PCIT,Kolkata-2 Vs V N Enterprises Limited
Date-30th September,2021
Forum-Calcutta High Court

Assessment Yrs 2002-03/2003-04
Sub-Whether blending of tea leaves amounts to manufacture within the meaning of Section 10B of the Income-tax Act,1961 to be eligible for deduction under the said section.

The Calcutta High Court CJ bench was considering the appeal of the department where the Calcutta Tribunal had allowed the assessee appeal by holding that blending of tea to be a manufacturing activity by allowing deduction of Rs 3.72 crore u/s 10B of the Act. The department argued that the exemption provisions has to be construed strictly following Commissioner of Customs (Import), Mumbai Vs. M/s. Dilip Kumar And Company & Ors., (2018) 9 SCC 1. It was also contended that the apex court in Commissioner of Income Tax Vs. Tara Agencies, [2007] 292 ITR 444 while interpreting Section 35B(1A) of the Act opined that blending of tea does not amount to manufacture. The counsel for the assessee argued that the assessee in the case in hand is a 100% export oriented unit. It buys tea of different varieties in bulk. With the help of machines and assistance of experts the same is cleaned, tested, blended and then packed for export and thus it was eligible for deduction. The Court finally noted the provisions of Section 10A, 10B, 10C, 10AA and the definition of manufacture which was added in the statute book w.e.f. 1/4/2009 in Section 2(29A) and following the decision in the case of Dilip Kumar(supra) and Union of India & Anr. v. Deoki Nandan Aggarwal, AIR 1992 SC 96 to the effect that it is not the duty of the Court either to enlarge the scope of the legislation or the intention of the legislature when the language of the provision is plain and unambiguous, allowed the department’s appeal following the decision in the case of Tara Agencies(supra).

The court also asked CBDT to consider the issue regarding the reconsidering the circular where the appeal of low-tax effect were being not pursued in those cases where legal issue was involved since the appeal for AY 2005-06 for the said issue was deemed to have been withdrawn due to this reason.

Ramesh Patodia
01-10-2021