Commissioner of Income-tax, Chennai v. S.Mahalakshmi
[Citation -2020-LL-0207-94]

Citation 2020-LL-0207-94
Appellant Name Commissioner of Income-tax, Chennai
Respondent Name S.Mahalakshmi
Court HIGH COURT OF MADRAS
Relevant Act Income-tax
Date of Order 07/02/2020
Judgment View Judgment
Keyword Tags manufacture or production • industrial undertaking • manufacturing activity • benefit of deduction • industrial activity
Bot Summary: 7.2.2020 in T.C.(A)407/2013 CIT v. S.Mahalakshmi 2/11 Urad into Urad Dhal was a manufacturing activity and therefore, the Assessee is entitled to deduction under Section 80IA of the Act. Further, the Ahmedabad Bench of the Tribunal in the case of Mukesh Trading Co. vs ITO also held that the process of converting raw urad into urad dal was manufacturing activity and assessee was entitled to deduction u/s 80IA of the Act. 7.2.2020 in T.C.(A)407/2013 CIT v. S.Mahalakshmi 3/11 in the case of ACIT, Bhopal vs. M/s.Shree Janki Overseas Pvt. Ltd.,, after taking into consideration the decision of the Hon'ble Supreme Court in the case of ITO vs. Arihant Tiles Marbles Pvt. Ltd., 320 ITR 79(SC), CIT vs. Oracle Software India Ltd., 320 ITR 546 and various other decisions reported in that order, came to the conclusion that manufacture of dal out of gram, moong, urad, masur, etc. The process of dehusking of Paddy into Rice with the aid of labour and machinery is definitely an industry activity undertaken by the Assessee. 7.2.2020 in T.C.(A)407/2013 CIT v. S.Mahalakshmi 8/11 'agricultural product' and therefore, the Assessee was entitled to the benefit under Section 35 of the Income Tax Act, which was designed for development of agricultural research specified thereunder. The Division Bench of Karnataka High Court, in the case of B.Raghurama Chetty case held that the said process of dehusking and milling of Paddy did not bring about new and different article and therefore, Paddy could not be said to have been consumed in the process of manufacture of Rice and hence, it will not amount to violation of the provision of Section 6 of the Karnataka Sales Tax Act and the Assessee would not be liable to pay Additional Sale Tax. Having heard the learned counsel for the parties and in view of the settled position of law, we are of the view that the learned Tribunal was justified in holding that the process of converting raw Urad into Urad Dhal is a manufacturing activity undertaken by the Assessee and therefore, the Assessee was entitled to deduction under Section 80IA of the Act.


Judgt. dt. 7.2.2020 in T.C.(A)407/2013 CIT v. S.Mahalakshmi 1/11 IN HIGH COURT OF JUDICATURE AT MADRAS DATED: 7.2.2020 CORAM HON'BLE DR.JUSTICE VINEET KOTHARI AND HON'BLE MR.JUSTICE R.SURESH KUMAR Tax Case (Appeal) No.407 of 2013 Commissioner of Income Tax Chennai Appellant Vs. Smt.S.Mahalakshmi PAN: AFZPM1125Q Respondent Tax Case (Appeal) filed under Section 260A of Income Tax Act, 1961 against order of Income Tax Appellate Tribunal, 'B' Bench, Chennai, dated 7.12.2012 made in ITA No.1523/Mds/2010. For Appellant Mr.M.Swaminathan Senior Standing Counsel assisted by Ms.V.Pushpa, Junior Standing Counsel For Respondent Mr.R.Vasumithran for Mr.N.Inbarajan JUDGMENT (Delivered by DR.VINEET KOTHARI,J) Heard learned counsel for both sides. 2. Revenue has filed present Appeal aggrieved by order passed by Income Tax Appellate Tribunal on 7.12.2012 holding in favour of Assessee that process of converting raw http://www.judis.nic.in Judgt. dt. 7.2.2020 in T.C.(A)407/2013 CIT v. S.Mahalakshmi 2/11 Urad into Urad Dhal was manufacturing activity and therefore, Assessee is entitled to deduction under Section 80IA of Act. 3. Appeal was admitted by co-ordinate Bench of this court by its order dated 22.8.2013, raising following purported substantial question of law:- "Whether on facts and in circumstances of case, Tribunal was right in holding that end product viz., dhall is different from input product viz., gram and assessee has engaged in manufacturing activity and eligible for deduction under Section 80IB?" 4. Tribunal has relied upon view of other Benches of Tribunal and Judgments of Hon'ble Supreme Court as well. relevant portion of order passed by Tribunal is quoted below for ready reference:- "17. Further, Ahmedabad Bench of Tribunal in case of Mukesh Trading Co. vs ITO (supra) also held that process of converting raw urad into urad dal was manufacturing activity and assessee was entitled to deduction u/s 80IA of Act. Similarly, Indore Bench of Tribunal http://www.judis.nic.in Judgt. dt. 7.2.2020 in T.C.