M/S BISSESWARIALL MANNALAL & SONS,KOLKATA vs. DCIT, CIR-33, KOLKATA, KOLKATA

आदेश / O R D E R

Per Dr. Arjun Lal Saini, AM:

The captioned appeal filed by the assessee, pertaining to Assessment Year 2011- 12, is directed against an order passed by the Commissioner of Income Tax(Appeals)-10, Kolkata which in turn arises out of an order passed by the Assessing Officer u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’), dated 10.03.2014.

“3.We have given a careful consideration to the rival submissions and perused the materials available on record, we note that dispute is in respect of claim for deduction under section 80IC (2) (b) (iii) of the Act. The assessee under consideration is engaged in both activities, that is, growing/cultivation of tea as well as manufacturing of tea. However, while adjudicating the claims of the assessee in respect of deduction u/s 80IC of the Act, we have taken a view that this issue involved is squarely covered in favour of

M/s Bisseswarlall Mannalal& Sons ITA No.1140/Kol/2015 Assessment Year:2011-12 the Revenue by the judgment of the Coordinate Bench in ITA No.740 & 741/Kol/2010, order dated 21.03.2013 in the case of M/s. Sewajpur Tea Co. Pvt. Ltd. However, through this M.A., it was brought to our notice that in the case of M/s. Sewajpur Tea Co. Pvt. Ltd. it was only engaged in manufacturing of the tea and there was no dispute of the fact that it is a standalone manufacturing tea company and that company does not do the cultivation of tea and therefore, it did not had with it Garden Registration certificate which is issued by the Tea Board of India and thus it is apparent that assessee did not own any tea garden. And since M/s. Sewajpur Tea Co. Pvt. Ltd. was not engaged in carrying on business of cultivation of tea, which was an essential ingredient to be qualified for claiming deduction under section 80-IC of the Income Tax Act, 1961 the claim of that assessee was rejected. However, on the other hand, it was brought to our notice that assessee company owned a Tea Estate situated in Silchar District of Assam. It was submitted before us that the assessee company, in order to utilize installed manufacturing capacity, purchased green leaves from the market also. Thus it was brought to our notice that the judgment of the Coordinate Bench of this Tribunal in the case of M/s. Sewajpur Tea Co. Pvt. Ltd. (Supra) is not applicable to the assessee company under consideration, as facts of the assessee company is different as discussed above. Since we have relied on the decision of the Coordinate Bench of the Tribunal in M/s. Sewajpur Tea Co. Pvt. Ltd. to decide the issue in assessee’s case, and it has been shown before us that case law is not applicable to the facts of the assessee’s case, therefore, we are of the view that the order of the Tribunal dated 31.01.2018 contains an apparent mistake and should be recalled. Therefore, we direct the Registry to fix the appeal in due course.”

Reliance is placed on the decision of the Calcutta High Court in the case of CIT -vs.- Singla Tea & Agriculture Industries Ltd., reported in 250 ITR, page 274, wherein income earned by the assessee by way of Services charges in Tea business was allowed to be set off against loss suffered in business of cultivation and manufacture of tea. Therefore, it is further submitted that where there is common management and control of a business, loss of earlier years has been allowed to be set off against the income from business of current assessment years. It was further held that since the management was common in running tea gardens, rendering services to other tea gardens, could be treated as the same business for the purpose of section 72. In the case of C.I.T. -vs.- Margarette Hope Tea Co. Ltd., reported in 201 ITR page 747, the Hon'ble Calcutta High Page | 2

