER OBSERVED THAT THE WORD PRODUCTION IS MUCH WIDER THAN THE WORD MANUFACTURE. IT WAS SAID (PAGE 423): THE WORD PRODUCTION HAS A WIDE C ONNOTATION THAN THE WORD MANUFACTURE. WHILE EVERY MANUFACTURE CAN BE CHARACTERIZED AS PRODUCTION, EVERY PRODUCTION NEED NOT AMOUNT TO MANUFACTURE 15 . ITA NOS.21 &22/PNJ/2014 , C.O. NO.14/PNJ/2014 (A.YS.2008 - 09 &2009 - 10) ACIT VS. RAMACANTA VELINGKAR MINERALS THE WORD PRODUCTION OR PRODUCE WHEN USED IN JUXTAPOSITION WITH THE WORD MANUFACTURE TAKES IN BRINGING INTO EXISTENCE NEW GOODS BY A PROCESS WHICH MAY OR MAY NOT AMOUNT TO MANUFACTURE. IT ALSO TAKES IN ALL THE BY - PRODUCTS, INTERMEDIATE PRODUCTS AND RESIDUAL PRODUCTS WHICH EMERGE IN THE COURSE OF MANUFACTURE OF GOODS. 43.6 IN CHRISTIAN MICA INDUSTRIES LTD . VS. STATE OF BIHAR (1961) 12 STC 150 (SC), HONBLE SUPREME COURT DEFINED THE WORD PRODUCTION, ALBEIT, IN CONNECTION WITH THE BIHAR SALES TAX ACT, 1947. THE DEFINITION WAS ADOPTED FROM THE MEANING ASCRIBED TO THE WORD PRODUCTION IN THE OXFORD ENGLISH DICTIONARY, AS MEANING AMONGST OTHER THINGS THAT WHICH IS PRODUCED; A THING THAT RESULTS FROM ANY ACTION, PROCESS OR EFFORT, A PRODUCT; A PRODUCT OF HUMAN ACTIVITY OR EFFORT. FOR THE WIDE DEFINITION OF THE WORD PRODUCTION, IT HAS TO FOLLOW THAT MINING ACTIVITY FOR THE PURPOSE OF PRODUCTION OF MINERAL ORES WOULD COME WITHIN THE AMBIT OF THE WORD PRODUCTION SINCE ORE IS A THING, WHICH IS THE RESULT OF HUMAN ACTIVITY OR EFFORT. 43.7 ACCORDING TO WEBSTER INTERNATIONAL ENGLISH DICTIONARY, THE VERB PRO DUCE MEANS TO BRING FORWARD, BEGET, ETC. THE JUXTAPOSITION OF THE WORD MANUFACTURE WITH AGRICULTURE AND HORTICULTURE IS SIGNIFICANT AND CANNOT BE LOST SIGHT OF. THE INTENTION IN EMPLOYING THE WORD PRODUCED OBVIOUSLY WAS TO INTRODUCE AN ELEMENT OF VOLITION AND EFFORT INVOLVING THE EMPLOYMENT OF SOME PROCESS FOR BRINGING INTO EXISTENCE SOME GOODS. 43.8 IN PARAGRAPH 7 OF ITS IN THE CASE OF CHOWGULE & C0 (P) LTD. VS. UOI (SUPRA), HONBLE APEX COURT ALSO CONSIDERED THE QUESTION WHETHER THE DIFFERENT BR ANDS OF TEA PURCHASED AND BLENDED BY THE ASSESSES FOR THE PURPOSE PRODUCING THE TEA MIXTURE COULD BE SAID TO HAVE BEEN PROCESSED, AFTER THE PURCHASE, WITHIN THE MEANING OF THE PROVISO TO SECTION 8(A), SO AS TO PRECLUDE THE ASSESSES FROM BEING ENTITLED TO DEDUCT THEIR TURNOVER UNDER SECTION 8(A), SO AS TO PRECLUDE THE VALUE OF THE TEA PURCHASED BY THEM. THE RELEVANT OBSERVATIONS MADE BY THE HONBLE SUPREME COURT IN THIS RESPECTIVE ARE QUOTED AND SET OUT HEREIN BELOW FOR READY REFERENCE: 7. THE REVENUE HO WEVER RELIED ON THE DECISION OF THE BOMBAY HIGH COURT IN NILGIRI CEYLON TEA SUPPLYING CO. VS. STATE OF BOMBAY [10 STC 500 (BOM HC)]. THE ASSESSEES IN THIS CASE WERE REGISTERED DEALERS IN TEA UNDER THE BOMBAY SALES TAX ACT, 1953 AND THEY PURCHASED IN BULK D IVERSE BRANDS OF TEA AND WITHOUT THE APPLICATION OF ANY MECHANICAL OR CHEMICAL PROCESS BLENDED THESE BRANDS OF DIFFERENT QUALITIES ACCORDING TO A CERTAIN FORMULA EVOLVED BY THEM AND SOLD THE TEA MIXTURE IN THE MARKET. THE QUESTION AROSE BEFORE THE SALES TA X AUTHORITIES WHETHER THE DIFFERENT BRANDS OF TEA PURCHASED AND BLENDED BY THE ASSESSEE FOR THE PURPOSE OF PRODUCING THE TEA MIXTURE COULD BE SAID TO HAVE BEEN PROCESSED AFTER THE PURCHASE WITHIN THE MEANING OF THE PROVISO TO SECTION 8(A), SO AS TO PRECL UDE THE ASSESSES FROM BEING ENTITLED TO DEDUCT FROM THEIR TURNOVER UNDER SECTION 8(A), THE VALUE OF THE TEA PURCHASED BY THEM. THE HIGH COURT OF BOMBAY HELD THAT DIFFERENT BRANDS OF TEA PURCHASED BY THE ASSESSES COULD NOT BE REGARDED AS PROCESSED WITHIN THE MEANING OF THE PROVISO TO CLAUSE (A) OF SECTION 8, 16 . ITA NOS.21 &22/PNJ/2014 , C.O. NO.14/PNJ/2014 (A.YS.2008 - 09 &2009 - 10) ACIT VS. RAMACANTA VELINGKAR MINERALS BECAUSE THERE WAS NOT EVEN APPLICATION OF MECHANICAL FORCE SO AS TO SUBJECT THE COMMODITY TO A PROCESS, MANUFACTURE, DEVELOPMENT OR PREPARATION AND THE COMMODITY REMAINED IN THE SAME CONDITION. THE A RGUMENT OF THE REVENUE BEFORE US WAS THAT THIS DECISION OF THE BOMBAY HIGH COURT WAS ON ALL FOURS WITH THE PRESENT CASE AND IF THE BLENDING OF DIFFERENT BRANDS OF TEA FOR THE PURPOSE OF PRODUCING A TEA MIXTURE IN ACCORDANCE WITH A FORMULA EVOLVED BY THE AS SESSES COULD NOT BE REGARDED AS PROCESSING OF TEA, EQUALLY ON A PARITY OF REASONING, BLENDING OF ORE OF DIFFERENT CHEMICAL AND PHYSICAL COMPOSITIONS COULD NOT BE HELD TO CONSTITUTE PROCESSING OF THE ORE. NOW UNDOUBTEDLY THERE IS A CLOSE ANALOGY BETWEE N THE FACTS OF NILGIRI TEA COMPANY CASE [10 STC 500 (BOM HC)] AND THE FACTS OF THE PRESENT CASE, BUT WE DO NOT THINK WE CAN ACCEPT THE DECISION OF THE BOMBAY HIGH COURT IN THE NILGIRI TEA COMPANY CASE [10 STC 500 (BOM HC)] AS LAYING DOWN THE CORRECT LAW. W HEN DIFFERENT BRANDS OF TEA WERE MIXED BY THE ASSESSEE IN NILGIRI TEA COMPANY CASE [10 STC 500 (BOM HC)] FOR THE PURPOSE OF PRODUCING A TEA MIXTURE OF A DIFFERENT KIND AND QUALITY ACCORDING TO A FORMULA EVOLVED BY THEM, THERE WAS PLAINLY AND INDUBITABLY PR OCESSING OF THE DIFFERENT BRANDS OF TEA, BECAUSE THESE BRANDS OF TEA EXPERIENCED, AS A RESULT OF MIXING, QUALITATIVE CHANGE, IN THAT THE TEA MIXTURE WHICH CAME INTO EXISTENCE WAS OF DIFFERENT QUALITY AND FLAVOR THAN THE DIFFERENT BRANDS OF TEA WHICH WENT I NTO THE MIXTURE. THERE ARE, IT IS TRUE, SOME OBSERVATIONS IN THE JUDGMENT OF THE BOMBAY HIGH COURT WHICH SEEM TO SUGGEST THAT IF INSTEAD OF MANUAL APPLICATION OF ENERGY IN MIXING THE DIFFERENT BRANDS OF TEA, THERE HAD BEEN APPLICATION OF MECHANICAL FORCE I N PRODUCING THE TEA MIXTURE, THE COURT MIGHT HAVE COME TO A DIFFERENT CONCLUSION AND THESE OBSERVATIONS WERE RELIED UPON BY THE ASSESSEE, SINCE IN THE PRESENT CASE THE BLENDING WAS DONE BY APPLICATION OF MECHANICAL FORCE, BUT WE DO NOT THINK THAT IS THE CO RRECT TEST TO BE APPLIED FOR THE PURPOSE OF DETERMINING WHETHER THERE IS PROCESSING. THE QUESTION IS NOT WHETHER THERE IS MANUAL APPLICATION OF ENERGY OR THERE IS APPLICATION OF MECHANICAL FORCE. WHATEVER BE THE MEANS EMPLOYED FOR THE PURPOSE OF CARRYING OUT THE OPERATION, IT IS THE EFFECT OF THE OPERATION ON THE COMMODITY THAT IS MATERIAL FOR THE PURPOSE OF DETERMINING WHETHER THE OPERATION CONSTITUTES PROCESSING WE ARE CLEARLY OF VIEW THAT THE BLENDING OF ORE IN THE COURSE OF LOADING THROUGH THE MECHA NICAL ORE HANDLING PLANT AMOUNTED TO PROCESSING OF ORE WITHIN THE MEANING OF SECTION 8(3)(B) AND RULE 13 AND THE MECHANICAL ORE HANDLING PLANT FELL WITHIN THE DESCRIPTION OF MACHINERY, PLANT, EQUIPMENT USED IN THE PROCESSING OF ORE FOR SALE 43.9 IN DECIDING THE SAID QUESTION, THE HONBLE SUPREME COURT AFTER CONSIDERING THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN NILGIRI CEYLON TEA SUPPLYING CO. VS. STATE OF BOMBAY [1959] 10 STC 500 (BOM), INTER ALIA, OBSERVED AS FOLLOWS: ( I ) WHEN DIFFERENT BRANDS OF TEA WERE MIXED BY THE ASSESSEE AS IN NILGIRI CEYLON TEA SUPPLYING CO.S CASE (1959) 10 STC 500 (BOM) FOR THE PURPOSE OF PURCHASING A TEA MIXTURE OF A DIFFERENT KIND AND QUALITY 17 . ITA NOS.21 &22/PNJ/2014 , C.O. NO.14/PNJ/2014 (A.YS.2008 - 09 &2009 - 10) ACIT VS. RAMACANTA VELINGKAR MINERALS ACCORDING TO A FORMULA EVOLVED BY THEM, THERE WAS PLAI NLY AND INDUBITABLY PROCESSING FOR THE DIFFERENT BRANDS OF TEA, BECAUSE THESE BRANDS OF TEA EXPERIENCED, AS A RESULT OF MIXING, A QUALITATIVE CHANGE, IN THAT THE TEA MIXTURE WHICH CAME INTO EXISTENCE WAS OF A DIFFERENT QUALITY AND FLAVOR THAN THE DIFFERENT BRANDS OF THE TEA WHICH WENT INTO THE MIXTURE; ( II ) THERE ARE, IT IS TRUE, SOME OBSERVATIONS IN THE JUDGMENT OF THE BOMBAY HIGH COURT WHICH SEEM TO SUGGEST THAT IF INSTEAD OF MANUAL APPLICATION OF ENERGY IN MIXING THE DIFFERENT BRANDS OF TEA, THERE HAD BEEN APPLICATION OF MECHANICAL FORCE IN PRODUCING THE TEA MIXTURE, THE COURT MIGHT HAVE COME TO A DIFFERENT CONCLUSION AND THESE OBSERVATIONS WERE RELIED UPON BY THE ASSESSEE, SINCE, IN THE PRESENT CASE, THE BLENDING WAS DONE BY APPLICATION OF MECHANICAL FORCE, BUT THAT IS NOT THE CORRECT TEST TO BE APPLIED FOR THE PURPOSE OF DETERMINING WHETHER THE OPERATION CONSTITUTES IS PROCESSING. ( III ) THE QUESTION IS NOT WHETHER THERE IS ANY MANUAL APPLICATION OF ENERGY OR THERE IS APPLICATION OF MECHANICAL FORCE. WHATEVER BE THE MEANS EMPLOYED FOR THE PURPOSE OF CARRYING OUT THE OPERATION, IT IS THE EFFECT OF THE OPERATION ON THE COMMODITY THAT IS MATERIAL FOR THE PURPOSE OF DETERMINING WHETHER THE OPERATION CONSTITUTES PROCESSING. 43.10 THEREFORE, HONBLE SUPREME COURT, I N CONSTRUING THE EXPRESSION PROCESSING ALLOWED THE APPEAL OF THE ASSESSEE, IN CHOWGULE & CO. PVT. LTD. (SUPRA), HOLDING, INTER ALIA, THAT WHERE ANY COMMODITY IS SUBJECTED TO A PROCESS OR TREATMENT WITH A VIEW TO ITS DEVELOPMENT OR PREPARATION FOR THE MA RKET IT WOULD AMOUNT TO PROCESSING OF THE COMMODITY WITHIN THE MEANING OF CENTRAL SALES TAX ACT, 1956. HONBLE SUPREME COURT, IN THE SAID JUDGMENT, DID NOT CONSIDER THE EXPRESSION MANUFACTURE SINCE THE QUESTION WAS DECIDED ONLY ON THE EXPRESSION PROCES SING. HOWEVER, CONSIDERING THE JUDGMENT OF THE BOMBAY HIGH COURT IN THE CASE OF NILGIRI TEA CO. [1959] 10 STC 500, HONBLE SUPREME COURT OBSERVED THAT, FOR THE PURPOSE OF PRODUCING A TEA MIXTURE OF A DIFFERENT KIND AND QUALITY ACCORDING TO A FORMULA EVOLV ED BY THEM, THERE WAS PLAINLY AND INDUBITABLY PROCESSING OF THE DIFFERENT BRANDS OF TEA, BECAUSE THESE BRANDS OF TEA EXPERIENCED, AS A RESULT OF A QUALITATIVE CHANGE, IN THAT THE TEA MIXTURE WHICH CAME INTO EXISTENCE WAS OF A QUALITY AND FLAVOR FROM THE DI FFERENT BRANDS OF TEA WHICH WENT INTO THE MIXTURE. 