ACIT, Kottayam V. Kanam Latex Industries P.Ltd, Kottayam

ITA 588/COCH/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 4393 (ITAT-COCHIN)
• Duration Of Justice: 2 year(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2010
• Appeal Filed By: Department
• Bench Allotted: DB
• Next Hearing Date: 16-03-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 21-04-2008
• Court: TRIBUNAL
• Department Lawyers: DR BABU JOSEPH
• Section: 80HHC; 80IB; 80IA; 191

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.VIJAYAKUMARAN, JM & SANJAY ARORA, AM I.T.A.NOS.11 & 12/COCH/2007 AND ITA NO.588/COCH/2008 ASST. YEARS:2000-01, 2003-04 & 2004-05 THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-1, KOTTAYAM. VS. M/S. KANAM LATEX INDUSTRIES PVT.LTD., KOTTAYAM. [PA NO.AABCK 0056E] (APPELLANT) (RESPONDENT) & C.O.NOS. 16 & 17/COCH/2008 (ARISING OUT OF I.T.A.NOS.11 & 12/COCH/2007) & ITA NO.442/COCH/2008 ASST. YEARS:2000-01, 2003-04 & 2004-05 M/S. KANAM LATEX INDUSTRIES PVT.LTD., KOTTAYAM. [PA NO.AABCK 0056E] VS. THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-1, KOTTAYAM. (APPELLANT) (RESPONDENT) REVENUE BY DR. BABU JOSEPH, SR.DR ASSESSEE BY NONE O R D E R PER SANJAY ARORA, AM : THIS IS A SET OF THREE APPEALS BY THE REVENUE FOR T HE ASSESSMENT YEARS (AYS) 2000-01, 2003-04 AND 2004-05, WITH THE ASSESSEE PRE FERRING CROSS OBJECTIONS (COS) FOR THE FIRST TWO YEARS AND APPEAL FOR THE THIRD. 2. THE ISSUES ARISING FOR ADJUDICATION IN THE ABOVE AP PEALS BEING COMMON, THE SAME WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY A COMMON, CONSOLIDATED ORDER, EVEN AS THEY ARISE OUT OF SEPAR ATE ORDERS PASSED BY THE ITA NO.11/COCH/2007 & OTHERS 2 COMMISSIONER OF INCOME-TAX (APPEALS)-IV, KOCHI (`CI T(A) FOR SHORT), I.E., DATED 16-10-2006 (OR AYS 2000-01 & 2003-04) AND DAT ED 27-01-2008 (FOR AY 2004-05). AS REGARDS THE COS BY THE ASSESSEE, TH E SAME ARE BARRED BY LIMITATION BY 313 AND 322 DAYS FOR THE TWO CONSECUT IVE YEARS RESPECTIVELY. HOWEVER, PER AN AFFIDAVIT BY THE PRINCIPAL OFFICER, A DECISION BY THE SUPREME COURT, REPORTED SUBSEQUENTLY, IS STATED AS THE REAS ON FOR THE DELAYED FILING BY THE ASSESSEE OF ITS COS. WE DO NOT CONSIDER THE SAM E AS A VALID REASON, SO AS TO CONSIDER THE DELAY AS JUSTIFIED OR EXPLAINED. IT IS ONLY WHERE THE MATTERS ARE KEPT ALIVE THROUGH APPEAL THAT A PARTY TO THE L ITIGATION CAN TAKE ADVANTAGE OF A SUBSEQUENT DECISION BY A HIGHER COURT. A DECIS ION ITSELF CANNOT INFUSE LIFE TO AN ISSUE, SINCE ACCEPTED AND NO LONGER ALIV E FOR ADJUDICATION. THE PURPORT OR OBJECTIVE OF THE DECISION IS DISPUTE RES OLUTION, SO THAT IT CANNOT ITSELF FORM THE BASIS OR SOURCE OF A DISPUTE, LEADI NG TO RECOURSE TO APPELLATE PROCEDURE, WHICH IS IN THAT SENSE ONLY A CONTINUATI ON OF THE ASSESSMENT PROCEEDINGS. PER ITS GROUND, THE APPLICANT ALSO STA TES OF THE SAID DECISION AS APPROVING A DECISION BY THE TRIBUNAL, WHICH STANDS REPORTED MUCH EARLIER. INDEED, THAT IS ALL THE MORE REASON FOR THE ASSESSE E TO HAVE FILED AN APPEAL OR CO; ITS CASE BEING WELL SUPPORTED, WITH IT IN FACT