The ITO-Ward-I, Gandhinagar V. M/s. Accura Organics Foods, Gandhinagar

ITA 895/AHD/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94302 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 06-08-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 23-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRAVIN KUMAR
• Assessee Lawyers: TUSHAR HEMANIAR
• Keywords: Competent authority
• Section: 143(3); 2(14); 10B; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV JUDICIAL MEMBER AND ANIL CHATURVEDI ACCOUNTANT MEMBER I.T.A. NO. 895/AHD/2012 (ASS TT. YEAR 2008-09) INCOME TAX OFFICER, GANDHINAGAR WARD 1, BLOCK NO.14, 4 TH FLOOR, UDYOG BHAVAN, SECTOR-11, GANDHINAGAR PAN AASFS 4779 G VS M/S. ACCURA O R GANICS FOODS, SURVEY NO.122, KARAI, DISTRICT GANDHINAGAR. (APPELLANT) (RESPONDENT) BY REVENUE SHRI PRAVINKUMAR, D.R. BY ASSESSEE. SHRI TUSHAR HEMANI,A.R. / DATE OF HEARING : 06- 08-2015 / DATE OF PRONOUNCEMENT: 28/08/2015 / O R D E R PER ANIL CHATURVEDI ACCOUNTANT MEMBER: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER OF CIT (A) GANDHINAGAR DATED 2-1-2012 FOR ASSESSMENT YEAR 2008 -09. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI AL ON RECORD ARE AS UNDER. 3. ASSESSEE IS A PARTNERSHIP FIRM STATED TO BE ENGA GED IN THE BUSINESS OF MANUFACTURING OF HULLED SESAME SEEDS AN D SESAME SEED OIL. ASSESSEE ELECTRONICALLY FILED ITS RETURN OF IN COME FOR A.Y. 2008-09 DECLARING TOTAL INCOME OF RS.1,00,765/-. THE CASE W AS SELECTED FOR ITA NO 895/AHD/2012 ASSESSMENT YEAR 2008-09 M/S. ACCURA ORGANICS FOODS. 2 SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED U /S. 143(3) OF THE INCOME TAX ACT, 1961 ON 24-12-2010 AND TOTAL INCOME WAS DETERMINED AT RS.13,82,630/-. AGGRIEVED BY THE ORDER OF ASSESS ING OFFICER, ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT (A), WHO VIDE ORDER DATED 2-1-2012 GRANTED PARTIAL RELIEF TO THE ASSESS EE. AGGRIEVED BY THE ORDER OF LD. CIT (A), REVENUE IS NOW IN APPEAL BEFO RE US AND HAS RAISED FOLLOWING GROUNDS:- 1. THE LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN ALLOWI NG EXEMPTION U/S. 10B OF THE INCOME TAX ACT OF RS.12,81,960/- EVEN THOUGH ASSESSEE IS NOT ENGAGED IN MANUFACTURING ACTIVITY AS DEFINED IN SECTION 2(29BA ) OF THE I.T. ACT. 2. THE LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN CONSIDERING THAT THE ASSESSEE IS ENGAGED IN MANUFACTURING AND PRODUCTION EVEN THOUGH ASSESSEE IS MERELY ENGAGED I N PROCESSING AS THERE IS NO CHANGE IN CHEMICAL COMPOS ITION OR INTEGRAL STRUCTURE OF THE ARTICLE INVOLVED AND ALSO NO NEW ARTICLE IS PRODUCED AFTER PROCESSING. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE L D. CIT (A) OUGHT TO HAVE UPHELD THE ORDER OF THE A.O. 4. IT IS THEREFORE PRAYED THAT THE ORDER OF THE LD. CIT (A) MAY BE SET ASIDE AND THAT OF THE A.O. BE RESTORED TO TH E ABOVE EXTENT. 4. BEFORE US, LD. D.R. SUBMITTED THAT THE SOLITARY ISSUE IN THE PRESENT APPEAL IS WITH RESPECT TO EXEMPTION U/S. 10B OF INC OME TAX ACT. