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TMI Blog2020 (3) TMI 130X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the activity of making poultry feed, as carried on by the Assessee, was not a mere process of mixing, but that of manufacture. It was held that the Assessee was itself carrying on the complete activity, id est, from mixing, grinding till pollicisation of all the ingredients and that the raw materials once consumed thus, could not be reconverted into the same position, and that its utility got changed.In such view of the matter, the Learned Tribunal held that the action of the Assessing Officer of disallowing the deduction claimed by the Assessee under Section 80-IB (5) was not justified. 3. This court, while admitting the appeal, had framed the following substantial question of law: - "Whether the conclusion arrived at by the Tribunal that production of poultry feeds constitutes manufacture is perverse or not?" 4. To appreciate why deduction was sought by the Assessee, we need to look at the relevant clauses of Sections 80-IB and 80-IE of the said Act. Section 80-IB provides, inter alia, as follows: - "(1) Where the gross total income of an assessee includes any profits and gains derived from any business referred to in sub-sections 2[(3) to 3[(11), (11A) and (11B) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the 1st day of October, 1994 and ending on the 11[31st day of March, 2004]; (ii) hundred per cent of the profits and gains derived from an industrial undertaking located in a backward district of category 'B' for three assessment years beginning with the initial assessment year and thereafter, twenty-five per cent (or thirty per cent where the assessee is a company) of the profits and gains of an industrial undertaking: Provided that the total period of deduction does not exceed eight consecutive assessment years (or where the assessee is a co-operative society, twelve consecutive assessment years): Provided further that the industrial undertaking begins to manufacture or produce articles or things or to operate its cold storage plant or plants at any time during the period beginning on the 1st day of October, 1994 and ending on the 11[31st day of March, 2004]." 5. The word "manufacture" has been defined with effect from April 1, 2009, by Section 2(29-BA) as follows: - "2(29BA) "manufacture" with its grammatical variations, means a change in a non-living physical object or article or thing,- (a) resulting in transformation of the object or article or thing into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rizer that is to say, through mills and/or small factories where these inputs are roasted, ground, mixed and blended. However, it is also not disputed that the chemical composition of none of the inputs is altered or any new compound generated by this - even though the finished product, being poultry feed, has a utility separate and distinct from the rice bran, or oil or bone meal or any of the inputs before they were combined to make the new product, poultry feed. By way of an example, it is impractical to expect chickens to feast on Di calcium phosphate or even raw maize gluten whereas they naturally eat the pellet sized poultry feed produced by the Assessee. 8. In the above factual conspectus, the appellant Revenue tried to impress upon us that this could never be anything more than a process of "mixing" and never "manufacture", since the mechanism of manufacture required that a new product - id est, a product with a different chemical composition than the individual inputs used to make it - be produced as the end result. In other words, it submitted that the term manufacture occurring in Sections 80-IB(2) and (5) as also 80-IE, necessarily requires that the end product of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... substance comes into existence." 10. On the other hand, the learned advocate for the Assessee first brings to the notice of the Court that this is not the first year in which deduction was sought on the ground that what the Assessee was doing by producing poultry feed was manufacture - the record shows that it had been claiming deduction under Section 80-IB of the said Act from Assessment Year 2001-02 onwards and it has regularly been assessed to tax the income tax authorities and allowed such deduction when assessment was done under section 143(3) of the said Act, but without there being any incriminating material the Assessing Officer has disapproved the claim of the Assessee under Section 153A assessment. If deduction had been allowed holding the activity of the Assessee as being 'manufacture', when the same activity is carried on, without there being a change in the law or pronouncement making the activity something other than manufacture, the Assessee submits, it is not open to the Revenue to disapprove of such deduction. In support of its contention the Assessee has relied upon the order of the Income Tax Appellate Tribunal at Kolkata in the case of ACIT-CC-XXVII, Kolkata- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the Hon'ble Supreme Court was pleased to hold, by a bench comprising three Hon'ble Judges, that where there are various stages through which the marble blocks have to go through before they become polished slabs and tiles, there is certainly an activity which will come in the category of "manufacture". 11.4. Commercial Tax Officer-v-Jalani Enterprises reported in 2011 (266) ELT 294 (SC) was relied upon by the Assessee for the limited point of establishing that when ingredients were 'grinded' (sic for 'ground') and mixed, and a new product separately known to the commercial world comes into existence, then the individual ingredients lose their own identity and character, and therefore this amounts to manufacture even though the chemical composition is not altered. The exact words in this case, which was determination of which entry would be applicable for levying sales tax on Jaljeera, are as follows: - "Each one of the contents of the product referred to above and relied upon by the High Court would indicate that most of the items used in the manufacture of Jaljira are nothing else but spices. They are grinded and mixed. When spices are grinded and mixed, it gives r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is clear that poultry feed is not merely rice bran or maize or vitamins or minerals but a mixture of all in calculated proportions through a process involving mills and manufacturing by the use of machinery which run on electricity and where the end product being the pellet is wholly different from each of the ingredients and results in a product which is commercially different and distinct as a commodity so that it cannot be considered as any of the original commodities which were used as ingredients. 14. As a result, the question of law framed by this Court as in paragraph 3 of this judgment is answered against the revenue and it is held that the conclusion of the learned tribunal that production of poultry feeds constitutes manufacture is not perverse. Consequentially, appeal of the Revenue is dismissed and the order of the learned tribunal is confirmed. The Revenue shall bear the costs of the appeal assessed at 1000 GMs. (PROTIK PRAKASH BANERJEE, J.) I. P. Mukerji, J. I have had the privilege of reading in draft the judgment prepared by my brother. I am in full agreement with the reasons given and the conclusions reached by his lordship. There is precious little that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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