STANDING TO GAIN ADDITIONAL TIME IN CASE OF THE AVAILABILITY OF THE LATTER OPTI ON, WHICH RUNS ONLY ON THE RECEIPT OF THE NOTICE OF APPEAL BY THE OTHER PARTY. FURTHER, TO THE EXTENT THE ISSUE IS ALREADY AGITATED BY THE OTHER PARTY, THE A PPLICANT CAN SURELY RELY ON ANY DECISION IT CONSIDERS AS PROMOTING ITS CASE, IN CLUDING THE CITED ONE WHICH STANDS THUS BROUGHT TO NOTICE, SO THAT NO PREJUDICE IS CAUSED TO IT. THE ASSESSEE, IF AGGRIEVED, OUGHT TO HAVE RATHER PREFER RED AN APPEAL RATHER THAN AWAITING FILING OF APPEAL BY THE REVENUE TO FILE A CO, WHICH, IN ANY CASE, OUGHT TO HAVE BEEN IN TIME, WHILE IN THE PRESENT CA SE THE DELAY EXTENDS TO CLOSE TO A YEAR. THE INCOME-TAX ACT, 1961 (`THE ACT HEREINAFTER) PROVIDES TIME LIMIT(S) FOR PREFERRING APPEALS/COS BEFORE THE APPELLATE AUTHORITIES. THE SAME, THOUGH NOT ABSOLUTE, BEING GOVERNED BY THE PR OVISION OF SEC. 5 OF THE LIMITATION ACT, 1963, WOULD REQUIRE SATISFACTION OF THE CONDITION OF ITA NO.11/COCH/2007 & OTHERS 3 `SUFFICIENT CAUSE FOR THE SAME. THE SAME IS NOT AU TOMATIC AND IMPINGES ON THE RIGHTS OF THE OPPOSITE PARTY. WE ALSO OBSERVE T HAT SOME GROUNDS AGITATED PER THE SAME ARE SUPPORTIVE IN NATURE, SO THAT TO T HAT EXTENT THESE ARE ONLY ACADEMIC. UNDER THE CIRCUMSTANCES, IN OUR VIEW, THE ASSESSEES COS FOR AY 2000-01 & 2003-04 ARE NOT MAINTAINABLE. 3.1 THE FIRST ISSUE RELATES TO THE DEDUCTION U/S.8 0HHC OF THE ACT. WE SHALL, FOR THE SAKE OF REFERENCE, SO AS TO ENABLE P ROPER APPRECIATION OF THE ISSUE, ADOPT THE FIGURES FOR AY 2000-01. THE ASSESS EE CLAIMED DEDUCTION, INTER-ALIA , U/S.80IB IN THE SUM OF RS. 1,05,77,345/-. NO ADJU STMENT, WHILE COMPUTING THE SAME, STOOD MADE FOR THE DEDUCTIONS U /SS. 80HHC & 80JJA, CLAIMED IN THE SUM OF RS.1,16,29,181/- AND RS.2,02, 730/- RESPECTIVELY. THE ASSESSING OFFICER (A.O.) WAS OF THE VIEW THAT SIMUL TANEOUS DEDUCTIONS, I.E., INDEPENDENT OF EACH OTHER, COULD NOT BE MADE IN RES PECT OF THE AFORESAID SECTIONS, IN VIEW OF THE PROVISIONS OF SECTION 80IB (13) R.W.S.80IA(9) OF THE ACT AND, IN ANY CASE, THE TOTAL DEDUCTION UNDER THE SE SECTIONS COULD NOT EXCEED THE GROSS TOTAL INCOME (GTI) IN VIEW OF SECT ION 80A(2) OF THE ACT. THE DEDUCTIONS U/S.80JJA AND 80HHC STOOD, THEREFORE , RE-WORKED BY HIM AT RS. NIL AND RS.9,93,521/- RESPECTIVELY. THE AMOUNT OF DEDUCTION U/S.80HHC WAS DETERMINED BY HIM BY REDUCING FROM THE ELIGIBLE DEDUCTION THERE-UNDER, I.E., INDEPENDENT OF SECTION 80IB, OR RS.11,15,70,8 66/-, THE AMOUNT OF DEDUCTION CLAIMED AND ALLOWED U/S.80IB (RS.11,05,77 ,345/-), SO THAT ONLY THE BALANCE AMOUNT OF RS.9,93,521/- (11,15,70,866 MINUS 11,05,77,345) STOOD TO BE ALLOWED U/S.80HHC, LEAVING NO AMOUNT TO BE CLAIM ED AS DEDUCTION U/S.80JJA. REFERENCE WAS MADE BY HIM FOR THE PURPOS E TO THE DECISIONS BY THE APEX COURT IN THE CASE OF VIKRANT TYRES LTD. V. ITO , 247 ITR 821 (SC) AND PADMASUNDARA RAO (DECD.) & ORS. V. STATE OF TAMIL N ADU , 255 ITR 147 (SC) HOLDING THAT NOTHING IS TO BE READ INTO STATUTORY P ROVISION WHEREIN THE LANGUAGE IS PLAIN AND UNAMBIGUOUS . ITA NO.11/COCH/2007 & OTHERS 4 3.2 IN APPEAL, THE LD. CIT (A), REFERRING TO THE PROVIS ION OF SECTION 80IA(9), WHICH BECOMES APPLICABLE IN VIEW OF SECTIO N 80IB(13), DIRECTED FOR REDUCTION OF THE DEDUCTION U/S.80IB FROM THE `PROFI TS OF THE BUSINESS IN COMPUTING THE DEDUCTION U/S.80HHC, FURTHER DIRECTIN G THAT DEDUCTION UNDER THE TWO SECTIONS SHOULD NOT EXCEED THE GTI IN VIEW OF SECTION 80A(2). AGGRIEVED, BOTH THE PARTIES ARE IN APPEAL BEFORE TH E TRIBUNAL. 