43.11 HONBLE KERALA HIGH COURT HAD THE OCCASION TO CONSIDER WHETHER ASSESSEE IS ENGAGED IN THE MANUFACTURE OR PRODUCTION OF AN ARTICLE OR THING WHEN ASSESSEE WAS EXCLUSIVELY ENGAGED IN BLENDING, PACKAGIN G AND EXPORT OF TEA BAGS, TEA PACKETS AND BULK TEA PACKS IN THE CASE OF TATA TEA LTD. VS. ACIT 338 ITR 285. THE ASSESSEES UNIT WAS RECOGNIZED AS 100% EOU. THE ASSESSEE CLAIMED EXEMPTION U/S 10B OF THE ACT FOR THE ASSESSMENT YEAR 1996 - 97 ONWARDS WHICH WAS GRANTED UP TO THE ASSESSMENT YEAR 2000 - 2001, BUT FOR THE ASSESSMENT YEARS 2001 - 02 AND 2002 - 03 THE EXEMPTION WAS DENIED FOR THE REASON THAT BY THE FINANCE ACT, 2000, THE DEFINITION OF MANUFACTURE WHICH INCLUDED PROCESSING CONTAINED IN SEC. 10B OF THE ACT WAS DELETED W.E.F. 01/04/2001. (THE SAME REASONING AS HAS BEEN GIVEN BY THE COORDINATE BENCH IN THE CASE OF CHOWGULE & CO. ITA 162 & 184 HEAVILY RELIED BY THE DEPARTMENT 18 . ITA NOS.21 &22/PNJ/2014 , C.O. NO.14/PNJ/2014 (A.YS.2008 - 09 &2009 - 10) ACIT VS. RAMACANTA VELINGKAR MINERALS UNDER PARA 14 OF THEIR ORDER DT. 12.7.2007.) HONBLE HIGH COURT NOTED IN THAT CASE THA T THE REVENUES STAND IS THAT MANUFACTURE OR PRODUCTION HAD LIBERAL MEANING UNDER THE DEFINITION CLAUSE CONTAINED IN SECTION 10B OF THE ACT UNTIL ITS DELETION WHICH COVERS EVEN PROCESSING AND, THEREFORE, BLENDING AND PACKAGING OF TEA FOR EXPORT WAS TREATED AS MANUFACTURE OR PRODUCTION OF AN ARTICLE QUALIFYING FOR EXEMPTION. HONBLE KERALA HIGH COURT CONSIDERED 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 TRA DE ZONE PROVIDED U/S 10AA OF THE ACT AND 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 SIMILAR IN NATURE. HONBLE KERALA HIGH COURT ALSO CONSIDERED THE JUDGMENT IN THE DEC ISION OF SUPREME COURT IN TARA AGENCIES (292 ITR 444 (SC) RELIED UPON BY THE SR. STANDING COUNSEL FOR THE REVENUE, WHEREIN HONBLE SUPREME COURT CLEARLY HELD THAT BLENDING OF TEA DOES NOT AMOUNT TO MANUFACTURE OR PRODUCTION OF AN ARTICLE OR THING, BUT IS ONLY PROCESSING. HONBLE HIGH COURT ALLOWING THE APPEAL OF THE ASSESSEE HELD THAT THE ASSESSEE WAS EXCLUSIVELY ENGAGED IN BLENDING AND PACKING OF TEA FOR EXPORT AND WAS NOT MANUFACTURING OR PRODUCING ANY OTHER ARTICLE OR THING. IT WAS RECOGNIZED AS A 10 0% EOU DIVISION 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 GROUND THAT PRODUCTS EXPORTED WERE NOT PRODUCED OR MANUFACTURED IN THE INDUSTRIAL UNITS OF THE ASSESSEES 100% EOU, IT WOULD DEFEAT THE VERY OBJECT OF SECTION 10B OF THE ACT. (SIMILAR TO ASSESSEES CASE). FURTHER, INDUSTRIAL UNITS ENGAGED IN THE VERY SAME ACTIVITY, I.E., BLENDING, PACKING AND EXPORT OF TEA IN THE SPECIAL ECONOMIC ZONES AND F REE TRADE ZONES, WOULD CONTINUE TO ENJOY TAX EXEMPTION UNDER SECTION 10A OF THE ACT AND SECTION 10AA OF THE ACT RESPECTIVELY. THE ASSESSEE WAS ALLOWED EXEMPTION ON THE PROFIT DERIVED BY ITS 100% EOU ENGAGED IN BLENDING, PACKING AND EXPORT OF TEA BAGS AND T EA PACKETS. HONBLE HIGH COURT HELD AS UNDER: THE FINDING OF THIS COURT IS THAT THE PURPOSE OF INCORPORATION OF SECTION 2(R) OF THE SPECIAL ECONOMIC ZONES ACT, 2005, INTO SECTION 10AA OF THE INCOME - TAX ACT IS TO PROVIDE A LIBERAL MEANING TO THE WORD MANU FACTURE WHICH TAKES IN EVEN BLENDING, REFRIGERATION, ETC. IT WAS NOTICED BY THIS COURT THAT THE DEFINITIONS OF MANUFACTURE CONTAINED IN THE ABOVE DEFINITION CLAUSES ARE VERY LIBERAL WHICH TAKES IN EVEN PROCESSING LIKE BLENDING. THE CONTENTION OF THE COU NSEL FOR THE ASSESSEE IS THAT THE PURPOSE OF REMOVAL OF THE DEFINITION OF MANUFACTURE FROM SECTION 10B WAS NOT TO PROVIDE A RESTRICTED MEANING FOR THAT TERM CONTAINED IN THE MAIN SECTION BECAUSE IF THAT WAS SO, THEN THE LEGISLATURE WOULD HAVE ONLY MODIFI ED THE DEFINITION CLAUSE. FURTHER, THE DEFINITION OF 100 PER CENT EXPORT ORIENTED UNIT EVEN AFTER THE AMENDMENT IS RETAINED IN THE SAID SECTION, WHICH DEFINES IT AS AN UNDERTAKING WHICH HAS BEEN APPROVED AS A 100 PER CENT EXPORT ORIENTED UNDERTAKING BY THE BOARD APPOINTED IN THIS BEHALF BY THE CENTRAL GOVERNMENT IN EXERCISE OF POWERS CONFERRED BY SECTION 40 OF THE INDUSTRIES (DEVELOPMENT & REGULATION) ACT, 1951, AND THE RULES MADE UNDER THAT ACT. IT IS PERTINENT TO NOTE THE PRODUCTS FOR WHICH THE ASSESSEES UNIT IS RECOGNIZED AS A 100 PER CENT EXPORT ORIENTED UNIT ARE TEA BAGS, TEA IN PACKETS AND TEA IN BULK PACKS. IN FACT, THE ASSESSEE IS EXCLUSIVELY ENGAGED IN BLENDING AND PACKING OF TEA FOR EXPORT AND IS NOT 19 . ITA NOS.21 &22/PNJ/2014 , C.O. NO.14/PNJ/2014 (A.YS.2008 - 09 &2009 - 10) ACIT VS. RAMACANTA VELINGKAR MINERALS MANUFACTURING OR PRODUCING ANY OTHER ARTICLE OR THING. STILL IT IS RECOGNIZED AS A 100 PER CENT EXPORT ORIENTED UNIT BY THE CONCERNED AUTHORITY WITHIN THE MEANING OF THAT TERM CONTAINED IN THE DEFINITION CLAUSE OF SECTION 10B OF THE INCOME - TAX ACT AND THE DEPARTMENT HAS NO CASE THAT THE ASSESSEES UNIT ENGAGED IN EXPORT OF TEA BAGS AND TEA PACKETS IS NOT A 100 PER CENT EXPORT ORIENTED UNIT. SO MUCH SO, IN OUR VIEW, IF EXEMPTION IS DENIED ON THE GROUND THAT PRODUCTS EXPORTED ARE NOT PRODUCED OR MANUFACTURED IN THE INDUSTRIAL UNIT OF THE ASSESSEES 100 PE R CENT EXPORT ORIENTED UNIT, THE SAME WOULD DEFEAT THE VERY OBJECT OF SECTION 10B. FURTHER, INDUSTRIAL UNITS ENGAGED IN THE VERY SAME ACTIVITY, I.E., BLENDING, PACKING AND EXPORT OF TEA IN THE SPECIAL ECONOMIC ZONES AND FREE TRADE ZONES, WILL CONTINUE TO E NJOY TAX EXEMPTION UNDER SECTION 10A AND SECTION 10AA RESPECTIVELY. THE STILL WORSE POSITION IS THAT THE APPELLANT WOULD BE DENIED OF EXPORT EXEMPTION AVAILABLE UNDER SECTION 80HHC EVEN TO A MERCHANT EXPORTER. IN OUR VIEW, THE DECISION OF THE SUPREME COURT IN TARA AGENCIES CASE [2007] 292 ITR 444 (SC) IS NOT APPLICABLE FOR THE PURPOSE OF CONSIDERING EXEMPTION FOR INDUSTRIES IN THE EXPORT PROCESSING ZONES, FREE TRADE ZONES AND TO 100 PER CENT EXPORT ORIENTED UNITS COVERED BY SECTIONS 10A, 10AA AND 10B OF TH E INCOME - TAX ACT. THEREFORE, FOLLOWING THE JUDGMENT OF THIS COURT ABOVE REFERRED TO WE HOLD THAT THE ASSESSEE IS ENTITLED TO EXEMPTION ON THE PROFIT DERIVED BY ITS 100 PER CENT EXPORT ORIENTED UNIT ENGAGED IN BLENDING, PACKING AND EXPORT OF TEA BAGS AND TE A PACKETS. CONSEQUENTLY, WE ALLOW THE APPEALS BY REVERSING THE ORDERS OF THE TRIBUNAL AND BY RESTORING THE ORDERS OF THE FIRST APPELLATE AUTHORITY DECLARING THE APPELLANTS ENTITLEMENT FOR EXEMPTION. 43.12 HONBLE HIGH COURT IN THIS CASE, IN OUR OPINION, HAS CLEARLY LAID DOWN THAT ONCE THE ASSESSEE IS RECOGNIZED AS A 100% EOU FOR ENGAGING IN AN ACTIVITY AND ASSESSEE IS ENGAGED IN THE SAME VERY ACTIVITY, IF THE EXEMPTION IS DENIED TO THE ASSESSEE ON THE GROUND THAT THERE IS NO PRODUCTION OR MANUFACTURING BU T ONLY PROCESSING OF THE PRODUCTS EXPORTED IN THE 100% EXPORT ORIENTED UNIT, THE SAME WOULD DEFEAT THE VERY OBJECT OF SECTION 10B. THE HONBLE HIGH COURT TOOK THE VIEW THAT THE DECISION OF THE HONBLE SUPREME COURT IN TARA AGENCYS CASE 292 ITR 444 WILL NO T APPLY EVEN THOUGH HONBLE SUPREME COURT IN THAT CASE HAS HELD THAT BLENDING OF TEA DOES NOT AMOUNT TO MANUFACTURE OR PRODUCTION OF AN ARTICLE BUT IS ONLY PROCESSING. THUS, THE HONBLE KERALA HIGH COURT IN THE CASE OF TATA TEA LTD. (SUPRA) GAVE THE CLEAR CUT FINDING IMPLIEDLY THAT EVEN IF THE ASSESSEE IS ENGAGED IN PROCESSING AND IS RECOGNIZED AS 100% EOU, IT WILL BE ENTITLED FOR EXEMPTION CLAIMED U/S 10B OF THE ACT. 43.13 THE CRUX OF THE SUBMISSIONS OF THE LD. SPECIAL COUNSEL FOR THE DEPARTMENT IS THAT T HE ASSESSEE IS ENGAGED IN THESE 100% EXPORT ORIENTED UNITS ONLY IN PROCESSING OF IRON ORE AND BY PROCESSING IT GET IT UPGRADED FOR EXPORT, THEREFORE IT IS NOT ENTITLED FOR EXEMPTION U/S 10B DOES NOT HAVE ANY LEG TO STAND IN VIEW OF THE DECISION OF KERALA HIGH COURT (SUPRA), SUPREME COURT IN THE CASE OF CHOWGULE & CO(SUPRA). EVEN ON THIS ISSUE WE HAVE GONE THROUGH THE DECISION OF HONBLE SPECIAL BENCH IN THE CASE OF MADHU JAYANTI INTERNATIONAL LTD. AND OTHERS VS. DCIT. THE QUESTION FOR CONSIDERATION AND DE CISION OF THE SPECIAL BENCH WAS: 20 . ITA NOS.21 &22/PNJ/2014 , C.O. NO.14/PNJ/2014 (A.YS.2008 - 09 &2009 - 10) ACIT VS. RAMACANTA VELINGKAR MINERALS WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ASSESSEES, WHO ARE IN THE BUSINESS OF BLENDING & PROCESSING OF TEA AND EXPORT THEREOF, CAN BE SAID TO BE MANUFACTURE/PRODUCER OF THE TEA FOR THE PURPOSE OF S ECTION 10A/10B OF THE I.T. ACT, 1961? 44. THE BRIEF FACTS IN THE CASE OF MADHU JAYANTI INTERNATIONAL LTD. IN ITA NO. 1463/KOL/2007 WERE THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF MANUFACTURING, PROCESSING, EXPORTING AND DEALING IN VARIOUS COMMODIT IES, MORE PARTICULARLY TEA, COFFEE, JUTE, PEPPER, CHILLIES, CARDAMOM, TURMERIC AND SIMILAR OTHER SPICES, ETC. THE ASSESSEE, AS PER THE CLAIM IS A 100% EOU WITHIN THE MEANING OF SECTION 10B OF THE I.T. ACT, 1961 AND CLAIMED EXEMPTION UNDER THAT SECTION. TH E ASSESSEE BUYS TEA FROM AUCTIONS HELD IN TEA BOARD RECOGNIZED AUCTION CENTRES AT KOLKATA, GUWAHATI, SILIGURI, COCHIN, COIMBATORE AND COONOOR. THE ASSESSEE CONCEDED THE FACTUAL POSITION THAT IT IMPORTS SMALL QUANTITY OF TEA OF THE TYPE AND QUALITY NOT PROD UCED IN INDIA. IT FURTHER CONCEDED THE FACTUAL POSITION THAT IT DOES NOT GROW OR MANUFACTURE ANY TEA. ACCORDING TO THE ASSESSEE, TEA SO BOUGHT IN DIFFERENT AUCTIONS IS PROCESSED WITH A VIEW TO REMOVE ALL DUST AND FOREIGN SUBSTANCES AND THEREAFTER IT BLENDS DIFFERENT VARIETIES OF TEA TO MAKE IT OF UNIFORM AND CONSISTENT QUALITY THROUGHOUT THE YEAR. THEREAFTER, IT IS PACKED IN CONSUMER PACKETS OF 50, 100, 250, 500 OR 1000 GMS. ETC. OR PACKED IN THE FORM OF TEA BAGS OF 1.94 GMS. OR 2 GMS. ETC., AS THE CASE M AY BE. THE ASSESSEE CLAIMED EXEMPTION U/S 10B OF THE ACT IN RESPECT OF ITS 100% EOU FOR EXPORT OF MANUFACTURED JUTE BAGS, PACKET TEA, TEA BAGS, BULK TEA, ETC. THE AO REJECTED THE CLAIM OF ASSESSEE OF EXEMPTION U/S 10B IN RESPECT OF EXPORT OF BLENDING OF TE A. THE REJECTION OF EXEMPTION U/S 10B WAS CONFIRMED BY THE CIT(A). WHEN THE MATTER WENT BEFORE THE SPECIAL BENCH, SPECIAL BENCH AFTER DISCUSSION THE RELEVANT PROVISIONS AS WELL AS THE VARIOUS DECISIONS OF HIGH COURT AND THE SUPREME COURT HELD AS UNDER: - 32. THE PROVISIONS OF SECTION 10AA OF THE ACT WAS INSERTED ON THE STATUTE BOOK BY THE SPECIAL ECONOMIC ZONES ACT, 2005 W.E.F. 10.02.2006. EVEN PRIOR TO THE ENACTMENT OF THE SAID SEZ ACT, SPECIAL ECONOMIC ZONES (INCLUDING UNITS THEREIN) WERE ALL ALONG TREA TED LIKE EQU / FTZ / EPZ FOR ALL PURPOSES WHATSOEVER AND WERE DEALT WITHIN THE EXIM POLICY ACCORDINGLY. SECTION 2(K) OF THE SPECIAL ECONOMIC ZONE ACT, 2005 DEFINES THE EXPRESSION 'EXISTING SPECIAL ECONOMIC ZONE' TO MEAN EVERY SPECIAL ECONOMIC ZONE WHICH IS IN EXISTENCE ON OR BEFORE THE COMMENCEMENT OF THE SAID ACT. SECTION 2(E) DEFINES THE EXPRESSION 'EXISTING UNIT' TO MEAN EVERY UNIT WHICH HAS BEEN SET UP ON OR BEFORE THE COMMENCEMENT OF TH E SAID ACT IN AN EXISTING SPECIAL ECONOMIC ZONE. IN OTHER WORDS, ADMITTEDLY ALL SPECIAL ECONOMIC ZONES WERE ALSO BEING GOVERNED BY THE EXIM POLICY PRIOR TO THE ENACTMENT OF SEZ ACT, 2005. CLAUSE (III) OF EXPLANATION 1 TO SECTION 1OAA LAYS DOWN THAT THE EXP RESSION 'MANUFACTURE' SHALL HAVE THE SAME MEANING AS ASSIGNED TO IT IN SECTION 2(R) OF THE SPECIAL ECONOMIC ZONES ACT, 2005, WHICH DEFINITION IS AS UNDER: 'MANUFACTURE' MEANS TO MAKE, PRODUCE, FABRICATE, ASSEMBLE, PROCESS OR BRING INTO EXISTENCE, BY HAND O R BY MACHINE, A NEW PRODUCT HAVING A DISTINCTIVE NAME, CHARACTER OR USE AND SHALL INCLUDE PROCESSES SUCH AS REFRIGERATION, CUTTING, POLISHING, BLENDING, REPAIR, REMAKING, RE - ENGINEERING AND INCLUDES AGRICULTURE, 21 . ITA NOS.21 &22/PNJ/2014 , C.O. NO.14/PNJ/2014 (A.YS.2008 - 09 &2009 - 10) ACIT VS. RAMACANTA VELINGKAR MINERALS AQUACULTURE, ANIMAL HUSBANDLY, FLORICULTURE, HORTICULTURE, PISCICULTURE, POULTRY, SERICULTURE, VITICULTURE AND MINING'. IN EXIM POLICY, THE EXPRESSION 'MANUFACTURE' IS DEFINED, IN PARAGRAPH 9.30 & 9.31 THEREOF ALMOST IN THE SAME MANNER AS IN THE SPECIAL ECONOMIC ZONE ACT, 2005, WHICH IS AS UNDER: 'MANUFACTURE' MEANS TO MAKE, PRODUCE, FABRICATE, ASSEMBLE, PROCESS OR BRING INTO EXISTENCE, BY HAND OR BY MACHINE, A NEW PRODUCT HAVING A DISTINCTIVE NAME, CHARACTER OR USE AND SHALL INCLUDE PROCESSES SUCH AS REFRIGERATION, REPACKING, POLISHING AND LABELIN G. MANUFACTURE, FOR THE PURPOSE OF THIS POLICY, SHALL ALSO INCLUDE AGRICULTURE, AQUACULTURE, ANIMAL HUSBANDRY, FLORICULTURE, HORTICULTURE, PISCICULTURE, POULTRY, SERICULTURE, VITICULTURE AND MINING.' BUT THE ONLY DIFFERENCE BETWEEN THE EXIM POLICY OF 2002 - 07 AND OF 2000 IS THAT WORDS 'AND SEGREGATION' WHICH WERE APPEARING IN THE DEFINITION OF THE