M/s Bisseswarlall Mannalal& Sons ITA No.1140/Kol/2015 Assessment Year:2011-12 Court has held that since assessee's main activity was cultivation, manufacture and sale of tea, the Tribunal was justified in holding that the amount of cash credit may be treated as income of the assessee company from its tea business and not as income from undisclosed sources. The facts in the present appeal are stronger than the facts in the above two decisions. In the present case the assessee amongst others, carried on business of cultivation and manufacture of tea from its own plantations, situated in the state of Assam, North-Eastern State of India. Having satisfied that the assessee has undertaken in the previous year relevant to the assessment, year 2005-06, substantial expansion, the Assessing Officer has allowed appellant's claim for exemption U/s 801C of the Act in respect of profits derived from its aforesaid eligible business of cultivation and manufacture of tea. During the Financial Year 2010-11, the assessee plucked from its own plantations 6327063 kg of green leaf purchased from the market, 435637 kg., both the purchased green leaf and plucked green leaf was mixed together and consumed for manufacture of 1583504 kg. of black tea. The black tea was manufactured could not be distinguished, whether it was made out of purchased leaf or out of own leaf, so manufactured total black tea was sold by the appellant to its customer under its own brand name. Accounts for carrying on the entire activity, the funds deployed therein and the management of the total activity of cultivation and manufacture of tea was common. The tea manufactured from purchased leaf could not be separated from tea manufactured from own leaf. This activity was therefore totally dove-tailed. The same could not be seen separately. In the circumstances, the profit earned by the appellant from the sale of black tea manufactured from purchased green leaf along with its own leaf has to be considered as part and parcel of the same business, i.e. cultivation and manufacture of tea. Exempted claim of the assessee in respect of such profit U/s 801C of the Act also have been allowed by the authority below.”

“At the time of hearing of the case on 28.01.2019 the Bench asked to furnish a written submission on the issue of deduction uls 80 IC Rs.34,73,556/-in this case. Your honour is requested to kindly consider the following submission while deciding that issue.

During the year under consideration, assessee company earned the profit from raising of tea leaf in their own plantation and processing of the same, and also from processing of purchased tea-leaf from outside and claimed deduction u/s 80 IC against the profit earned from both the activities. Issue is ,whether both the activities are to be done simultaneously to claim such benefit.It is an admitted fact that assessee had not maintained any separate set of account for such activity to ascertain actual profit derived from two separate sources. Section 80-IC(2)(b) read with item 12 of Schedule 14 shows that for claiming deduction under this section assessee needs to be engaged in "Processing and raising of plantation crops - tea"

The AO observed that, only if the assessee is engaged in carrying on both the activities together i.e. processing and raising of plantation crop of tea, then only they are entitled for such benefit. For sing only one activity being raising or just processing of tea is not enough for claiming such benefit. In the submission assessee argued 'that word "and" between "processing" and "raising" should be read as "or". It means that word

M/s Bisseswarlall Mannalal& Sons ITA No.1140/Kol/2015 Assessment Year:2011-12 "and" be interpreted here only as "or" , and not as "and" , which actually mixes two activities together, where "or" separates it. This is important to consider how the dictionary meaning of the word "and" can have the meaning of "or" also. If that had been the intention of the legislation, there was no requirement of introduction of the word "and " there instead of "or " to create a confusion intentionally.

The sequence of the words used does not change the intention. It is not important which words used first, whether processing or raising. The issue is both the things to be done one after another in their natural sequence and same should not be interpreted as per our convenience.

The intention of the legislation for allowing deduction u/s 80-IC (2)(b) needs to be considered in the proper prospective. Plain reading of the provisions shows that such benefit should be given to those who done both the activities.

In a normal situation , under rule 8(1) where income is derived from the sale of tea 'grown and manufactured' by the seller in India shall be computed as if it were income derived from business, and forty per cent of such income shall be deemed to be income liable to tax and the remaining sixty percent should be considered as deemed agricultural. Thus, the person growing of tea and selling the tea leafs are already been considered for allowance of a benefit of exemption of sixty percent of such profit directly.In such context it needs to be considered, whether raising of tea-leaf along can also be considered for deduction u/s 801C (2)(b) also. That is unlikely. If that is not allowable, how only processing activity alone can be entitled for such benefit.