4. BEFORE US, LIKE CONTENTIONS STOOD RAISED BY EITH ER SIDE. THE LD. DR FURTHER CLAIMED THAT THE MATTER SHOULD BE CONSIDERE D AS SETTLED IN VIEW OF THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT I N THE CASE OF OLAM EXPORTS (I) LTD. VS. CIT , 229 CTR (KER.) 206, PLACING A COPY OF THE SAME ON RECORD. IT STANDS SPECIFICALLY HELD BY THE HONBLE COURT THEREIN THAT WHILE COMPUTING THE DEDUCTION U/S.80HHC, THE DEDUCTION GR ANTED U/S.80IB HAS TO BE TAKEN INTO ACCOUNT, I.E., HAS TO BE EXCLUDED. 5.1 WE HAVE HEARD THE PARTIES, AND PERUSED THE MATE RIALS ON RECORD INCLUDING THE CASE LAW CITED. THERE IS NO DOUBT TH AT THE DECISION BY THE HONBLE HIGH COURT IS ON THE ISSUE UNDER REFERENCE AND, FURTHER, SQUARELY ON THE POINT; IT UNAMBIGUOUSLY CLARIFYING THAT IN COMP UTING DEDUCTION U/S.80HHC THE DEDUCTION GRANTED U/S.80IB IS TO BE R ECKONED OR HAS TO BE EXCLUDED. 5.2 THE QUESTION, HOWEVER, THAT WOULD ARISE, IS WHE THER THE COMPUTATION AS MADE BY THE AO, OR THAT BY THE LD. CIT(A), IS CONSI STENT WITH THE PROVISIONS OF THE ACT, AS EXPLAINED BY THE HONBLE HIGH COURT. THIS IS AS BOTH OF THEM ADMITTEDLY RECOGNIZE THE SUPERVENING EFFECT OF SECT ION 80IB(13) R.W.S.80IA(9), SO THAT IT HAS TO BE GIVEN EFFECT TO , WHICH THEY DO, ALBEIT DIFFERENTLY. IN THIS REGARD, WE FIND THE DIRECTION BY THE LD. CIT(A) TO BE IN CONFORMITY WITH THE RELEVANT PROVISIONS. THIS IS AS HE HAS CLEARLY DIRECTED ITA NO.11/COCH/2007 & OTHERS 5 THAT IN COMPUTING THE DEDUCTION U/S.80HHC, THE DEDU CTION ALLOWED U/S.80IB HAS TO BE REDUCED. ALL THAT MEANS IS THAT IN COMPUT ING THE PROFITS OF THE BUSINESS FOR THE PURPOSE OF S. 80HHC, THE PROFITS T O THE EXTENT ALLOWED AS DEDUCTION U/S. 80IB, ARE TO BE EXCLUDED. THE ACT NO WHERE STATES, NOR DID THE HONBLE COURT READ IT TO MEAN, THAT THE DEDUCTION U /S.80HHC (OR ANY OTHER SECTION FALLING UNDER CHAPTER VI-A FOR THAT MATTER) IS TO BE REDUCED BY THE AMOUNT OF DEDUCTION CLAIMED AND ALLOWED U/S.80IB. W E, THEREFORE, FIND HIS DIRECTION, FOR REDUCING THE DEDUCTION ALLOWABLE U/S . 80IB FROM THE PROFITS OF THE BUSINESS, W.R.T. TO WHICH DEDUCTION U/S. 80HHC IS TO BE MADE, AS CONSISTENT WITH THE PROVISIONS OF LAW, AND AS FURTH ER CLARIFIED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF OLAM EXPORTS (I) LTD. (SUPRA). THE RELIANCE BY THE ASSESSEE ON THE DECISIONS BY THE TR IBUNAL IN THE CASE OF DCW LTD. VS. DY. CIT , 77 ITD 462 (MUM) WOULD, IN VIEW OF THE FOREGOING, BE OF NO CONSEQUENCE. THE DECISION IN THE CASE OF CIT VS. BABY MARINE EXPORTS , 290 ITR 323 (SC) WE FIND TO BE ON A DIFFERENT ISSUE AND DOES NOT IN ANY MANNER RELATE TO THE SIMULTANEOUS CLAIM