9911796707
TMI Blog2009 (1) TMI 542X X X X Extracts X X X X X X X X Extracts X X X X ..... rocessed under section 143(1) on 30-11-2004, in the scrutiny assessment that followed, assessee s claim for deduction of an amount of Rs. 10,37,029 under section 80-IB(3)( ii ) of the Act was examined and it was found by the Assessing Officer that the activity of the assessee was only of grinding wheat and grading wheat flour. According to him, assessee cannot be held to have produced a new article or thing and consequently assessee cannot be allowed deduction under section 80-IB(3)( ii ). Accordingly, relying on the decision of the Supreme Court in the case of Sacs Eagles Chicory v. CIT [2002] 255 ITR 178 and of the Bombay High Court in CIT v. Premier General Traders (P.) Ltd. [2000] 242 ITR 654 , the Assessing Officer disallowed the claim of the assessee under section 80-IB(3)( ii ) of Rs. 10,37,029 and completed the assessment on a total income of Rs. 34,56,770 as against returned income of Rs. 24,19,733, vide order of assessment dated 22-8-2006 passed under section 143(3) of the Act. 4. Aggrieved by the order of assessment, assessee preferred appeal before the CIT(A). The CIT(A) after considering the detailed submissions of the assessee before him, in the light of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wa and such other preparations. It is further submitted that the raw material and the end-products also differ in physical attributes. While Atta and Maida differ in colour and feel, Rawa, being coarse, is altogether different. Hence, he submitted that the assessee s activity amounts manufacture. Referring the observation of the Assessing Officer that the assessee is engaged only in grinding of wheat, he submitted that the value addition done by the assessee using the machinery is not taken into the account by the Assessing Officer. Grinding of wheat if done, without the use of machinery, would not produce the same end-products that the assessee produces. This fact was overlooked by the Assessing Officer, who thereby denied the deduction which was rightly claimed by the assessee. He relied on the decision of the Apex Court in Sonbhadra Fuels v. CIT [2006] 147 STC 549, wherein it was held the coal briquettes and coal dust are entirely two different commodities in substance. He also cited a number of decisions in support of his contentions with a gist of the ratio laid down therein, some of which are noted below ( a ) V.M. Jog Engg. Ltd. v. Jt. CIT [2007] 11 SOT 47 (Pune) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was held that conversion of raw coffee berries into coffee beans amounts to manufacture. 8. He further submitted that the case law relied upon by the Assessing Officer to deny the exemption, was distinguishable and, hence, not applicable to the facts of the present case. In Sacs Eagles Chicory s case ( supra ), the assessee only roasted and grinded the chicory roots to produce chicory powder. The activity of the assessee in that case did not involve any sophisticated manufacturing procedure involved and as such, the facts of the present case are completely different from the present case. In the present case, a sophisticated manufacturing procedure is used to produce end-products from wheat. In the case under consideration, complicated manufacturing procedure was put in use to produce Maida, Atta, Rawa and Bran from wheat and by performing mere grinding of wheat. He furnished a detailed note on Manufacturing Process in the paper book and also the flow chart diagram showing standard operating procedure and detailed flow of manufacturing process is attached. He further submitted that the enclosed copies of certificates in the paper book to show that production of Atta, Rawa, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase does not result in wheat powder simplicitor, just as the processing of chicory resulting in chicory powder . Processing of wheat in the instant case results in Maida, Rawa, Atta and Bran which are capable of being used independently in the production of edible items in their own identity. It is obvious that Maida cannot in the normal course substitute Rawa or Atta for making upma or chapatti, while Rawa cannot in the normal course be used for making biscuits or bread. Similarly, cattle feed/bran in no way can be a substitute for Maida, Rawa and Atta. It is also a common knowledge that Maida, Rawa, Atta and Bran, as also the raw material wheat, are known and available as distinct articles in commercial parlance and any person willing to buy any one of these items will not accept any other of these items as a substitute, since the end-use of each of these items is totally different. Therefore, it is clear that the activities undertaken by the assessee results in production or manufacture of distinct articles/things, which are new and different from the raw material used for the production of such items, as contemplated by section 80-IB. Such activity cannot be equated with m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epresentative, it is noted that the activity undertaken by the assessee was not held to be manufacturing activity for the reason that no commercially different article or commodity resulted after processing the chicory roots. The raw chicory roots were only being roasted so as to make them fit to be powdered. The chicory even after such processing remained chicory powder only and, therefore, was not a commercially different article or commodity, as person intending to buy chicory could also buy chicory roots as such for roasting and grinding it on his own and the powder so made could be used as a beverage. The chicory powder even after such processing, therefore, was a substitute for the chicory roots, while the roots could be substitute for powder. 13. Similarly, in the case of Premier General Traders (P.) Ltd. (supra ), relied upon by the Assessing Officer, the activity of the assessee in that case was held to be not amounting to manufacture because the process involved only crushing of boulders for obtaining stones of smaller sizes. The assessee was not carrying out any process to produce any commercially different article or commodity. The stone of smaller sizes obtain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the raw material fit for human consumption and it is only after the end-products are so manufactured that they become edible and tasteful. The end-products and the raw materials cannot be substituted for each other for specific purposes nor is it possible to reverse the process once undertaken or to sell the end-products again in the market as wheat. We are fortified in this behalf by the recent Special Bench (Pune) decision of this Tribunal in the case of B.G. Chitale v. Dy. CIT [2008] 23 SOT 189 , wherein it was held that while pasteurization of milk does not amount to manufacture or production, if assessee markets curd, ghee or other products after processing milk, that activity of the assessee amounts to manufacture, and as such, assessee is entitled to the benefit under section 80-I of the Act. 16. We are also supported in our conclusion by the recent decision of the Supreme Court in the case of India Cine Agencies v. CIT [2009] 308 ITR 98 , wherein it was held that the word production or produce , when used in juxtaposition with the word manufacture takes in bringing into existence new goods by a process, which may or may not amount to manufacture. It also ..... X X X X Extracts X X X X X X X X Extracts X X X X
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