CASE LAWS DETAILS
DECIDED BY: HIGH COURT OF KERALA
IN THE CASE OF: Tata Tea Ltd. Vs. ACIT, APPEAL NO: ITA No. 87 of 2009, DECIDED ON: January 21, 2010
3. In this context we notice that the decision of the Supreme Court in TARA AGENCIES’ case abovereferred was on assessee’s entitlement for weighted deduction on export market development allowance provided under Section 35B(1A) of the Act which is no longer in the statute. In our view, the scheme of deduction of export market development allowance earlier available and the scheme of exemption on export profits are different in nature. It may be noticed that exemption on export profit is available even to merchant exporters by virtue of the provisions contained under Section 80 HHC of the Income Tax Act Besides the exemption available on profits earned in export business by traders, specific provisions are incorporated in Sections 10A, 10AA and I OB providing for exemption to entire profits earned by industrial units in Free Trade Zones, Special Economic Zones and industries which are declared 100% Export Oriented Units. While deciding the issue in the case of the industry located in the Special Economic zone in .the case above referred, this court has taken into account the definition of “manufacture” contained in Chapter IX of the Export Import Policy 2002-2007, which is as follows:
“Manufacture” means to mate, produce, fabricate, assemble, process or bring into existence, by hood or by machine, a new product having a distinctive name, character or use and shall include processes such as refrigeration, repacking, polishing, labelling, re-conditioning, repair, remaking, refurbishing, testing calibration, re-engineering. Manufacture, for the purpose of this Policy, shall also include agriculture, aquaculture, animal husbandry, floriculture, horticulture, pisciculture, pwiltry, sericulture, viticulture and mining.”
This court also noticed that the definition of “manufacture1* contained in Section 2(r) of the Special Economic Zones Act, 2005, was incorporated later under Section 10AA of the Income Tax Act with effect from 10.2.2006, which is as follows:
“”Manufacture” means to make, produce, fabricate, assemble, process or bring into existence, by hand or by machine, a new product having a distinctive name* character or use and shall include processes such as refrigeration, cutting, polishing, blending, repair, remaking, re-engineering and includes agriculture, aquaculture, animal husbandry, floriculture, horticulture, piscfcailture, poultry, sericulture, viticulture and mining.”
The finding of this court is that the purpose of incorporation of Section 2(r) of the Special Economic Zones Act, 2005 into Section 10AA of the Income Tax Act is to provide a liberal meaning to the word “manufacture” which takes in even blending, refrigeration etc ft was noticed by this court that the definitions of “manufacture” contained in the above definition clauses are very liberal which takes in even processing like blending. The contention of counsel for the assessee is that the purpose of removal of definition of “manufacture” from Section 10B was not to provide a restricted meaning for that term contained in the main Section because if that was so, then the Legislature would have only modified the definition clause. Further, definition of 100% Export Oriented Unit even after the amendment is retained in the said Section, which defines it as an undertaking which has been approved as a 10096 Export Oriented Undertaking by the Board appointed in this behalf by the Central Government in exercise of powers conferred by Section 40 of the Industries (Development and Regulation) Act, 1951 and Rules made under that Act It is pertinent to note that the products for which assessee’s unit is recognised as a 100% Export Oriented Unit are tea bags, tea in packets and tea in bulk packs. In fact, assessee is exclusively engaged in blending and packing of tea for export and is not manufacturing or producing any other article or thing. Still it is recognised as a 100% Export Oriented Unit by the concerned authority within the meaning of that term contained in the definition clause of Section 10B of the Income Tax Act and the department has no case that assessee’s unit engaged in export of tea bags and tea packets is not a 100% Export Oriented Unit. So much so, in our view, if exemption is denied on the ground that products exported are not produced or manufactured in the industrial unit of the assessee’s 100% Export Oriented Unit, the same would defeat the very object of Section l0B. Further, industrial units engaged in the very same activity; i.e. blending, packing and export of tea in the Special Economic Zones and Free Trade Zones, will continue to enjoy tax exemption under Section 10A and Section 10AA respectively. The still worse position is that the appellant would be denied of export exemption available under Section 80 HHC even to a merchant exporter, hi our view, the decision of the Supreme Court in TARA AGENCIES case is not applicable for the purpose of considering exemption for industries in the Export Processing Zones, Free Trade Zones and to 100% Export Oriented Units covered by Sections 10, 10AA and 10B of the Income Tax Act Therefore, following the judgement of this court above referred we hold that assessee is entitled to exemption on the profit derived by its 100% EOU engaged in blending, packing and export of tea bags and tea packets. Consequently we allow the appeals by reversing the orders of the Tribunal and by restoring the orders of the first appellate authority declaring appellants entitlement for exemption.