EXPRESSION 'MANUFACTURE' IN THE EXIM POLICY OF 2000 WAS DELETED IN THE EXIM POLICY OF 2002 - 07. FURTHER, EVEN IN PREVENTION OF FOOD ALTERNATION RULES, 1955, IT HAS BEEN INTER ALIA STATED THAT TEA USED IN THE MANUFACTURE OF FLAVOURED TEA SHALL CONFORM TO THE STANDARDS OF TEA. THE FLAVOURED TEA : MANUFACTURERS SHALL REGISTER THEMSELVES WITH THE TEA BOARD BEFORE MAKING FLAVOUR TEA IN THE TEA (DISTRIBUTION & EXPORT) CONTROL ORDER, 1957 ISSUED BY THE GOVERNMENT OF INDIA, MINISTRY OF COMMERCE & INDUSTRY (DEPARTMENT OF COMMERCE) THE EXPRESSIONS 'FLAVOUR TEA', 'GREEN TEA ' 'INSTANT TEA', 'PACKET TEA' 'QUICK BREWING BLACK TEA', 'TEA' AND 'TEST BAG' HAVE BEEN S EPAR ATELY DEFINED AS DISTINCT PRODUCT. IN TEA (MARKETING) CONTROL ORDER, 2003 ISSUED BY THE ' CENTRAL GOVERNMENT, IN EXERCISE OF THE POWERS CONFERRED BY SECTION 30(5)(3) OF THE TEA ACT, 1953, THE EXPRESSIONS 'MANUFACTURER', 'BUYER', 'PACKET TEA', 'TEA BAG', - 'G REEN TEA', 'QUICK BREWING BLACK TEA', 'INSTANT TEA' AND 'MADE TEA' HAVE ALSO BEEN DISTINCTLY AND SEPARATELY DEFINED. CLAUSE (29BA) WAS INSERTED IN SECTION 2 OF THE INCOME TAX ACT, 1961 BY THE FINANCE (NO.2) ACT, 2009 W.E.F. 01.04.2009 TO DEFINE THE EXPRES SION 'MANUFACTURE' AS UNDER: 'MANUFACTURE', WITH ITS GRAMMATICAL VARIATIONS, MEANS A CHANGE IN A NON - LIVING PHYSICAL OBJECT OR ARTICLE OR THING, - (A) RESULTING IN TRANSFORMATION OF THE OBJECT OR ARTICLE 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 OBJECT OR ARTICLE OR THING WITH A DIFFERENT CHEMICAL COMPOSITION OR INTEGRAL STRUCTURE; THE AFORESAID DEFINITION OF THE EXPRESSION 'MANUFACTURE', ALTHOUGH BROUGHT INTO THE STATUTE BOOK W.E.F. 01.04.2009, WAS APPLIED BY THE HON'BLE SUPREME COURT EVEN FOR THE ASSESSMENT YEAR 2001 - 02 IN ITO V. ARIHANT TILES AND MARBLES PVT. LTD. (2010) 320 ITR 7 9, 82 (SC) ON THE GROUND THAT PARLIAMENT HAD TAKEN NOTE OF GROUND REALITY IN INSERTING SECTION 2(29BA) IN THE INCOME TAX LAW. THE SAID DEFINITION WAS AGAIN APPLIED BY THE HON'BLE SUPREME COURT IN CIT V. EMPTEE POLY - 22 . ITA NOS.21 &22/PNJ/2014 , C.O. NO.14/PNJ/2014 (A.YS.2008 - 09 &2009 - 10) ACIT VS. RAMACANTA VELINGKAR MINERALS YARN PVT. LTD. (2010) 'GREEN TEA' MEANS T HE VARIETY OF MANUFACTURED TEA COMMERCIALLY KNOWN AS GREEN TEA; 320 ITR 665,667 (SC). 33. THE ASSESSEE COMPANY CARRIES OUT ITS OPERATIONS OF BLENDING, PACKAGING AND EXPORT OF TEA BAGS, TEA PACKETS AND BULK TEA PACKS IN ITS MODERN FACTORY, WELL EQUIPPED WIT H ALL IMPORTED AND SOPHISTICATED AUTOMATIC PLANT AND MACHINERIES WITH THE HELP OF OVER 100 WORKMEN ENGAGED ON CONTRACT BASIS THROUGH M/S. TROT PVT. LTD. THE MANUFACTURING'. OPERATIONS ARE CARRIED IN ITS SAID FACTORY SITUATED AT 19/4A, MUNSHIGANJ ROAD (UNDE R FALTA EXPORT PROCESSING ZONE), KOLKATA. WE FIND FROM FACTS OF THE CASE THAT THE DETAILS OF TURNOVER OF THE ASSESSEE SHOWS BULK TEA (0.94%), PACKET TEA AND TEA BAGS .(99.06%),. AS. PER DIFFERENT DESCRIPTIONS, BRAND NAMES AND VARIETIES, AS LISTED APR. ASSE SSEE COMPANY IS DULY REGISTERED AS A 100% EOU BY THE GOVERNMENT OF INDIA, MINISTRY OF INDUSTRY, DEPARTMENT OF INDUSTRIAL POLICY AND PROMOTION SECRETARIAL FOR INDUSTRIAL APPROVALS, ECU SECTION IN THE STATE OF WEST BENGAL FOR MANUFACTURE OF PACKET TEA, TEA BAGS/BULK TEA WITH ANNUAL CAPACITY OF 3110 MT. IN TERMS OF REGISTRATION CERTIFICATE DATED 26TH DECEMBER, 1995, INTER ALIA, WITH THE CONDITION THAT ITS 100% PRODUCTION (EXCLUDING REJECTS NOT EXCEEDING 5%) WOULD HAVE TO BE EXPO RTED AND THAT ITS REGISTERED EOU UNIT SHALL MAKE VALUE ADDITION TO A MINIMUM EXTENT OF 79%. UNDISPUTEDLY, THE EXPORTED CONSUMER PRODUCTS, BLENDED BY ASSESSEE IN ITS SAID FACTORY PREMISES IS A CASE OF SUBSTANTIAL VALUE ADDITION, AS COMPARED TO THE UNBLENDED BLACK TEA IN GRANULE AND DUST FORM NORMALLY AVAILABLE FOR SALE IN THE OPEN RETAIL MARKET THROUGHOUT INDIA. 34. THE SUBJECT FOR CONSIDERATION UNDER SECTIONS 10A AND/OR 10B OF THE SAID ACT IS MANUFACTURE / PRODUCTION OF TEA ; THE OBJECT BEING GRANT OF BENEF ITS OF TAX EXEMPTION TO EXPORTERS CARRYING OUT THEIR OPERATIONS IN FTZ, EOU, EPZ & SEZ AREAS IN ACCORDANCE WITH THE EXIM POLICY DECLARED BY THE GOVERNMENT OF INDIA IN PARLIAMENT AND IN THE LIGHT OF ALLIED AND GOVERNING LAWS; IN THE LIGHT OF ALLIED LAWS E.G . THE TEA ACT, 1953, THE PREVENTION OF FOOD ADULTERATION ACT, 1953 READ WITH PREVENTION OF FOOD ADULTERATION RULES, 1955. THE TEA (MARKETING) CONTROL ORDER, 2003, THE TEA (DISTRIBUTION & EXPORT) CONTROL ORDER, 2005 AS WELL AS THE RULES AND REGULATIONS FRAM ED BY THE TEA BOARD AND ALSO CALCUTTA TEA TRADERS ASSOCIATION FROM TIME TO TIME AS DISCUSSED ABOVE. 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 ASSESSEE'S DIVISION ENJOYS RECOGNITION AS A 100% EOU, WHICH IS GRANTED BY THE DEVELOPMENT COMMISSIONER, MINISTRY OF COMMERCE & INDUSTRY, GOVT. OF INDIA. THE 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 DECLINED FOR THE REASONS THAT BY THE FINANCE ACT, 2000, THE DEFINITION OF `MANUFACTURE WHICH INCLUDED 'PROCESSING' CONTAINED IN SECTION 1OB OF THE ACT WAS DELETED W.E.F. 01.04.2001. THE ARGUMENT OF THE DEPARTMENT IS THAT MANUFACTURE OR PRODUCTION HAD LIBERAL MEANING UNDER THE DEFINITION CLAUSE CONTAINED IN SECTION 10B OF TH E ACT UNTIL ITS DELETION WHICH COVERS EVEN 23 . ITA NOS.21 &22/PNJ/2014 , C.O. NO.14/PNJ/2014 (A.YS.2008 - 09 &2009 - 10) ACIT VS. RAMACANTA VELINGKAR MINERALS PROCESSING AND, THEREFORE, BLENDING 'AND PACKAGING OF TEA FOR EXPORT WAS TREATED AS 'MANUFACTURE' OR 'PRODUCTION' OF AN ARTICLE QUALIFYING FOR EXEMPTION. WE ARE OF THE CONSIDERED VIEW THAT THE CONTENTION OF THE AS SESSEE THAT THE SCHEME OF INCOME TAX EXEMPTION AVAILABLE TO UNITS IN THE SEZ U/S. TOA OF THE ACT AND UNITS IN THE FREE TRADE ZONE PROVIDED U/S, 10AA OF THE ACT AND THE EXEMPTION AVAILABLE TO 100% EOU U/S. 1OB OF THE ACT ARE VERY SIMILAR IN NATURE AND THE WORDINGS OF THE STATUTORY PROVISIONS ARE SIMILAR IN NATURE IS CORRECT. WE FIND THAT HON'BLE KERALA HIGH COURT ALSO CONSIDERED THE JUDGMENT IN - THE DECISION OF SUPREME COURT IN TARA AGENCIES, SUPRA RELIED ON BY THE LD. CIT, DR, WHER EIN HON'BLE SUPREME COURT CLEARLY HELD THAT BLENDING OF TEA DOES NOT AMOUNT TO 'MANUFACTURE' OR 'PRODUCTION' OF AN ARTICLE, BUT IS ONLY PROCESSING. WE FIND THAT THE ASSESSEE WAS EXCLUSIVELY ENGAGED IN BLENDING AND PACKING OF TEA FOR EXPORT AND WAS NOT MANU FACTURING OR PRODUCING ANY OTHER ARTICLE OR THING. IT WAS RECOGNISED AS A 100% EOU DIVISION AND THE DEPARTMENT HAD NO CASE THAT THE ASSESSEE'S UNIT ENGAGED IN EXPORT OF TEA BAGS AND TEA PACKETS WAS NOT A 100% EOU. IF EXEMPTION WAS DENIED ON THE GROUND THAT PRODUCTS EXPORTED WERE NOT PRODUCED OR MANUFACTURED IN THE INDUSTRIAL UNIT OF THE ASSESSEE'S 100% EOU, IT WOULD DEFEAT THE VERY OBJECT OF SECTIONS 10B OF THE ACT. 36. WE, IN VIEW OF THE ABOVE, HOLD THAT WHEN THE PRODUCTS FOR WHICH THE ASSESSEE'S 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 ARTICLE 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' AS DEFINED IN SECTION 2(R) OF SEZ ACT, EXIM POLICY, FOOD ADULTERATION RULES, 1955, TEA (MARKETING) CONTROL ORDER, 2003, ETC. WE ALSO FIND THAT THE DEFIN ITION OF 'MANUFACTURE' AS PER SECTION 2(R) OF THE SEZ ACT, 2005 IS INCORPORATED IN SECTION 10AA OF THE INCOME - TAX ACT WITH EFFECT FROM 10.02.2006. HON'BLE KERALA HIGH COURT IN THE CASE 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 WIDER THAN WHAT IS THE MEANING OF THE TERM `MANUFACTURE UNDER THE COMMON PARLANCE, AND IT INC LUDES PROCESSING, BLENDING, PACKAGING ETC. IN VIEW OF THE ABOVE AND RESPECTFULLY FOLLOWING THE DECISION OF HON'BLE KERALA HIGH COURT IN THE CASE OF GIRNAR INDUSTRIES (SUPRA) AND TATA TEA LIMITED (SUPRA), WE 'HOLD THAT THE ASSESSEE IS ENTITLED FOR EXEMPTION UNDER SECTION 10B OF THE ACT ON ACCOUNT OF BLENDING OF TEA. SIMILARLY, IN OUR VIEW, THE INDUSTRIAL UNITS ENGAGED IN THE VERY SAME ACTIVITY I.E. BLENDING, PACKING AND EXPORT OF TEA IN THE FREE TRADE ZONE SHALL ALSO BE ENTITLED TO ENJOY TAX EXEMPTION UNDE R 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 HI RESPECT OF UNDERTAKINGS IN FREE TRADE ZONES ARE MANUFACTURER/PRODUCER OF TEA FOR THE PURPOSE OF CLAIMING 24 . ITA NOS.21 &22/PNJ/2014 , C.O. NO.14/PNJ/2014 (A.YS.2008 - 09 &2009 - 10) ACIT VS. RAMACANTA VELINGKAR MINERALS 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 APPEALS 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. 44.1 FROM THE READING OF PARA 35 OF THE AFORESAID JUDGMENT WE NOTED THAT THE SPECIAL BENCH IN THIS CASE CLEARLY HELD THAT THE ASSESSEE WAS ENGAGED ONLY IN PROCESSING AND WAS NOT ENGAGED IN THE MANUFACTURE OR PRODUCTION BUT HAD ULTIMATELY UNDER PARA 36 IT T OOK THE VIEW IN VIEW OF THE FACT THAT THE DEFINITION OF MANUFACTURE U/S 2(R) OF THE SEZ ACT, 2005 WHICH IS INCORPORATED IN SECTION 10AA W.E.F. 10/02/2006 INCLUDES PROCESSING. THEREFORE, FOLLOWING THE DECISION OF KERALA HIGH COURT IN THE CASE OF GIRNAR INDUSTRIES AND TATA TEA LTD. (WHICH WAS DISCUSSED BY US IN THE PRECEDING PARAGRAPHS) HELD THAT THE ASSESSEE IS ENTITLED FOR EXEMPTION U/S 10B OF THE ACT ON ACCOUNT OF BLENDING OF TEA. 45. WE HAVE ALSO GONE THROUGH THE DECISION OF HONBLE SUPREME COURT IN INDIAN CINE AGENCIES VS CIT 308 ITR 98. IN THIS CASE THE QUESTION BEFORE THE HONBLE SUPREME COURT WAS: WHEN THE ASSESSEE WAS ENGAGED IN THE ACTIVITY OF CUTTING JUMBO ROLL FILMS INTO FLAT AND SMALL ROLLS IN DESIRED SIZES, WHETHER SUCH ACTIVITY UNDERTAKEN BY THE ASSESSEE WAS MANUFACTURE OR PRODUCTION? IN THIS CASE, THE HONBLE SUPREME COURT AFTER DISCUSSING VARIOUS CASES, THE PROVISIONS OF DIFFERENT ACTS AND THE DICTIONARY MEANING TOOK THE VIEW THAT THE ASSESSEE WAS ENGAGED IN MANUFACTURE / PRODUCTION. WHIL E HOLDING SO UNDER PARA 12 OF ITS ORDER, HONBLE SUPREME COURT HAS GIVEN THE SAME ANALOGY FOR THE PURPOSE OF ELIGIBILITY OF DEDUCTION UNDER SECTION 80HH AND 80 - I AS HAS BEEN GIVEN BY THE KERALA HIGH COURT IN THE CASE OF TATA TEA DISCUSSED HEREIN ABOVE FOR THE PURPOSE OF SECTION 10B, THAT IF THERE WAS NO MANUFACTURING ACTIVITY, THEN THE QUESTION OF REFERRING TO ITEM 10 OF ELEVENTH SCHEDULE FOR THE PURPOSE OF EXCLUSION DOES NOT ARISE. FROM THIS JUDGMENT, THUS, IT IS APPARENT THAT THE HONBLE APEX COURT ACCEPT ED THAT MANUFACTURE/PRODUCTION INCLUDES PROCESSING ALSO. 45.1 WE HAVE ALSO GONE THROUGH THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF ITO VS. ARIHANT TILES AND MARBLES PVT. LTD. 320 ITR 79(SC). IN THIS CASE WHEN THE ASSESSEE WAS ENGAGED IN THE ACTI VITY OF CUTTING AND POLISHING OF MARBLE BLOCKS, THE QUESTION BEFORE THE SUPREME COURT WAS WHETHER THE ACTIVITIES UNDERTAKEN BY THE ASSESSEE WOULD FALL WITHIN THE MEANING OF THE WORDS MANUFACTURE OR PRODUCTION IN SECTION 80 - IA OF THE INCOME - TAX ACT, 1961? IN THIS CASE, HONBLE SUPREME COURT, AFTER DISCUSSING THE DEFINITION OF MANUFACTURE GIVEN IN SECTION 2(29BA) OF THE INCOME - TAX ACT, 1961 AND ALSO DISCUSSING THE PROVISIONS OF SECTION 80 - IA(2)(III) AND AFTER GOING THROUGH VARIOUS DECISIONS, HELD AS UNDER : 22. APPLYING THE ABOVE TESTS LAID DOWN BY THIS COURT IN CIT VS. N.C. BUDHARAJA AND CO. 204 ITR 412 (SC) TO THE FACTS OF THE PRESENT CASES, WE ARE OF THE 25 . ITA NOS.21 &22/PNJ/2014 , C.O. NO.14/PNJ/2014 (A.YS.2008 - 09 &2009 - 10) ACIT VS. RAMACANTA VELINGKAR MINERALS VIEW THAT BLOCKS CONVERTED INTO POLISHED SLABS AND TILES AFTER UNDERGOING THE PROCESS INDICATED A BOVE CERTAINLY RESULTS IN EMERGENCE OF A NEW AND DISTINCT COMMODITY. THE ORIGINAL BLOCK DOES NOT REMAIN THE MARBLE BLOCK, IT BECOMES A SLAB OR TILE. IN THE CIRCUMSTANCES, NOT ONLY THERE IS MANUFACTURE BUT ALSO AN ACTIVITY WHICH IS SOMETHING BEYOND MANUFA CTURE AND WHICH BRINGS A NEW PRODUCT INTO EXISTENCE AND, THEREFORE, ON THE FACTS OF THESE CASES, WE ARE OF THE VIEW THAT THE HIGH COURT WAS RIGHT IN COMING TO THE CONCLUSION THAT THE ACTIVITY UNDERTAKEN BY THE RESPONDENTS - ASSESSEES DID CONSTITUTE MANUFACTU RE OR PRODUCTION IN TERMS OF SECTION 80IA OF THE INCOME TAX ACT, 1961. 