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS A.O. NOTICED THAT THE ASSESSEE HAS CLAIMED EXEMPTION OF RS.12,81,860/ - U/S. 10B OF THE I.T. ACT. HE WAS OF THE VIEW THAT ASSESSEE IS NOT E NTITLED FOR EXEMPTION U/S. 10B OF THE ACT FOR THE REASONS THAT TO CLAIM E XEMPTION U/S. 10B AN UNDERTAKING HAS TO BE APPROVED AS 100% EXPORT ORIEN TED UNDERTAKING. IN THE CASE OF THE ASSESSEE SINCE THE APPROVAL WAS OBTAINED FROM JOINT DEVELOPMENT COMMISSIONER, KANDLA SEZ, ASSESSING OFF ICER WAS OF THE ITA NO 895/AHD/2012 ASSESSMENT YEAR 2008-09 M/S. ACCURA ORGANICS FOODS. 3 VIEW THAT THE APPROVAL DID NOT FULFILL PRE-REQUISIT E CONDITION AS ACCORDING TO HIM THE 100% EOU APPROVAL BY KANDLA SEZ CANNOT B E EQUATED WITH THE APPROVAL OF COMPETENT AUTHORITY AS STIPULATED I N THE PROVISIONS. APART FROM THE APPROVAL ASPECT, HE ALSO NOTICED THA T THE MANUFACTURING PROCESS UNDERTAKEN BY THE ASSESSEE CONSIST OF CLEAN ING, GRADING, DE- HULLING, DRYING, SORTING AND PACKAGING AND THAT THE AFORESAID ACTIVITIES CARRIED ON BY THE ASSESSEE CANNOT BE TERMED AS MANU FACTURING ACTIVITY AND THEREBY BRINGING ANY NEW ARTICLE. ASSESSING OFF ICER WAS OF THE VIEW THAT ASSESSEE WAS MERELY ENGAGED IN THE PROCESS OF REMOVING UPPER FLAKES OF SESAME AND THUS MANUFACTURING PROCESS CAN NOT BE TREATED AS MANUFACTURING AS PER THE DEFINITION GIVEN IN SECT ION 2(29BA) OF THE ACT. HE ACCORDINGLY DENIED THE CLAIM OF DEDUCTION 1 0B OF THE ACT. AGGRIEVED BY THE ORDER OF ASSESSING OFFICER, ASSESS EE CARRIED THE MATTER BEFORE THE LD. CIT (A) WHO DELETED THE ADDITION BY HOLDING AS UNDER:- 6.2. I HAVE CONSIDERED THE LAW, THE OBSERVATIONS O F THE A.O. AND THE SUBMISSIONS OF THE APPELLANT. IT IS OBSERVED TH AT SESAME SEEDS UNDERGO DIFFERENT PROCESSES AT THE UNIT OF TH E APPELLANT. THE PROCESSES INCLUDE (I) GOING THROUGH PRE-CLEANER MACHINE WHICH CLEANER-CLASSIFIER-1 FOR REMOVING IMPURITIES OF FOREIGN MATERIALS, STONES, IMMATURE SEEDS, DUST AND LIGHT W EIGHT SESAME SEEDS WITH THE HELP OF SCREENS AND AIR ETC., (II) D E-STONER FOR REMOVAL OF STONES WHICH ARE BEING SIMILAR AND SMALL ER SIZE OF SEEDS (III) GRAVITY SEPARATOR TO REMOVE LIGHT WEIGH T AND SMALL SEEDS (IV) HULL/PEEL THE SEEDS (HOT TEMPERATURE WAT ER HAVING CAUSTIC SODA SOLUTION MIX WITH THE SEED AND STIRRED BY SCRAPPER) (V) HULLER WASHES (VI) HEAT DRYING (VII) COLOR SORT ING TO REMOVE UNACCEPTABLE MATERIAL. THEREFORE, A DISTINCT OBJECT COMES INTO BEING WHICH HAS A DIFFERENT NAME IN COMMERCIAL MARKET, DIFFERENT USAGE BEING PA RTICULARLY SUITABLE FOR BAKED FOODS ( DOESNT TURN BLACK BY BU RNING AND STICKS TO THE BUNS/BREADS ETC.), AND WOULD NATURALLY HAVE DISTINCT AND DIFFERENT NUTRITIONAL PERCENTAGES PER UNIT WEIGHT A FTER THE HULLED PORTION IS REMOVED. THESE HAVE GOT DIFFERENT MARKET AND COMMANDS HIGHER RATE THAN THE NATURAL SESAME SEEDS. I AM OF THE CONSIDERED OPINION THAT THE SET OF PROCESSES DISCUS SED ABOVE LEAD TO MANUFACTURE AS DEFINED IN SECTION 2(29BA) OF THE I.T. ACT,1961. ITA NO 895/AHD/2012 ASSESSMENT YEAR 2008-09 M/S. ACCURA ORGANICS FOODS. 