INDIA AGRO EXPORTS PVT LTD.,CHENNAI vs. ITO, CHENNAI

This is an appeal filed by the assessee against the order of the Commissioner of Income-tax (Appeals)-9,Chennai in dated 28.02.2017 for the assessment year 2006-07.

In this appeal, the assessee has raised the following grounds:-

The Commissioner of Income tax (Appeals) erred in holding that the Honourable Courts had considered the effect of substitution of Section 10B of the Act with effect from 2001, even though it had been held that for the purpose of Section 10A, 10AA and 10B, the definition of ‘manufacture’ as mentioned in Chapter IX of Export Import Policy 2002 to 2007, and as mentioned in Section 2(r) of Special Economic Zones Act, 2005 will be considered.

It was submitted by the ld.A.R that the assessee is in the business of manufacture and export of gherkin pickles. It was a submission that assessee was entitled to claim deduction u/s.10B of the Act. It was a submission that the ld. Assessing Officer had disallowed the assessee’s claim on the ground that the assessee does not do any manufacture. It was a submission that ld. Assessing Officer had held that assessee only buys gherkins from farmers, sorts, grade them, puts in HDPE drums containing brine solution (salt water) & export them, and consequently, there was no manufacturing process involved. Therefore, ld. Assessing Officer was of the opinion that the assessee was not entitled to deduction u/s.10B of the Act. It was a submission that the assessee is a 100 percent Export Oriented Undertaking (EOU) approved by the appropriate authority. For this purpose, ld.A.R placed before us a copy of the license issued by office of the Development Commissioner, Cochin Special Economic Zone in respect of its unit at 47/1A & 48/1, Eddumudu Village, Horohalli Post, Kanakpura Main Road, Bangalore Rural-562 112. It was a submission that assessee had exported the articles and realized the proceeds within the statutory period for which evidences were produced. It was a submission that assessee was an exporter registered as a 100% EOU and it was manufacturing and producing the products as specified. For this purpose, the ld.A.R placed before us a copy of the Green Card issued to the assessee in respect of the said unit wherein under the head “Products Manufactured” it is specified ‘processed foods, pickles, fresh fruits and vegetables’. It was a submission that the issue was squarely covered by the decision of Co-ordinate Bench of this Tribunal in the case of Sterling Agro Products Processing (P) Ltd., Vs. ACIT reported in (2011) 48 SOT 0080(Chen Trib.), as also the decision of Co-ordinate Bench of Bangalore Tribunal in the case of Intergarden (India) P. Ltd Vs. ACIT reported in (2016) 46 CCH 0359 (Bang Trib) wherein it has been held that the assessee assessee being 100% EOU and as the assessee had undertaken process which had the significant effect on the raw nature, converting it into material capable of withstanding decay for considerable period of time, even though it was not “manufacture” as commonly understood, it cannot be denied that it resulted in a product which cannot be equated with raw gherkins and consequently, the assessee had been granted benefit of claim of deduction u/s.10B of the Act. The ld.A.R also placing reliance upon the decision of the Hon’ble Kerala High Court in the case of Tata Tea Ltd., Vs. ACIT, submitted that even though processing also qualified for exemption under the definition clause of ‘manufacture’ contained in section 10B and the definition of “manufacture” having been deleted from the provisions of the section 10B of the Act with effect from assessment year 2001-02, would not restrict the benefit of exemption to 100% EOU to goods as produced by them, other than through processing. It was a submission that Hon’ble Kerala High Court held in favour of the assessee. It was a submission that consequently as the assessee is a 100% EOU, which has been licensed for manufacturing of the processed foods and the assessee is having only the processed foods manufactured at its entitled unit, the assessee was entitled to claim of deduction u/s.10B of the Act.

In reply, ld.D.R submitted that the assessee was only adding salt water to the gherkin in plastic containers and there was no manufacturing involved. It was a submission that “process” is excluded and what is required is “manufacture”. It was a submission that the basic character of the raw materials remained intact. The ld.D.R vehemently relied upon the decisions cited by the ld.CIT(A) in page-6 of his order.

We have considered the rival submissions. A perusal of the various Tribunal decisions relied upon by the ld.A.R, more specific in the case of M/s. Intergarden (India) P. Ltd Vs. ACIT referred to supra and M/s. Sterling Agro Products Processing (P) Ltd., Vs. ACIT referred to supra, show that in both the cases, the process involved in the manufacture of the product were available before the Tribunal. In the present case, the basic fact itself is missing. What is the process done by the assessee, whether there is actual manufacture or not, has not been shown before the Tribunal. In fact, perusal of the license issued to the assessee as a 100% EOU, shows that under the head “Products Manufactured” it is specified ‘processed foods, pickles, fresh fruits and vegetables’. Admittedly, fresh fruits and vegetables are not manufactured items. What is the breakup of the processed foods, pickles, fresh fruits and vegetables which have been exported, have not been brought out before us. In fact, in the assessment order, the ld. Assessing Officer has made a blanket disallowance, the assessee has only given a general reply and claims the issue to be covered by various case laws. Neither the ld. Departmental Representative nor the assessee has been able to place the facts before this Tribunal.

In the result, the appeal of the assessee is partly allowed for statistical purposes.