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TMI Blog1991 (9) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... ome tax Officer was that it was engaged in the manufacture or production of articles within the meaning of section 80J(4)(iii) and so it was entitled to the relief envisaged in section 80J of the Act. The Income-tax Officer declined to grant this relief on the ground that the assessee was not an industrial undertaking manufacturing or producing any article as it was engaged only in the blending of different types of tea and selling the tea so blended. He also mentioned that it was not possible to determine the computation period as envisaged under Explanation 2 to section 80J(1A)(II). Hence, he did not give any relief under section 80J of the Act to the assessee and made the assessment accordingly after getting the approval of the Inspecting Assistant Commissioner under section 144B of the Act on a total income of Rs. 5,46,240 on March 31, 1984. The assessee appealed to the Commissioner of Income-tax (Appeals) and contended that the assessee's claim for relief under section 80J of the Act should have been allowed. The Commissioner of Income-tax (Appeals) agreed with the contention of the assessee and held that the assessee company was an industrial undertaking engaged in the manu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anufacture or production of any one or more of the articles or things specified in the list in the Fifth Schedule. Therefore, an amount at the rate specified, in section 33(1)(b)(B)(i) of the said Act is to be allowed in respect of machinery and plant installed for the purpose of manufacture or production of "tea" (item No. (26) of the Fifth Schedule). In order to claim deduction by way of development rebate the machinery and plant installed for the purpose of manufacture or production of tea is eligible for deduction as tea is an article or thing specified in the list in the Fifth Schedule to the said Act. "Tea" has not been defined but it is approved by Schedule V as a manufactured article or thing. Blended tea is 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 new brands of tea which come into existence are a new product or new article as manufactured or produced by the industrial undertaking. The process by which tea is blended after manufacture and comes into the category of new mixture tea is a production or manufacture and is commercially new and di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a case which brings into existence something different from its components, whereas, in this case, the thing produced by the assessee is tea and the end product sold by the assessee is also tea. (e) Item No. (26) of the Fifth Schedule of the Income-tax Act speaks of tea and not processing of tea. It has been contended on behalf of the Revenue that, in the instant case, the assessee merely mixes and blends tea and sells it in the market. Therefore, in this case, processing of tea does not involve manufacture of any article or thing. The input and the output of the assessee's business remain tea. It has been submitted that the Tribunal is right in holding that the assessee does not manufacture or produce any article or thing to be entitled to relief under section 80J of the Income-tax Act, 1961, and it has been submitted that the question referred may be answered in the negative and in favour of the Revenue. We have considered the submissions of the parties and decision cited from the Bar. In the case of Chrestien Mica Industries Ltd. v. State of Bihar [1961] 12 STC 150 (SC), it was held that the assessee was carrying on its business of mica mining operations by which crude ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een nothing but a manual application of energy to the different quantities of tea purchased by the assessees in certain proportion so as to evolve a mixture of tea which was sold as tea mixture of the assessee. There is not even application of mechanical force so as to subject the commodity to a process, manufacture, development or preparation. The commodity has remained in the same condition. It is true that in the preparation of the tea mixture which is marketed, there may be some skill involved but that cannot be regarded as processing within the meaning of the proviso to the said Bombay Sales Tax Act. It was further observed that in the preparation of the tea mixture it cannot be said that there is any alteration in the goods. Undoubtedly, by mixing the different varieties of tea purchased by the assessees there resulted a mixture in which the individuality of the components was obscured but that is not alteration and as such there is neither processing nor alteration in any manner of the goods purchased by the assessees. In the case of Chowgule and Co. (Pvt.) Ltd. v. Union of India [1981] 47 STC 124 (SC), it was held that the blending of different qualities of ore possessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a mixture which came into existence was of a different quality and flavour than the different brands of the tea which went into the mixture; (ii) There are, it is true, some observations in the judgment of the Bombay High Court which seem to suggest that if Instead of manual application of energy in mixing the different brands of tea, there had been application of mechanical force in producing the tea mixture, the court might have come to a different conclusion and these observations were relied upon by the assessee, since, in the present case, the blending was done by application of mechanical force, but that is not the correct test