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TMI Blog2024 (10) TMI 997X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act and notice u/s 148 were issued after the expiry of 4 years from the end of the respective assessment years then the reopening of the reassessment is hit by the proviso to Section 147 as there is nothing brought on record by the AO to show that the income assessable to tax has escaped assessment due to the reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. Thus, the said mandatory condition in the case of the assessee has not been fulfilled. Accordingly the reopening of the assessment for Assessment Years 2012-13 and 2013-14 is quashed being invalid. Deduction u/s 80IB - whether this process of making potato based chips and snacks falls within the expression processing as provided in Sub Section 11A of Section 80IB of the Act or not? - The Hon ble Madras High Court in case of M/s Chamadhi Trades V/s Commercial Tax Officer [ 2018 (5) TMI 461 - MADRAS HIGH COURT ] as held that the products (chips) sold by the assessee are to be classified as processed vegetable and not to come under the residuary entry for the purpose of commercial tax. Once the chips is classified as processed vegetable for the purpose of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0IB(11A) for each of the year under appeal. The A.O while passing the assessment orders u/s 143(3) of the Act for the Assessment Years 2017-18 to 2019-20 and reassessment orders interalia for the Assessment Years 2012-13 and 2013-14 has disallowed the claim of deduction u/s 80IB(11A) which was challenged by the assessee before CIT(A). The CIT(A) has allowed the claim of the assessee u/s 80IB (11A) on merits however, the grounds raised by the assessee against the validity of reopening of the assessment have been dismissed by the CIT(A). Therefore, aggrieved by the impugned order of the CIT(A) both the department as well as the assessee has filed these appeals and Cross Objections. 4. The revenue has raised common grounds in these appeals as under: Whether on the facts and circumstances of the case, the Ld. CIT(A) was correct in allowing the deduction u/s 80IB(11A) when there are judicial findings holding that the activities of the assessee would constitute the manufacturing and not processing eligible for deduction. 5. The assessee has raised following common grounds of Cross-Objection:- Ground No. 1. On the facts and in the circumstances of the case, and, in law, the Ld. CIT (APPEA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under chapter - VIA : Rs. 6,47,46,882/-). The assessee s case was selected for scrutiny by issuing notice u/s 143(2). After selecting the case for scrutiny, the AO conducted a detailed and exhaustive scrutiny by issuing questionnaires dated 19/08/2013, 29/07/2014, 01/10/2014 and requiring information during the assessment proceedings, and requiring the assessee to furnish various details regarding the affairs, income, expenses and deduction of the assessee. The assessee submits that in response to various queries, the assessee has furnished all the desired information and requisite details which were required by AO. Simultaneously the assessee also produced the books of accounts for verification before the assessing authority and thus there is a presumption that the AO who completed the assessment of the assessee had applied his mind to the details and books of accounts furnished by the assessee during the course of assessment proceedings. Finally an order of assessment dated 30/09/2015 was passed by the AO, assessing the total income of the assessee at Rs. 6,11,27,620/-, ie, after making disallowances of Rs. 9,81,100/- on account of labour charges, advertisement sales promotion a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the powers of the AO in case where the assessment is completed u/s 143(3) and a period of four years from the end of relevant assessment year has expired. A combined reading of the main part of section 147 along with the proviso thus shows that in cases covered by proviso, the AO should not only have reason to believe that any income chargeable to tax has escaped assessment but it is also necessary that such escapement must be due to the circumstances mentioned in the proviso i.e non furnishing of return u/s 139 or 142 or 148 or due to failure of the assessee to disclose fully and truly or material facts necessary for assessment. The assessee submits that in the instant case there is neither any escapement within the meaning of section 147 nor it is a case where there is any failure on the part of assessee to disclose fully and truly all material facts necessary for purpose of assessment. h) The Ld. AR for assessee submits that since the present matter relates to assessment year 2012-13 for which the original assessment has been completed by AO u/s 143(3) and since the proceedings u/s 147 have been initiated after the expiry of four years from the end of relevant assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aterial facts necessary for purpose of assessment. k) In support of this contention he has relied upon the decision of Supreme Court in the case of Gangasaran Sons Pvt. Ltd. Vs ITO reported in 130 ITR as well as ITO vs. Lakhmani Mewaldas reported in 103 ITR 437 and submitted that the Hon ble Supreme Court has held that there should be sufficient and adequate material to justify the formation of belief that income assessable to tax is escaped assessment. He has also referred to the following decisions:- (i) Gujarat High Court in the case of Dishman Pharmaceutical and Chemicals Ltd Vs DCIT reported in 346 ITR 328(Guj). (ii) MP High Court in the cases of Smt. Prabha Rajyalaxmi Vs WTO reported in (1983) 144 STC 180 and Lokendra Sing Rathore v/s WTO (1985) 153 ITR 466. 