9911796707
TMI Blog2007 (7) TMI 297X X X X Extracts X X X X X X X X Extracts X X X X ..... "1. Whether, on the facts and circumstances of the case, the Tribunal was right in holding that the assessee was entitled to deduction under section 80-IA for the assessment year 1999-2000 ? 2. Whether, on the facts and circumstances of the case, the Tribunal was right in holding that the process of printing activity will amount to manufacture in order to quantify for the benefit under section 80-IA ? 3. Whether, on the facts and circumstances of the case, the Tri-bunal was right in not following the judgment in the case of CIT v. Western India Pharmaceutical Services P. Ltd. [1998] 230 ITR 96 wherein it was held by the Bombay High Court that the activity of printing manufacturer name on pharmaceutical capsules will not amount to manufacture ?" 2. The facts leading to the above substantial questions of law are as under : The assessee is a widely held public limited company and is engaged in the construction and promotion of a five star hotel project. The hotel project has not commenced its business activity during the year. The assessee-company, however, derived income from various other units and divisions by selling IMFL, beer, steel and labels. The relevant assessment year i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt in the case of Union of India v. J. G. Glass Industries Ltd. [1998] 2 SCC 32 ; [1999] 114 STC 387 and the decision of the Bombay High Court in the case of CIT v. Western India Pharmaceutical Services P. Ltd. [1998] 230 ITR 96 to support the contention. 4. Heard counsel. The assessee derived income of Rs. 1,55,20,243 from its printing division situated at Sedarapet Industrial Estate, Pondicherry. The Commissioner, Villaianur Commune Panchayat, Pondicherry, has issued the licence in No. 39/95/VCP on April 25, 1995, to the assessee-company for manufacture of printed paper label. The Government of Pondicherry, Industries Department has issued a certificate on June 10, 1996, to the effect that the assessee-company is a medium scale unit set up at B-20 and 34, Industrial Estate, Sedarapet, Pondicherry, for the manufacture of printed paper labels. Further, it has granted exemption from the payment of CST/PGST for a period of five years with effect from January 19, 1995. The Factory Inspectorate, Pondicherry, has issued registration and licence to the assessee-company to work as factory, vide their letter in No. 6247/ 4976 during February, 1996. The printing unit of the assessee-compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dity to the point where commercially it can no longer be regarded as the original commodity but instead is recognised as a new and distinct article that a manufacture can be said to take place. 'The word 'production' or 'produce' when used in juxtaposition with the word 'manufacture' takes in bringing into existence new goods by a process which may or may not amount to manufacture. It also takes in all the bye-products, intermediate products and residual products which emerge in the course of manufacture of goods." 6. In the case of CIT v. Tara Agencies [2007] 292 ITR 444, the Supreme Court considered the scope, distinction and the meaning of the words "manufacture", "production" and "processing" by considering its various earlier decisions. In the present case, the assessee produces printed paper labels which is recognised in the trade as a new and distinct commodity. The raw materials required for producing these printed paper labels are paper rolls, inks, fountain solution and varnish. Out of these raw materials, the assessee produces new and different article, namely, labels. The raw materials and the end product are different and distinct and the end product was also sold t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terials losing their identity, the article produced would still be a totally different article from the materials, namely, paper and ink, which are consumed in making it. The paper and ink which are used in the process of making pamphlets, balance-sheets or the book, by them-selves would be of no value and cannot have apart from the contents a realisable value if sold as such materials. When they are used the only commodity which would have any commercial value would be the finished product, namely, the balance-sheet or the profit and loss account, the share certificate, the pamphlet, etc. Considering the consistent view that has been adopted by the various High Courts while deducing the meaning of the word 'manufacture' or 'manufacturer' and the object with which Explanation 2 has been inserted in section 23A of the Act, we are of the view that the business carried on by the respondent-company of printing balance-sheets, profit and loss accounts, dividend warrants, pamphlets, share certificates, etc., required by the textile mills referred to in the statement of the case and other textile mills would be a business which consists wholly of manufacture and, therefore, clause (ii) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial company" as contained in section 2 of the Finance Act, 1976, or not. After considering the arguments, the Bombay High Court held as follows (page 98) : "On a careful perusal of the definition of 'industrial company' and the context and setting in which the expression 'manufacture or processing of goods' appears, we are of the clear opinion that printing of manufacturers' names on pharmaceutical capsules cannot be regarded as the business of processing goods within the meaning of clause (c) of sub-section (9) of section 2 of the Finance Act, 1976, and a company engaged in such activity cannot be regarded as an 'industrial company'. In our view, by printing of manufacturers' names on the pharmaceutical capsules cannot be regarded as processed. In fact, the pharmaceutical capsules do not undergo any 'process' whatsoever in the course of printing of the manufacturer\qs name thereon. The capsules remain in the same condition. There is no alteration in the nature and character thereof. Moreover, the expression 'processing' appears in the definition of 'industrial company' with the expression 'manufacture'. The full expression is 'engaged in the business of manufacture or processing ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