to be applied for the purpose of determining whether there is "processing"; (iii) The question is not whether there is any manual application of energy or there is application of mechanical force. Whatever be the means employed for the purpose of carrying out the operation it is the effect of the operation on the commodity that is material for the purpose of determining whether the operation constitutes "processing". Therefore, the Supreme Court, in construing the expression "processing", allowed the appeal of the assessee holding, inter alia, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roduced by the assessee, viz., package tea, it was held that package tea is produced out of tea already manufactured in the garden. The process by which tea is packed after manufacture and comes into the category of package tea will be deemed to have been considered by the Legislature to amount, by itself, to a production or manufacture which make the article excisable to duty. While considering the expression "manufacture", it was held that package tea is the manufactured goods as the articles themselves prepared are the result of the process of manufacture and the net result of the process of manufacture is the production of articles in some form which is envisaged as goods to be subjected to excise duty. In the case of G. A. Renderian Ltd. v. CIT [1984] 145 ITR 387 (Cal), while considering the claim of the assessee for treating it as an "industrial company" within the meaning of section 2(7)(c) of the Finance Act, 1978, for allowing the benefit of concessional rate of tax, it was held that blending of tea amounts to processing and as such the assessee was an industrial company in terms of section 2(7)(c) of the Finance Act, 1978. The Calcutta High Court considered that, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... place, but not before, the chemist has the goods with which to supply his customers and which he has agreed to sell to them. The resultant mixtures, after dispensing prescriptions, are the goods sold by a dispensing chemist to his customers. Since it is the production of goods for the purpose of selling to customers, the chemist who dispenses prescriptions thereby produces goods for sale. In the case of Collector of Central Excise v. Eastend Paper Industries Ltd. [1990] 186 ITR 105 (SC), it was held that manufacture is a process or activity which brings into existence new, identifiable and distinct goods. Goods are identifiable articles known in the market as goods and marketed or marketable the market as such. Anything required to make the goods marketable must form part of the manufacture and any raw material or any materials used for the same would be a component part of the end product. In the case of CIT v. U. P. Agra State Industrial Corporation (No. 1) [1991], 188 ITR 370 (All), a similar view was taken regarding "process" and "manufacture". In the case of Addl. CIT v. A. Mukherjee and Co. (P.) Ltd. [1978] 113 ITR 718 (Cal), (sic) it was held that preservation of goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o processing but not manufacture or production of an article, within the meaning of section 32A or section 80J of the Income-tax Act. In our opinion, the Tribunal is justified in its interpretation of section 80J of the Act and in distinguishing processing of goods from manufacture of an article. In the cases cited, the question was whether the assessee was engaged in the processing of goods, whereas in the instant case, the question is whether the relief sought for under section 80J of the Act requires manufacture or production of an article since the assessee was not manufacturing or producing any article but was only buying tea from the market, mixing them and selling them in the market. The input of the assessee's business was tea and the output of the business both remain tea. Both sections 32A and 80J of the Act refer to manufacturing or producing Of an article and do not have anything to do with processing of goods. It appears to us that the words "manufacture" and "production" apply to a case which brings in to existence something different from its components. In this case, however, the thing produced by the assessee is tea and the end product sold by the assessee is also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o taken in the case of Singh Engineering Works Pvt. Ltd. v. CIT [1979] 119 ITR 891 (All). In the instant case, the assessee merely mixes and blends tea and sells them in the market. Therefore, in this case, processing of tea does not involve manufacture of any article or thing. The input and the output of the assessee's business remain tea. Hence, it is submitted that the Tribunal is right in holding that the assessee does not manufacture or produce any article or thing to be entitled to relief under section 80J of the Income-tax Act, 1961. It is, therefore, submitted that the question referred may be answered in the negative and in favour of the Revenue. Accordingly, in our opinion, the decision of the Tribunal does not call for any interference by this court. In the facts and circumstances of the case and on a true and proper interpretation of section 80J of the Income-tax Act, 1961, the blending of different kinds of tea carried on by the assessee does not constitute manufacture or production of articles or things within the meaning of section 80J of the Income-tax Act, 1961, and the Tribunal was justified in law in not allowing relief under section 80J of the Income-tax Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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