7. The next contention of the Ld. AR is that the assessment has been reopened by the A.O on the basis of change of opinion as the A.O during the scrutiny assessment u/s 143(3) of the Act has formed the opinion that the claim of the assessee is allowable therefore the subsequent reassessment to disallow the claim is nothing but the change of opinion which is not permissible under the law. In support of his contention he ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment for the subsequent years i.e. 2017-18 to 2020-21 therefore, the order of the Assessing Officer for the subsequent year is sufficient material to form the belief that the income assessable to tax for not disallowing the claim of deduction u/s 80IB(11A) for the earlier assessment years i.e. 2012-13 and 2013-14 amounts to escapement of income assessable to tax. Therefore, there is direct nexus between the assessment orders passed in the subsequent years and the reason to believe that the income assessable to tax as escaped assessment for the Assessment Years 2012-13 and 2013-14. He has relied upon the order of the CIT(A) on this issue and submitted that the CIT(A) has relied upon various judgments of Hon ble Supreme Court as well as Hon ble High Courts on this point. Thus the Ld. DR has submitted that the reopening of the assessment is valid. 10. We have considered rival submissions and perused the relevant materials record. Since the assessee has raised a legal issue in the Cross Objections for the Assessment Years 2012-13 and 2013-14 challenging the validity of reopening of the assessment after 4 years from the end of the assessment year and there is no failure on the part of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee is not in the business of processing, preservation and packaging of fruits or vegetable. These reason recorded by the A.O do not reveal any new fact or material on the basis the A.O has taken this view that the assessee is not in the business of processing of vegetable but the information on the basis of which this opinion has been formed by the A.O was already available with the A.O and therefore, this is a case of change of opinion on the part of the A.O based on the same facts and record already available with the A.O at the time of passing the scrutiny assessment u/s 143(3) of the Act. Though the A.O has recorded that the income chargeable to tax escaped assessment by reason of failure on the part of the assessee to disclosed fully and truly all material facts necessary for its assessment however, the A.O has not indicated what information or facts were not disclosed by the assessee at the time of original scrutiny assessment. Therefore, the reopening of the assessment for the Assessment Years 2012-13 and 2013-14 is hit by the proviso to Section 147 as existed at the relevant point of time reads as under: Section 147. Income escaping assessment. If any income chargeab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -open assessments on the basis of mere change of opinion , which cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to re-assess. The Assessing Officer has no power to review; he has the power to reassess. But reassessment has to be based on fulfilment of certain pre-condition and if the concept of change of opinion is removed, as contended on behalf of the Department, then, in the garb of re-opening the assessment, review would take place. One must treat the concept of change of opinion as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1-4-1989, Assessing Officer has power to reopen, provided there is tangible material to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support from the changes made to section 147 of the Act, as quoted hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987, Parliament not only deleted the words reason to believe but also inserted the word opinion in section 147 of the Act. However, on receipt of representations from the Companies against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment and consequently the conditions as provided in the proviso to section 147 is not satisfied. Whereas the reopening within 4 years from the end of assessment year was held to be valid when assessment was reopened on the basis of the assessment year of the subsequent year. The Hon ble High Court has held in para 10 to 14 as under (324 ITR 48): 10 In dealing with the merits of the rival