23. BEFORE CONCLUDING, WE WOULD LIKE TO MAKE ONE OBSERVATION. IF THE CONTENTION OF THE DEPARTMENT IS TO BE ACCEPTED, NAMELY THAT THE ACTIVITY UNDERTAKEN BY THE RESPONDENTS HEREIN IS N OT A MANUFACTURE, THEN, IT WOULD HAVE SERIOUS REVENUE CONSEQUENCES. AS STATED ABOVE, EACH OF THE RESPONDENTS IS PAYING EXCISE DUTY, SOME OF THE RESPONDENTS ARE JOB WORKERS AND THE ACTIVITY UNDERTAKEN BY THEM HAS BEEN RECOGNIZED BY VARIOUS GOVERNMENT AUTHO RITIES AS MANUFACTURE. TO SAY THAT THE ACTIVITY WILL NOT AMOUNT TO MANUFACTURE OR PRODUCTION UNDER SECTION 80IA WILL HAVE DISASTROUS CONSEQUENCES, PARTICULARLY IN VIEW OF THE FACT THAT THE ASSESSEES IN ALL THE CASES WOULD PLEAD THAT THEY WERE NOT LIABLE T O PAY EXCISE DUTY, SALES TAX ETC. BECAUSE THE ACTIVITY DID NOT CONSTITUTE MANUFACTURE. KEEPING IN MIND THE ABOVE FACTORS, WE ARE OF THE VIEW THAT IN THE PRESENT CASES, THE ACTIVITY UNDERTAKEN BY EACH OF THE RESPONDENTS CONSTITUTES MANUFACTURE OR PRODUCTIO N AND, THEREFORE, THEY WOULD BE ENTITLED TO THE BENEFIT OF SECTION 80IA OF THE INCOME TAX ACT, 1961. 45.2 IN THIS CASE ALSO, HONBLE SUPREME COURT TOOK THE VIEW THAT CUTTING AND POLISHING OF THE MARBLE BLOCKS IS THE ACTIVITY WHICH CONSTITUTES MANUFACTUR E OR PRODUCTION AS AFTER PROCESSING MARBLE BLOCK NO MORE REMAINS AS MARBLE BLOCK. THIS DECISION HAS ALSO DULY CONSIDERED, IN OUR OPINION, WHETHER THE ACTIVITY OF PROCESSING IS MANUFACTURE / PRODUCTION. 45.3 NOW, WE WOULD LIKE TO DEAL WITH THE SUBMISSIONS OF THE REVENUE WHETHER THIS ISSUE SHOULD BE SENT TO SPECIAL BENCH OR NOT. WE HAVE GONE THROUGH THE DECISION OF THIS TRIBUNAL IN ITA NO. 162/PNJ/2006 DT. 12 TH JULY, 2007 READ WITH MISC. APPLICATION IN MA NO. 23/PNJ/2007 DT. 19 TH JULY, 2007 IN THE CASE OF CHOWGULE & CO. IN THIS CASE WE NOTED THAT THE COORDINATE BENCH OF THE TRIBUNAL HAS INTERPRETED THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF SESA GOA 271 ITR 331 THAT EXTRACTION AND PROCESSING OF MINING ORE AMOUNTS TO PRODUCTION; AND ONE SHOULD READ THE EXPRESSION EXTRACTION AND PROCESSING TOGETHER (THIS DECISION WAS NOT RENDERED IN RESPECT OF EXEMPTION AVAILABLE U/S 10B). EVEN THE COORDINATE BENCH OF THIS TRIBUNAL FURTHER HELD THAT IF SECTION 10B PROVIDES EXEMPTION FOR PROCESSING ALSO, THE LA W WOULD HAVE MADE IT VERY CLEAR BY APPARENTLY STATING THAT PROCESSING IS ALSO ENTITLED FOR EXEMPTION. WHEN THE EXPRESSION PROCESSING IS OMITTED IN SECTION 10B, WE ARE NOT SUPPOSED TO FILL UP THE OMISSION. IF SOMETHING IS NOT THERE WE SHOULD ACCEPT AS IT IS NOT THERE. WE SHOULD NOT PROVIDE FOR THE OMISSION THAT AMOUNTS TO JUDICIAL LEGISLATION. THERE IS NO CONFUSION IN THE PROVISION OF LAW PROVIDED UNDER SECTION 10B. THE EXEMPTION IS 26 . ITA NOS.21 &22/PNJ/2014 , C.O. NO.14/PNJ/2014 (A.YS.2008 - 09 &2009 - 10) ACIT VS. RAMACANTA VELINGKAR MINERALS AVAILABLE ONLY TO MANUFACTURE OR PRODUCTION. IT IS NOT AVAILABLE FOR PROCE SSING. ALTHOUGH SUBSEQUENTLY THIS TRIBUNAL HAS RECTIFIED THE ORDER UNDER SECTION 254 VIDE ORDER DATED 19 TH JULY, 2007 ON THE APPLICATION OF THE ASSESSEE AND TOOK THE VIEW THAT THE ASSESSEE IS ENTITLED FOR EXEMPTION UNDER SECTION 10B AS THE ASSESSEE - COMPAN Y ITSELF IS EXTRACTING THE ENTIRE IRON ORE FROM OWN MINES AND MINES TAKEN ON LEASE AND THEREAFTER PROCESSING THE SAME. WE CANNOT LOOK INTO THE FINDING OF THE COORDINATE BENCH WHETHER THEY HAVE CORRECTLY INTERPRETED THE DECISION OF SUPREME COURT IN 271 ITR 331 OR NOT. THE LD. AR VEHEMENTLY CONTENDED THAT THE DECISION DT. 12 TH JULY, 2007 OF THIS TRIBUNAL IN THAT CASE GOT OVERRULED BY THE DECISION OF THIS TRIBUNAL VIDE ORDER DT. 19 TH JULY, 2007 BUT WE DO NOT AGREE ON THIS WITH THE LD. AR. WE HAVE GONE THROUGH THE ORDER DT. 12 TH JULY, 2007 AS WELL AS ORDER DT. 19 TH JULY, 2007 BUT WE NOTED THAT THE TRIBUNAL RECTIFIED THE ORDER AS THE TRIBUNAL NOTED THE ASSESSEE ITSELF WAS EXTRACTING THE ENTIRE ORES AND PROCESSING THE SAME. THUS, THE ASSESSEE COMPLIED WITH BOTH TH E CONDITIONS OF EXTRACTING AND PROCESSING OF IRON ORE. THIS TRIBUNAL DID NOT REVERSE THE FINDING THAT THE PROCESSING IS NOT ENTITLED FOR THE EXEMPTION. THE TRIBUNAL DID NOT REVERSE THE FINDING THAT EXTRACTION AND PROCESSING SHOULD GO TOGETHER. EVEN THAT BE NCH / TRIBUNAL DID NOT VISUALIZE THAT 100% EOU IS APPROVED FOR A PARTICULAR LOCATION AND ITS BOUNDRY CANNOT EXTEND BEYOND THAT LOCATION. IT IS ONLY THE PROFIT DERIVED BY THE 100% EOU UNIT SITUATED WITHIN THAT LOCATION, CAN BE REGARDED TO BE THE PROFIT DERI VED BY THE 100% EOU. THE ASSESSEE IN THAT CASE HAS TAKEN THE MINES ON LEASE WHICH WERE NOT APPROVED AS PART OF 100% EOU BUT STILL THE ASSESSEE WAS ALLOWED EXEMPTION U/S 10B EVEN THOUGH THE IRON ORE EXTRACTED FROM THOSE MINES WHICH WERE TAKEN ON LEASE WERE NOT PART OF THE 100% EOU 45.4 NO DOUBT THE DECISION OF THE COORDINATE BENCH IS BINDING ON US IN VIEW OF THE SETTLED JUDICIAL PRINCIPLES IN THE VARIOUS DECISIONS EVEN RELIED ON BY THE LD. CCIT BUT THERE ARE CERTAIN EXCEPTIONS TO THIS CARDINAL PRINCIPL E OF JUDICIAL DISCIPLINE. ONCE THE DECISION OF SPECIAL BENCH OR THIRD MEMBER HAS COME ON SIMILAR ISSUE SUBSEQUENTLY, THE DECISION OF THE SPECIAL BENCH WILL BE BINDING ON US. IF THE DECISION OF JURISDICTIONAL HIGH COURT / SUPREME COURT HAS COME SUBSEQUENTLY ON THE SIMILAR ISSUE, IN VIEW OF THE ARTICLE 141 OF THE CONSTITUTION OF INDIA THAT DECISION WILL BE BINDING ON US. EVEN THIS WILL BE REGARDED A MISTAKE OF LAW IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS SAURASHTRA KUTCH STOCK EX CHANGE 305 ITR 227 (SC).IF THERE IS NO JURISDICTIONAL HIGH COURT DECISION AND SUBSEQUENTLY ANY OTHER HIGH COURT HAS DECIDED THE SIMILAR ISSUE, THIS IS THE SETTLED PRINCIPLE OF LAW THAT THE DECISION OF THAT HIGH COURT HAS TO BE FOLLOWED AS THE HIGH COURT I S ALWAYS SUPERIOR TO THE TRIBUNAL IN PREFERENCE TO THE DECISION OF COORDINATE BENCH. THE DECISION SO PRONOUNCED SUBSEQUENTLY IF AFFECTS THE ISSUE RELATING TO THE ASSESSEE, IN OUR OPINION, THESE SUBSEQUENT DECISIONS ARE BINDING ON US AS JUDICIAL DISCIPLINE REQUIRE THAT. THIS TRIBUNAL IS BOUND TO CONSIDER THOSE DECISIONS AND THE TRIBUNAL IS NOT BOUND WITH THE DECISION OF THE COORDINATE BENCH. THE JURISDICTIONAL BOMBAY HIGH COURT IN THE CASE OF H.A. SHAH & CO. VS. CIT (1956) 30 ITR 618, 625 (BOM.) EVEN TOOK T HE VIEW THAT IN CASE FRESH MATERIAL FACTS CAME TO THE KNOWLEDGE OF SUBSEQUENT BENCH, THE DECISION OF COORDINATE BENCH IS NOT BINDING. IN THIS REGARD, HONBLE HIGH COURT OBSERVED AS UNDER : - NOR ARE WE SATISFIED THAT IN ORDER TO ENABLE THE SECOND TRIBUN AL TO DEPART FROM THE FINDING OF THE FIRST TRIBUNAL IT IS ESSENTIAL THAT THERE MUST BE SOME 27 . ITA NOS.21 &22/PNJ/2014 , C.O. NO.14/PNJ/2014 (A.YS.2008 - 09 &2009 - 10) ACIT VS. RAMACANTA VELINGKAR MINERALS FRESH FACTS WHICH MUST BE PLACED BEFORE THE SECOND TRIBUNAL WHICH WERE NOT PLACED BEFORE THE FIRST TRIBUNAL. IF THE FIRST TRIBUNAL FAILED TO TAKE INTO CONSIDERATION MATERIAL FACTS, FACTS WHICH HAD A CONSIDERABLE BEARING UPON THE ULTIMATE DECISION, AND IF THE SECOND TRIBUNAL WAS SATISFIED THAT THE DECISION WAS ARRIVED AT BECAUSE OF THE FAILURE TO TAKE INTO CONSIDERATION THOSE MATERIAL FACTS AND THAT IF THESE MATERIAL FACTS HAD BEEN TAKEN INTO CONSIDERATION THE DECISION WOULD HAVE BEEN DIFFERENT, THEN THE SECOND TRIBUNAL WOULD BE IN THE SAME POSITION TO REVISE THE EARLIER DECISION AS IF FRESH FACTS HAD BEEN PLACED BEFORE IT. ON PRINCIPLE THERE IS NOT MUCH DIFFERENCE BET WEEN FRESH FACTS BEING PLACED BEFORE THE SECOND TRIBUNAL AND THE SECOND TRIBUNAL TAKING INTO CONSIDERATION CERTAIN MATERIAL FACTS WHICH THE FIRST TRIBUNAL FAILED TO TAKE INTO CONSIDERATION. 45.5 THE OTHER EXCEPTION IS FOR NON - BINDING OF THE COORDINATE BENCH DECISION IS WHEN THERE HAD BEEN AMENDMENT IN LAW SUBSEQUENT TO THE DECISION ON THE BASIS OF WHICH THE COORDINATE BENCH RENDERED THE DECISION AND THE CO - ORDINATE BENCH COULD NOT BE ABLE TO CONSIDER THE SAID AMENDMENTS, THE DECISION OF THE CO - ORDINATE BENCH IS NOT BINDING. FROM PARA 14 OF THE ORDER OF THE CO - ORDINATE BENCH IT IS APPARENTLY CLEAR WHILE DECIDING THE APPEAL IN THE CASE OF CHOWGULE & CO. (ITA 162 & 184), IT HAD GOT IMPRESSED THAT THE EXPRESSION PROCESSING IS OMITTED IN SECTION 10B. THE APPEAL RELATES TO A.Y.2002 - 03 NOT RELATING TO IMPUGNED A.Y. CLAUSE (III) OF EXPLANATION 1 TO SECTION 1OAA, WHICH LAYS DOWN THAT THE EXPRESSION 'MANUFACTURE' SHALL HAVE THE SAME MEANING AS ASSIGNED TO IT IN SECTION 2(R) OF THE SPECIAL ECONOMIC ZONES ACT, 2005, AND SECTION 2(29BA) WERE SUBSEQUENTLY BROUGHT INTO THE STATUTE AFTER THE RENDERING OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF SESA GOA 271 ITR ON THE BASIS OF CO - ORDINATE BENCH DECIDED THE CASE OF CHOWGULE & CO. EVEN THESE PROVISIONS WE RE NOT IN THE STATUTE DURING THE ASSESSMENT YEAR 2002 - 03 TO WHICH YEAR THE CO - ORDINATE BENCH WAS ENTRUSTED WITH THE ISSUE OF CLAIM OF EXEMPTION U/S 10B. THE CO - ORDINATE BENCH COULD NOT HAVE ANY OCCASION TO CONSIDER THE SAME EVEN THOUGH THE CLAUSE (III) OF EXPLANATION 1 TO SECTION 10AA HAS ALREADY COME INTO FORCE AFTER THE DECISION OF HONBLE APEX COURT IN THE CASE OF SESA GOA LTD 271 ITR 331 WHEN THE DECISIONS WAS RENDERED BUT WAS NOT INSERTED WITH RETROSPECTIVE EFFECT. EVEN THE PROVISION OF SECTION 2(29BA) WAS ALSO INSERTED AFTER THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF SESA GOA LTD(SUPRA). BOTH THESE AMENDMENTS ARE IN THE STATUTE AS ON TODAY AND ARE TO BE CONSIDERED FOR THE IMPUGNED ASSESSMENT YEAR. THE DECISION OF SUPREME COURT IN THE CASE O F CHOWGULE & CO AS CITED BY US EARLIER WAS ALSO NOT CONSIDERED BY THE COORDINATE BENCH AS THE WORD PROCESSING WAS OMITTED IN SECTION 10B DURING THAT YEAR FOR WHICH CASE WAS DECIDED. BOTH THESE AMENDMENTS HAVE DULY BEEN CONSIDERED BY THE SUBSEQUENT DECIS ION OF SPECIAL BENCH, HIGH COURT AND THE SUPREME COURT CITED BY US IN DISCUSSION HELD HERE IN ABOVE. WE NOTED THAT SUBSEQUENT TO THE DECISION OF THIS TRIBUNAL IN ITA NO. 162/PNJ/2006 DT. 12 TH JULY, 2007, THE SPECIAL BENCH OF THIS TRIBUNAL IN THE CASE OF MA DHU JAYANTI INTERNATIONAL LTD. [2012 - TIOL - 424 - ITAT - KOL - SB] HAS DEALT WITH THE ISSUE EXHAUSTIBLY WHETHER THE ASSESSEES WHO ARE IN THE BUSINESS OF BLENDING OF TEA I.E PROCESSING OF TEA AND EXPORT THEREOF IN 100% EOU CAN BE SAID TO BE MANUFACTURER / PRODUCER OF TEA FOR THE PURPOSE OF SECTION 10A/10B. WHEN THE SUPREME COURT HAS ALREADY HELD IN THE CASE OF TARA AGENCIES 292 ITR 444 THAT BLENDING OF TEA IS PROCESSING. THUS, THE SPECIAL 28 . ITA NOS.21 &22/PNJ/2014 , C.O. NO.14/PNJ/2014 (A.YS.2008 - 09 &2009 - 10) ACIT VS. RAMACANTA VELINGKAR MINERALS BENCH HAS DECIDED THE ISSUE IN RESPECT OF 100% EOU FOR THE PURPOSE OF EXEMPTIO N UNDER SECTION 10B WHETHER AN ASSESSEE WHO IS ENGAGED IN PROCESSING CAN BE SAID TO BE ENGAGED IN MANUFACTURE / PROCESSING. WE ALSO NOTED THAT KERALA HIGH COURT IN THE CASE OF TATA TEA LTD. VS. ACIT 338 ITR 285 DEALT WITH THE ISSUE IN RESPECT OF 100% EOU F OR THE PURPOSE OF EXEMPTION UNDER SECTION 10B WHETHER THE PROCESSING OF TEA IS TREATED AS MANUFACTURE OR PRODUCTION OF AN ARTICLE QUALIFYING FOR EXEMPTION. NOT ONLY THESE DECISIONS SUBSEQUENT TO THE DECISION OF THE COORDINATE BENCH, SUPREME COURT HAS ALSO DECIDED FOLLOWING CASES IN WHICH ALSO, IN OUR OPINION, SIMILAR ISSUE WHETHER PROCESSING IS MANUFACTURE OR PRODUCTION HAS BEEN DECIDED. THESE DECISIONS ARE GIVEN AS UNDER: - I ) INDIA CINE AGENCIES 308 ITR 98 (SC) II ) ORACLE SOFTWARE INDIA LTD. 320 ITR 546 (SC) III ) ARIHANT TILES AND MARBLES (P) LTD. 320 ITR 79 (SC). 