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TMI Blog2005 (7) TMI 61X X X X Extracts X X X X X X X X Extracts X X X X ..... he judgment of the court was delivered by Rajesh Balia J.- In this special appeal, a short but interesting question that arises for consideration is whether the blending of different types of tea by the assessee amounts to production of a thing or an article by an industrial undertaking within the meaning of the expression as used in section 80-IB of the Income-tax Act, 1961, though it may not amount to manufacture of goods in the sense of bringing into existence altogether a new and different thing as known differently in the commercial parlance in the market where tea is transacted. The appellant-assessee has set up a small-scale industrial unit in the backward industrial area of Banswara. The appellant's case is that it purchased tea leaves powder/granules and these tea leaves are collected by marking the name of the garden and lot number. The samples of available quality are dispatched to the "blend master" who after going through his own process, suggests the mixing ratio and process of mixing for making the perfect blend of tea. The activity of blending of different types of leaves obtained from different gardens in a definite ratio results in production of a commodity ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r registration under the Small Scale Industries Development Scheme. The learned single judge dismissed the writ petition on the ground of availability of alternative remedy and noticed that after the filing of the writ petition, the petitioner has also filed an appeal before the Deputy Commissioner of Income-tax (Appeals) which was still pending. Ordinarily, we would have also agreed with the learned single judge in not interfering at the stage of passing of the assessment order, but during the course of hearing, at the admission stage, learned counsel for the appellant stated that he shall not press any issue except on the question whether blending or processing of tea amounts to manufacture/production and the said question being of recurring nature and likely to affect the successive assessment years as well as other dealers engaged in the like business the said issue requires to be settled by this court to minimise litigation on this issue. Considering the aforesaid circumstances, it appears to us to be a fit case in which availing of alternative remedy may not be considered a ground for not examining the issue on the merits, thus, we admitted the special appeal. Section 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year in question envisaged that where the gross total income of an assessee includes any profits and gains derived from any business referred to in sub-sections as the eligible business and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to such percentage and for such number of assessment years as specified in this section. The bone of contention is the condition precedent which the industrial undertaking is required to fulfil before it avail of the aforesaid benefit. It is not in dispute before us that if the condition, to which we shall presently refer, is fulfilled by the assessee, he is entitled to avail of 100 per cent, deduction of the profits and gains derived from the business of such undertaking under clause (iii) of sub-section (2) of section 80-IB, which reads as under: "(iii) it manufactures or produces any article or thing, not being any article or thing specified in the list in the Eleventh Schedule, or operates one or more cold storage plant or plants, in any part of India: Provided that the condition in this clause shall, in relation to a small sca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther tea. He places reliance on a decision of the Calcutta High Court in the case of Appeejay P. Ltd. v. CIT [1994] 206 ITR 367 and a decision of the Bombay High Court in the case of J.B. Advani and Co. P. Ltd. v. CIT [1992] 193 ITR 781. He contended that blending of different tea may amount to process and process simpliciter does not result in "manufacture" or "production" of tea which is an essential condition for claiming relief under section 80-IB by any industrial undertaking. He also relies on a decision of the Supreme Court in the case of Chowgule and Co. P. Ltd. v. Union of India [1981] 47 STC 124, which is also relied on by learned counsel for the assessee. Learned counsel further places reliance on Deputy CST (Law), Board of Revenue (Taxes) v. Pio Food Packers [1980] 46 STC 63 (SC) wherein food processing for the purpose of selling pineapple in tins was held not to be manufacture because no new commercially distinct commodity comes into existence. The first question we have to consider is whether there is a difference between the expressions "produce" and "manufacture" or they are exactly synonyms. The words "manufacture" or "production" have not been defined in the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion manufacture of articles or things by applying labour or process on the existing raw material but also bringing to surface a natural produce of soil like agricultural product, horticultural product, production of fruits and vegetables and excavation of minerals and mineral oil from the product of plants which are grown by the cultivators, agriculturists through labours and other plant products as well as exploitation of other natural resources like mines. Thus, learned counsel for the assessee is right when he says that the word "produce" or "production" has a wider connotation than the term "manufacture". The