contentions, it must at the be noted that during the course of the proceedings under section 143(3), the Assessing Officer was duly apprised of the circumstance that the petitioner was acting as an agent for the collection of subscriptions and procuring advertisements for the benefit of its foreign principal. The order of assessment makes a reference to the nature of business of the petitioner in the following terms: The assessee is a private limited company incorporated on September 18, 1995. The company is engaged in the business of Production, acquisition and sale of television programmes/files, distribution of satellite channels and acting as advertising agent of SET Satellite (Singapore) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll material facts necessary for assessment. Absent the existence of the jurisdictional condition precedent, the assessment cannot be reopened beyond a period of four years after the expiry of the relevant assessment year, as has been done in the present case. In the circumstances, the notice for reassessment is liable to be quashed and set aside solely on the ground that the Revenue has failed to establish the existence of the jurisdictional condition precedent to the exercise of the power to reopen an beyond a period of four years of the expiry of the relevant assessment year. 13 The petition would accordingly have to be allowed. Rules is made absolute in terms of prayer clause (a), by quashing and setting aside the notice dated March 25, 2009 and the order dated September 29, 2009. 14 The facts of this writ petition, it is common ground between both the learned counsel, are the same as in Writ Petition No. 8719 of 2009 which has been allowed for the reasons recorded in the judgment. In the present case also, assessment is sought to be reopened beyond a period of four years from the end of expiry of the relevant assessment year 2013-14. For the reasons already recorded while allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which was not justified in the assessee's company case. However, in the assessee's company case, the assessee company was engaged in the business of manufacturing and sales of different types of potato based snacks and namkeen and not in the eligible business of processing, preservation and packaging of fruits or vegetables. Since the assessee company was not deriving its profit from the eligible business as per provisions of section 80IB(11A) of the Act. He has relied upon the order of A.O as well as the decision of Mumbai Bench of Tribunal dated 05.03.1995. 11.1 On the other hand Ld. AR of the assessee submitted that the beneficent intention or scheme of the legislature while enacting the Section 80 IB (11A) of the Act which was initially brought into the statue book by the Finance Act of 2001 w.e.f 01.02.2002 by granting deduction in a case of the integrated business of handling, storage and transportation of food grains. By virtue of the Finance Act of 2004, the undertaking deriving profits from the business of processing, preservation and packaging of fruits or vegetables was also brought under the purview of sub- Sec. 11A of 80IB of the Act w.e.f 01.04.2005. 11.2 Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n industrial company for the purposes of Section 2(7)(c) of the Finance Act, 1973. An industrial company has been defined to mean a company which is mainly engaged in the manufacture or processing of goods and other activities specified therein. The question was whether the cold storage of the appellant can be said to be engaged in the processing of goods? The Supreme Court answered the question in the negative for the reason that the stored articles cannot be said to have undergone a process mainly because there was reduction of moisture content as a result of long storage. At the same time, the Supreme Court observed that processing is a term of wide amplitude and has various aspects and meanings . It was pointed out that in common parlance processing is understood as an action which brings forth some change or alteration of the goods or material which is subjected to the act of processing. b) Chowgule Co Pvt. Ltd. vs. Union of India (1981, 47 STC pg. 124). The three-judge Bench of the Hon ble Supreme Court held that the blending of iron-ore in the course of loading through the mechanical ore handling plant amounted to processing of ore within the meaning of Section 8(3)(b) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decisions is that notwithstanding the extent of processing and the changes that occur to the original commodity by reason of series of operations, it could still amount to processing of that original commodity. 