FOR DEDUCTI ON U/S.80IA/80IB AND OTHER SECTIONS FALLING UNDER CHAPTER VIA, BEING, IN FACT, IN RESPECT OF COMPUTATION OF DEDUCTION U/S.80HHC(1A). FOR THE SA ME REASON, THE REVENUES GRIEVANCE AS TO THE LD. CIT(A) BEING OBLI GED TO FOLLOW THE ORDER OF HIS PREDECESSOR FOR A.Y. 1999-2000 SHALL BE OF NO M OMENT; HIS VIEW, TO WHICH HE IS ENTITLED, OTHER THAN WHERE THE MATTER S TANDS COVERED BY THE DECISION BY THE JURISDICTIONAL HIGH COURT OR THE AP EX COURT, HAVING BEEN, AS FOUND BY US, CONFIRMED BY THE FORMER PER ITS SUBSEQ UENT DECISION IN THE CASE OF OLAM EXPORTS (I) LTD . (SUPRA). THE DECISION BY THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ACIT V. ROGINI GARMENTS , 294 ITR (AT) 15 (CHENNAI) (SB) IS TO THE SAME EFFECT. WE DECIDE ACCORDINGLY. 6. THE SECOND AND ONLY OTHER ISSUE ARISING IN THE P RESENT APPEALS IS THAT QUA THE REVENUES APPEAL FOR A.Y.2003-04, VIDE GROUND NO.3 THEREOF, AND RELATES TO THE DEDUCTION U/S.80IB. IT STOOD ALLOWED PARTIAL RELIEF, REJECTING THE ITA NO.11/COCH/2007 & OTHERS 6 ASSESSEES CONTENTION THAT STERILIZATION OF GLOVES AMOUNTS TO A MANUFACTURING ACTIVITY. 7. THE FACTS OF THE CASE, TO THE EXTENT RELEVANT, A RE THAT THE ASSESSEE HAS FOUR UNITS LOCATED AT KOTTAYAM, NAGERCOIL, BANGALOR E AND PONDICHERRY. THE NAGERCOIL UNIT UNDERTAKES TRADING AND MANUFACTURE O F GLOVES. THE PROFITS OF THE SAID UNIT FOR THE YEAR, AN ELIGIBLE UNDERTAKING U/S. 80IB, STOOD WORKED OUT BY THE ASSESSEE AT RS.36,59,780/-, CLAIMING DED UCTION U/S.80IB THERE- AGAINST. FOR THIS PURPOSE, IT RELIED ON CASE LAW LI STED AT PAGES 2 AND 3 OF THE ASSESSMENT ORDER. THE AO, HOWEVER, WAS OF THE VIEW THAT STERILIZATION DID NOT AMOUNT TO MANUFACTURE, SO THAT THE ASSESSEE WAS NOT ENTITLED TO THE BENEFIT U/S. 80IB QUA THE SAME. THE RELIANCE BY THE ASSESSEE ON THE DECISION BY THE EXCISE TRIBUNAL IN THE CASE OF CCE VS. SERVO-NED INDUSTRY PVT. LTD . (2004) 172 ELT 318 STOOD MET BY HIM PLACING RELIANC E ON THE DECISION IN THE CASE OF ACQUA MINERALS PVT. LTD. VS. DY.CIT , 279 ITR (AT) 106 (AHBD.), WHEREIN IT HAS BEEN EXPLAINED THAT A DECISION RENDE RED UNDER THE EXCISE LAW CANNOT BE IMPORTED FOR INTERPRETATION OF THE TERM MANUFACTURE UNDER THE ACT. IN APPEAL, THE ASSESSEE FOUND FAVOUR WITH THE LD. CIT(A), WHO ALLOWED ITS CLAIM RELYING ON THE DECISION OF THE RAJASTHAN HIGH COURT IN THE CASE OF MAMTHA SURGICAL COTTON INDUSTRIES & OTHERS VS. ASST . COMMISSIONER OF SALES TAX (2003) 181 CTR (RAJ) 234. AGGRIEVED, THE REVENUE IS IN APPEAL. 8. BEFORE US, LIKE CONTENTIONS STOOD RAISED BY EITH ER SIDE, EACH RELYING ON THE ORDER OF THE AUTHORITY BELOW AS FAVOURABLE TO I T. IN ADDITION, THE REVENUE HAS PLACED ON RECORD, BY WAY OF ITS PAPER-BOOK, A S ERIES OF DECISIONS BY THE HONBLE HIGH COURTS AS WELL AS BY THE TRIBUNAL IN T HE CASE OF ACQUA MINERALS PVT. LTD . (SUPRA). 