expression "produce" in the context of producing any thing or article has been assigned its meaning in the Oxford Dictionary as under: "3b. Of an animal or plant; To generate, bring forth, give birth to, bear, yield (offspring, seed, fruit, etc.); d. To work up from raw material, fabricate, make, manufacture (material objects); e. To produce the goods, money, results." Apparently, the expression used in the provision with which we are concerned relates to "produce". In contrast, the word "manufacture" has been defined to mean: "1b. The action or process of ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Kerala Act which required consumption of the fruit in the process before it could be termed as manufacture. The court said: "There is no essential difference between pineapple fruit and the canned pineapple slices. The dealer and the consumer regard both as pineapple. The only difference is that the sliced pineapple is a presentation of fruit in a more convenient form and by reason of being canned, it is capable of storage without spoiling. The additional sweetness in the canned pineapple arises from the sugar added as a preservative. On a total impression, it seems to us, the pineapple slices must be held to possess the same identity as the original pineapple fruit." In coming to this conclusion, the court referred to yet another decision from the United States in East Texas Motor Freight Lines v. Forzen Food Express [1995] 100 L Ed 917 where the United States Supreme Court held that dressed and frozen chicken was not a commercially distinct article from the original chicken. It was pointed out: "killing, dressing and freezing a chicken is certainly a change in the commodity. But, it is no more drastic a change than the change which takes place in milk from pasteurizing, h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es milk though he has not applied any process on any raw material for the purpose of bringing into existence the thing known as milk. In CIT v. N.C. Budharaja and Co. [1993] 204 ITR 412, the question has arisen before the Supreme Court for interpreting the like provision contained under section 80HH of the Income-tax Act, 1961, as is contained in section 80-IB with which we are concerned. Under section 80HH, one of the conditions for availing of the benefit of deduction under section 80HH was prescribed under sub-section (2) which was couched in the same language as is the provision of section 80-IB(2)(iii) with which we are concerned. The assessee had claimed that the foundation for superstructures on which the dam is to be constructed is an article manufactured by the assessee. The court referring to its earlier decision in Pio Food Packers [1980] 46 STC 63 (SC), reiterated the difference as under: "Commonly, manufacture is the end result of one or more processes through which the original commodity is made to pass. The nature and extent of processing may vary from one case to another, and indeed there may be several stages of processing and perhaps a different kind of proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. A distinct change comes about in the finished product. In another case of Sacs Eagles Chicory v. CIT [2002] 255 ITR 178, the Supreme Court found that the process of making chicory powder from chicory roots does not amount to manufacture as no new commodity comes into existence. Therefore, in each case it has to be found as a fact the process through which the end product is arrived at and whether it is a new product brought into existence through manufacture by applying the various processes on the original material as raw material or is derived by human endeavour from natural elements or other resources. There being no involvement of applying process to the raw material, the same may not amount to manufacture. In either case, in order to fall within the meaning of the term "manufacture" or "produce", it must result in bringing into existence a thing or article which is new. This brings us to consider the Supreme Court decision in Chowgule's case [1981] 47 STC 124, on which reliance has been placed by both learned counsel. The court was considering the case of a dealer under the Central Sales Tax Act. The assessee was a private limited company carrying on the business of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mining and manufacture or processing of ore for sale, so that the items of goods purchased for use in every phase of this integrated operation could be said to be use of goods purchased in the course of inter-State trade intended to be used for manufacturing or processing of ore for sale falling within the scope and ambit of section 8(3)(b) and rule 13 so as to attract the lower rate of sales tax under section 8(1)(b). The court dealt with the two aspects separately. Firstly, to whether this amounts to manufacture, the answer was in negative. The court after referring to the test evolved by it in finding out whether any process results in manufacture of goods or not, said: "The test that is required to be applied is: does the processing of the original commodity bring into existence a commercially different and distinct commodity? On an application of this test, it is clear that the blending of different qualities of ore possessing differing chemical and physical composition so as to produce ore of the contractual specifications cannot be said to involve the process of manufacture, since the ore that is produced cannot be regarded as a commercially new and distinct commodity fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... processing. The