11.6 The Ld. AR submits that potato-chips are manufactured by processing the Potatoes. It involves various steps which are shown in below mentioned chart: (i) Potato sorting (iv)Blanching (vii) Frying (ii) Potato input in elevator (v) Slicing and washing (viii)Flavour Application (iii) Destoning (vi) Peeling That as a first or initial step, the potatoes are sorted as per their size and then put into elevator. After that it goes through de-stoning to remove foreign particles like stones and clay etc. and the outer skin of the potato is removed to give it a smooth spherical shape. Then it is sliced using slicers with standardized settings so as to get consistent thickness which is important to the crispiness of the chips. The slices are then gently washed to remove the starch to avoid stickiness during cooking and to prevent starch from entering the cooker and becoming carbonized. The resultant potato slices are gelatinized and fried. The temperature and time controls of cook ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... port), Food processing Policy 2008 of Department of Horticulture and Food Processing and copy of Tenth Plan Schemes of Ministry of Food Processing Industries, Govt. of India. are attached herewith. Kindly refer to Para 1 on page 2 with the main heading Scheme for Technology up gradation/Establishment/Modernization of Food Processing Industries . It clearly says that the scheme will cover setting up/expansion/modernization of Food Processing industries covering all segments viz. Fruits Vegetables, milk products, meat, poultry, fishery, cereal, pulses, oil seeds and such other agri-horticultural sectors leading to value addition and shelf life enhancement including food flavours and colours, oleoresins, spices, coconut, mushroom, hops, etc. It says that the scheme will cover the following activities i.e setting up/expansion/ modernization of food processing industries covering all segments viz. fruits vegetables. Since the assessee company is engaged in the business of processing, packing and sales of different types of potato based snacks, extruded snacks and namkeen, the exemption u/s 80IB(11A) has been claimed. The Ld. AR relied on the decision of Hon'ble ITAT Ahmedabad bench ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... like stone, clay etc. Thereafter the outer skin of the potato is removed to give it a smooth spherical shape before it is sliced into chips using slicer so as to get consistent thickness essential for giving correct size and texture to the chips. The slices are then washed to remove the starch to avoid stickiness during cooking and to prevent starch from entering the cooker and becoming carbonized. The resultant potato slices are fried. All these process is under strict control of temperature and conditions so as to get desired potato based chips and other snacks. The packaging is done in the manner to preserve this processed potato chips for a longer life and the individual packs are filled with nitrogen gas to preserve the chips. The end product is also potato based chips and snacks and therefore the potato which is a vegetable has undergone this process. The question arises whether this process of making potato based chips and snacks falls within the expression processing as provided in Sub Section 11A of Section 80IB of the Act or not. The Authority for Advance Ruling vide its ruling dated October 28, 2009 in case of Mrs. Delna Rustom Boyce reported in 318 ITR 455 has dealt wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the blending of iron-ore in the course of loading through the mechanical ore handling plant amounted to processing of ore within the meaning of section 8(3)(b) of the Central Sales Tax Act and the mechanical ore handling plant fell within the description of machinery, plant, equipment used in the processing of ore for sale. The following pertinent observations were made while explaining the connotation of the word 'processing' : . . .The nature and extent of processing may vary from case to case; in one case the processing may be slight and in another it may be extensive; but with each process suffered, the commodity would experience a change. Wherever a commodity undergoes a change as a result of some operation performed on it or in regard to it, such operation would amount to processing of the commodity. The nature and extent of the change is not material. It may be that camphor powder may just be compressed into camphor cubes by application of mechanical force or pressure without addition or admixture of any other material and yet the operation would amount to processing of camphor powder as held by the Calcutta High Court in Sri Om Prakas Gupta v. Commissioner of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... traction of juice and oil from the fruits or further converting the homogenized juice into fruit powder and adding the substances meant for preservation would legitimately fall within the sweep of the expression processing . The fact that the fruit assumes a different form or that a series of operations are involved in preparing the mixed juices and concentrates which could be preserved for long does not take it out of bounds of processing. Processing in its wider sense would still be aptly applicable. 