9.1 WE HEARD THE PARTIES AND PERUSED THE MATERIALS ON RECORD, INCLUDING THE CASE LAW CITED. FOR THE REASONS STATED HEREUNDER, W E FIND THAT THE ASSESSEES ITA NO.11/COCH/2007 & OTHERS 7 CLAIM AS NOT MAINTAINABLE. THE SHORT QUESTION BEFOR E US IS WHETHER THE PACKING AND STERILIZATION OF GLOVES EITHER PRODUCED BY THE ASSESSEE OR PURCHASED IN NON-STERILIZED FORM FROM THE MARKET, W OULD AMOUNT TO A MANUFACTURING ACTIVITY, SO AS TO QUALIFY THE PROFIT S DERIVED THERE-FROM FOR DEDUCTION U/S.80IB OF THE ACT, CLAIMED IN THE SUM O F RS.117.02 LACS FOR THE YEAR. ADMITTEDLY, THE ASSESSEE IS ALSO TRADING IN B OTH QUALITIES OF GLOVES THROUGH ITS NAGERCOIL UNIT, I.E., PRE-STERILIZED AN D NON-STERILIZED, AND WHICH BEING PURELY A TRADING ACTIVITY, THERE IS NO QUESTI ON OF IT BEING CONSIDERED AS A MANUFACTURE. AS IT APPEARS, THE ASSESSEE ITSELF D ID NOT CLAIM DEDUCTION ON THE PROFIT FROM THE SAME (RS. 6,20,086/-). AS REGA RDS STERILIZATION, THE SAME IS UNDERTAKEN BOTH ON THE NON-STERILIZED GLOVES PUR CHASED FROM THE MARKET AS WELL AS THOSE PRODUCED BY THE ASSESSEE. OUR OBSERVA TIONS AND FINDINGS WOULD BE RESTRICTED TO THE FIRST CATEGORY ONLY, AS THE FO RMER WOULD ALSO INVOLVE THE PRODUCTION OF LATEX GLOVES, SO THAT THE SAME CANNOT BE REGARDED AS ONLY STERILIZATION ACTIVITY. THE REVENUE, AGAIN, AS IT A PPEARS, HAS NOT DISPUTED THE ASSESSEES CLAIM QUA THE LATTER ACTIVITY, WITH THE ASSESSEE HAVING BEEN ALLOWED DEDUCTION TO THE EXTENT OF RS.106.04 LAKHS OUT OF THE ITS TOTAL CLAIM FOR RS.117.02 LAKHS AND, FURTHER, THE ISSUE AGITATE D BEFORE US BEING LIMITED TO THE SCOPE OF THE STERILIZATION ACTIVITY AND, CONSEQ UENTLY, IT BEING LIABLE TO BE REGARDED AS AMOUNTING TO `MANUFACTURE OR NOT. 9.2 COMING BACK TO THE QUESTION, IT NEEDS TO BE CLARIFIED AT THE OUT-SET THAT THE WORD PROCESSING IS NOT SPECIFIED IN SECTION 8 0IB, WHICH IS ONLY IN RESPECT OF `MANUFACTURE OR `PRODUCTION OF AN ARTI CLE OR THING, NOT BEING AN ARTICLE OR THING SPECIFIED IN THE ELEVENTH SCHEDULE TO THE ACT. THE SAME HAS ENTIRELY DIFFERENT CONNOTATION THAN THE WORD MANUF ACTURE OR PRODUCTION, AND FOR WHICH REFERENCE BE MADE TO THE DECISION IN THE CASE OF CHILLIES EXPORTS HOUSE LTD. VS. CIT , 225 ITR 814 (SC). IT STANDS EXPLAINED THEREIN THA T THE WORD PROCESSING HAVING NOT BEEN DEFINED IN THE AC T, IT MUST BE INTERPRETED ACCORDING TO ITS PLAIN NATURAL READING. WHENEVER A COMMODITY UNDERG OES A CHANGE AS A RESULT OF SOME ITA NO.11/COCH/2007 & OTHERS 8 OPERATION ON IT OR IN REGARD TO IT, SUCH OPERATION WOULD AMOUNT TO ITS PROCESSING. IN DOING SO, THE APEX COURT REITERATED THE DICTUM LAID DOWN BY IT IN THE CASE OF DELHI COLD STORAGE PVT. LTD. VS. CIT , 191 ITR 656 (SC). AS SUCH, WHERE ANY COMMODITY IS SUBJECTED TO A PROCESS OR TREATMENT WITH A VIEW TO ITS DEVELOPMENT OR PREPARATION FOR THE MARKET, AS FOR EXAMPLE LIVESTOCK BY SLAUGHTERING, GRAIN BY MILLING , COTTON BY SPINNING, MILK BY PASTEURIZING, FRUITS AND VEGETABLES BY SORTING AND REPACKING, IT WOULD AMOUNT TO PROCESSING OF THE COMMODITY . THE DECISION IN THE CASE OF CIT VS. OCEANIC PRODUCTS EXPORTING COMPANY , 219 ITR 293 (KER.) IS ALSO ELUCIDATIVE AND ON THE POINT. T HE WORD `MANUFACTURE, WHICH, BEING USED IN THE SECTION, WOULD ONLY ENTITLE THE ASSESSEE TO A REBATE UNDER THE RELEVANT FINANCE ACT, IT WAS, DRAWING ON THE