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TMI Blog2011 (8) TMI 460X X X X Extracts X X X X X X X X Extracts X X X X ..... resentative that the only issue in the assessee's appeals was as to whether the assessee is entitled to the benefit of deduction under section 10B of the Income-tax Act, 1961 ('the Act' in short) in regard to its business of manufacturing of gherkin pickles. It was the submission that gherkins are commonly known as cucumbers. The assessee purchased gherkins and put them through various processes for manufacture of gherkin pickles. The learned authorised representative placed before us the process involved which is extracted herein below : "Process involved in the manufacture of the end product 'pickle' (a) Gherkins are procured from the individual farmers and the same are unloaded at the receiving centre of the appellants EOUs; (b) Gherkins are stored in cold storages at particular temperatures; (c) Thereafter, various defects are removed from the gherkins to get the desired quality of the raw materials. This process is known as pre-culling; (d) Selected quality gherkins are put into dry grading machine, wherein the gherkins undergo machine oscillation through dry plate. As a result, very fine and thin varieties are selected in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uired pieces and automatically packs in bottles. These bottles are filled with the aforesaid chemicals to convert them into a distinct product namely sweet pickle or hot pickle. Sugar is added to the sweet pickle and chilly is added to the hot pickle at the process of topping up the chemicals. This process involves chemical reactions like fermentation; neutralization and oxidization." 4. It was fairly agreed by the learned authorised representative that in the assessee's own case for the assessment years 2000-01 to 2003-04 in ITA Nos. 2416 to 2418/Mds/2007 vide order dated 06-02-2009 the co-ordinate Bench of this Tribunal has held the issue against the assessee by following the decision of the Hon'ble Supreme Court in the case of Indian Hotels Co. Ltd. reported in 245 ITR 538. It was the submission that after the decision of the Hon'ble Supreme Court in the case of Indian Hotels Co., referred to supra, the issue of 'manufacture or production' has undergone substantial debate. It was the submission that the Hon'ble Supreme Court in the case of ITO v. M/s. Arihant Tiles & Marbles (P) Ltd. reported in 320 ITR 79 has held once excise duty is being paid it would not be possible to hold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provisions of the Explanation to section 10B had categorically provided that "manufacture" includes any "process". It was the submission that in any case the activities of the assessee in converting raw gherkins into gherkin pickles involved multiple processes and the same, in view of the Explanation to section 10B as it stood at the year of commencement of its claim, were "manufacture". It was the further submission that the Hon'ble Kerala High Court in the case of Tata Tea Ltd. v. Assistant Commissioner of Income-tax, reported in (2000) 189 Taxman 303 (Ker.), for the purpose of section 10B of the Act had held that blending, packing and exporting of tea bags, tea in packets and tea in bulk packs was manufacture. The learned authorised representative further relied upon the decision of the Hon'ble jurisdictional High Court in the case of CIT v. Jamal Photo Industries (I) (P.) Ltd. reported in 287 ITR 620 wherein it had been held that for the purpose of section 80-IA, the expression "manufacture" involves the concept of changes effected to a basic raw material resulting in the emergence of, or transformation into, a new commercial commodity. It is not necessary that the original a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocessing of pineapple into pineapple slices was not manufacture but as per the Explanation to section 10B of the Income Tax Act, 1961 as process has been held to be inclusive in the term "manufacture", the assessee should be held to be eligible for the deduction under section 10 B of the Act. 8. We have considered the rival submissions. A perusal of the provisions of section 10-B of the Act in the present case clearly shows that it is the provision of section 10-B before its substitution w.e.f. 1.4.2001 which is applicable in the assessee's case. This is because the assessment year 2006-07 is the 7th year of its business and it remains undisputed that the assessee had started its production on 1.4.1999 and its first year of claim is 2000-01. Before its substitution, section 10B and the Explanation thereto has categorically held that "manufacture" includes any "process". A perusal of the various decisions as have been quoted above clearly shows that the conversion of the gherkins in the present case into gherkin pickles involves "process". This is also evident from the chart of the activity done by the assessee, extracted above. Once it is held to be a "process" for the purpose of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purpose of the deduction under section 80J, 80IA etc. the process is not being treated as a "manufacture" as process does not amount to "manufacture" for the said sections. However, for the purpose of section 10B the term "manufacture" has been held to include "process". This is where the difference comes. Section 80J, 80IA etc. did not explain or define the term "manufacture". This led to the interpretation of the term "manufacture" or "production". However, section 10B before its substitution w.e.f. 1.4.2001 defined "manufacture" to include "process". 10. Now coming to the decision of the co-ordinate Bench of this Tribunal in the assessee's own case for the assessment years 2001-02 to 2003-04, it is noticed that the co-ordinate Bench has held that there was no production or manufacture of article or thing. It is noticed that the co-ordinate Bench of this Tribunal had not taken into consideration the Explanation to section 10B where the term "manufacture" included the "process". In the circumstances, we are of the view that in view of the decision of the Hon'ble jurisdictional High Court in the case of CIT v. Hi-Tech Arai Ltd. reported in 321 ITR 477 we must take a different ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as nothing but a Revenue loss. Ld. CIT(Appeals) was appreciative of this contention. According to him, decision of Hon'ble Apex Court in the case of Mysore Sugar Co. Ltd. (supra) supported the claim of the assessee. 15. Now before us, learned D.R., strongly assailing the order of ld. CIT(Appeals), submitted that there was no finding whether such a claim of loss, was out of earlier advances given by the assessee or advances given during the impugned assessment years. According to learned D.R., if it were advances given during the relevant previous year itself, then a write-off could not be allowed since irrecoverability thereof could not be established, in such a short period of time. 16. Per contra, learned A.R. submitted that the advances were given during the years prior to the relevant previous years and write-off was effected only for the reason that supplies of Gherkins were not made by the concerned agriculturists. 17. We have perused the orders and heard the rival contentions. There is no dispute that assessee had given the money for supply of Gherkins to the agriculturists and farmers. There is also no dispute that the concerned farmers or agriculturists failed to supply ..... X X X X Extracts X X X X X X X X Extracts X X X X
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