11. I am therefore of the view that the applicant is entitled to the benefit of deduction contemplated in sub-section (11A) of Section 80-IB and the question has to be answered in the affirmative subject however to the clarification that the conditions laid down in sub-section (2) of Section 80-IB should be satisfied. I may add that the Commissioner in his comments has very rightly taken the stand that the profit of the proposed business seems to be eligible for deduction provided the assessee satisfies the other conditions 12.2 Though this ruling is not binding on the Tribunal but it has strong persuasive value wherein the term processing is used in Sub Section 11A of Section 80IB h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, it cannot be taxed under Entry 69 at the rate of 12.5%. 1 respectfully follow the judgment of the Hon'ble First Division Bench and conclude that the impugned order passed by the respondent is not sustainable. Further, the clarification issued by the Commissioner of Commercial Taxes is not accepted by the Hon'ble Division Bench. Once it is decided that the clarification is not sustainable, it cannot be followed in other cases on similar issues . 12.3 Thus, it is clear that the Hon ble High Court has held that the products (chips) sold by the assessee are to be classified as processed vegetable and not to come under the residuary entry for the purpose of commercial tax. Once the chips is classified as processed vegetable for the purpose of commercial tax then it cannot be given a different classification for the purpose of Income Tax so far as the processing of vegetable is concerned. Similarly the Hon ble Uttarakhand High Court in case of M/s Shriya Enterprises vs. Commissioner of Commercial Tax has held that the potato chips is nothing but a preserved vegetable and in other words the potato chips is also a vegetable product. The contention of the revenue that the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Collector of Central Excise 1990 1 SCC 532. . Similar view was reiterated in Mauri Yeast India Pvt. Ltd. Vs. State of U.P. another, 2008 U.P.T.C. 729 11. In the light of the aforesaid, unless the department can establish that the goods in question can by no conceivable process of reasoning be brought under any of the tariff items, resort cannot be had to the residuary category and if there is a conflict between entries, then, the residuary category should not be taken into consideration. others. A Division Bench of the Gauhati High Court, by the judgment dated 29.04.2009, held that the sale of potato chips made by Pepsico India Holding Pvt. Ltd. is covered by Entry 80 of Part A of Schedule II to the Assam Value Added Tax Act, 2003 which provided for processed or preserved fruits and vegetables and that the entry would take within its compass potato chips being a processed vegetable. 13. Similar view was held by the Madras High Court in its judgment dated 10.11.2009 passed in Pepsico India Holdings Pvt. Ltd. Vs. Commissioner of Commercial Taxes others, wherein the court held that the Pepsico India Holdings Pvt. Ltd. cannot be taxed under the residuary entry. 14. A Division Bench of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hallow-eyed, and clean. Varieties differ as to shape, size, colour of skin, and cooking qualities. Suitability for processing requires such qualities as high dry matter content good texture and colour low homemakers used potatoes in, various processed forms, particular frizer Freuchfried and dehydrated, or instant, mashed types. Potato chips have long been established as a major processed product. Instant mashed potato, in both potato granules and potato flake form, sliced and diced potato, and potato flour comprise the principal dehydrated products now in commercial production. One of the principal uses for dehydrated potato dice is as an ingredient in the manufacture of canned meat products. 18. The Ministry of Food Proceeding Industry has understood processing of potato wafers or chips as a vegetable processing industry. Further, the Government of India has understood potato chips to be a vegetable product for the purpose of classification under the Central Excise Tariff Act. 19. In Deputy Commissioner of Commercial Taxes, Tiruchirapalli Division, Tiruchirapalli Vs. Hameed Trading Company 1973 (32) S.T.C. 228 (Madras High Court), it was held that contemporaneous exposition by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealed containers or otherwise) under entry no.6 of Schedule-II(B) of the Act and the absence of any exclusion of potato chips within the said entry gives a clear legislative intent of inclusion of potato chips under entry no.6 of Schedule-II(B). To support this view of ours, the court finds that entry 10, 32, 40, 101 114 specifically excludes a Schedule-II (B). For facility, the said entries are quoted hereunder:- 10. Aluminum, Aluminum alloy, their products (excluding extrusions) 32. Coir and coir products excluding coir mattress 40. Declared Goods as specified in Section 14 of the Central Sales Tax Act, 1956 except coarse gain. 101. Silk fabrics excluding handloom silk unless covered by Additional Excise Duty 114. Toys excluding electronic toys 23. A perusal of the aforesaid entries gives a clear indication that some of the products have been specifically excluded