Supreme Court recognised the close analogy between the facts of Nilgiri Tea Co.'s case [1959] 10 STC 500 (Bom), and the facts of the case before the Supreme Court, namely, blending of iron ore. By overruling the decision of the Bombay High Court, the court said: "When different brands of tea were mixed by the assessees in Nilgiri Tea Co.'s case [1959] 10 STC 500 (Bom) for the purpose of producing a tea mixture of a different kind and quality according to a formula evolved by them, there was plainly and indubitably processing of the different brands of tea, because these brands of tea experienced, as a result of mixing, qualitative change, in that the tea mixture which came into existence was of different quality and flavour than the different brands of tea which went into the mixture." The assessee relied on the later part of the judgment of Chowgule and Co.'s case [1981] 47 STC 124, wherein the court equated the blending process of iron ore with the blending of different grades of tea. However, the court clarified that the process in either case does not amount to manufacture. In other words, it does not bring into existence a new commodity, commercially dif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roduction though it may not amount to manufacture cannot be accepted. We may notice here, in all fairness to either party that both the parties have been carried away by the facts stated by the assessee and the decision given by the assessing authority solely based on the decision in Pio Food Packers' case [1980] 46 STC 63 (SC), which in our opinion deals with the term "manufacture" and was not dealing with the expressions "production" or "produce". Moreover, it was more concerned with consumption of an article in manufacture of goods and finding that the fruit after it is cleared from its skin, sliced and put in preservatives does not result in consumption of the fruit so as to fall within the purview of the Kerala General Sales Tax Act with which the apex court was dealing. "Manufacture" and "production" of tea: A perspective under the Tea Act, 1953. It is to be noticed that tea is a natural product of a bushy plant. The Tea Act, 1953, was enacted by Parliament to provide for control by the Union of the tea industry, including the control, in pursuance of the International Agreement then in force, of the cultivation of tea in, and of the export of tea from, India and for tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been defined to mean the income derived from any rent or revenue derived from land which is situated in India and is used for agricultural purposes and any income derived from such land by agriculture or the performance by a cultivator or receiver of rent-in-kind of any process ordinarily employed by a cultivator or receiver of rent-in-kind to render the produce raised or received by him fit to be taken to market. Therefore, agricultural income derived by a cultivator or receiver of rent-in-kind to render the produce raised or received by him fit to be taken to market is also not taxable. It is in this context, it has to be examined what is the impact of the expression "producer of tea" and "manufacturer of tea". Tea trade has three different stages. Firstly, producing of tea leaves by the owner of the garden, the second stage is manufacture of tea from green leaves plucked from the bushes, and lastly, sorting and grading tea, as it comes in different groups and different quantities not of uniform quality. The blending becomes an important part of tea marketing. Therefore, if the blending which comes after manufacture of tea is a part of the process of manufacture or making the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pecifying that tea leaf be plucked during certain moms and clear weather, how it is to be manipulated in hands, dried and sealed. This signified that tea leaves as such are not used as a fresh green leaves but have to be brought by some process to usable condition. The growing operation as per scientific study undertaken since 1890 reveals that tea growing operations include seed production, clonal selection, tea nursery management, transplanting, development of bushes and subsequent pruning and plucking, soil management, and the ultimate replanting of the stand. With plucking of tea leaves, the agricultural or plant produce of tea comes in hand. But that is not marketable. It has to be subjected to process of preparing or making tea which can be brought to market. The second stage is properly described as preparing or making or manufacturing of tea. The hand method for preparation of tea shoots consisting of young leaves and terminal leaf bud have their origin in antiquity. The prepared teas are designated broadly as black (fermented), green (unfermented) or oolong (semi-fermented). In its most simple form, the preparation of black tea has been described as under: "When blac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the infusion. Teas to be used for a blend are selected for the quality, flavour, strength, and body of the liquors and the size and style and density of the leaf. Teas are blended by mixing the leaf in a machine consisting of a revolving drum fitted with veins. Satisfactory blending requires about 16 revolutions. From the aforesaid narration of the Encyclopaedia Britannica, it can be inferred that the three stages through which the tea goes in the market are growing of tea in different estates or gardens by the growers of tea at a suitable place. Green tea leaves as plucked from the tea bushes are not directly usable as tea as we know. It has to