PRECEDENTS, WHICH STOOD EXTENSI VELY REVIEWED, EXPLAINED THAT MANUFACTURE IS THE END RESULT OF ONE OR MORE PROCES SES THROUGH WHICH THE ORIGINAL COMMODITY IS MADE TO PASS. WITH EACH PROCESS SUFFER ED, THE ORIGINAL COMMODITY EXPERIENCES A CHANGE. BUT IT IS ONLY WHEN THE CHAN GE, OR A SERIES OF CHANGES, TAKE THE COMMODITY TO THE POINT WHERE COMMERCIALLY IT CAN NO LONGER BE REGARDED AS THE ORIGINAL COMMODITY BUT INSTEAD IS RECOGNIZED AS A NEW AND DI STINCT ARTICLE THAT THE MANUFACTURE CAN BE SAID TO TAKE PLACE. THE SCOPE OF THE SAME WAS D ISTINCT FROM THE TERM PRODUCTION, BEARING A FUNDAMENTAL AND VITAL DIFFE RENCE, FOR WHICH REFERENCE STOOD MADE TO THE DECISION IN THE CASE OF CIT V. N.C. BUDHARAJA & CO ., 204 ITR 412 (SC), AS ALSO THE WORD PROCESSING, WHICH IN FACT IT FOUND THE ASSESSEE-RESPONDENTS ACTIVITY TO BE ACTUALLY A S. THE SCOPE OF PROCESSING WAS SOUGHT TO BE EXPLAINED WITH REFERENCE TO THE DECISI ON IN THE CASE OF DELHI COLD STORAGE PVT. LTD . (SUPRA), SO THAT IT MAY BE UNDERSTOOD AS AN ACTION WHICH BRI NGS FORTH SOME CHANGE OR ALTERATION OF THE GOODS OR MATERIAL WHICH IS SUBJEC T TO THE ACT OF PROCESSING. THE SAME INVOLVES BRINGING INTO EXISTENCE A DIFFERENT SUBSTA NCE FROM WHAT THE MATERIAL WAS AT THE COMMENCEMENT OF THE PROCESS . THE HONBLE COURT EXAMINED THE PROCESSES TO WHICH THE PRODUCT SOLD, FISH, STOOD SUBJECT, I.E., PEELING; DEVEINING; AND CLEANING, WHERE-AFTER IT WAS PRESSED INTO A SLAB IN THE FREEZER AND PACKED IN SUITABLE CONTAINERS, HOLDING THAT THE SAME DO NOT A MOUNT TO MANUFACTURE, BUT ITA NO.11/COCH/2007 & OTHERS 9 ONLY PROCESSING, REJECTING THE REVENUES CLAIM THAT IT WAS NOT EVEN SO. IT WAS EXPLAINED THAT IT COULD NOT BE DENIED THAT THE FISH SOLD BY THE ASSESSEE WAS SUBSTANTIALLY DIFFERENT FROM THE FISH BOUGHT AND PR OCESSED BY IT, BUT THAT, HOWEVER, WOULD NOT MAKE THE ANTECEDENT PROCESSES UN DERTAKEN AS CONSTITUTING `MANUFACTURE; THE END-PRODUCT BEING, AGAIN, ONLY FISH, ALBEIT BETTER PREPARED OR IN A MORE SUITABLE FORM, SO THAT NO NEW OR DISTINCT PRODUCT CAME INTO BEING, WHICH IS THE ESSENTIAL REQUIREMENT OF MANUFACTURE. IN THE CASE OF CIT V. TARA AGENCIES , 292 ITR 444 (SC), WHERE THE PROCESSES INVOLVED WERE PURCHASE OF DIFFERENT GRADE S AND BRANDS OF TEA AND THEIR BLENDING, IT WAS HELD TO BE A CASE OF `PROCES SING OF TEA, AND NEITHER PRODUCTION NOR MANUFACTURE. MORE RECENTLY, THE TRIBUNAL, PER A DECISION BY ITS SPECIAL BENCH, I.E., B.G. CHITALE V. DY. CIT , 305 ITR (AT) 81 (PUNE)(SB), HELD THAT STANDARDIZATION AND PASTEURIZATION OF MILK AMOUNTS TO PROCESSING, BUT NOT TO MANUFACTURE OR PRODUCTION, SO AS TO ENTITLE THE PRO FITS FROM THE SAID ACTIVITY TO DEDUCTION U/SS. 80IA AND 80HHA. ALL THE ANTECEDE NT PROCESSES INVOLVED THEREIN DID NOT GO BEYOND THE STAGE OF `PROCESSING , MAKING THE MILK `CLEANER OR `MORE FIT, BUT NOT A DIFFERENT PRODUC T FROM THE RAW MILK. THE PRECEDENTS ON THE SUBJECT STOOD EXTENSIVELY REVIEWE D. THE DECISION IN THE CASE OF ACQUA MINERALS PVT. LTD. (SUPRA), RELIED ON BY THE REVENUE, IS IN THE SAME VEIN AND TO THE SAME EFFECT, WHEREIN