(A)407/2013 CIT v. S.Mahalakshmi 3/11 in case of ACIT, Bhopal vs. M/s.Shree Janki Overseas Pvt. Ltd., (supra), after taking into consideration decision of Hon'ble Supreme Court in case of ITO vs. Arihant Tiles & Marbles Pvt. Ltd., 320 ITR 79(SC), CIT vs. Oracle Software India Ltd., 320 ITR 546 (SC) and various other decisions reported in that order, came to conclusion that manufacture of dal out of gram, moong, urad, masur, etc. was commercially new and distinct end product and therefore, amounts to 'manufacture' and assessee was entitled to deduction u/s. 80IB(3)(ii) of Act. 18. In view of above, and respectfully following above quoted decisions of Tribunal, we do not find any good and justifiable reason to interfere with order of CIT(A). It is confirmed and grounds of appeal of Revenue are dismissed. 19. In result, Appeal of Revenue is dismissed." http://www.judis.nic.in Judgt. dt. 7.2.2020 in T.C.(A)407/2013 CIT v. S.Mahalakshmi 4/11 5. Now, both learned counsel submitted that recently, this court has also taken view in CIT v. Muthuramalingam Modern Rice Mill ((2019) 105 taxmann.com 39 (Madras)) that process of converting Paddy into Rice is also manufacturing activity and therefore, Assessee was entitled to deduction under Section 80- IA/80-B of Act. relevant portion of said Judgment of this Court is quoted below for ready reference:- "14. On consideration of case laws relied upon by both sides and provisions of Act itself, we are of considered opinion that benefit of Deduction under Section 80IA/ and 80IB of Act was intended to promote industrial activity in field of infrastructural development and other sectors and those engaged, in process of manufacture or production of articles or things not included in Eleventh schedule of Act, were held entitled to avail such deduction. 15. words manufacture or production employed jointly in said provisions do not permit us to take narrow or pedantic approach in matter. On other hand, pragmatic and http://www.judis.nic.in Judgt. dt. 7.2.2020 in T.C.(A)407/2013 CIT v. S.Mahalakshmi 5/11 purposive interpretation deserves to be put to these words of wider connotations. 16. These words "Manufacture or production" cover within their ambit any activity by which, different commercial article, having different commercial value, is brought into existence by process of 'Manufacture or Production'. When Paddy in husk is converted into Rice by process of dehusking, by manual or mechanical process it cannot be said, by any stretch of imagination that there is no transformation of article. husked Paddy is not de-husked Rice, and not only form undergoes change but also value addition happens by such process. different commercial article undoubtedly comes into being. industrial activity by employing men and machine in industrial undertaking of Assessee is not even doubted by Revenue. It is also not in dispute that Rice and Paddy are two different things, but only contention which Revenue seeks to raise before us is that said process of dehusking http://www.judis.nic.in Judgt. dt. 7.2.2020 in T.C.(A)407/2013 CIT v. S.Mahalakshmi 6/11 is not covered by terms "Manufacture". We cannot accept this submission for simple reason that while investment in Industry is made by Assessee and carrying of industrial activity is not disputed and article in question viz., husked Paddy and Rice are two different articles having different value, what can be reason to deny them benefit under Section 80 IA and 80 IB of Act. We see no reason, much less any justifiable reason, for denial of said benefit to Assesee before us. 17. We find that definition of word Manufacture though was not available in Assessment Years before us upto 2003-2004, but said definition embodies concept of transformation of object or article into different commercial article as was discussed in several judicial pronouncements from time to time. If different commercial article comes into existence as understood by persons who deal with those things, different approach need not be taken by http://www.judis.nic.in Judgt. dt. 7.2.2020 in T.C.