undergo certain process, before it can be used as tea. That process is described as making or manufacturing of tea which results in bringing green tea leaves to the stage of usability as tea of different grades having different chemical contents and properties depending upon the process applied and the geographical region in which the tea is grown, the soil over which plantation has taken place and the period in which the leaves have been plucked and collected from the tea growing centre. The making and manufacturing of tea results in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... knows the type of tea to be expected at any particular time from a particular locality and even from a particular estate, and in his operations his interest is centered on the individual estate or group of estates. When he buys, he is not buying in bulk but in a series of small lots some of which may be no greater than 600 lbs. Consequently, bearing in mind the multiplicity of estates, it will be readily appreciated that the marketing of tea is a very intricate business. It is for the purpose of making a uniform grade out of the assorted product which is purchased by the traders that the process of blending takes place by tea traders. Mr. Eden has dealt with some process held in the London tea auction in detail and that may be taken as illustration for other countries, the reason being obvious that at the time the book was published, the major tea trading took place at London and the traditional markets were at Calcutta, Colombo. A similar view has been expressed by E. Jaiwant Paul in his recently published book The Story of Tea. He describes "Planting and Manufacture of Tea", and "Tea Tasting and Blending" in two separate chapters. According to him also, as noticed above, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... art of the second stage of marketing by traders. It does not involve production or manufacture of tea. We shall presently notice that manufacture of tea is subjected to excise duty by way of cess imposed under the Act which distinguishes between growing of tea, manufacturing of tea and marketing of tea. In short, the tea manufactured or made in different quality as stated above and in different grades is brought to the auction house where it is purchased by the traders in variable quantities. About the blending of tea, Mr. Eden says that the grades into which tea is sorted in producers' factories are not sold as such to consumers. Retail tea, whether sold loose, or more usually in the branded packet, is invariably a blend of different grades derived from a variety of estates and usually from more than a single country of origin. The blend may contain in various proportions twenty to forty different components. In blending tea, different components are chosen for their contribution to a number of desirable qualities in the brew, such as, colour, strength, pungency and flavour. The prescription for a blend is based on various tea-tasters' reports on various teas. There are no qua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... new article or thing. Apparently, in the present case, the natural product through vegetation growth is the green tea leaves. Its subjection to income-tax depends on who brings it into the market, and at what stage. It is relevant to mention here that under the Income-tax Act, 1961, agricultural income is not taxable as the same is exempted under section 10(1) from the charge of tax. Agricultural income has been defined under clause (1A) of section 2, which reads as under: "(1A) 'agricultural income' means- (a) any rent or revenue derived from land which is situated in India and is used for agricultural purposes; (b) any income derived from such land by- (i) agriculture; or (ii) the performance by a cultivator or receiver of rent-in-kind of any process ordinarily employed by a cultivator or receiver of rent-in-kind to render the produce raised or received by him fit to be taken to market; or (iii) the sale by a cultivator or receiver of rent-in-kind of the produce raised or received by him, in respect of which no process has been performed other than a process of the nature described in paragraph (ii) of this sub-clause;..." It is to be noticed that agricultural in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... condition necessary. In these circumstances, a somewhat similar question had arisen before the Supreme Court in CST v. D.S. Bist [1979] 44 STC 392 under the U.P. Sales Tax Act, 1948. Under the U.P. Sales Tax Act, 1948, the term "turnover" has been defined under section 2(i), which reads as under: "Turnover' means the aggregate amount for which goods are supplied or distributed by way of sale (or are sold), or the aggregate amount for which goods are bought, whichever is greater, by a dealer, either directly or through another, on his account or on account of others, whether for cash or deferred payment or other valuable consideration: Provided that the proceeds of the sale by a person of agricultural or horticultural produce, grown by himself or grown on any land in which he has an interest whether as owner, usufructuary mortgagee, tenant or otherwise, or poultry or dairy products from fowls or animals kept by him, shall be excluded from his turnover." It may be noticed that no specific definition of "agricultural turnover from the agriculture or horticulture produce grown by himself or grown on any land" in which such person has interest was provided, yet the principle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o some kind of processing or treatment by the