THE PROCE SSES INVOLVED WERE PURIFICATION AND DE-MINERALIZATION OF WATER, SO THA T IT WAS FOUND THAT NO NEW OR DISTINCT PRODUCT CAME INTO EXISTENCE THEREBY; TH E END PRODUCT BEING ONLY A PURIFIED FORM OF WATER. IN FACT, AS WOULD BE APPARENT FROM THE SAID ORDER, STERILIZATION FORMED ONE OF THE VARIOUS PROCESSES T O WHICH THE RAW WATER STANDS SUBJECT, SO THAT THE SAID DECISION IN A WAY COVERS THE PRESENT CASE AS WELL . ITA NO.11/COCH/2007 & OTHERS 10 9.3 THE QUESTION AT HAND, WE MAY CLARIFY, IS E SSENTIALLY ONE OF THE FACT, AND NOT OF LAW. TRANSFORMATION STANDS WROUGHT BY EV ERY PROCESS BUT WHETHER IT STANDS TO A DEGREE THAT WOULD QUALIFY IT TO BE A MANUFACTURE IS THE QUESTION WHICH HAS TO BE ANSWERED, AND FOR WHICH THE DEFININ G TEST IS A DISTINCT CHARACTER, USE AND THE NAME, I.E., VIS--VIS THE OR IGINAL PRODUCT. IT WAS EXPLAINED IN THE CITED CASES, WITH REFERENCE TO THE DECISIONS BY THE APEX COURT, THAT THE END PRODUCT WAS ONLY PREPARED FISH, PASTEURIZED MILK OR POTABLE WATER, AS THE CASE MAY BE, EVEN THOUGH OF A BETTER GRADE OR QUALITY, I.E., A SUPERIOR FORM THEREOF, SO THAT NO NEW PRODU CT CAME INTO BEING TO REGARD THE TRANSFORMATION AS LEADING TO MANUFACTURE , WHICH WOULD THUS ONLY QUALIFY TO BE ONLY `PROCESSING. 9.4 THE STERILIZATION OF GLOVES, PURCHASED FROM THE MARKET IN THE NON- STERILIZED FORM MAKES THEM MORE HYGIENIC, ENABLING THEIR USER FOR A PARTICULAR PURPOSE, AS FOR SURGICAL OPERATIONS, AND WOULD NOT MAKE IT, ON THAT ACCOUNT, A NEW OR A DISTINCT PRODUCT. THIS IS AS TH E SAID PROCESS ONLY LENDS IT WITH AN ATTRIBUTE, I.E., HYGIENE, AND THEREBY FIT F OR A PARTICULAR MARKET SEGMENT, AS INDEED, AS EXPLAINED, ANY PROCESSING AC TIVITY IS GEARED TO. IT CANNOT BY ANY STRETCH OF IMAGINATION BE REGARDED AS COMING INTO EXISTENCE OF A NEW OR SEPARATE PRODUCT, I.E., FROM THE RAW MATER IAL FROM WHICH IT COULD BE SAID TO BE PRODUCED OR MANUFACTURED, THE NON-STERIL IZED GLOVES. IN FACT, EVEN THE EFFECT OF THE CHANGE SUFFERED OR WROUGHT BY THE PROCESS OF STERILIZATION IS NOT ENDURING, AND ONCE EXPOSED, THE STERILIZED GLOV ES WOULD LOOSE THEIR STERILIZED CHARACTER OR EFFECT, AND WHICH, BY DEFIN ITION, CONTRADICTS THE CONCEPT OF MANUFACTURE, IF NOT ALSO PROCESSING, SO THAT IT IS ALSO DOUBTFUL IF IT, GIVEN THE TRANSITORY NATURE OF THE CHANGE, COUL D EVEN BE SAID TO BE A CASE OF `PROCESSING. THIS IS AS A PRODUCT ONCE MANUFACT URED OR PROCESSED CANNOT BY ITSELF REVERT BACK TO ITS `RAW FORM OR THE ORI GINAL STATE. IT IS FOR THIS REASON THAT WHERE REPEATED USE IS DESIRED, BE IT QU A GLOVES OR ANY OTHER, VIZ. ITA NO.11/COCH/2007 & OTHERS 11 SURGICAL EQUIPMENTS; HYGIENE BEING PARAMOUNT, THE S AME ARE STERILIZED PRIOR TO EVERY FRESH USER . 