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TMI Blog2012 (11) TMI 426X X X X Extracts X X X X X X X X Extracts X X X X ..... r. Vide order dated 25.11.2009, the Assessing Officer finalized the assessee's assessment under section 143(3) of the "Act" as under: "Income returned Rs. 1,35,58,850/- Agricultural Income Rs. 7,41,316/- Tax payable thereon Rs. 40,67,655/- Add: Surcharge @ 10% Rs. 4,06,766/- Education cess Rs. 89,488/- Rs. 45,63,909/- Less: TDS Rs..17,31,327/- AT Rs.30,00,000/- Rs. 47,31,327/- Balance refundable Rs. 1,67,418/- Less: Int. u/s 234C Rs. 21,720/- Balance refundable Rs. 1,45,698/-" 3. Thereafter, on 14.02.2011, the Assessing Officer issued notice to the assessee under section 154/155 of the "Act"; proposing rectification of mistake alleged to have been committed re assessee's claim under section 10B of the "Act" qua 'live plants' produced by the assessee through tissue culture as in his view, the same was concerned with "live article" or things. The assessee filed reply to the said notice on 17.02.2011 and tendered explanation in suppo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng physical object or article or thing. Though, definition was inserted by the Finance (No.2) Act, 2009, with retrospective effect from 1.4.2009, it did not in any way, confer the benefit to the assessee in the past as deduction u/s 10B is restricted to articles or things only. 7. To be eligible for deduction u/s 10B, excepting computer software, the article or thing should be "manufactured and the manufactured article or thing" should be exported. The assessee has not fulfilled the first condition. An "article" or "thing" even before insertion of sec.2(29BA) cannot be a living organism and hence raising plant through tissue culture cannot be termed as manufacture. 8. The Hon'ble Supreme Court in the case of CIT v. Relish Foods [1999] 237 ITR 59 (SC), much before the insertion of definition u/s 2(29BA), had held that culturing/living things like prawns is not manufacture. 9. A similar view was expressed by the Hon'ble Supreme Court in the case of CIT v. Venkateswara Hatcheries (P.) Ltd., [1999] 237 ITR 174 (SC). Once, the apex court has held that for the purpose of the IT Act, 1961, the word 'manufacture' cannot consider 'living things' under its ambit, placing reliance on allie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xport oriented being approved by the Ministry of Commerce and Industry, Government of India. In the paper book of the case, the assessee has also enclosed the said certificate at page 19 & 20. We notice that since the assessee's unit is established in the State of Kerala, District Ernakulam, the State Government has also granted necessary permission under the provisions of Factory Act, 1948. 10. Coming to the details of assessee's alleged 'manufacturing' and 'production' activity of tissue culture, we notice from the paper book that the modern day technology of tissue culture is a multifaceted activity with the help of latest biotechnological tools, wherein from one mother plant the manufacturer/producer can get thousands of plant within a short span of time; with limited space and minimum other requirements. In the paper book, we find that the assessee has highlighted following steps in the tissue culture activity, which are reproduced herein below: "Manufacturing Process of Tissue culture plants: Steps Involved (a) Initiation / Explant: Cut-out Plant Tissue and Place in Tissue Culture Container. The first step is to obtain what is called an explant. This means to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... growth rooms which are supported / equipped with the facility of providing the light and temperature required for the growth of the plants. The requirements of temperature and lights for each variety of plants may vary and this is catered to by the support of lighting and cooling systems." 11. So far as the provisions of "Act" are concerned, we notice that sections 10A, 10AA,10B and 10BA provide incentives to concerned assessee engaged in various businesses in newly established undertakings in free trade zone, SEZ and 100% export oriented undertakings and so on. In the instant appeal, the principal reason cited by the Commissioner of Income Tax for denying the assessee deduction under section 10B of the "Act" is that the assessee's activity of producing plants through tissue culture does not amount to manufacturing exercise. Therefore, limiting our scope of adjudication, we find that the Legislature by way of Finance Act, 1988 had inserted section 10B in the "Act" for providing impetus to export oriented undertakings. In the said provision, section 10B(2)(1) contained inter alia, one of the condition for the concerned assessee that "it manufactures or produces any article or thing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ' as provided under section 10B(2)(i) of the "Act". 12. As already stated herein above, the other corresponding provisions of various exempted income provided in section 10A and section 10AA of the "Act" also contain similar provisions. After perusing the said provisions, we find that in section 10A, the word "manufacture or produce" has nowhere been specifically defined. Whereas, in the other corresponding provisions i.e. section 10AA of the "Act" pertaining to SEZ's unit, the Legislature has duly defined the word "manufacture" in sub-section 9(iii) of the "Act" as "(iii) "manufacture" shall have the same meaning as assigned to it in clause (r) of section 2 of the Special Economic Zones Act, 2005." In the above reproduced provision, since the Legislature has itself defined "manufacture" to be the same under section 2(r) of the SEZ's Act, we also deem it appropriate to reproduce the said provisions herein below: "(r) "manufacture" means to make, produce, fabricate, assemble, process or bring into existence, by hand or by machine, a new product having a distinctive name, character or use and shall include processes such as refrigeration, cutting, polishing, blending, repair, rem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat in the said assessment years and well upto 2009, there was no definition of 'manufacture', therefore, we deem it appropriate to apply the said definition contained in section 10AA of the "Act" qua the present case of assessment year 2007-08 falling under section 10B(1) of the "Act". We conclude, in the light thereof, that the assessee's business activity of tissue culture is 'manufacture or produces' within the meaning of section 10B(2)(i) of the "Act" and Commissioner of Income Tax had wrongly held that since assessee's produce is "plant", which is a lively object, therefore, it is covered by section 2(29)BA) of the "Act". In our opinion, the Commissioner of Income Tax has not proceeded on the correct factual and legal interpretation of section 2(29BA) of the "Act" qua facts and circumstances of the instant case. As already explained hereinabove, the tissue culture is a modern day advanced technology of the 21st century, which has redefined the concept a plant's growth. We also notice that the Commissioner of Income Tax has placed reliance on the case law of Hon'ble Supreme Court's decision of Relish Foods (supra) and Vekateshwara Hatcheries (P.) Ltd. (supra). In our humble o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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