and, as held by the Supreme Court in Deepak Agro Solutions (supra), what is not excluded would be held to be included and, consequently, the court is of the opinion that potato chips would be covered under the processed vegetable and is covered by entry No.6 of Schedule-II (B) of the Act. The court further finds that wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowing points emerge from above: - AO has raised the contention that appellant is not deriving income for 'eligible business for the purpose of deduction u/s 80IB(11A) as it is a mere manufacturer of different kind of potato based snacks and namkeen and hence it cannot be termed to be engage in business of processing, preservation and packaging of fruits or vegetables. - Section 80IB(11A) of the Act provides deduction in respect of profits derived from undertakings engaged in the business of processing, preservation and packaging of fruits or vegetables or meat and meat products or poultry or marine or dairy products. The provisions of section 80IB(11A) of the Act read as under: (11A) The amount of deduction in a case of an undertaking deriving profit from the business of processing, preservation and packaging of fruits or vegetables or meat and meat products or poultry or marine or dairy products or from the integrated business of handling, storage and transportation of food grains, shall be hundred per cent of the profits and gains derived from such undertaking for five assessment years beginning with the initial assessment year and thereafter, twenty-five per cent (or thirt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circular. However, for the purpose of interpretation reference may be made to judicial pronouncements and dictionaries, where the meaning of the said term has been explained in common parlance. (A) Processing In various dictionaries, the expression 'Processing' is defined as under. - The term 'processing' has been defined in the Oxford English Dictionary as the treatment of raw material, food, etc. in order to change it, preserve it, etc - Collins Dictionary defines 'processing' as 'the act or process of treating or process of treating or preparing something by a special method . - Cambridge Dictionary defines 'processing' as 'the act of preparing, changing, or treating food or natural substances as a part of an industrial operation' - The term 'processing' has been defined in Free Dictionary as 'the act or process of treating or preparing something by a special method - The Merriam Webster has defined the term 'process' as 'a natural phenomenon marked by gradual changes that lead toward a particular result Hon'ble Courts has defined the expression Processing' as under: The Supreme Court in the case of Chow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f bounds of processing. Processing in its wider sense would still be aptly applicable 11. I am therefore of the view that the applicant is entitled to the benefit of deduction contemplated in sub-section (11A) of section 80-IB and the question has to be answered in the affirmative subject however to the clanification that the conditions laid down in sub-section (2) of section 80-IB should be satisfied, I may add that the Commissioner in his comments has very rightly taken the stand that the profit of the proposed business seems to be eligible for deduction provided the assessee satisfies the other conditions . Further in the case of 3F Oil Palm Agrotech (P.) Ltd vs. ACIT: 178 ITD 319. I was held as under. 18. The next question is whether the assessee satisfies all the three conditions of processing, preservation and packaging. The activity of processing itself means that original article undergoes a change. The change may not only be visible but may also change in its form. The Hon'ble Authority for Advance Ruling in the case of Mrs. DelnaRustom Boyce (supra) has considered the decisions of the Hon'ble Supreme Court in the case of Delhi Cold Storage (P) Ltd. v. CIT [1991] 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of Mrs. DelnaRustum Boyce (supra) is, definitely. applicable in other similar cases also and we have to hold that the activities carried on by the assessee for extraction of oil from FFB's of oil palm, will amount to processing u/s 80IB(11A) of the Act . 26. The last objection of the Revenue is that the end product is not a fruit but it is edible oil or kernels and shells which are not consumable goods, and hence it does not satisfy the condition of section 80IB(11A). In the case of Delna Rustum Boyce Inre, the AAR has also held that the end product need not remain in the same form as the raw material. It may be in the form of juice or cut fruits or even oil or powder. As long as the end product is derived from the fruits or vegetables, the assessee is eligible for deduction u/s 80IB(11A) of the Act. In these circumstances, we are satisfied that the oil palm is a fruit and that it undergoes different processes before extraction of oil, and the palm oil is preserved under adjusted temperature and they are packed in large container or tanks and therefore, the assessee is