agriculturist himself in his farm or elsewhere. In order to bring them to a condition of non-perishability and to make them transportable and marketable, some minimal process is necessary to be applied to many varieties of agricultural produce ... But, there may be some other kinds of agricultural produce which required some more processing to make it marketable. In the case of such a commodity what one has to judge is to find out whether in relation to that agricultural produce the process applied was minimal or was it so cumbersome or long-drawn that either, in common parlance or in the market, or even otherwise, anybody would not treat the produce as an agricultural produce ...". With this background, the court said: "Unlike many agricultural products tea leaves are not marketable in the market fresh from the tea gardens. Nobody eats tea leaves. It is meant to be boiled for extracting juice out of it to make tea liquor. Tea leaves are, therefore, only fit for marketing when by a minimal process they are made fit for human consumption. Of course, the processing may stop at a particular point in order to produce inferior quality of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s its character as an agricultural income as defined under section 2(1A) as the process of making tea fit for marketing is not carried out by the grower of agricultural produce but has been applied by a trader or a dealer in tea, who is not an agriculturist. This also fortifies our conclusion that in such case, the manufacturer or producer of tea in the sense it makes it marketable by applying the process as popularly known as manufacturing or making of tea and it becomes chargeable to income-tax and the question of applicability of deduction under section 80-IB arises for consideration. In the present case, obviously, the appellant purchased manufactured or made tea leaves powder/granules through auction or through the dealer and not directly from the grower. The samples of available qualities are dispatched to the "blend master", who after going through his own process suggests the mixing ratio and process of mixing for making the perfect blend of tea. So, apparently, the assessee is not the producer of green tea leaves and he only applies the process to make made tea marketable tea, as noticed by us above. The circular to which the appellant has referred applies to made tea or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally new or distinct commodity from the ore which is blended and hence, it cannot be said that any process of manufacture is involved. One has to replace tea for ore in reaching the same conclusion. We have no hesitation in coming to this conclusion that blending of different qualities of tea possessing different chemicals and physical composition so as to produce the specified blend of tea does not involve an act of manufacture of tea. What is brought about as a result of blending remains tea though of different specification than the tea which is blended. Therefore, it cannot be said to be manufacturing or producing of tea. We have already noticed that the appellant is not engaged in growing tea, so that he may be called a producer of tea, nor is he engaged in manufacturing of potable tea from green leaves, which cannot be used as otherwise potable drink. In such event, a different conclusion may be reached, depending upon whether the grower of tea himself undertakes the process of manufacturing tea as a marketable and usable commodity, resulting in agricultural income or a different person is engaged in such activity of producing taxable income. So far as the emphasis laid b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... analogy between blending of tea and blending of ore with which the court was dealing. Applying the analogy to tea, the blending of various teas to smoothen its marketability may amount to processing of tea, but does not amount to manufacture or production of a thing or article so as to fulfil the condition of availing of the benefit of deduction under section 80-IB. We may briefly refer to some of the decisions which have been referred 109 to by both learned counsel stating that they have a direct bearing on the case. Firstly, we may refer to the decisions relied on by learned counsel for the appellant. The appellant heavily relied on a decision of the Karnataka High Court in Brooke Bond Upton India Ltd.'s case [1998] 109 STC 265. It may be noticed, at the outset, that the Karnataka High Court was dealing with the issue arising under the provisions of the Karnataka Sales Tax Act, 1957, and notifications issued thereunder. The relevant notifications provide for exemption to industrial units engaged in "agro-food processing", agro-based high-tech packaging units amongst other industries. These industries were listed as "thrust sector" industries. The incentive scheme issued vide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y by applying the Supreme Court decisions in Ujagar Prints' case [1989] 179 ITR 317 and Empire Industries' case [1986] 162 ITR 846; [1987] 64 STC 42, wherein the processes of bleaching, dying, sizing, printing, finishing were held to be manufacture and held blending and packing to be manufacture. Undoubtedly, the special leave petition against that judgment was dismissed. A question which is not decided, the observation about it cannot be read as ratio. We may notice here that apart from the fact that the decision was rendered in the particular interpretation taken by the Karnataka High Court on the combined reading of the two notifications issued under the