45.6 WE NOTED THAT IN ALL THESE DECISIONS EXCEPT IN THE CASE OF ORACLE SOFTWARE THE DECISION OF THE SUPREME COURT IN THE CASE OF CIT VS. SESA GOA LTD. 271 ITR 331 WAS REFERRED TO BY THE COURT. HONBLE P UNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. ABHISHEK INDUSTRIES LTD. 286 ITR 1 (P&H) HAS OBSERVED AS UNDER ON THE RESPONSIBILITY OF THE TRIBUNAL WHILE DECIDING THE CASE: THE TRIBUNAL BEING THE LAST FACT - FINDING AUTHORITY, A HIGHER RESPONSIBILITY IS CAST BY THE LEGISLATURE ON IT TO DECIDE THE CASES BY RECORDING COMPLETE FACTS AND ASSIGNING COGENT REASONS. IT IS THE DUTY OF THE TRIBUNAL TO DECIDE THE CASES ON THE BASIS OF THE LAW LAID DOWN BY THE SUPREME COURT/HIGH COURT AND NOT WHAT THE TRIBUNAL DEC IDES ON THE PARTICULAR ISSUE. EVERY EFFORT MUST BE MADE BY THE TRIBUNAL TO DECIDE THE ISSUE BY TAKING HELP FROM THE DECISIONS OF THE SUPREME COURT AND IF THERE IS NO DIRECT AUTHORITY OF THE SUPREME COURT ON THE POINT THEN OF THE JURISDICTIONAL HIGH COURT AND LASTLY OF ANY OTHER HIGH COURT. 45.7 WE NOTED THAT THE COORDINATE BENCH IN THE CASE OF CHOWGULE & CO. LTD. ITA NO. 162/PNJ/2006 DECIDED THE ISSUE ONLY ON THE BASIS OF THE DECISION OF THE SUPREME COURT IN THE CASE OF CIT VS. GEM INDIA MANUFACTURING CO. 249 ITR 307, WHILE THE SAID DECISION HAS NOT BEEN FOLLOWED BY THE SUPREME COURT IN THEIR SUBSEQUENT D ECISIONS. EVEN THE CASE RELATE TO A.Y.2002 - 03. NO CONTRARY DECISION SUBSEQUENT TO THE DECISION OF THE SPECIAL BENCH, KERALA HIGH COURT AND THAT OF THE SUPREME COURT RENDERED IN THE CASE OF INDIA CINE AGENCY (SUPRA) AS WELL AS ARIHANT TILES & MARBLES (SUPRA ) WAS BROUGHT TO OUR KNOWLEDGE WHICH MAY HAVE TAKEN A DIFFERENT VIEW THAT 100% EOU APPROVED BY THE COMPETENT AUTHORITY IF ENGAGED IN PROCESSING ACTIVITY FOR UPGRADING A COMMODITY FOR THE PURPOSE OF MARKETABILITY FOR EXPORT WOULD NOT BE ALLOWED EXEMPTION U/ S 10B. THE LD. SPECIAL COUNSEL EVEN COULD NOT BRING TO OUR KNOWLEDGE ANY DECISION SUBSEQUENT TO THE DECISION OF THE SPECIAL BENCH AND ARIHANT TILES & MARBLES (SC) AS WELL AS KERALA HIGH COURT IN THE CASE OF TATA TEA (SUPRA) WHICH WOULD HAVE DISALLOWED THE CLAIM OF THE ASSESSEE U/S 10B ON THIS BASIS AFTER CONSIDERING THE EXPLANATION (III) OF SECTION 10AA AS WELL AS DEFINITION GIVEN U/S 2(29BA). THUS, DUE TO THE DECISION RENDERED BY THE SPECIAL BENCH, HIGH 29 . ITA NOS.21 &22/PNJ/2014 , C.O. NO.14/PNJ/2014 (A.YS.2008 - 09 &2009 - 10) ACIT VS. RAMACANTA VELINGKAR MINERALS COURTS AND SUPREME COURT SUBSEQUENT TO THE DATE OF OR DER IN THE CASE OF CHOWGULE & CO. LTD. VS. ACIT IN ITA NO. 162/PNJ/2006 IN OUR OPINION, THE ISSUE RAISED BY THE REVENUE IS NOT FIT TO BE REFERRED TO SPECIAL BENCH AS THE DECISIONS OF SPECIAL BENCH / HIGH COURT / SUPREME COURT ARE BINDING ON US IN PREFERENC E TO THE DECISION OF THE COORDINATE BENCH. THUS, WE HAVE IN OUR OPINION GERMANE REASON NOT TO REFER THIS ISSUE FOR CONSTITUTION OF A SPECIAL BENCH AS IN OUR OPINION EVEN IF THE SPECIAL BENCH IS CONSTITUTED THE EARLIER DECISION OF THE SPECIAL BENCH IN THE C ASE OF MADHU JAYANTI WILL BE BINDING UNTIL AND UNLESS THERE ARE SPECIAL AND GERMANE REASONS FOR CONSTITUTING A LARGE SPECIAL BENCH. WE, THEREFORE, DISMISS THE APPLICATION DT. 18/01/2013 MOVED BY THE REVENUE FOR CONSTITUTING THE SPECIAL BENCH. 45.8 NOW COM ING BACK TO THE ISSUE WHETHER AN ASSESSEE WHO IS ENGAGED IN PROCESSING FOR UPGRADING AND MAKING THE COMMODITY FIT FOR EXPORT AND WHICH IS A 100% EOU APPROVED BY THE COMPETENT AUTHORITY CAN BE SAID TO HAVE BEEN ENGAGED IN MANUFACTURE OR PRODUCTION OF AN AR TICLE OR THING. WE HAVE NOTED THAT THIS ISSUE IS DULY COVERED BY THE DECISION OF THE SPECIAL BENCH IN THE CASE OF MADHU JAYANTI INTERNATIONAL LTD.(SUPRA). THE RELEVANT PARAGRAPH OF THIS JUDGEMENT HAS BEEN REPRODUCED BY US IN THE PRECEDING PARAS. 45.9 IN T HIS DECISION, SPECIAL BENCH HAS EXHAUSTIVELY DEALT WITH THE PROVISIONS OF SECTION 10B, SECTION 2(29BA) OF THE INCOME - TAX ACT, 1961 AND SECTION 2(R) OF THE SPECIAL ECONOMIC ZONES ACT, 2005; AND THE VARIOUS DECISIONS OF THE SUPREME COURT AS WELL AS THE HIGH COURT WHICH DEALT WITH THE SIMILAR ISSUE AND EVEN THE DECISION OF CHOWGULE & CO (SC) AS WAS REFERRED TO BY US IN THE PRECEDING PARAS HEREIN ABOVE. THE SPECIAL BENCH CLEARLY NOTED IN THIS DECISION, THE DECISION OF THE SUPREME COURT IN TARA AGENCIES CASE 29 2 ITR 444 IN WHICH IT WAS HELD BLENDING AND PACKING OF TEA AMOUNTS TO PROCESSING AND IS NOT MANUFACTURING OR PRODUCING OF AN ARTICLE OR THING. IN THIS DECISION THE SPECIAL BENCH ALSO NOTED THAT KERALA HIGH COURT IN THE CASE OF TATA TEA LTD. VS. ACIT 338 IT R 285 (KER.) WHICH TOOK THE VIEW THAT 100% EOU ENGAGED IN PROCESSING CANNOT BE DENIED EXEMPTION ON THE BASIS THAT THE UNITS ARE NOT ENGAGED IN MANUFACTURE OR PRODUCTION. MOREOVER, ON FACTS EXACTLY SIMILAR TO THE FACTS OF THE ASSESSEE, IN THE CASE OF CHOWG ULE & CO. PVT. LTD. VS UNION OF INDIA (1981) 1 SCC 653 AIR 1981 SC 014, HONBLE SUPREME COURT WERE CONCERNED WITH THE QUESTION WHETHER THE BLENDING OF ORE, WHILST LOADING IT IN THE SHIP BY MEANS OF THE MECHANICAL ORE HANDLING PLANT, CONSTITUTED MANUFACTUR E OR PROCESSING OF ORE FOR SALE WITHIN THE MEANING OF SECTION 8(3)(B) AND RULE 13 OF CENTRAL SALES TAX ACT, 1956. THE HONBLE SUPREME COURT, IN CONSTRUING THE EXPRESSION PROCESSING ALLOWED THE APPEAL OF THE ASSESSEE, IN CHOWGULE & CO. PVT. LTD. (SUPRA ), HOLDING, INTER ALIA, THAT WHERE ANY COMMODITY IS SUBJECTED TO A PROCESS OR TREATMENT WITH A VIEW TO ITS DEVELOPMENT OR PREPARATION FOR THE MARKET IT WOULD AMOUNT TO PROCESSING OF THE COMMODITY WITHIN THE MEANING OF CENTRAL SALES TAX ACT, 1956. THE SPE CIAL BENCH ULTIMATELY ALLOWED EXEMPTION TO THE ASSESSEE ON THE SIMILAR ISSUE WHERE THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF BLENDING THE TEA FOR UPGRADING FOR MARKETING. THUS, IN VIEW OF THE DECISION OF THE SPECIAL BENCH AND OTHER DECISIONS DISCUSSED IN THE PRECEDING PARAGRAPHS AND THAT OF HONBLE SUPREME COURT IN THE CASE OF CHOWGULE & CO (SUPRA) AS WELL AS DEFINITION OF MANUFACTURE AS INSERTED W.E.F 1.4.2009 BY WAY OF SECTION 2 (29AB) OF THE INCOME TAX ACT AS REFERRED TO BY BOTH THE 30 . ITA NOS.21 &22/PNJ/2014 , C.O. NO.14/PNJ/2014 (A.YS.2008 - 09 &2009 - 10) ACIT VS. RAMACANTA VELINGKAR MINERALS PARTIES, WE HOLD THAT ALL THE THREE 100% EOU ENGAGED IN PROCESSING SO AS TO MAKE CRUDE ORE AND WASTE I.E TAILINGS USABLE OR MARKETABLE ARE ENTITLED FOR EXEMPTION U/S 10B SUBJECT TO THE OTHER CONDITIONS FOR EXEMPTION UNDER SECTION 10B ARE BEING FULFILLED. WE RES PECTFULLY FOLLOWING THE SAME WE ARE OF THE VIEW THAT THE CIT(A) IS JUSTIFIED IN HIS ACTION AND OUR INTERFERENCE IS NOT REQUIRED. DURING THE COURSE OF HEARING THE LEARNED DR COULD NOT BRING ANY CONTRARY DECISION AGAINST THE DECISION OF TRIBUNAL, THEREFORE, WE RESPECTFULLY FOLLOWING THE SAME WE DISMISS THE DEPARTMENTS APPEAL ON THIS GROUND. 4. GROUND NO. 2 : - THE SHORT FACTS OF THE CASE ARE THAT THE ASSESSEE FIRM ENGAGED IN BUSINESS OF MINING AND EXPORT OF IRON ORE. IT HAS TWO DIVISION ONE MINING DIVISION AND EOU DIVISION. THE ASSESSEE HAS FILED ITS RETURN OF INCOME FOR A.Y. 2008 - 09 ON 28 - 09 - 2008 DECLARING THE TOTAL INCOME OF RS.2,03,55,300/ - . DURING THE COURSE OF ASSESSMENT, THE ASSESSING OFFICER OBSERVED THAT THE MINING DIVISION OF THE ASSESSEE SOLD IRON ORE TO ITS GROUP CONCERN VIZ. M/S. RAMCANTA VELINGKAR MINERALS (100% EOU). THE ASSESSING OFFICER OBSERVED THAT AS PER THE DESCRIPTION ON THE INVOICES, THE ASSESSEE HAS SOLD IRON ORE FINES/LUMPY TO THE SAID RAMCANTA VELINGKAR MINERALS HAVING AROUND 54 - 54% IRON CONTENT. THE ASSESSEE WAS ASKED TO PROVIDE THE GRADE - WISE LIST OF PURCHASE AND SALES DATA WHICH IS REP RODUCE IN ASSESSMENT ORDER AS UNDER: PURCHASE DATA: PURCHASE OF ORE - MINING DIVISION: S. NO. NAME OF THE PARTY(SELLER) QUANTITY(MT) GRADE UNIT RATE (RS./MT) TOTAL COST (RS.) 1 MR. M.S.REGE 20,871.300 47.60 480 10,41,985 2 MR. M.S.REGE 17,062.400 47.90 480 8,51,755 3 MR. M.S.REGE 3011 48.30 510 1,59,703 4 MR. M.S.REGE 22,537.500 47.80 480 11,25,072 5 MR. M.S.REGE 3,946 48 510 2,09,296 6 MR. M.S.REGE 22,731 47.50 480 11,34,771.45 7 MR. M.S.REGE 4,011 48.20 510 2,12,743.45 PURCHASE OF ORE - EOU DIVISION: SL. NO. NAME O THE PARTY ADDRESS QUANTITY GRADE RATE TOTAL COST+VAT 31 . ITA NOS.21 &22/PNJ/2014 , C.O. NO.14/PNJ/2014 (A.YS.2008 - 09 &2009 - 10) ACIT VS. RAMACANTA VELINGKAR MINERALS 1 ATCHUTA V.S. VELINGKAR (SECORDA MINE) VELING. MARDOL, GOA 403404. 30,000.000 53.10 300 9000000 2 ATCHUTA V.S. VELINGKAR (SACORDA MINE) VELING. MARDOL, GOA 403404. 12,969.400 53.20 300 3890820 3 RAMACANTA V.S. VELINGKAR (CORPADEGA MINE) VELING MARDOL, GOA 403404. 17,000.000 53.60 450 7650000 4 VELINGKAR BROTHERS (ATCHUTTA) DALAL COMMERCIAL COMPLEX, 4 TH FLOOR, NEAR HARI MANDIR, MARGAO GOA 403601. 2,030.600 52.90 300 609180 21150000 SALES DATA: SALE OF ORE - MINING DIVISION SR. NO. NAME OF THE PARTY ADDRESS QUANTITY GRADE RATE TOTAL COST+VAT 1. MR. RAMACANTA VELINGKAR MINERALS 100% EOU S.O.14, FIRST FLOOR, NAVELCAR TRADE CENTRE, PANAJI - GOA 403001 36,534.00 52.80 450 16440300 2 MR. RAMACANTA VELINGKAR MINERALS 100% EOU S.O. 14, FIRST FLOOR, NAVELCAR TRADE CENTRE, PANAJI - GOA 403001 27,761.000 3,385.000 53.50 54.30 450 450 12492450 1523250 3 MR. RAMACANTA VELINGKAR MINERALS 100% EOU S.O. 14, FIRST FLOOR, NAVELCAR TRADE CENTRE, PANAJI - GOA 403001 19,067.000 1,003.000 53.20 53.80 450 450 8580150 451350 4 MR. RAMACANTA VELINGKAR MINERALS 100% EOU S.O. 14, FIRST FLOOR, NAVELCAR TRADE CENTRE, PANAJI - GOA 403001 5,000.000 53.90 450 2250000 5 MR. S.O. 14, FIRST 54,780.000 52.70 150 8217000 32 . ITA NOS.21 &22/PNJ/2014 , C.O. NO.14/PNJ/2014 (A.YS.2008 - 09 &2009 - 10) ACIT VS. RAMACANTA VELINGKAR MINERALS RAMACANTA VELINGKAR MINERALS 100% EOU FLOOR, NAVELCAR TRADE CENTRE, PANAJI - GOA 403001. 6 ATCHUTA V.S. VELINGKA (SACORDA MINE) VELING. MARDOL, GOA 403404. 