4 IT IS ALSO OBSERVED THAT THE SET OF PROCESSES EMPLO YED BY THE APPELLANT, AND THE TYPE OF RAW MATERIAL AND THE END PRODUCT ARE SIMILAR TO THE PROCESS OF CONVERSION OF PADDY TO RI CE. THE HONBLE ITAT SMC BENCH AHMEDABAD IN THE CASE OF M/S. MILA P RICE MILLS, ITA NO.3359/AHD/2010 DATED 9-3-2011 HAS HELD THAT C RUSHING PADDY AND CONVERSION TO RICE WILL AMOUNT TO INDUSTR IAL UNDERTAKING INVOLVED IN MANUFACTURING PROCESS. IT HAS RELIED ON THE HONBLE ITAT HYDERABAD DECISION IN THE CASE OF K. CHAKRADHA RA REDDY 20 TTJ 126 AND HONBLE ITAT BANGALORE DECISION IN THE CASE OF ASHOKA RICE MILLS 11 TTJ 117. I HAVE ALSO TAKEN GUI DANCE FROM THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE O F PREMIER TOBACCO INTO A COMMERCIALLY DIFFERENT COMMODITY AND AMOUNTS TO MANUFACTURE AND PRODUCTION. AS FAR AS THE OBSERVATIONS OF THE A.O. ON THE ISSUE OF MACHINERY INSTALLED, MANUFACTURING EXPENSES AND THE EXPORTS A RE CONCERNED; I FIND FROM THE AUDITED ACCOUNTS THAT THERE ARE HUG E ERRORS IN THE FIGURES TAKEN BY THE A.O. THE EXPORTS DURING THE YE AR TOTALED RS.2.09 CRORES AND NOT EIGHT CRORES. THERE WAS PLAN T AND MACHINERY WITH WDV RS.34.20 LACS AT THE BEGINNING O F THE YEAR, AND NEW MACHINERY OF AROUND RS.1.85 CRORES WAS INST ALLED DURING THE YEAR, MAINLY IN THE LAST QUARTER. DURING THE YE AR, THERE WERE CONSUMPTION OF GAS/FIREWOOD AND CHEMICALS OF AROUND RS.10 LACS BESIDES DIRECT MANUFACTURING EXPENSES OF RS.2.80 LA CS WHICH APPEAR REASONABLE LOOKING TO THE EXTENT OF MACHINER Y INSTALLED, THE PROCESSES EMPLOYED BY IT AND THE FACT THAT MAJO R MANUFACTURING TOOK PLACE IN LAST MONTH ONLY AFTER I NSTALLATION OF SUBSTANTIAL NEW MACHINERY. THEREFORE, CONSIDERING ALL THE FACTS IT IS HELD THA T THE UNIT IS INVOLVED IN MANUFACTURING AND PRODUCTION AND IS ELI GIBLE FOR THE DEDUCTION U/S. 10B OF THE I.T. ACT. 6. AGGRIEVED BY THE ORDER OF LD. CIT (A), REVENUE I S NOW IN APPEAL BEFORE US. 7. BEFORE US THE LD. D.R. TOOK US THROUGH THE VARIO US OBSERVATIONS MADE BY A.O. AND SUPPORTED HIS ORDER. THE LD. A.R. ON THE OTHER HAND, REITERATED THE SUBMISSIONS MADE BEFORE THE A.O. AND THE LD. CIT (A) AND FURTHER SUBMITTED THAT PROVISIONS OF SECTION 10 B CONTEMPLATES MANUFACTURING OR PRODUCING ARTICLES AND IN THE PRESENT CASE, THE ITA NO 895/AHD/2012 ASSESSMENT YEAR 2008-09 M/S. ACCURA ORGANICS FOODS. 5 ASSESSEE PRODUCING IS NOT DISPUTED BY THE ASSESSI NG OFFICER AND HE HIMSELF HAS OBSERVED THAT ASSESSEE IS MERELY ENGAGE D IN THE PROCESS OF REMOVING UPPER FLAKES OF SESAME. HE FURTHER SUBMIT TED THAT BEFORE HONBLE GUJARAT HIGH COURT IN THE CASE OF STATE OF GUJARAT V/S. SHYAM INDUSTRIES & OTHERS (TAX APPEAL NO.228 OF 2015 ORDE R DATED 16-4- 2015) THE QUESTION WAS WHETHER THE PROCESS UNDERTAK EN BY THE DEALER WHILE CONVERTING NATURAL SESAME SEEDS INTO HULD SES AME CAN BE SAID TO BE PROCESS OF MANUFACTURE AND WILL TANTAMOUNT TO MA NUFACTURE. HE SUBMITTED THAT HONBLE GUJARAT HIGH COURT AFTER REF ERRING TO VARIOUS DECISIONS HELD THE ACTIVITY OF CONVERTING NATURAL S ESAME SEEDS TO HULD SESAME TO BE MANUFACTURE AND THE RELEVANT OBSERVATI ON OF HONBLE GUJARAT HIGH COURT READS AS UNDER:- 11. NOW, APPLYING THE LAW LAID DOWN BY THE DIVISIO N BENCH OF THIS COURT IN THE CASE OF LAXMI OIL MILLS LTD. (SUP RA) TO THE FACTS OF THE CASE ON HAND AND THE PROCESS UNDERTAKEN BY THE DEALER TO CONVERT THE NSS TO HS