2013 (11) TMI 837 - AT - Income Tax

Deduction u/s 10B of the Income tax Act - Declined exemption u/s 10B on the short ground that the blending of tea does not amount to manufacture or production of tea for the purpose of claiming exemption u/s 10B Held that - This appeal was squarely covered by the decision of the Co-ordinate Bench of this Tribunal in assessee s own case for the immediately succeeding assessment year 2012 (7) TMI 531 - ITAT KOLKATA wherein the Coordinate Bench of this Tribunal has held that, the assessee 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. - Decided in favor of assessee.

Summary

Issues involved:
Appeal against order u/s 263 of the IT Act for Assessment year 2004-05 regarding benefit of deduction u/s 10B for blending tea.

Analysis:
The appeal was filed against the order of the ld. C.I.T, Kolkata-II passed u/s 263 of the IT Act for Assessment year 2004-05. The issue revolved around the benefit of deduction u/s 10B concerning the blending of different types of tea. The appellant contended that the matter was covered by a decision of the Co-ordinate Bench of the Tribunal in the appellant's own case for the immediately succeeding assessment year. The CIT(Appeals) had relied on the Supreme Court's judgment in the case of CIT vs Tara Agencies, emphasizing that blending tea did not amount to manufacture or production of a new article for claiming exemption u/s 10B. However, the Special Bench and the Kerala High Court had held that blending of tea constituted manufacture or production of tea for exemption u/s 10B. The Tribunal upheld the claim of the assessee, following the Special Bench decision and considering the issue as settled. The ld. DR argued that the assessee was also involved in exporting spices and other items, but the Tribunal noted that the order u/s 263 was limited to the issue of deduction u/s 10B for blending tea, which was already decided in the assessee's favor by the Coordinate Bench for the succeeding year. Consequently, the order u/s 263 was quashed, and the appeal of the assessee was allowed.

In conclusion, the Tribunal's decision was based on the interpretation of whether blending tea constituted manufacture or production of a new article for claiming exemption u/s 10B. The Tribunal relied on the precedent set by the Special Bench and higher judicial authorities, which held that blending tea did amount to manufacture or production of tea for the purpose of exemption. The Tribunal's decision was in favor of the assessee, as the issue was considered settled based on previous rulings and the specific scope of the order u/s 263. The Tribunal's decision highlighted the importance of consistency in applying legal principles and following established judicial interpretations in tax matters.