30,000.000 53.10 300 9000000 7 ATCHUTA V.S. VELINGKA (SACORDA MINE) VELING. MARDOL, GOA 403404 12,969.400 53.2 0 300 3890820 8 RAMACANTA V.S. VELINGKAR (CORPADEGA MINE) VELING. MARDOL, GOA 403404 17,000.000 53.60 450 7650000 9 VELINGKA BROTHERS DALAL COMMERCIAL COMPLEX, 4 TH FLOOR, NEAR HARI MANDIR,MARGAO GOA 403601. 2,030.600 52.90 300 609180 71104500 SALE OF ORE - EOU DIVISION: SR. NO. NAME OF THE PARTY ADDRESS QUANTITY GRADE RATE TOTAL VALUE (IN RUPEES) 1 SUNDIAL METALS AND MINERALS LTD. FLAT/RM A 15/F HILLIER COMMON BLDG 65 - 67 BONHAM STRAND EAST SHEUNG WAN, HONGKONG 41,800.000 58.07 PCT US $ 36.10 56137529.00 5,61,37,529.00 THE AO HAS DISCUSSED THE PROVISION OF S.10B OF THE IT ACT, UNDER WHICH THE SISTER CONCERN OF THE ASSESSEE, M/S RAMACANTS VELINGKAR MINERALS HAS STARTED TO CLAIM THE DEDUCTION. IT WAS FOUND THAT AS MENTIONED IN THE ABOVE QUOTED PROVISIONS THERE EXISTED A RELATING AND CLOSE CONNEC TION BETWEEN THE ASSESSEE AND ONE OF THE BUYER M/S RAMACANTA VELINGKAR MINERALS AS PRESENTED BELOW: M/S VELINGKAR BROTHERS ASSESSEE FIRM S. NO. PARTNERS NAME PROFIT SHARING 33 . ITA NOS.21 &22/PNJ/2014 , C.O. NO.14/PNJ/2014 (A.YS.2008 - 09 &2009 - 10) ACIT VS. RAMACANTA VELINGKAR MINERALS RATIO(%) 1. ATCHUTA V.S. VELINGKAR 10 2. RAMACANTA V.S. VELINGKAR 10 3. VISHNUM N.S. VELINGKAR 15 4. ANILKUMAR N.S. VELINGKAR 15 5. PRAFULLA N.S. VELINGKAR 7.5 6. DINESH N.S. VELINGKAR 15 7. VASUDEVA A.S. VELINGKAR 10 8. DATTARARAJ VELINGKAR 10 9. GAURAV P.S. VELINGKAR 7.5 M/S RAMACANTA VELINGKAR MINERAL BUYER S. NO. PARTNERS NAME PROFIT SHARING RATIO(%) 1. SH. VASUDEVA A.S. VELINGKAR 20 2. SH. DATTARAJ R.S. VELINGKAR 20 3. GAURAV P.S. VELINGKAR 20 4. DIPTIP N.S. VELINGKAR 20 5. AVINAS N.S. VELINGKAR 20 TO BRING ON RECORD THE MISSING DETAILS REGARDING THE PHYSICAL FEATURES OF THE ORE PURCHASES, ALL THE PURCHASES INVOICES WERE ASKED FOR. FROM THE PURCHASE INVOICES THE FOLLOWING CLEAR PICTURE EMERGED WITH RESPECT TO THE PURCHASES MADE FROM ASSOCIATED/RELATED F IRM/CLOSELY CONNECTED PARTY. SL. NO. DATA NAME OF THE PARTY(SELLER) AS PER INVOICES QUANTITY (MT) GRADE DESCRIPTION UNIT RATE (RS/MT) 1 31.5.2007 MR. RAMACANTA V.S. VELINGKAR* 36,534 52.48 IRON ORE FINES 450 2 1.9.2007 MR. RAMACANTA V.S. VELINGKAR* 27,761 53.5 IRON ORE FINES 450 3 1.9.2007 MR. RAMACANTA V.S. VELINGKAR* 3385 54.3 IRON ORE LUMPY 450 4 25.9.2007 MR. RAMACANTA V.S. VELINGKAR* 19,067 53.2 IRON ORE FINES 450 5 25.9.2007 MR. RAMACANTA V.S. VELINGKAR* 1,003 53.8 IRON ORE LUMPY 450 6 15.2.2008 MR. RAMACANTA V.S. VELINGKAR* 5,000 53.9 IRON ORE FINES 450 7 21.2.2008 MR. VELINGKAR BROTHERS 54,780 52.7 ROM FINES 150 34 . ITA NOS.21 &22/PNJ/2014 , C.O. NO.14/PNJ/2014 (A.YS.2008 - 09 &2009 - 10) ACIT VS. RAMACANTA VELINGKAR MINERALS TOTAL SALES MADE TO RELATED/CONNECTED FIRMS/ENTITIES 1,42,530 MT *THE SALES WERE ACTUALLY MADE BY M/S VELINGKAR BROTHERS, BUT THE INVOICES WERE IN THE NAME OF THE INDIVIDUAL. FROM THE ABOVE DETAILS, IT IS SEEN THAT THE ASSESSEE HAS SOLD 54,780 MT OF ROM FINES 52.7% GRADE TO THE GROUP CONCERN M/S. RAMACANTA VELING KAR BROTHERS AT RS. 150/ - PER MT, AND EVEN THE REMAINING SALES OF ABOUT 92,000 MT OF IRON ORE FINES IN THE RANGE OF 52.53% GRADE HAVE BEEN SOLD BY SH. RAMACANTA V.S. VELINGKAR AT THE PRICE OF RS. 450/ - MT. IT EMERGED THAT THE ARRANGEMENT MADE BY THE SISTER CONCERN, M/S RAMACANTA VELINGKAR MINERALS, OF THE ASSESSEE FIRM WITH REGARD TO THE PURCHASES GETS SQUARELY COVERED BY THE S.10B(7) PRESENTED ABOVE. THIS IS BECAUSE THE SALE PRICE QUOTED BY THE ASSESSEE, EVEN AFTER FACTORING IN FOR THE PRICE FLUCTUATIONS, OTHER DELIVERY CONDITIONS ETC, ARE FAR BELOW THE MARKET RATES FOR THOSE GRADES, S ESTIMATED BASED ON CERTAIN SAMPLE OF SIMILAR SALES - PURCHASES INVOICES FOR THE PERIOD. THE RATES ESTIMATED BASED ON INDUSTRY INFORMATION AND SIMILAR PURCHASE - SALES TRANSACTION S ARE PRESENTED BELOW: S. NO. GRADE (FE%) DESCRIPTION ESTIMATED RATE (RS./MT) 1. 52% IRON ORE FINES 800/ - 2. 53% IRON ORE FINES 900/ - 3. 54% IRON ORE FINES 1000/ - 4. 54% IRON ORE LUMPY 900/ - 5. 52% ROM ORE 300/ - THE ASSESSEE HAS MENTIONED THAT THE BASIS ON WHICH THE ESTIMATES WERE MADE WAS NOT PROVIDED. THE DETAILED TABULATION, BASED ON WHICH THE PRICES OF THE DIFFERENT TYPES OF ORE WERE ESTIMATED, WAS PROVIDED TO THE ASSESSEE ON 27.12.2010. IN THE FOURTH PARAGRAP H, THE ASSESSEE HAD MENTIONED THAT THE 35 . ITA NOS.21 &22/PNJ/2014 , C.O. NO.14/PNJ/2014 (A.YS.2008 - 09 &2009 - 10) ACIT VS. RAMACANTA VELINGKAR MINERALS PROVISIONS OF THE IT ACT BASED ON WHICH THE ADDITIONS WERE PROPOSED TO BE MADE WERE UNKNOWN. THE SAME IS NOT CORRECT AS THE DETAILS WERE GIVEN ON 20.12.2010 AND PLACED ON RECORD. IN THE THIRD PARAGRAPH OF THE REPLY PR ODUCED BY THE ASSESSEE, NOTICE HAS BEEN BROUGHT ON CHAPTER X WHICH ENUMERATES ON THE SECTIONS 92 TO 94 DEALING WITH TRANSFER PRICING. TRANSFER PRICING IS APPLICABLE ONLY TO, INTERNATIONAL TRANSACTIONS AND NOT TO DOMESTIC TRANSACTION. BY MENTIONING ABOUT TH E TRANSFER PRICING PROVISIONS, THE ASSESSEE IS ONLY TRYING TO DEVIATE AWAY FROM THE ISSUE. THERE WAS NO MENTION ABOUT THE SECTIONS 92 TO 94 IN THE ORDER SHEET NOTING MADE BY ME. THE NOTING ONLY MENTIONED ABOUT THE RECALCULATION OF PROFIT B ASED ON THE FAIR MARKET PRICE. IN THE LAST PARAGRAPH OF THE LETTER, THE ASSESSEE HAD ACCEPTED THE ESTIMATE OF RS.300/ - FOR THE ROM ORE. ONLY AFTER ENSURING THE CORRECTNESS OF THE FACTUAL MATRIX AS P ER THE ASSESSEES OWN INVOICES, I T HAS BEEN CONCLUDED THAT THERE EXISTS A N ARRANGEMENT WHEREIN IT HAS RESULTED IN THE ELIGIBLE UNIT OF THE ASSESSEE (IE) M/S. RAMACANTA VELINGKAR MINERALS MAKING MORE THAN THE ORDINARY PROFITS; SUBSEQUENTLY THE AO OF THE SISTER FIRM M/S. RAMACANTA VELINGKAR MINERALS PROCEEDED TO COMPARE THE RATES WITH THE ESTIMATE BASED ON SIMILAR INDUSTRY TRANSACTIONS. COMING TO THE DETAILED NOTE MENTIONED BY THE ASSESSEE WHEREIN IT HAD MENTIONED THE PARAMETERS THAT GO BEHIND THE PRICING OF IRON ORE. THEREFORE THE CONTENTION OF THE ASSESSEE HAS ALREADY BEEN INCOR PORATED IN THE ESTIMATES. FROM THE TABLE PRODUCED ABOVE, IT IS CLEAR THAT OUT OF 5 INVOICES OF SALE MADE TO M/S RAMACANTA VELINGKAR MINERALS, ONLY IN ONE INVOICE THE DESCRIPTION IS MENTIONED AS ROM FINES IN ALL THE OTHER 4 INVOICES, IT IS MENTIONED AS IRON ORE FINES AND IRON ORE LUMPY. HOWEVER, THE ASSESSEE DID NOT PRODUCE ANY OF THE ORIGINAL INVOICES OR ANY OTHER PRIMARY RECORDS TO PROVE THAT IT WAS ACTUALLY A MISTAKE . IT IS NOW A WELL ESTABLISHED FACT THAT THE ASSESSEE HAS SHIFTED ALL ITS PROFITS TO T HE SISTER CONCERN, M/S RAMACANTA VELINGKA R MINERALS, W HICH IS A TAX EXEMPT EXPORT ORIENTED UNIT. BUT IN THE SUBMISSION, THE ASSESSEE ITSELF HAS 36 . ITA NOS.21 &22/PNJ/2014 , C.O. NO.14/PNJ/2014 (A.YS.2008 - 09 &2009 - 10) ACIT VS. RAMACANTA VELINGKAR MINERALS MENTIONED THAT THE ORE GRADE AND TYPE PLAY A ROLE IN FIXING THE PRICE OF THE COMMODITY. THOUGH THE ONUS WAS ON T HE ASSESSEE, IT WAS NOT ABLE TO PRODUCE ANY OTHER DOCUMENTS. IT ONLY MENTIONED IN THE LETTER SAYING THAT ROM WAS WRONGLY MENTIONED AS IRON ORE FINES & LUMPS. THE FOLLOWING POINTS ARE ALSO TO BE NOTED IN THIS MATTER: THE GRADE OF THE IRON ORE SOLD BY M/S. VELINGKAR BROTHERS WAS NOT QUOTED IN ANY OF THE INVOICES. THE ASSESSEE DID NOT PRODUCE ANY RECORDS TO PROVE THAT THE INVOICES WERE WRONG . THE ABOVE ERRORS DO NOT PERTAIN TO JUST ONE SINGLE INVOICE; IT IS APPLICABLE TO ALL THE SALE INVOICES TO THE SISTER/CO NNECTED CONCERNS. STRANGELY, WHILE THE MATERIAL WAS SOLD BY THE FIRM MIS. VELINGKAR BROTHERS (AS VERIFIED FROM THE P/L ACCOUNT OF THE SELLER FIRM), IN SIX OUT OF SEVEN INVOICES RATHER THAN THE NAME OF THE SELLER - FIRM, ONLY THE NAME OF THE PARTNER I.E. MR. RAMACANTA V.S. VELINGKAR, IS QUOTED. ONLY IN ONE OF THE INVOICES, DATED 21.02.2008, THE NAME OF THE SELLER - FIRM WAS MENTIONED ON IT. TO SUM UP, IN ALMOST ALL THE INVOICES - THE NAME OF THE SELLER PARTY OR GRADE OF THE ORE OR THE DESCRIPTION - THE THREE MOST IMPORTANT FACTORS HAVE ALL BEEN QUOTED WRONGLY OR NOT QUOTED AT ALL. IN ALL THE INVOICES, THE NAME OF THE BUYER, THE QUANTITY, AMOUNT ETC WERE TYPED CORRECTLY. THE ASSESSEE WAS NOT ABLE TO EXPLAIN WHY THERE WAS MISTAKE ONLY IN THE DESCRIPTION OF THE ORE. GOING BY ALL THE ABOVE IT IS DECIDED THAT THE ASSESSEE FIRM HAS INDEED MADE A CONVENIENT ARRANGEMENT WITH A RELATED / CLOSELY CONNECTED FIRM / PARTY BY WHICH WHILE THE PROFITS OF THE SELLER - UNIT THAT IS NOT ELIGIBLE FOR ANY TAX DEDUCTIONS, THE BUYER - FIRM THA T IS ELIGIBLE FOR DEDUCTION U/S10 B OF THE IT ACT, IS ABLE TO MAKE MORE THAN ORDINARY PROFITS. THIS IS A CLASSIC CASE OF AN ASSESSEE WORKING THROUGH THE SYSTEM IN SUCH A WAY THAT EVEN THE BENIGN PROVISIONS OF THE IT ACT OFFERING TAX DEDUCTIONS AND EXEMPTIONS ARE EXPLOITED AND IN FACT ABUSED TO A SIGNIFICANT EXTENT RESULTING IN A HUGE REVENUE LOSS FOR THE EXCHEQUER. THIS CASE IS CLEARLY CO VERED BY THE PROVISIONS OF S. 10 B(7) OF THE IT ACT. IF WE GO BY THE NAMES AS PROVIDED IN THE INVOICES S.80 - IA(8) IS APPLICABLE; OR IF WE GO BY WHAT THE 37 . ITA NOS.21 &22/PNJ/2014 , C.O. NO.14/PNJ/2014 (A.YS.2008 - 09 &2009 - 10) ACIT VS. RAMACANTA VELINGKAR MINERALS ASSESSEE CLAIMS AND CONSIDER THE SUPPLIER IS ACTUALLY THE FIRM, THEN S.80 - IA(10) IS APPLICABLE. IN A NY OF THESE TWO SCENARIOS THE WORKING OF THE REVISED PROFIT REMAINS THE SAME. ACCORDINGLY, GIVEN BELOW IS THE WORKING OF THE RECOMPUTED SALES VALUE AND THEREBY THE REVISED INCOME FOR THE ASSESSEE: S. NO. NAME OF THE PARTY(SELLER) AS PER INVOICES QUANTITY (MT) DESCRIPTION GRADE% UNIT RATE (RS/MT) CLAIMED TOTAL COST (RS.) ESTD. RAT E (RS/MT) ESTD. TOTAL COST (RS.) 1. MR. RAMACANTA V.S. VELINGKAR* 36,534, IRON ORE FINES, 52.5 450 1,64,40,300 900 3,28,80,600 2. MR. RAMACANTA V.S. VELINGKAR* 27,761,IRON ORE FINES, 53.5 450 1,24,92,450 900 2,49,84,900 3. MR. RAMACANTA V.S. VELINGKAR* 3385, IRON ORE LUMPY, 54.3 450 15,23,250 800 27,80,000 4. MR. RAMACANTA V.S. VELINGKAR* 19,067, IRON ORE FINES, 53.2 450 85,80,150 900 1,71,60,300 5. MR. RAMACANTA V.S. VELINGKAR* 1,003, IRON ORE LUMPY, 53.8 450 4,51,350 800 8,02,400 6. MR. RAMACANTA V.S. VELINGKAR* 5,000 IRON ORE FINES, 53.9 450 22,50,000 900 45,00,000 7. MR. VELINGKAR BROTHERS* 54,789, ROM FINES, 52.7 150 82,17,000 300 1,64,34,000 4,99,54,500 9,94,70,200 CONSEQUENTLY, THE JURISDICTIONAL A.O. OF THE BUYER - FIRM, M/S. RAMACANTA VELINGKAR MINERALS, HAD INFORMED ABOUT THE RECOMPUTED PURCHASE RATES, AND INFORMED TO MAKE APPROPRIATE ADJUSTMENTS WHILE ASSESSING THE INCOME OF THE SELLER - FIRM. HENCE THE DIFFERENCE OF AMOUNT OF SALES RS.4,95,15,700/ - IS BEING ADDED BACK TO THE TOTAL INCOME. THE AO OF THE S ELLER FIRM , M/S. VELINGKAR BROTHERS, HAS BEEN INFORMED ABOUT THE RECOMPUTED OF PURCHASE PRICE , AND TO INFORM TO MAKE APPROPRIATE ADJUSTMENT WHILE ASSESSING THE INCOME OF SELLER FIRM AND TAX LIABILITY ELIGIB LE DEDUCTION WAS WORKOUT AS UNDER: INCOME AS PER THE REVISED RETURN FILED BY ASSESSEE RS. 5,39,21,164 ASSESSEES CLAIM OF 90% DEDUCTION U/S 10B RS. 4,85,29,048 38 . ITA NOS.21 &22/PNJ/2014 , C.O. NO.14/PNJ/2014 (A.YS.2008 - 09 &2009 - 10) ACIT VS. RAMACANTA VELINGKAR MINERALS DIFFERENCE BETWEEN THE COSTS CLAIMED AND THAT ESTIMATED: RS.4,95,15,700 REVISED INCOME AS PER THE ESTIMATED COST RS. 44,05,464 ELIGIBL E DEDUCTION AT 90% U/S 10B RS. 39,64,918 4.1. THE MATTER CARRIED TO CIT(A) AND CIT(A) HAS DELETED THE ADDITION BY OBSERVING AS UNDER: - 6.5 I HAVE GONE THOUGH THE ASSESSMENT ORDER AND THE SUBMISSION OF THE APPELLANT. DURING THE COURSE OF HEARING, THE LEARNED COUNSEL POINTED OUT THE FOLLOWING FACTS: A) THE ASSESSEE PURCHASED R.O.M FROM SISTER CONCERN M/S VELINGKAR BROS. @ RS. 450 PER T. B) THE ASSESSEE BOUGHT ONE SHIPMENT FROM OTHER UNRELATED PARTY @ 350 PER T. C) THE A.O. ERRONEOUSLY COMPARED THESE R ATES WITH THE RATE OF PROCESSED ORE VARYING BETWEEN RS. 525/ - TO RS. 1395 PER TONNE AND APPLIED OF RS. 900/ - FOR 53% GRADE FINES. THIS RATE WAS ERRONEOUSLY APPLIED ON THE PURCHASE OF R.O.M PURCHASED FROM VELINGKAR BROS., A SISTER CONCERN OF THE APPELLANT. D) THE A.O HAS CONTRADICTED HIMSELF, AS IN THE ASSESSMENT ORDER, ON PAGE 12, THE A.O. HAS HIMSELF WORKED OUT THE RATE OF R.O.M. AND THE AVERAGE RATE COMES TO RS. 327/ - PER TONNE, WHEREAS THE AVERAGE RATE AT WHICH THE APPELLANT HAS PURCHASED R.O.M. FROM SI STER CONCERN COMES TO RS. 450/ - PER TONNE, WHICH IS MUCH HIGHER THAN THE AVERAGE RATE WORKED OUT BY THE A.O.. IN VIEW OF THESE FACTS, IT IS CLEAR THAT THE A.O. ERRONEOUSLY APPLIED FINES RATE ON R.O.M WHICH GAVE A WRONG PICTURE OF THE PROFITABILITY IN TH E CASE OF THE APPELLANT. OTHERWISE ALSO, THE R.O.M CANNOT BE EXPORTED. AFTER THE PROCESS OF BENEFICTION/PROCESSING FINES ARE PRODUCED, AND THEN ONLY THE IRON ORE CAN BE EXPORTED. THE MAIN VALUE ADDITION IS DONE THROUGH PROCESSING OF R.O.M. AND THEREFORE THE PROFITABILITY IS ALSO HIGHER IN THE CASE OF THE APPELLANT COMPARED TO ITS SISTER CONCERN. IN VIEW OF THE ABOVE FACTS, IN MY OPINION, THE A.O. WAS NOT JUSTIFIED IN REDUCING THE INCOME OF THE APPELLANT AND HE IS DIRECTED TO ACCEPT THE PROFITABILITY DECLA RED BY THE APPELLANT. THIS GROUND OF APPEAL OF THE APPELLANT IS ALLOWED ACCORDINGLY. 4.2 . THE LEARNED DR SUBMITTED THAT ASSESSEE IS MINING DIVISION OF THE ASSESSEE SOLD IRON ORE TO ITS GROUP CONCERN V/Z. M/S RAMCANTA VELINGKAR MINERALS WHO IS 100% EOU. T HE ASSESSING OFFICER HAS VERIFIED THE INVOICES AND HE WAS OF THE VIEW THAT ASSESSEE HAS SOLD IRON ORE FINES/LUMPY TO THE SAID M/S RAMCANTA VELINGKAR MINERALS HAVING AROUND 53 - 54% OF IRON CONTENT SOLD TO HIS SISTER CONCERNED. THE ASSESSEE HAS MADE ARRANGEME NTS WITH ITS SISTER 39 . ITA NOS.21 &22/PNJ/2014 , C.O. NO.14/PNJ/2014 (A.YS.2008 - 09 &2009 - 10) ACIT VS. RAMACANTA VELINGKAR MINERALS CONCERN WHICH IS GETTING BENEFIT OF EXEMPTION U/S 10B BY SELLING THE IRON ORE AT A PRICE FAR BELOW THE MARKET RATES FOR THOSE GRADES AND HENCE ASSESSEES INCOME NEEDS TO BE INCREASED AND ADJUSTED TO THAT EFFECT. THE AO HAS CARRIED OUT INDEPENDENT SEARCH AS TO MARKET RATES OF THE RAW MATERIAL AS PER THE DESCRIPTION IN THE INVOICES. AS REGARDS, IRON ORE LUMPY (AROUND 54% GRADE) THE ESTIMATE WAS WORKED OUT AT RS. 900 BY AVERAGING THE PURCHASE COST INFORMATION OBTAINED FROM VARIOUS PARTIES RANGING FROM RS.525/MT TO RS.1395/MT. THE COST OF ROM OF 53% LOW GRADE ROM WAS ARRIVED AT RS. 300 AND THE AO HAS INVOKED THE PROVISIONS OF SECTION 10B(7) R.W.S 80IA (10) AND RECOMPUTED THE PROFIT, THEREFORE, CIT(A) IS NOT JUSTIFIED IN DELETING THE ADDITIO N. 4.3 . THE LEARNED AR HAS SUBMITTED THE WRITTEN SUBMISSION WHICH READ AS UNDER: THE ASSESSING OFFICER STATED IN HIS ORDER AT PARA 4.1 (PAGE 7 OF THE ASSESSMENT ORDER) AS FOLLOWS: ON THE EVENT OF THE ASSESSEE FINDING A RELIEF BY AN ORDER OF AN APPELLATE AUTHORITY, WITH RESPECT TO THE ABOVE DISALLOWANCE, THE ISSUE DISCUSSED UNDER THIS HEADING - 4. UNDER - PRICING OF PURCHASES TO REDUCE TAX LIABILITY OF A SISTER CONCERN, WILL STILL HOLD TRUE THE ASSESSEE SUBMITS THAT THE ASSESSING OFFICER WAS NOT AT ALL CERTAIN ABOUT HIS DISALLOWANCE OF CLAIM U/S 10 B AS DISCUSSED ABOVE. YET SOMEHOW HE INTENDED TO MAKE ADDITION IN THE ASSESSMENT. THEREFORE HE ESTIMATED THAT PURCHASE PRICE OF ROM AT RS.9,94,70,200 INSTEAD OF ACTUAL PURCHASE PRICE OF RS.4,99,54,500. (PA GE 16 OF THE ASSESSMENT ORDER). HE COMPUTED THE DIFFERENCE BETWEEN THE TWO AT RS.4,95,15,700 AND RECOMPUTED THE ELI GIBLE DEDUCTION U/S 10 B AT RS.39,64,918 INSTEAD OF RS.4,85,29,048 AS CLAIMED BY THE ASSESSEE. THE ASSESSEE FURNISHED HIS WRITTEN SUBMISSIONS TO CIT - A VIDE LETTERS DATED 15 APR 2013 AND 23 APRIL 2013 AND 03 MAY 2013 AS PER COPIES ENCLOSED. THE 40 . ITA NOS.21 &22/PNJ/2014 , C.O. NO.14/PNJ/2014 (A.YS.2008 - 09 &2009 - 10) ACIT VS. RAMACANTA VELINGKAR MINERALS LEARNED CIT - A CONSIDERED ALL THE CONTENTS AND ARGUMENTS OF THE ASSESSEE AND HELD THAT THE AO ERRONEOUSLY APPLIED FINES RATE ON ROM WHICH GAVE WRONG PICT URE OF PROFITABILITY IN THE CASE OF THE APPELLANT. HE HELD THAT THE AO WAS NOT JUSTIFIED IN REDUCING THE INCOME OF THE APPELLANT AND HE IS DIRECTED TO ACCEPT THE PROFITABILITY DECLA RED BY THE APPELLANT. (PAGE 34 - PARA 6.5 OF ORDER OF CIT - A). 4.4 . WE HAVE HEARD THE RIVAL C ONTENTION OF BOTH PARTIES. T HE ASSESSEE HAS PURCHASED ROM FROM SISTER CONCERN M/S. VELINGKAR BR OTHERS. @ RS.450/ - PER TONNE THE ASSESSEE ONE SHIPMENT UNRELATED PARTY @ 350 FOR TONNE. THE ASSING OFFICER HAS HELD ON PAGE 12 OF THE ASSE SS ME NT ORDER THAT THE AVERAGE PRICE OF LOW GRADE ROM ABOUT 52.3 GRADE COST BETWEEN RS. 262 TO RS. 475 FOR PER TONNE. THE ASSESSEE HAS P URCHASED THE SAME IRON ORE FROM HIS SISTER CONCERN WHICH COME TO 450 PER TONNE . THE ASSESSING OFFICER HAS APPLIED THE RATE ON ROM WHICH IS IRON ORE FINES WHICH IS EXPORTED DIRECTLY, THEREFORE, AFTER PROCESSING THE FINES ARE PRODUCED THEN ONLY IRON CAN BE EXPORTED. THEREFORE, THE CIT(A) WAS OF THE VIEW THAT ASSESSING OFFICER HIMSELF HA S WORKED OUT THE RATE OF ROM AT THE AVERAGE RATE COMES TO 327 PER TONNE WHEREAS THE AVERAGE RATE AT WHICH THE ASSESSEE HAS PURCHASED ROM FROM SISTER CONCERNED COME TO 450 PER TONNE WHICH IS HIGHER THEN WORKED OUT BY THE AO. THE CIT(A) IS JUSTIFIED IN HIS ACTION AND OUR INTERFERENCE IS NOT REQUIRED. IN THE RESULT, DEPARTMENT APPEAL IS DISMISSED. ITA NO. 22/PNJ/2014(A.Y. 2009 - 10) 5. GROUND NO.1 : - THE ASSESSE E STARTED THE CLAIMING DEDUCTION U/S 10B OF THE ACT FROM THE A.Y.2008 - 09. THE PERIOD BEING COVERED BY THIS ASSESSMENT ORDER I.E. A.Y. 2009 - 10, I S THE SECOND YEAR OF THE CLAIM OF EXEMPTION. IN THE ASSESSMENT ORDER DATED FOR AY 2008 - 09, THE CLAIM OF THE EXEM PTION U/S. 10B HAS BEEN DISCUSSED IN DETAILED. BASED ON FACTS THE ASSESSEE DID NOT INVOLVE IN THE 41 . ITA NOS.21 &22/PNJ/2014 , C.O. NO.14/PNJ/2014 (A.YS.2008 - 09 &2009 - 10) ACIT VS. RAMACANTA VELINGKAR MINERALS MANUFACTURING ACTIVITY THEREFORE, ENTIRE CLAIM OF THE EXEMPTION WAS DISALLOWED. THE YEAR UNDER CONSIDERATION THE DETAIL OF PURCHASE AND SALES SHOWS THAT ASSES SEE HAS MADE ONLY ONE CLAIM OF IRON ORE. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS 45,051.00 MT OF 56.82% FE IRON ORE TO A PARTY SUNDIAL METALS AND METALS AND MINERALS P L TD. THE SALE VALUE COMES TO RS. 9,92,02,298/ - . THE ASSESSING OFFICER HAS A LSO VERIFIED THE TECHNICAL FEASIBILITY DATA AND HE WAS OF THE VIEW THAT ASSESSEE HAS NOT CARRIED OUT ANY MANUFACTURING ACTIVITIES, THEREFORE, IT WAS DISALLOWED BY OBSERVING AS UNDER: 4.5 D URING THE PROCEEDINGS FOR THE AY 2008 - 09 THE ASSESSEE JUSTIFIED T HE EXCESS RECOVERY RATE BY CLAIMING THAT IT COULD BE ATTRIBUTED TO VARIOUS FACTORS LIKE FEED QUALITY, MOISTURE CONTENT ETC. HOWEVER, DURING THE CURRENT PROCEEDINGS, VIDE A LETTER DATED 20 . 12.2011, THE ASSESSEE HAS HARPED ON THE CLAIM THAT: ... HOWEVER, AFTER PREPARING THE REPORT, THE ASSESSEE REVIEWED ITS PROPOSAL AND DECIDED TO INSTALL HIGH INTENSITY MAGNETIC SEPARATOR PLANT TO ACHIEVE BETTER RATE OF RECOVERY. YOUR HONOUR HAS FRAMED ASSUMPTION ON THE BASIS OF PROJECT REPORT WHICH WAS PREPARED F OR INSTALLATION OF LOW INTENSITY MAGNETIC SEPARATOR PLANT. BUT THE ASSESSEE HAD INSTALLED HIGH INTENSITY MAGNETIC SEPARATOR PLANT AND USED HA EMATITIC ROM AS RAW MATERIAL FEED TO THE PLANT, WHICH HAS ALTOGETHER DIFFERENT CAPABILITIES AND ABLE TO GIVE RECOVE RY OF 65 - 85%OF CA RGO FED INTO THE PLANT DEPENDING ON THE BENEFICIATION AMENABILITY, FE CONTENT AND IMPURITIES OF THE FEED. THE LOW INTENSITY PLANT WAS MEANT FOR PROCESSING ONLY SILICEOUS MAGNETIC ORE WHEREAS HIGH INTENSITY PLANT COULD PROCESS SILICEOUS MAG NETIC ORE AS WELL AS HAEMATITIC ORE... 4.6 THE ABOVE JUSTIFICATION OF THE ASSESSEE IS EXAMINED CAREFULLY. HOWEVER, IT IS NOT ACCEPTED FOR REASONS AS DISCUSSED. THE TECHNICAL FEASIBILITY REPORT DATED 26.05.2006 PREPARED BY CHARTERED ENGINEER FOR THE PURPOSE OF SETTING UP THE EOU CLEARLY STATES THAT THE: PROPOSAL FOR SETTING UP THE 100% EOU IS PRIMARILY CONCEIVED ON THE BASIS OF THE USE OF LOW GRADE SILICEOUS ROM ORE FROM M/S ATCHUT V.S.VELINGKA R, SANCORDEM MINES, AND OTHER SMALL MINE OWNERS/OPERATORS,.. . IN VIEW OF THIS FACTUM OF ABUNDANT QUANTITIES OF LOW GRADE SILICEOUS R OM ORE, WHICH FORM THE BASIC IN PUT REQUIREMENT, BEING READILY AVAILABLE IN GOA ITSELF THE FIRM HAS PROMOTED THE IDEA OF E STABLISHING A COMMERCIAL VIABLE UNIT TO UPGRADE THIS LOW G RADE SILICEOUS MAGNE T IT E TOM ORE INTO EXPORTABLE VARIETY OF ORE +58% FE CONTEN T WITH AN EXPECTED COMBINED RECOVERY OF ABOUT 32% WITH READY EXPORT MARKET .. THE MAGNETIC CONCENTRATE SEPARATED FROM THIS PRIMARY MAGNETIC SEPARATOR WILL BE FURTHER FED TO ANOTHER SECONDARY WET LOW INTENSITY MAGNETIC SEPARATOR 42 . ITA NOS.21 &22/PNJ/2014 , C.O. NO.14/PNJ/2014 (A.YS.2008 - 09 &2009 - 10) ACIT VS. RAMACANTA VELINGKAR MINERALS FOR FURTHER SEPARATION AND CONCENTRATION POSSIBLE. LIKEWISE, THE NON MAGNETIC FRACTIONS REJECTED FROM BOTH THE PRIMARY AND SECONDARY WET LOW INTEN SITY MAGNETIC SEPARATORS WILL BE FURTHER FED TO A WET MEDIUM INTENSITY MAGNETIC SEPARATOR FOR ANY FURTHER RECOVERY OF MAGNETIC CONCENTRATE POSSIBLE. IT IS SEEN THAT THE TECHNICAL FEASIBILITY REPORT PREPARED BY A CHARTERED ENGINEER HAS MADE RECOMMENDATIONS AND PLANS MUCH CONTRARY TO THE CLAIM OF THE ASSESSEE. EVEN ASSUMING THAT THE ASSESSEE HAS BEEN ABLE TO PRODUCE A RECOVERY RATE OF ABOUT 70% AS CLAIMED USING A HIGH INTENSITY MAGNETIC SEPARATOR THE ASSESSEE IS NOT ABLE TO PRODUCE ANY TECHNICAL OPINION BY THE EXPERTS TO BACK UP THE CLAIM. THERE IS NO REVISED TECHNICAL FEASIBILITY REPORT OR PROJECT REPORT OR ANY EXPERT OPINION OR CORRESPONDENCE TO THIS EFFECT PLACED ON RECORD. IN FACT, IT IS VERY CLEAR FROM BOTH THE REPORTS THAT THE UNIT HAS BEEN SPECIFICAL LY MADE WITH THE RELATED PARTYS MINE IN MIND, AND DESIGNED ACCORDING TO THE FEED AVAILABLE. THE ASSESSEES BASELESS JUSTIFICATION OF AN EXORBITANTLY HIGH RECOVERY RATE IS NOT ACCEPTABLE. FURTHER, IT IS SEEN THAT EVEN IN THE MINUTES OF THE BOARD OF APPROVA L THAT PROVIDES THE APPROVAL FOR THE ASSESSEE TO SET UP AN EOU, IT IS SEEN THAT THE TOTAL VALUE OF CAPITAL GOODS TO BE IMPORTED IS RS.336.38 LAKHS. WHEN THIS AMOUNT IS CROSS - VERIFIED WITH THE ANNEXURE - Q OF THE PROJECT REPORT, THIS CORRESPONDS TO TWO NUMBER S OF LOW INTENSITY MAGNETIC SEPARATORS AND ONE NUMBER OF JAW/IMPACT CRUSHER TOTAL L ING TO RS.33638 LAKHS. THIS MEANS THE NEW CLAIM OF THE ASSESSEE THAT IT HAS REPLACED THE LOW AND MEDIUM INTENSITY SEPARATORS WITH A HIGH INTENSITY MAGNETIC SEPARATOR IS NOT B ORNE OUT BY FACTS. THE ASSESSEE IS ALSO NOT ABLE TO PRODUCE ANY REVISED APPLICATION FILED WITH THE BOARD OF APPROVAL. 