There is nothing special in processing of tea for allowance of this benefit.The processing of tea can be done by any person from anywhere in India. It is apparent, this benefit has been intended for the tea planters who after' raising tea-leaf also process it, and thus, created a self-contained activity, and the legislation wanted to incentivise those persons.

On this issue, I rely on the judgement the Hon'ble ITAT , Kolkata bench in its order in the case of DCIT Circle-4 Kolkata Vs. Sewujpur Tea Co. (P.) Ltd [2013] 34 taxmann.com 124 (Kolkata- Trib), where assessee was only in the activity of processing of tea and claimed deduction u/s 80-IC on the ground that processing and raising of plantation of tea are separate activities, and as the assessee is engaged in processing activities they are entitled for deduction u/s 80-1C.

In the case in para "5", Ld. ITAT observed as under ;-

"An article and things has been mentioned subsequently to that. If we see the activities in item no.1 between the activities, the word "or" has been used as is apparent in the case of "fruit" and "vegetable", "processing industries, manufacturing or producing". Similarly in item no.2 also, between the activities, the word "or" has been used, manufacturing or producing. Similarly, in item no.4 also, the word "or" has been used between the activities, while in item no.12, the word "and" has been used between activities. It clearly denotes that both the conditions, i.e., processing and raising of plantation crops must be specified by an undertaking eligible for deduction under section 80IC(2)(b). This is the settled law that a fiscal statute shall have to be interpreted on the basis of the language used therein and not de hors the same. No words ought to be added and only the language to be used or considered so as to ascertain the proper meaning and intent of the legislation. The Court is to ascribe the natural and ordinary meaning to Page | 4

M/s Bisseswarlall Mannalal& Sons ITA No.1140/Kol/2015 Assessment Year:2011-12 the words used by the legislature and the Court ought not, under any circumstances, statute to its own impression and ideas in place of the legislative intent as is available from a plain reading o[the statutory provisions. The Hon 'ble Supreme Court in the case of Orissa state Warehousing Corpn v. CIT [1999]237 ITR 589/103 Taxman 623 has clearly held that an exemption is an exception to the general rule and since the same is opposed to the natural tenure of the statute, the entitlement for exemption, ought not to be read with any latitude to the taxpayer of even with a wider connotation to restrict its application to the specific language used depicting the intent of the Legislature. The decision of the Hon'ble Supreme Court is binding on us. This decision is delivered subsequent to the decision of the Hon'ble Supreme Court in the case of Bajaj Tempo Ltd. (supra) on which the Id. A.R. has vehemently relied on. This is the settled law in view of the decision of Govinda Niak v. West Patent Press AIR 1980 kar. 92 (FB) and Bhika Ram v. Union of India [1999] 238 1TR 113 (Delhi) that even there is a conflict between the two decisions of the Supreme Court, the one decided by a Larger Bench is binding if both decisions are rendered by the Bench consisting of equal number of Judges, the latter decision is binding."

In para no. 5.1 of the order it is further observe that :-

"We are of the view that there is no ambiguity in the provision as stipulated under the said schedule 14 and this is a settled law in view of the decision of the Hon'ble Supreme Court in the case of IPCA Laboratory Ltd. v. Dy CIT [2004]266 ITR 521/135 Taxman 594 that when there is no ambiguity in the provisions of the statute, the provisions cannot be interpreted to confer benefit on the assessee. Even Mumbai High Court in the case of Indian Rayon Corporation Ltd. v. CIT [1998] 231 ITR 26/97 Taxman 501 (Bom) has categorically held that principles of beneficial interpretation would apply only in a case where the Court is in doubt about the true scope and ambit of the provisions or finds two equally reasonable interpretations where the words of the statute are plain, precise and unambiguous. In view of our aforesaid discussions, we are of the firm view that until and unless complied with the conditions of engaging in processing and raising of the plantation of tea, the assessee cannot be allowed deduction under section 80IC(2)(b)."