REFERRED TO HEREINABOVE, THE PROCESS UNDERTAKEN BY THE DEALER CAN BE SAID TO BE PROCESS OF MANUFACTURE WITHIN THE MEANING OF SECTION 2(14) O F THE ACT AND, THEREFORE, AS SUCH, NO ERROR HAS BEEN COMMITTED BY THE DEALER TO CONVERT THE NSS TO HS CAN BE SAID TO BE THE PROCESS OF MANUFACTURE WITHIN THE MEANING OF SECTION 2(14) O F THE ACT AND CONSEQUENTLY, THE DEALER WOULD BE ENTITLED TO THE I NPUT TAX CREDIT. AS OBSERVED HEREINABOVE, AS SUCH, BY THE PROCESS UN DERTAKEN BY THE DEALER, SEEDS WHICH WAS INITIALLY NOT MARKETABL E AND EATABLE, WOULD BECOME EATABLE AND MARKETABLE AND, THEREFORE, THERE WILL BE CHANGE IN THE FORM. 8. THE LD. A.R. FURTHER PLACED RELIANCE ON THE DECI SION OF HONBLE APEX COURT IN THE CASE OF VIJAY SHIP BREAKING REPOR TED IN 314 ITR 309. HE THUS SUPPORTED THE ORDER OF LD. CIT (A). 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RESP ECT TO AS TO WHETHER ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S. 10B OF THE ACT ON THE ACTIVITIES ITA NO 895/AHD/2012 ASSESSMENT YEAR 2008-09 M/S. ACCURA ORGANICS FOODS. 6 UNDERTAKEN BY IT. WE FIND THAT THE LD. CIT(A) WHILE DELETING THE ADDITION HAS GIVEN A FINDING THAT THE SESAME UNDERGO DIFFERE NT PROCESS AT THE UNIT OF THE ASSESSEE AND THEREAFTER DISTINCT OBJECT COMES INTO BEING WHICH HAS A DIFFERENT NAME IN COMMERCIAL MARKET, DI FFERENT USAGE AND BEING DISTINCT AND DIFFERENT IN NUTRITIONAL PERCEN TAGES PER UNIT WEIGHT AFTER HULLED PORTION IS REMOVED. HE HAS ALSO HELD T HAT THE PRODUCT MANUFACTURED HAS DIFFERENT MARKET AND COMMANDS HIGH ER RATE THAN THE NATURAL SESAME SEEDS AND THUS THE SET OF PROCESS LE AD TO MANUFACTURE AS DEFINED IN SECTION 2(29BA) OF THE ACT. WE FURTHE R FIND THAT HONBLE GUJARAT HIGH COURT IN THE CASE OF STATE OF GUJARAT VS.SHYAM INDUSTRIES & OTHERS HAS ALSO HELD THE ACTIVITY OF CONVERTING N ATURAL SESAME SEEDS TO HULD SESAME TO BE MANUFACTURING. BEFORE US THE REVENUE HAS NOT PLACED ANY MATERIAL TO CONTROVERT THE FINDINGS OF L D. CIT (A) NOR HAS PLACED ANY BINDING DECISION IN ITS SUPPORT. IN VIEW OF THE AFORESAID FACTS WE FIND NO REASON TO INTERFERE IN THE ORDER OF LD. CIT (A). THUS THIS GROUND OF REVENUE IS DISMISSED. 10. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE COURT ON FRIDAY, THE 28 TH AUGUST, 2015 AT AHMEDABAD. SD/- SD/- (RAJPAL YADAV) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. DATE:-28 -08-2015 ITA NO 895/AHD/2012 ASSESSMENT YEAR 2008-09 M/S. ACCURA ORGANICS FOODS. 7 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ! / CONCERNED CIT 4. ! () / THE CIT(A), AHMEDABAD 5. $%& '', , )*++ / DR, ITAT, AHMEDABAD 6. &,- . / GUARD FILE. / BY ORDER, / ( DY./ASSTT.REGISTRAR) ! '#$, &' / ITAT, AHMEDABAD 1. DATE OF DICTATION- 6-8-2015 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER :13-8-2015 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S. - 13-8-2015/21-8-2015 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT : 5. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK : 6. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 7. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 8. DATE OF DESPATCH OF THE ORDER