eligible for deduction u/s 80IB(11A) of the Act. The assessee's appeals are accordingly allowed. (e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for same purpose in the same form. Therefore, the process of dehusking of Paddy into Rice with the aid of labour and machinery is definitely an industry activity undertaken by the Assessee. In view of the aforesaid, it can be said that all the activities which brings forth some change or alteration in the goods or material come under the definition of 'processing'. Such change may not only be visible but may also change in its form. Thus, whenever a commodity undergoes a change as a result of some operation performed on it, such operation would amount to processing of the commodity. In the present case there is change in physical form, volume, contents and taste. New products came into existence namely chips, snacks and extruded namkeen, on account of processing. In commercial parlance and market places both the products potatoes (as input) and Chips/namkeen (as output) have distinct identities. (B) Preservation In various dictionaries, the expression 'preservation is defined as under: -The term 'preservation' has been defined in the Merriam Webster as the act, process, or result of preserving something, such as (a) the activity or process of keeping somethin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t a fruit but it is edible oil or kemels and shells which are not consumable goods, and hence it does not satisfy the condition of section 80IB(11A). In the case of DelnaRustum Boyce Inre, the AAR has also held that the end product need not remain in the same form as the raw material. It may be in the form of juice or cut fruits or even oil or powder. As long as the end product is derived from the fruits or vegetables, the assessee is eligible for deduction u/s 80IB(11A) of the Act. In these circumstances, we are satisfied that the oil palm is a fruit and that it undergoes different processes before extraction of oil, and the palm oil is preserved under adjusted temperature and they are packed in large container or tanks and therefore, the assessee is eligible for deduction u/s 80IB(11A) of the Act. The assessee's appeals are accordingly allowed. In view of the aforesaid, any activity undertaken to keep the processed product intact in good condition and free from any damage comes under the definition of 'preservation'. The product chart submitted by the appellant mentions that it uses Nitrogen Gas as preservative to each individual pack before packaging. The Nitrogen, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0IB(11A) are satisfied by the assessee 26 The last objection of the Revenue is that the end product is not a fruit but it is edible oil or kemels and shells which are not consumable goods, and hence it does not satisfy the condition of section 80IB(11A) in the case of Delna Rustum Boyce Inre.the AAR has also held that the end product need not remain in the same form as the raw material. It may be in the form of juice or cut fruits or even oil or powder. As long as the end product is derived from the fruits or vegetables, the assessee is eligible for deduction u/s 80IB(11A) of the Act. In these circumstances, we are satisfied that the oil palm is a fruit and that it undergoes different processes before extraction of oil, and the palm oil is preserved under adjusted temperature and they are packed in large container or tanks and therefore, the assessee is eligible for deduction u/s 80IB(11A) of the Act. The assessee's appeals are accordingly allowed. In view of the aforesaid, it can be seen that packaging has been defined as a activity of wrapping/packing/covering the product with some material to delive products to consumers in perfect condition. In case of food items, packaging ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al processing that would not change the identity of the fruit. If processing and preservation is intended to be given to agro processing industries will operate in a very limited sphere, thereby defeating the very object of the provision. The extraction of juice and oil from the substances meant for preservation would legitimately fall within the sweep of the expression 'processing The fact that the fruit assumes a different form or that a series of operations are involved in preparing the mixed juices and concentrates which could be preserved for long does not take it out of bounds of processing. Processing in its wider sense would still be aptly applicable. 7.8 Considering the facts and circumstances of the case and respectfully following the decision of Hon'ble Courts (supra), the AO is not justified in disallowing the deduction at Rs. 6,47,46,882/- claimed u/s 80IB(11A) of the Act. Accordingly, the AC is directed to allow the deduction u/s 80IB(11A) of the Act. The addition made by th AO is deleted. This ground of appeal is allowed. 12.5 Thus, the CIT(A) has allowed the claim of the assessee by following various decisions including the judgment of Hon ble Supreme Court, ..... 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