In this case this is to be considered whether assessee is entitled for benefit of section 80- IC(2)(b) in respect to the tea proceed out of the tea leaves purchased from the market. The assesee has not made any separate account to ascertain the actual profit derived out of the tea leaves grown and processed by it, and out of the tea leaves purchased and processed by it, and so, it is not possible to determine the actual profit derived from two separate activities, and therefore, no deduction is allowable under this section.”

M/s Bisseswarlall Mannalal& Sons ITA No.1140/Kol/2015 Assessment Year:2011-12 Sl.no Source of Income Amount (Rs)

The assessing officer observed that to decide upon whether the assessee is eligible to have the deduction under 80-lC, it isimperative to confirm that sources of income are actually arising from the activity ofprocessing and raising of plantation crops-[tea in this case] and there should be nexusbetween income and activity of processing and raising of plantation crops [Tea]. a) The assessee in core has two sources of lncome, one income is arising from cultivation,manufacturing and sale of tea [source one (1)] and second is income arising from Bought leafmanufacture [source two (2)]. Although the eligibility of the source one (1) is apparentlyvalid on record by law, it is the source two (2), whose eligibility for deduction under theSection 80-IC of the Act is ascertainable in fact and questionable in law. The assessee maintains two channels of business and distinguish the income arising from two different sources (1&2).It implies that assessee on one side engaged in processing and raising plantation crops, alsoadditionally involves only in processing of plantation crops (Tea) [in a separate andindependent mode], by purchasing Bought leaf from nearby garden. The key word is "separate and independent". The assessee also maintains the sale proceeds of the both thesources in a separate book of accounts and brings both the income under one roof and claimsdeduction under 80-lC of the Act In view of above, during the assessment proceedings, the assessee was asked to explain the validity of the claiming deduction for thesource Sl.no 2.i.e Income from Bought Leaf manufacture. In response to that the assessee submitted that he used to purchasegreen leaf from other gardens when there is a less production of green leaf from theirown garden and to utilize the factory production capacity by providing the required greentealeafs. It can't be differentiate the income derived from bought leaf andown leaf, that's why the total income was treated as business income and claimed undersection 80-1C.Since all

M/s Bisseswarlall Mannalal& Sons ITA No.1140/Kol/2015 Assessment Year:2011-12 the above incomes were generated by their garden, and should be treated as Business income. The assessing officer observed that response by the assessee was considered in view of Operational requirement, Businessdynamics and Commercial necessity. However,the question of law in this matter was of scopeand ambit of the item no. 12 of the fourteen schedule of the Act that allow deduction for theincome arising from the activity of Processing and raising of the plantation crops. The AO noted that fundamental question here was whether, in order to claim the tax deduction under section 80-IC(2) (b): i) Is assessee required to carry on both activities i.e. processing as well as raising of plantation crop- tea to claim deduction under section 80-IC (2)(B)? or carry oneither one of the activity i.e. processing or raising and ii) Is processing and raising an integrated scope or independent entities? From the response of the assesse ,it was understood that assessee has taken view that word"and" between "processing" and "raising" should be read as "or". The deduction is availableto any person engaged either in processing or raising of the plantation crops. The assessee is not required to carry on both the activities i.e. processing as well as raising of the plantationcrops.

M/s Bisseswarlall Mannalal& Sons ITA No.1140/Kol/2015 Assessment Year:2011-12 Act.Here,the clear aim and object of the legislature is to provide tax benefit to the assessee who are engaged both in cultivation and processing. 7.We note that, it is the settled law that a fiscal statue shall have to be interpreted on the basis of thelanguage used therein and not dehors the same. We note that there is no ambiguity in the provision as stipulated underthe said schedule l4 and this is asettled law in view of the decision of the Apex court in the case of IPCA Laboratory Ltd vDy,CIT[2004] 266 ITR 521/135 TAXMAN594 that when there is no ambiguity in theprovisions of the stature, the provisions cannot be interpreted to confer the benefit on the assessee. Even Mumbai High court in the case of Indian Rayon CorpLtd vs CIT[1998]23ITR26/97taxman.501(BOM), has categorically held that principles of beneficialinterpretation would apply only in a case where there is a doubt about the true scope andambit of the provisions. In view of above, the AO noted that unless conditions of engaging in processing and raising of plantation crops is met or complied, deduction under section 80-IC(2)(b) of the Act cannot be allowed to the assessee. Therefore, the Income of Rs. 34,73,556/- arising from bought Leaf manufacturedwas not considered as eligible business income and excluded from the benefit of deductionunder section 80-IC of the Act.