Karnataka Sales Tax Act, it refers to Chowgule's case [1981] 47 STC 124 (SC) for supporting its conclusions while considering the question whether blending of different teas amounts to manufacture. The Karnataka High Court, with great respect, has not relied on Chowgule's case [1981] 47 STC 124 (SC) and reached its conclusions in para. 29, in which it was said as under: "For the same very reason, it can conveniently be held that the blending of different kinds and varieties of tea to provide a balance in terms of flavour, st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch not only included manufacture proper but any process or manner of producing, collecting, extracting or preparing of any goods. In the aforesaid context, the court said: "The plain construction of the special definition of the word in a particular Act must prevail. In the special definition given in section 2(j) of the said Act, 'manufacture' has been defined as including a process or manner of producing, collecting, extracting, preparing or making any goods. There can be no doubt whatsoever that 'collecting' goods does not result in the production of a new article. There is, therefore, inherent evidence in the definition itself that the narrow meaning of the word 'manufacture' was not intended to be applied in the said Act. Again, the definition speaks of 'the process of lopping the branches (of trees), cutting the trunks'. The lopping of branches and the cutting of trunks of trees also, self-evidently, does not produce a new article. The clear words of the definition, therefore, must be given due weight and cannot be overlooked merely because in other contexts the word 'manufacture' has been judicially held to refer to the process of manufacture of new articles." Consequent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ividual cases. There might be borderline cases where either conclusion with equal justification may be reached. Insistence on any sharp or intrinsic distinction between 'processing' and 'manufacture', we are afraid, results in an oversimplification of both and tends to blur their interdependence in cases such as the present one." The court further observed that: "On a consideration of the matter, we are persuaded to think that the view taken in the Empire Industries' case [1986] 162 ITR 846 (SC) that 'grey fabric' after it undergoes the various processes of bleaching, dyeing, sizing, printing, finishing, etc., emerges as a commercially different commodity with its own price structure, custom and other commercial incidents and that there was in that sense a 'manufacture', within the meaning of section 2(f), even as unamended, is an eminently plausible view and is not shown to suffer from any fallacy. Indeed on this point, the referring Bench did not disagree or have any reservations either. It is to be noticed that if the amending law is valid, this aspect becomes academic." This clearly goes to show that accepting the general principle and the meaning of "manufacture" in the sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Kerala High Court in the case of CIT v. Tara Agencies [2000] 243 ITR 336. The court was considering the meaning of small-scale exporter within the meaning of section 35B(1A) of the Income-tax Act, 1961, which, inter alia, defined, small-scale exporter to mean a person who exports goods manufactured or produced in any small-scale industrial undertaking or undertaking owned by him. With utmost respect, we are unable to agree with the conclusion reached by the Kerala High Court in interpreting the expression "manufacture" or "produce" by referring to the dictionary meaning of the word "process" and by ignoring the ratio of the Supreme Court decision in Chowgule's case [1981] 47 STC 124 distinguishing "manufacture" and "process". The term "process", in our opinion, cannot be equated with "manufacturing" or "producing" in each and every case. Lastly, reliance was placed by learned counsel for the appellant in this regard on the Supreme Court decision in the case of S.S.M. Bros. P. Ltd. v. CIT [2000] 243 ITR 418; [1999] 3 SCC 229. Again, this was a case where the court was construing different provisions of the Income-tax Act. The question relevant was allowing development rebate whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9] 10 STC 500 (Bom) that it does not amount to manufacturing activity though it may amount to processing of goods, as per Chowgule's case [1981] 47 STC 124 (SC). As a result of the aforesaid discussion, we have no hesitation in coming to the conclusion that the expression "manufacture" or "producing" any thing or article under section 80-IB(2)(iii) has been used in a generic sense and within its ambit it does not include any processing of goods, which does not bring out a new or commercially distinct commodity. In view of the clear distinction between the expressions "manufacture" and "producing" in N.C. Budharaja's case [1993] 204 ITR 412 (SC), blending of different teas by a trader of tea who has purchased the tea from the auction house or the dealer does amount to processing of tea but falls short of manufacturing process and it does not amount to manufacturing or producing any article or thing within the meaning of section 80-IB of the Income-tax Act, 1961. Consequently, the assessee cannot be held to have fulfilled the condition for availing of the benefit of deduction under section 80-IB of the Income-tax Act, 1961. In the result, the appeal fails on the merits and is h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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