(A)407/2013 CIT v. S.Mahalakshmi 7/11 Courts of law to hold otherwise. dehusked Paddy and Rice obviously are not sold on same rate nor can they be consumed for same purpose in same form. Therefore, process of dehusking of Paddy into Rice with aid of labour and machinery is definitely industry activity undertaken by Assessee. cases relied on by learned counsel for Revenue are not only in different contexts but finally resulted in giving benefit to Assessee, depending upon context of concerned enactment. Even in case before CESTAT, in case of Dunar Foods Limited (supra) it was held that Rice and husk remain in natural form and both of them continue to be covered by term "agricultural product" as was held by Hon'ble Supreme Court in case of M/s.Cynamid India Ltd., (supra). In said case, Hon'ble Supreme Court held that conversion of Paddy into Rice is not industrial operation and Rice and husk remain in their natural form as result of dehusking and are covered by term http://www.judis.nic.in Judgt. dt. 7.2.2020 in T.C.(A)407/2013 CIT v. S.Mahalakshmi 8/11 'agricultural product' and therefore, Assessee was entitled to benefit under Section 35 of Income Tax Act, which was designed for development of agricultural research specified thereunder. Similarly, Division Bench of Karnataka High Court, in case of B.Raghurama Chetty case (supra) held that said process of dehusking and milling of Paddy did not bring about new and different article and therefore, Paddy could not be said to have been consumed in process of manufacture of Rice and hence, it will not amount to violation of provision of Section 6 (1) of Karnataka Sales Tax Act and Assessee would not be liable to pay Additional Sale Tax. 18. Therefore, we are of opinion that it would depend upon context in which words Manufacture or production have to be interpreted by Court of law. In present case, context is whether industrial activity in form of dehusking of Paddy into Rice amounts to Industrial undertaking engaged in ' Manufacture or http://www.judis.nic.in Judgt. dt. 7.2.2020 in T.C.(A)407/2013 CIT v. S.Mahalakshmi 9/11 production' of Rice or not. 19. In said context, in view of aforesaid cases, we find no reason to hold that activity of dehusking of Paddy into Rice will not amount to "manufacture or production". We do not find justification to give narrower meaning to these terms, which, by themselves independently or jointly as employed in said provisions of Section 80IA are wide enough to cover industrial activity undergone by Assessee." 6. Having heard learned counsel for parties and in view of settled position of law, we are of view that learned Tribunal was justified in holding that process of converting raw Urad into Urad Dhal is manufacturing activity undertaken by Assessee and therefore, Assessee was entitled to deduction under Section 80IA of Act. 7. We do not find any merit in Appeal and Appeal filed by Revenue deserves to be dismissed. Accordingly, it is dismissed and question of law is answered in favour of Assessee and against Revenue. No costs. (V.K.,J.) (R.S.K.,J.) 7.2.2020 Judgt. dt. 7.2.2020 in T.C.(A)407/2013 CIT v. S.Mahalakshmi 10/11 Index Yes/No Internet Yes/No To 1. Commissioner of Income Tax Chennai 2. Income Tax Appellate Tribunal, 'B' Bench, Chennai, 3. Income Tax Officer, Ward III(1), Tiruchirapalli. http://www.judis.nic.in Judgt. dt. 7.2.2020 in T.C.(A)407/2013 CIT v. S.Mahalakshmi 11/11 DR.VINEET KOTHARI, J. and R.SURESH KUMAR, J ssk. TC(A) No.407 of 2013 7.2.2020 Commissioner of Income-tax, Chennai v. S.Mahalakshmi
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