[THE FOURTEENTH SCHEDULE] See SECTION 80-IC(2) List of articles or Things or Operations Part A For the North Eastern states 1. Fruit and vegetable processing industries manufacturing orproducing- (i) canned or bottled products; Page | 8

M/s Bisseswarlall Mannalal& Sons ITA No.1140/Kol/2015 Assessment Year:2011-12 (ii) Aseptic packaged products; (iii) Frozen products; (iv) De-hydrated products; (v) Oleoresins.

(i) Milk powder; ( ii) Cheese; ( iii) Butter/ ghee; (iv) Infant Food; (v) Weaning food; (vi) Malted milk food. 6. Food packaging industry. 7. Paper products industry. 8. Jute and mesta products industry. 9. Cattle or poultry or fishery feed products industry. 10. Edible oil processing or vansapati industry, 11. Processing of essential oils or fragrances industry.

M/s Bisseswarlall Mannalal& Sons ITA No.1140/Kol/2015 Assessment Year:2011-12 12. Processing and raising of plantation crops, tea, rubber, coffee, coconuts etc. 13.Gas based Intermediate Products Industry manufacturing or producing - (i)Gas exploration and production; ( ii)Gas distribution and bottling; (iii)Power generation (iv)Plastics; (v)Yarn raw materials; (vi)Fertilizers; (vii)Methanol; (viii)Formaldehyde and FR resin melamine and MF Resin; (ix)Methylamine, Hexamethylene tetramine, Ammonium bi-carbonate; (x)Nitric Acid and ammonium Nitrate; (xi)Carbon Black; (xii) Polymer chips. 14.Agro forestry based industry. 15.Horticulture Industry. 16.Mineral based industry. 17.Floriculture Industry. 18. Agro based industry. ** “Or" and "and" have been highlighted in the Fourteenth Schedule foreffect only.

It is apparent from the above Fourteenth Schedulethat the "activities" or "operations"covering the Articles to be "manufactured" or "processed" have beenclearly spelt out, and is highly exhaustive. In certain situations thebenefits are to be given when the taxpayer may be "manufacturing" or"producing", such as those listed at serial numbers 1,2,3,4 and 5. HereOR appears to qualify the "activity", and may mean that the eligibilitywould be conferred if either there is "manufacture' or "production". Incertain other situations the word OR seems to point out that the eligibilitywould be covered if any one or more of the products are being made,whether "manufacturing" or "processed" or both has not been mentioned.These are more easily discernible for items at serial numbers 9, 10 and11.

9.We note that if the item appearing at serial no. 12 of the FourteenthSchedule, which is mentioned above as, “12. Processing and raising of plantation crops, tea, rubber, Page | 10