9.5 IN VIEW OF THE FOREGOING, APPLYING THE PRINCI PLES AND PERCEPTS AS LAID DOWN IN THE CITED DECISIONS (SUPRA), WITH REGARD TO `PROCESSING AND `MANUFACTURE, WE FIND THAT THE ACTIVITY OF STERILI ZATION OF THE NON-STERILIZED LATEX GLOVES DOES NOT AMOUNT TO A MANUFACTURING ACT IVITY, SO AS TO ENTITLE THE ASSESSEES RELEVANT UNDERTAKING TO THE BENEFIT OF D EDUCTION U/S. 80IB ON THE PROFITS DERIVED THERE-FROM. 9.6 AS REGARDS THE DECISION BY THE HONBLE RAJAST HAN HIGH COURT IN THE CASE OF MAMTHA SURGICAL COTTON INDUSTRIES (SUPRA) RELIED UPON BY THE LD. CIT (A), WE CONSIDER IT AS DISTINGUISHABLE ON FACTS. FI RSTLY, THE SAME IS WITH RESPECT TO THE SALES-TAX LAW, THE PURPORT OF WHICH STATUTE IS MARKEDLY DIFFERENT FROM THE INCOME-TAX LAW. EVEN AS EXPLAINE D IN THE CASE OF ACQUA MINERALS PVT. LTD. (SUPRA) , THE DECISIONS RENDERED UNDER ONE STATUTE WOULD NOT HAVE AN AUTOMATIC APPLICATION IN CASE OF ANOTHE R LAW, AND THE CASE LAW UNDER A COGNATE LEGISLATION IS TO BE APPLIED WITH D UE CIRCUMSPECTION, REGARD BEING TO THE OBJECT AND THE INTENT OF THE LEGISLATI ON. THE SALES-TAX LAW IS ESSENTIALLY CONCERNED WITH A DIFFERENT MARKETABLE P RODUCT COMING INTO EXISTENCE, AND THIS PERSPECTIVE ALSO MARKS THE EXCI SE LAW; THE STANDPOINT BEING WHETHER THERE IS SOME INDUSTRIAL ACTIVITY TO WHICH SOME VALUE ADDITION COULD BE ASCRIBED, AS WOULD ALSO BE APPARENT FROM A BARE READING OF THE DECISION IN THE CASE OF MAMTHA SURGICAL COTTON INDUSTRIES (SUPRA). THE DISTINCTION BETWEEN `PROCESSING, `PRODUCTION AND `MANUFACTURE IS MISSING UNDER THE RELEVANT STATUTES; THE SOLE FOCUS AND PUR VIEW BEING THE COMING INTO EXISTENCE OF A DIFFERENT MARKETABLE PRODUCT. WITHOU T DOUBT, SURGICAL COTTON IS DIFFERENT MARKETABLE PRODUCT FROM ORDINARY COTTON, BUT AS EXPLAINED HEREINABOVE, EVEN PROCESSING WOULD YIELD A DIFFERENT MARKETABLE COMMO DITY; RATHER THAT BEING THE END OBJECT OF PROCESSING IN A VARIETY OF REAL LIFE SITUATIONS, AS RECOUNTED BY THE APEX COURT IN THE CASE ITA NO.11/COCH/2007 & OTHERS 12 OF CHILLIES EXPORTS HOUSE LTD. (SUPRA). FURTHER, IT STOOD ALSO EXPLAINED, WITH REFERENCE TO THE PROCESSES UNDERTAKEN, THAT SIZABLE QUANTITIES OF RAW COTTON IS CONSUMED, I.E., WEIGHT-WISE, IN THE PROCESS, AND WHICH FACT IS VITA L, AND DISTINGUISHES THE SAID CASE ON FACTS. THIRDLY, WE HAVE, IN ARRIVING AT OUR CONCLUSION, PL ACED RELIANCE ON THE DECISIONS BY THE APEX COURT AS WELL AS BY THE HONB LE HIGH COURTS, WHICH FIND PLACE IN THE DETAILED PAPER-BOOK BY THE REVENU E, INCLUDING SOME TO WHICH REFERENCE STANDS MADE IN THIS ORDER. FINALLY, THE FACT THAT THE TRANSITION WROUGHT IN THE PRESENT CASE IS NOT ENDURING, AND IS SUBJECT TO REVERSAL ON EXPOSURE TO ATMOSPHERE, REMOVES ANY PARITY THAT MAY BE SOUGHT T O BE DRAWN WITH THE SAID CASE. 10. IN THE RESULT, THE REVENUES APPEALS FOR ASSESS MENT YEARS 2000-01 AND 2004-05 ARE DISMISSED, AND THAT FOR ASSESSMENT YEAR 2003-04 PARTLY ALLOWED. THE ASSESSEES APPEAL AND CROSS OBJECTIONS FOR THE THREE YEARS ARE DISMISSED. SD/- SD/- (N. VIJAYAKUMARAN) (SANJ AY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER ERNAKULAM, DATED THE 13TH MAY, 2010. PM. COPY FORWARDED TO: 1. KANAM LATEX INDUSTRIES PVT. LTD.,OOPPOOTTIL BUIL DINGS, KK ROAD, KOTTAYAM. 2. THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-1, KOTTAYAM. 3. THE CIT (APPEALS)-IV, KOCHI 4. THE CIT, KOTTAYAM. 5. D.R., ITAT, COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR)