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TMI Blog2016 (5) TMI 687X X X X Extracts X X X X X X X X Extracts X X X X ..... : 1. The order of the learned CIT(A) is opposed to law and facts of the case. 2. On the facts and in the circumstances of the case The Ld. CIT(A) has erred in allowing the assessee's claim of deduction u/s 10B without considering the fact that the assessee is not manufacturing any new article or thing, rather assembling instruments and apparatus for measuring and detecting ionizing radiators and processing undertaken by the assessee would not bring anything new into existence. 3. On the facts and in the circumstances of the case the learned CIT(A) has erred in holding that the assessee is entitled to claim deduction u/s 10B in respect of Unit-1 for A.Y. under reference i.e. A.Y. 2008-09 without appreciating the fact that as per the provisions of sub-section (1) of section 10B, the assessee is entitled to claim deduction only for a period of 10 consecutive assessment years beginning with the A.Y. relevant to the previous year in which the undertaking begins manufacture or production of articles or things or computer software. 4. On the facts and in the circumstances of the case the learned-CIT(A) erred in holding that for the purpose of accounting 10 conse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess carried out by it, had come to the conclusion that the respondentassessee- company is engaged in the manufacturing or production of an article or thing and entitled for deduction. As regards reckoning the period of 10 consecutive years, the CIT(A) held that since the respondent-assessee-company opted out of the scheme of provisions of sec.10B in the assessment years 1997-98 and 1998-99, first year should be reckoned from the year 1999-00. He, accordingly, held that the respondent-assessee-company was entitled for deduction u/s 10B of the Act. 5. Being aggrieved by this direction, revenue is in present appeal before us. 5.1 The learned Departmental Representative (DR) has invited our attention to the plain provisions of sec.10B of the Act. He submitted that the activities of the respondent-assessee-company are not in the nature of manufacture and the period of 10 consecutive years should be reckoned from the year in which manufacture or production of article or thing is commenced. As a result, respondent-assessee-company is not entitled for deduction under the provisions of sec.10B of the Act. In this connection, he has relied on the decision of the Hon'ble jurisdictio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facture implies not only the production but also various stages through which the raw material is subjected to change by different operations. It is the cumulative effect of the various processes to which the raw material is subjected that the manufactured product emerges. The nature and extent of processing may vary from one case to another. There may be several stages of processing, a different kind of processing at each stage. With each process suffered, the original commodity experiences a change. The test for determining whether the manufacture can be said to have been taken place is whether the commodity, which is subjected to process can no longer be regarded as the original commodity but is recognized in trade as a new and distinct commodity. The word manufacture implies a change but every change is not manufacture. The manufacture is a transformation of an article which is commercially different from the one which is conferred. The essence of manufacture is the change of one object to another for the purpose of making it marketable. The essential point is in manufacture, something is brought into existence which is different from that which originally existed, in the sen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taking begins to manufacture or produce articles or things or computer software, as the case may be, shall be allowed from the total income of the assessee : Provided that where in computing the total income of the undertaking for any assessment year, its profits and gains had not been included by application of the provisions of this section as it stood immediately before its substitution by the Finance Act, 2000, the undertaking shall be entitled to the deduction referred to in this sub-section only for the unexpired period of aforesaid ten consecutive assessment years : Provided further that for the assessment year beginning on the 1st day of April, 2003, the deduction under this sub-section shall be ninety per cent. of the profits and gains derived by an undertaking from the export of such articles or things or computer software: Provided also that no deduction under this section shall be allowed to any undertaking for the assessment year beginning on the 1st day of April, [2011] and subsequent years. Provided also that no deduction under this section shall be allowed to an assessee who does not furnish a return of his income on or before the due date specifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssible for any assessment year beginning on or after the 1st day of April, 2001, unless the assessee furnishes in the prescribed form, along with the return of income, the report of an accountant, as defined in the Explanation below sub-section (2) of section 288, certifying that the deduction has been correctly claimed in accordance with the provisions of this section. (6) Notwithstanding anything contained in any other provision of this Act, in computing the total income of the asses-see of the previous year relevant to the assessment year immediately succeeding the last of the relevant assess-ment years 5ending before the 1st day of April 2001, or of any previous year, relevant to any subsequent assessment year,- (i) section 32, section 32A, section 33, section 35 and clause (ix) of sub-section (1) of section 36 shall apply as if every allowance or deduction referred to therein and relating to or allowable for any of the relevant assessment years, in relation to any building, machinery, plant or furniture used for the purposes of the business of the undertaking in the previous year relevant to such assessment year or any expenditure incurred for the purposes of such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng that the provisions of this section may not be made applicable to him, the provisions of this section shall not apply to him for any of the relevant assessment years. Explanation 2.- For the purposes of this section,- (i) computer software means,- (a) any computer programme recorded on any disc, tape, perforated media or other information storage device ; or (b) any customized electronic data or any product or service of similar nature, as may be notified by the Board, which is transmitted or exported from India to any place outside India by any means ; (ii) convertible foreign exchange means foreign exchange which is for the time being treated by the Reserve Bank of India as convertible foreign exchange for the purposes of the Foreign Exchange Regulation Act, 1973 (46 of 1973), and any rules made there-under or any other corresponding law for the time being in force ; (iii) export turnover means the consideration in respect of export by the undertaking of articles or things or computer software received in, or brought into India by the assessee in convertible foreign exchange in accordance with sub-section (3), but does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt year in which production or manufacture of an article or thing was commenced. Same reasoning was followed by the Hon'ble jurisdictional High Court in the case of CIT vs. DSL Software Ltd. (18 taxmann.com 151)(Kar) and Sami Labs (334 ITR 157). The relevant para of the judgment in the case of DSL Software Ltd. (supra) is reproduced below: 9. In the instant case, the assessee has commenced production in the year 1993-94. He enjoyed the benefit of 5 years from 1993-94 to 1997- 98. The amended provision came into force on 01 .04.1999. He is entitled to the tax holiday under the amended provision i.e. from 1993-94 to 2002-03. He claimed benefit from 1999-2000, 2000-01 and 2001- 02. It is for the period 2001-02, the benefit is denied. The said denial of the benefit runs counter to the spirit of Section 10B and it would negate the object with which the amended provision was brought in. The assessee is entitled to the benefit of extension from 5 years to 10 years tax holiday as provided under the amended provision for 10 consecutive years from the date of commencement of production. In that view of the matter, the order passed by the Tribunal as well as the First Appellate Autho ..... X X X X Extracts X X X X X X X X Extracts X X X X
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