M/s Bisseswarlall Mannalal& Sons ITA No.1140/Kol/2015 Assessment Year:2011-12 coffee, coconuts etc.” is examined, it appears that "processing and raising" wouldbe a composite and conjoint activity, and ought to be treated as suchwhile interpreting the possible benefits to the taxpayer. The AO'sobservation that for this particular point of activity at serial no. 12 of the schedule, the "activity" has been mentioned first, and then the "article" or"thing" follows appears to be entirely logical and correct. The AO'sobservation that both the conditions ,i.e., processing and raising ofplantation crops must be undertaken by an assessee to be eligible fordeduction U/s 80-IC of the Act, appears to be the correctinterpretation. Herein, it has to be noted that an exemption is clearly anexception to the general rule and as the same is opposed to the naturaltone and tenor of the taxing statute, the entitlement for exemption oughtnot to be read with any latitude to the taxpayer or even with a wider connotation, but to restrict its application to the specific language useddepicting the intention of the Legislature. This appears to be the ration emanation in the following judgments: a. Orissa State warehousing Corporation Vs CIT (SC) 237 ITR 589 b. Renuka Datla Vs CIT &Anr. (AP) 240ITR 463 c. Novopan India Ltd Vs Commissioner of Central Excise 1994 (73)E.L.T. 769(SC) d. Bombay Chemicals Pvt Ltd Vs CCE (SC) 1995 AIR 1469

M/s Bisseswarlall Mannalal& Sons ITA No.1140/Kol/2015 Assessment Year:2011-12 that, in the firstinstance, the grammatical sense of the word is to be adhered to. If suchadherence appears to be contrary to or inconsistent with the expressed intention, or declared purpose of the statute, or if it would involve anyabsurdity, repugnancy or inconsistency, then only the grammatical sensemay need to be modified, extended or abridged, so far as to avoid suchinconvenience, but no further. The elementary rule is that words used in asection must be given their plain grammatical meaning. In saying sostrength is drawn from the following judgments: a. CIT Vs Gautam Sarabhai Trust ( Guj) 173 ITR 216 b. CBDT Vs Cochin Goods Transport association (Ker) 236 ITR 993 c. M.P.Poddar (HUF( &Anr. Vs Appropriate Authority &Anr( Del) 240ITR 372

As the reasonable,unequivocal and unambiguous conclusion is that the assessee must carryout both the activities, there cannot be any other alternate possibility. This is settled position of lawin view of the case of IPCA Laboratory Ltd V DCIT(2006)(SC)(266 ITR 521) (supra), that where there is no ambiguity in the provisions of the statute,the provisions cannot be interpreted to confer any benefit to the assessee. Also in the case of Indian Rayon Corporation Ltd V CIT (231 ITR26) (supra), the Hon'ble Mumbai High Court has adjudicated that where itconcerns the principles of beneficial interpretation, they would apply onlyin a case where the Court is in doubt about the true scope and the ambitof the provisions, or finds two equally reasonable interpretations wherethe words of the statute are plain, precise and unambiguous.

“52.To sum up, we answer the reference holding as under

(1)Exemption notification should be interpreted strictly;the burden of proving applicability,would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification.

M/s Bisseswarlall Mannalal& Sons ITA No.1140/Kol/2015 Assessment Year:2011-12 (2). When there is ambiguity in exemption notification, which is subject to strict, interpretation, the benefit of such ambiguity,cannot be claimed by the assessee andit must be interpreted in favour of the revenue. (3).The ratio in Sun Export case (supra) is not, correct and all the decisions which took view as in the Sun Export case (supra) stands over -ruled.

Under the facts and circumstances as well as the legal position in the matter, as explained above, we do not find any merit in assessee`s appeal, as the assessee is not eligible to claim deduction under section 80-IC(2) (b) of the Act, in respect of green tea leaf purchased from outside market. Hence, we find no reason to interfere in the said order of the ld CIT(A) and the same is hereby upheld. Therefore, ground No.3 of appeal of Assessee is dismissed.

Order is pronounced in the open court on 24.04.2019.

Sd/- Sd/- (A.T.Varkey) (DR. A.L.SAINI) �ाियकसद� / JUDICIAL MEMBER लेखासद� / ACCOUNTANT MEMBER

िदनांक Dated 24/04/2019

SB, Sr. PS Copy of the order forwarded to: 1. M/s Bisseswarlall Mannalal& Sons 2. DCIT, Cir-33, Kolkata 3. C.I.T(A)- 4. C.I.T.- Kolkata. 5. CIT(DR), Kolkata Benches, Kolkata. 6. Guard File.