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TMI Blog1995 (3) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... d unit of the assessee did either processing or manufacturing and, therefore, the assessee is entitled to relief under section 80J of the Income-tax Act, is sustainable in law ? " Tax Cases Nos. 301 to 303 of 1983 : " Whether, on the facts and in the circumstances of the case, the assessee was entitled to deduction under section 80J in respect of seed processing and cattle feed unit ? " The assessee is a company deriving income among other activities, from business in the manufacture and sale of sugar, fertilizers, chemicals, sanitary wares, etc. For the assessment years 1970-71 and 1972-73 to 1974-75, the assessee claimed the relief under section 80J of the Act in respect of the seed unit. This relief was claimed not before the Income-tax Officer for the assessment year 1970-71, but for the first time before the Appellate Assistant Commissioner. For the assessment years 1972-73 to 1974-75, this relief was claimed before the Assessing Officer. For the assessment years 1972-73 to 1974-75, the Income-tax Officer refused to grant the relief under section 801 in respect of the seed unit because, according to him, the assessee has not satisfied the conditions prescribed under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be entitled to the benefit under those sections as manufactured and as finished products. Benefit under section 80J is available to all manufactured goods and products since there is no schedule attached to section 80J. According to learned counsel, a combined reading of the schedules to section 80B and section 33 along with section 80J would go to show that the processing of seeds would amount to manufacturing or producing an article. In order to support this contention, reliance was placed upon a decision of the Allahabad High Court in Tarai Development Corporation v. CIT [1979] 120 ITR 342. Thus, according to learned counsel, on the facts, it was proved that the assessee was manufacturing or producing an article in the seed unit and, therefore, the assessee is entitled to the benefit under section 80J of the Act. It remains to be seen that the assessee is claiming relief under section 80J in the assessment years under consideration, as the assessee is running a separate seed unit for manufacturing or producing the seeds for sale. The assessee does the following operations in the seed processing unit : (a) Rough cleaning (physical) ; (b) Mechanical drying ; (c) Final c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will be safe to infer that the Legislature did not exclude processed seed from the category of manufactured or produced article for purposes of section 80J. It is also worth remembering that sections 80B and 80-I which grant relief to specified industries including those which sell processed seeds occur in Chapter VI-A of the Act along with section 80J. This being so, interpretative uniformity supports the view that processed seeds should be taken as an article which is obtained either by the process of manufacture or production for purposes of section 80J. However, learned standing counsel for the Department submitted that the Allahabad High Court in Tarai Development Corporation v. CIT [1979] 120 ITR 342 on the basis of assumption and presumption held that the processing of goods would amount to manufacturing or producing a new article. But, in our opinion, on a reading of the judgment of the Allahabad High Court it was correct in coming to the conclusion that the processing of goods, especially processing of seeds would amount to manufacturing activity in view of the Schedules contained under sections 33, 80B and 80-I of the Act. Therefore, the decision in Tarai Development Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d with item 32 of Schedule V to the Income-tax Act, 1961. But this court held that mere purchase of textiles already manufactured by another and dyeing or printing or otherwise processing it, resulting in the retention of its identity as a cloth material, would not be comprehended within the expression " manufacture or production " of textiles. But in the present case, the raw seeds after processing the same were converted into seeds for cultivation. After processing, the raw seeds will not remain as raw seeds but they would be fit only for cultivation and they would not be fit for consumption. Therefore, this decision would render no assistance to the Department to contend that there was no manufacturing activity in processing the seeds. Learned standing counsel again placed reliance upon a decision of this court rendered in Addl. CIT v. Chillies Export House Ltd. [1978] 115 ITR 73. According to the facts arising in that case, the assessee, an exporter of chillies, purchased the chillies, sorted them, graded them as per Agmark specifications, clipped and stemmed them, subjected them to fumigation under expert technical hands in order to prevent deterioration and with a view to g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat it has been ' manufactured '." But according to the facts arising in the present case, after processing, the new raw seed would not remain as it is. The processed seeds would not be fit for human consumption or edible. The processed seeds would be fit only for cultivation. Therefore, the raw seeds are entirely different from the new product emerged after they were processed through various means. In view of the abovesaid facts, we are fortified in saying that by processing the seeds, the assessee manufactured and produced an entirely new article which is quite different from the raw materials used. Thus considering the facts arising in this case in the light of the decision of the Allahabad High Court in Tarai Development Corporation v. CIT [1979] 120 ITR 342, we hold that the order passed by the Tribunal in granting the relief under section 80J in respect of the seed unit in the assessment years for consideration is in order. Accordingly, we answer the question referred to us in the assessment years 1970-71 and 1972-73 to 1974-75 in the affirmative and against the Department. In so far as the assessment years 1972-73 to 1974-75 are concerned, the question referred relates ..... X X X X Extracts X X X X X X X X Extracts X X X X
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