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2013 (9) TMI 435 - AT - Income TaxExemption u/s 10A of the Income Tax Act - Disallowance of exemption claimed u/s. 10A of Rs.2,37,70,404/- on the alleged ground that the assessee was blending different types of tea but not manufacturing or producing any articles for the purpose claiming exemption u/s.10A Held that - In view of the admission made by AO, that assessee is carrying on the activity of blending of tea consistently, on factual aspects, which Revenue has not objected. It is not the case of the Revenue that there is no blending Further, relying upon the decision in the case of Madhu Jayanti International Ltd 2012 (7) TMI 531 - ITAT KOLKATA , claim of the assessee is allowed Decided in favor of Assessee. Relying upon the case Madhu Jayanti International, it is held that 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 of the Act. Further, assessee who are in the business of blending and processing of tea in respect of undertakings in free trade zones are manufacture / producer of tea for the purpose of claiming exemption u/s. 10A of the Act Examination of facts in the case of Madhu Jayanti International Ltd. is done, and found that there is blending of tea and consequently assessee is eligible for exemption u/s. 10B of the Act as prayed for. There appeal for the AY 2004-05 is allowed.
Issues Involved:
1. Disallowance of exemption under Section 10A of the Income-tax Act, 1961. 2. Whether the blending of tea amounts to "manufacture" or "production" for the purpose of claiming exemption under Section 10A. Issue-wise Detailed Analysis: 1. Disallowance of Exemption under Section 10A: The primary issue in these four appeals is the confirmation by the CIT(A) of the disallowance of exemption claimed under Section 10A of the Income-tax Act, 1961. The assessee argued that their activities of blending different types of tea amounted to the production of goods, thus qualifying for the exemption under Section 10A. The CIT(A) and the Assessing Officer (AO) disagreed, stating that blending tea does not constitute manufacturing or producing any article for the purposes of Section 10A. 2. Whether Blending of Tea Amounts to "Manufacture" or "Production": The AO detailed the process adopted by the assessee, which involved selecting, sorting, cleaning, blending, and packing different grades of tea. The AO concluded that this process does not transform the tea into a new commodity with a distinct identity, as required for it to be considered "manufacture" or "production." The CIT(A) upheld this view, stating that the activities of the assessee did not result in a new product but merely improved the quality of tea, which remained tea. However, the assessee's counsel argued that the issue was covered in their favor by a Special Bench decision of the ITAT in the case of Madhu Jayanti International Ltd. v. DCIT. The Special Bench had held that blending and packaging of tea for export constituted "manufacture" or "production" for the purposes of Section 10B, and by extension, Section 10A, due to the similar nature of the provisions. The Special Bench considered various definitions, including those in the SEZ Act and Exim Policy, which include processing, blending, and packaging within the scope of "manufacture." The Tribunal found that the assessee's activities were consistent with those described in the Special Bench decision. The Tribunal noted that the assessee had set up a new industrial undertaking in a Special Economic Zone (SEZ) for blending tea, which was recognized by the Government of India. The Tribunal concluded that the assessee's activities of blending tea qualified as "manufacture" or "production" under Section 10A, following the precedent set by the Special Bench. Conclusion: The Tribunal allowed the appeals of the assessee, holding that the blending of tea amounts to "manufacture" or "production" for the purposes of claiming exemption under Section 10A of the Income-tax Act, 1961. The Tribunal's decision was based on the Special Bench ruling in the case of Madhu Jayanti International Ltd., which had established that blending and packaging tea for export constituted manufacturing or producing an article or thing. Consequently, the disallowance of exemption under Section 10A was reversed, and the assessee's claim was allowed for all the years in question.
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