4.7 THE DETAILS OF THE PLANT/PLANT OPERATION EXPENSES WERE OBTAINED. IT IS SEEN THAT WHILE THE ASSESSEE CLAIMS TO HAVE MADE SOME PRODUCTIO N OUTPUT IN THE MONTH OF APRIL 2008, IT HAS NOT INCURRED ANY PLANT OPERATION SERVICES EXPENSES TILL THE MONTH OF JULY. FURTHER OUT OF THE TOTAL PLANT EXPENSES OF RS.2,50,350/ - INCURRED DURING THE WHOLE YEAR , ONLY AN AMOUNT OF RS.560/ - HAS BEEN SPENT ON THI S BEF ORE THE MONTH OF JULY 2008. SIM ILARLY WITH FUEL AND LUBRICANTS EXPENSES, IT IS SEEN THAT THE ASSESSEE HAS NOT INCURRED ANY COST TILL THE MONTH OF MAY 2008. EVEN GENERATOR EXPENSES HAVE BEEN INCURRED ONLY IN THE MONTH OF JULY 2008 ONWARDS, WHILE THE CL AIMED PRODUCTION TOOK PLACE IN THE MONTH OF APRIL 2008. THE SAME IS THE CASE WITH ELECTRICITY AND WATER CHARGES, WHICH THE ASSESSEE HAD INCURRED ONLY FROM THE DATE 23.05.2008. BASED ON THE ABOVE, THE CONTENTION OF THE ASSESSEE IS NOT ACCEPTED. IT IS CLEAR THAT THE ASSESSEE DID NOT CARRY - OUT MANUFACTURING PROCESS TO MAKE THE EXPORT. AT BEST IT CAN BE SAID THAT THE ASSESSEE DIRECTLY EXPORTED OUT OF ITS PURCHASES. THEREFO RE THE CLAIM OF EXEMPTION U/S.10 B OF THE IT ACT AMOUNTING TO RS.4,63,82,434/ - IS DISALLOWED. 5.1 THE MATTER CARRIED TO CIT (A) AND CIT (A) HAS ALLOWED THE CLAIM BY OBSERVING AS UNDER: 43 . ITA NOS.21 &22/PNJ/2014 , C.O. NO.14/PNJ/2014 (A.YS.2008 - 09 &2009 - 10) ACIT VS. RAMACANTA VELINGKAR MINERALS 5.2 THE AO DISALLOWED THE CLAIM OF EXEMPTION OF THE APPELLANT U/S 10B DURING A. YR. 2008 - 09 ALSO, ON SIMILAR GROUNDS. THE APPELLANT HAD GIVEN DETAILED SUBMISSION AND HAD PLACED RELIANCE ON THE RECENT JUDGEMENT BY THE JURISDICTIONAL ITAT, PANAJI IN THE CASE. OF M/S SESA GOA LTD. THE BUSINESS OF THE APPELLANT AND M/S SESA GOA ARE SAME AND ALL THE ISSUES RAISED BY THE A.O. IN THE INSTANT CASE HAVE BEEN DEA LT WITH IN DETAIL BY THE HONOURABLE ITAT IN THE CASE OF M/S SESA GOA LTD. IN ITA NO. 72/PNJ/2012 DATED 08.03.2013. SINCE THE CASE OF THE APPELLANT IS SQUARELY COVERED BY THE DECISION OF HONBLE ITAT, PANAJI IN THE CASE OF M/S SESA GOA AND MY OWN DECISION I N THE CASE OF THE ASSESSEE FOR A. YR. 200809, THE A.O. IS DIRECTED TO ALL OW THE CLAIM OF DEDUCTION U/S 10 B TO THE APPELLANTS HOLDING THAT THE ACTIVITY OF THE ASSESSEE AMOUNTS TO PRODUCTION. THE ASSESSEE, OBVIOUSLY, CARRIES OUT THE PROCESS OF BENEFIC IA TION AND UPGRADES THE LOW GRADE NON INTO A HIGHER GRADE TO MAKE IT EXPORT - WORTHY AND THEREFORE, AOS OBSERVATION THAT ASSESSEE INDULGES ONLY IN TRADING IS NOT CORRECT. THE A.O. HAS HELD THAT SINCE THE MINE IS VERY OLD, AND THE PERIOD OF 10 YRS SHOULD BE COU NTED FROM THE PERIOD THE MINE IS OPERATED IS NOT CORR ECT BECAUSE THE EXEMPTION U/S 10 B IS AVAILABLE TO A NEW INDUSTRIAL UNDERTAKING, WHICH IS A 100% ECU, AND NOT TO THE MINE. THERE IS NO DOUBT ABOUT THE FACT, THE APPELLANT IS A SEPARATE UNIT, WHICH DOES NO T OWN MINE, BUT MAKES PURCHASES FROM THEM. FOR OTHER REASONS, GIVEN BY THE A.O, MY ORDER PASSED FOR A. YR. 2008 - 09 HOLDS GOOD. THEREFORE, IN VIEW OF ALL THE ABOVE, I HOLD THAT THE APPELLANT COMPANY IS ELIGI BLE FOR CLAIM OF DEDUCTION U/S 10 B. THESE GROUNDS OF APPEAL OF THE APPELLANT ARE ALLOWED ACCORDINGLY. WE HAVE HELD IN ITA NO. 21/PNJ/2014 WHEREIN ASSESSEE IS ENTITLED FOR DEDUCTION U/S. 10B SO WE RESPECTFULLY FOLLOWING THE SAME WE DISMISS THE APPEAL OF THE DEPARTMENT ON THIS GROUND. 5.2 SECOND GROUND: - THE ASSESSING OFFICER HAS VERIFIED THE PURCHASE OF THE SALES DATE AND FROM THIS DATA ASSESSING OFFICER WAS OF THE VIEW THAT ASSESSEE IS THE SELLER OF THE IRON ORE ON CLOSE CONNECTION. THE ASSESSEE FIRM HAS PURCHASED THE IRON ORE FROM CONCER NED FIRM WHEREIN SAME OF THE PARTNERS ARE COMMON, THEREFORE, HE REVISED THE PURCHASE VALUE AND HE REVISED THE ELIGIBLE DEDUCTION BY OBSERVING AS UNDER: 5.2 THE ASSESSEE WAS ASKED TO PROVIDE THE GRADE - WISE LIST OF PURCHASE AND SALES DATA FOR THE YEAR UNDE R CONSIDERATION. THE SUBMISSION IS SHOWN IN THE TABLE BELOW: PURCHASE DATA: SL. NO. NAME OF THE PRTY(SELLER) AS INVOICES DATA QUANTITY (MT) GRADE RATE (RS.MT) 44 . ITA NOS.21 &22/PNJ/2014 , C.O. NO.14/PNJ/2014 (A.YS.2008 - 09 &2009 - 10) ACIT VS. RAMACANTA VELINGKAR MINERALS PER INVOICES 1 ATCHUTA V.S. VELINGKAR 05.05.2008 3,209.10 LUMPS 15,981.0 FINES 53.2% 303 300 2 RAMACANTA V.S. VELINGKAR 05.01.2009 1318.00LUMPS 47,039.00 FINES 52,88% 453 450 3 RAMACANTA V.S. VELINGKAR 05.02.2009 792.00LUMPS 15,111.00FINES 50.19% 453 450 TOTAL PURCHASE VALUE: 3,46,89,987.30 SALE DATA: S.NO. NAME OF THE PARTY (BUYER) QUANTITY(MT) GRADE TOTAL SALES (RS.) 1. SUNDIAL METALS AND MINERALS LTD. 45.051.00 56.82% RS.9,92,02,298.36 5.3 AT THIS POINT OF TIME IT IS CRUCIAL TO DISCUSS ONE ANOTHER IMPORTANT PROVISION OF S.1OB OF THE IT ACT, UNDER WHICH THE ASSESSEE HAS STARTED TO CLAIM THE DEDUCTION. THE RELEVANT PORTION IS REPRODUCED BELOW: S. 10 B. (7) THE PROVISIONS OF SUB - SECTION (8) AND SUB - SECTION (10) OF SECTION 80 - IA SHALL, SO FAR AS MAY BE, APPLY IN RELATION TO THE UNDERTAKING REFERRED TO IN THIS SECTION AS THEY APPLY FOR THE PURPOSES OF THE UNDERTAKING REFERRED TO IN SECTION 80 - IA. 5.80 - IA (10) WHERE IT APPEARS TO THE ASSESSING OFFICER THAT, OWING TO THE CLOSE CONNECTION BETWEEN THE ASSESSEE CARRYING ON THE ELIGIBLE BUSINESS TO WHICH THIS SECTION APPLIES AND ANY OTHER PERSON, OR FOR ANY OTHER REASON, THE COURSE OF BUSINESS BETWEEN THEM IS SO ARRANGED THAT THE BUSINESS TRANSACTED BETWEEN THEM PRODUCES TO THE ASSESSEE MORE THAN THE ORDINARY PROFITS WHICH MIGHT BE EXPECTED TO ARISE IN SUCH ELIGIBLE BUSINESS, THE ASSESSING OFFICER SHALL, IN COMPUTING THE PROFITS AND GAINS OF SUCH ELIGIBLE BUSINESS FOR THE PURPOSES OF THE DEDUCTION UNDER THIS SECTION, TAKE THE AMOUNT OF PROFITS AS MAY BE REASONABLY DEEMED TO HAVE BEEN DERIVED THEREFROM. 5.4 FROM THE SUBMISSIONS MADE IT WAS FOUND THAT CLOSE CONNECTION EXISTED BETWEEN THE ASSESSEE AND ITS SELLER OF IRON ORE. IN FACT, THE ENTIRE EOU PROJECT HAS BEEN STARTED ONLY DUE TO THE FACT THAT SOME OF THE PARTNERS WERE ALSO PARTNERS IN A CONCERN THAT WAS CARRYING OUT THE MINI NG ACTIVITY. THIS IS QUITE CLEAR FROM THE TECHNICAL FEASIBILITY REPORT AND PROJECT REPORT. 45 . ITA NOS.21 &22/PNJ/2014 , C.O. NO.14/PNJ/2014 (A.YS.2008 - 09 &2009 - 10) ACIT VS. RAMACANTA VELINGKAR MINERALS 5.5 VIDE A LETTER DATED 20.12.2011 THE ASSESSEE EXPLAINED THAT THE TWO FIRMS HAD MAINLY DIFFERENT SET OF PARTNERS AND THE PROFIT - SHARING RATIO WAS COMPLETELY DIFFERE NT AND THEREFORE THE PROVISION WAS NOT APPLICABLE. HOWEVER THIS CONTENTION IS NOT ACCEPTED AS THE PROVISION COVERS ALL CASES OF CLOSE CONNECTION. IN THIS CASE, THREE PARTNERS ARE COMMON BETWEEN THE ASSESSEE AND THE FIRM SUPPLYING THE MATERIAL. 5.6 VIDE A LET TER DATED 21.12.2011 THE ASSESS EE WAS GIVEN THE RATES THAT ARE TO BE FOR ITS PURCHASE BASED ON SOME MARKET SAMPLES. A BASE RATE OF RS.843/MT FOR FE 56% LUMPY/FINE WAS ADOPTED. 5.7 VIDE A LETTER DATED 26.12.2011 THE ASSESSEE HAD OBJECTED TO THE CONTENTI ON. THE MAIN ARGUMENT IS THAT THE RATES SUPPLIED WERE FOR THE FINES AND LUMPY WHEREAS THE ASSESSEE FIRM PURCHASED ONLY ROM WITHOUT SEGREGATION. THIS CONTENTION IS NOT ACCEPTED AS IT IS CLEARLY SEEN FROM THE INVOICES AND THE DETAILS ATTACHED WITH THEM THAT THE ASSESSEE FIRM HAD INDEED PURCHASED FINES AND LUMPY. IN FACT, ONLY BECAUSE OF THIS THE ASSESSEE WAS ABLE TO MAKE EXPORTS. THE ASSESSEE ALSO CLAIMS THAT THE SAMPLE RATES SHOWN HAVE HUGE VARIANCE BETWEEN THEM. THIS CONTENTION HAS SOME MERIT. HOWEVER, IT I S POINTED OUT THAT SUCH A SAMPLING HAS BEEN DONE ONLY TO REDUCE THE EFFECTS OF THE COMMODITY CYCLE AS POINTED OUT BY THE ASSESSEE. BASED ON THIS THE AVERAGE RATE OF RS.843/MT IS TAKEN FOR FE 56% LUMPY/FINE ORE. PRO RATA AMOUNT OF RS.20/MT IS CONSIDERED FOR EVERY PER CENT POINT OF DEVIATION IN THE GRADE FROM THE BENCHMARK OF FE 56%. 5.8 ACCORDINGLY, I HAVE GIVEN BELOW MY WORKING OF THE RECOMPUTED PURCHASE VALUE AND THEREBY THE REVISED TAX DEDUCTION ELIGIBLE FOR THE ASSESSEE: S.NO. NAME OF THE PARTY(SELLER) A S PER INVOICES INVOICE DATE QUANTITY (MT) GRADE RATE CLAIMED (RS./MT) RATE ADOPTED (RS./MT) REVISED PURCHASE VALUE (RS) 1 ATCHUTA V.S.VELINGKAR 05.05.2008 3,209.10 LIMPS 15,981.0 FINES 53.2% 303 300 787 1,51.02,608 2 RAMACANTA V.S. VELINGKAR 05.01.2009 1318.00 LUMPS 47,039.00 FINES 52.88% 453 450 780 3,77,18,460 3 RAMACANTA V.S. VELINGKAR 05.02.2009 792.00 LUMPS 15,111.00 50.19% 453 450 727 1,15,61,481 46 . ITA NOS.21 &22/PNJ/2014 , C.O. NO.14/PNJ/2014 (A.YS.2008 - 09 &2009 - 10) ACIT VS. RAMACANTA VELINGKAR MINERALS FINES REVISED PURCHASE V A L UE 6,43,82,550 TOTAL PURCHASES DEBITED BY THE ASSESSEE: RS. 3,46,89,987/ - TOTAL PURCHASE VALUE AS REWORKED ABOVE: RS. 6,43,82,550/ - DIFFERENT BETWEEN THE ABOVE: RS. 2,96,92,562/ - THE REVISED ELIGIBLE DEDUCTION IS WORKED OUT AS UNDER: INCOME AS PER THE COMPUTATION STATEMENT OF THE ASSESSEE RS. 5,15,36,038/ - ASSESSEES CLAIM OF 90% DEDUCTION U/S 10B RS. 4,63.82,434/ - DIFFERENCE BETWEEN THE COSTS CLAIMED AND ESTIMATED: RS.2,96,92,562/ - REVISED INCOME AS PER THE ESTIMATED PURCHASE COST RS.2,18,43,476/ - ELIGIBLE DEDUCTION AT 90% U/S 10B (SUBJECT TO THE DISCUSSION UNDER PARA 3) RS. 1,96,59,128/ - 5.9 CONSEQUENTLY, THE JURISDICTIONAL A.O. OF THE SELLER - FIRM, M/S. VELIN GKAR BROTHERS, HAS BEEN INFORMED ABOUT THE RECOMPUTED PURCHASE RATES, AND REQUESTED TO MAKE APPROPRIATE ADJUSTMENTS WHILE ASSESSING THE INCOME OF THE SELLER - CONCERN. 5.3 THE MATTER CARRIED TO CIT(A) AND CIT(A) HAS DELETED THE ADDITION BY OBSERVING AS UNDER: 6.3. I HAVE DECIDED THIS ISSUE BY A DETAILED OR DER FOR A.YR. 2008 - 09 IN FAVOUR OF THE APPELLANT. SINCE THE FACTS ARE SAME DURING THIS YEAR ALSO, RELYING ON MY OWN ORD ER, THIS ISSUE IS DECIDED IN FAVOUR OF THE APPELLANT FOR THIS YEAR ALSO. THE A.O. IS DIRECTED TO ACCEPT THE PROFITS DISCLOSED BY THE ASSESSEE. THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED ACCORDINGLY 5.4 WE HAVE HEARD THE RIVAL CONTENTION OF BOTH THE PARTIES. RELYING UPON THE DECISION OF THE A. YR. 2008 - 09, SIMILARLY FOLLOWING THE SAME REASON WE DISMISS THE DEPARTMENTS APPEAL. 5 . C.O. NO. 14 ARISING OUT OF 22/PNJ/2014 IS NOT PRESSED HENCE DISMISSED. [ 6 . IN THE RESULT, BOTH THE APPEAL S OF THE DEPARTMENT ARE DISMISSED. ORDER PRONOUNCED I N THE OPEN COURT ON 30 .5 .2014. SD/ - SD/ - ( P.K. BANSAL) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER PLACE : PANAJI / GOA DATED : 30 .5 .2014 P.S. - *PK* 47 . ITA NOS.21 &22/PNJ/2014 , C.O. NO.14/PNJ/2014 (A.YS.2008 - 09 &2009 - 10) ACIT VS. RAMACANTA VELINGKAR MINERALS COPY TO : ( 1 ) APPELLANT ( 2 ) RESPONDENT ( 3 ) CIT CONCERNED ( 4 ) CIT(A) CONCERNED ( 5 ) D.R ( 6 ) GUARD FILE TRUE COPY, BY ORDER