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Issues Involved:
1. Eligibility of the assessee for tax exemption under Section 10A of the IT Act, 1961. 2. Interpretation of the term "manufacture" under Section 10A. 3. Applicability of the definition of "manufacture" as provided in Section 10AA and the SEZ Act, 2005. 4. Relevance of judicial pronouncements and legislative intent in interpreting tax exemption provisions. Detailed Analysis: 1. Eligibility of the Assessee for Tax Exemption Under Section 10A of the IT Act, 1961 The assessee, a registered partnership firm engaged in the export of blended tea and recognized as a 100% Export Oriented Unit (EOU), claimed tax exemption under Section 10A of the IT Act, 1961. The Assessing Officer (AO) denied this exemption, asserting that blending tea does not constitute "manufacture or production" as required by Section 10A. The CIT(A) allowed the claim, interpreting "manufacture" to include blending based on Section 10AA and the SEZ Act, 2005. 2. Interpretation of the Term "Manufacture" Under Section 10A The AO argued that the activity of blending tea does not amount to "manufacture" or "production" but is merely "processing," which was excluded from the definition of "manufacture" by the Finance Act, 2000. The Supreme Court's decision in CIT vs. Tara Agencies, which held that blending tea is not manufacturing, was cited to support this view. The CIT(A) disagreed, suggesting that the definition of "manufacture" in Section 10AA, which includes blending, should apply retroactively to Section 10A. 3. Applicability of the Definition of "Manufacture" as Provided in Section 10AA and the SEZ Act, 2005 The CIT(A) and the assessee argued that the definition of "manufacture" in Section 10AA and the SEZ Act, 2005, which includes blending, should apply to Section 10A. They cited various judicial pronouncements supporting the idea that clarificatory amendments should be applied retrospectively. However, the Tribunal emphasized that Section 10AA was introduced by the SEZ Act, 2005, effective from 2006, and does not apply retroactively to the assessment year 2004-05. The Tribunal held that the term "manufacture" in Section 10A should be interpreted strictly within its own context, without importing definitions from other sections or statutes. 4. Relevance of Judicial Pronouncements and Legislative Intent in Interpreting Tax Exemption Provisions Both parties cited numerous judicial precedents to support their interpretations. The Tribunal highlighted the Supreme Court's decision in P.R. Prabhakar vs. CIT, which mandates a strict interpretation of exemption provisions. The Tribunal also referred to the principle of "causus omissus," emphasizing that courts cannot fill gaps in legislation. The Tribunal concluded that the legislative intent behind Section 10A, as evidenced by the exclusion of "processing" from the definition of "manufacture," must be respected. Conclusion: The Tribunal ruled that the activity of blending tea does not qualify as "manufacture" under Section 10A for the assessment year 2004-05. Consequently, the assessee is not entitled to the tax exemption claimed. The Tribunal set aside the CIT(A)'s order and restored the AO's decision, thereby allowing the Revenue's appeal.
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