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The Tax PublishersITA No. 144 of 2018
2020 TaxPub(DT) 1462 (Cal-HC) : (2020) 424 ITR 0387 : (2020) 316 CTR 0569 : (2020) 275 TAXMAN 0578INCOME TAX ACT, 1961
Section 80-IB(5)
Poultry feed was not merely rice bran or maize or vitamins or minerals but a mixture of all in calculated proportions through a process involving mills and manufacturing by the use of machinery which run on electricity and where end product being the pellet is wholly different from each of the ingredients and resulted in a product which is commercially different and distinct as a commodity so that it could not be considered as any of the original commodities which were used as ingredients. Accordingly, production of poultry feeds constituted manufacture and assessee was entitled to deduction under section 80-IB(5).
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Deduction under section 80-IB(5) - Allowability - Whether activity of making poultry feed constituted manufacture or mere mixing as alleged by revenue -
Assessee engaged in activity of making poultry feed claimed deduction under section 80-IB(5). AO denied deduction on the ground that production of poultry feeds did not constitute manufacture as the mechanism of manufacture required that a new product id est a product with a different chemical composition than individual inputs used to make it be produced as the end result whereas all the ingredients used in Poultry feed were basically items which were even otherwise independently used for poultry feed. And the whole process amounted to just mixing together of all the different ingredients.Held: All that is necessary to take an activity out of realm of mere process to that of manufacture, would be that application of processes brought out a change to take the commodity to a commercially different and distinct commodity that it could no longer be considered as the original commodity. There does not have to be change of chemical composition of end poduct from that of original ingredients, to take an activity out of the purview of an ordinary process and constitute manufacture as argued by revenue. As evident, poultry feed was not merely rice bran or maize or vitamins or minerals but a mixture of all in calculated proportions through a process involving mills and manufacturing by the use of machinery which run on electricity and where end product being the pellet is wholly different from each of the ingredients and resulted in a product which is commercially different and distinct as a commodity so that it could not be considered as any of the original commodities which were used as ingredients. Accordingly, production of poultry feeds constituted manufacture and assessee was entitled to deduction under section 80-IB(5).
REFERRED : CIT v. Vinbros & Co. (2012) 349 ITR 697 (SC) : 2012 TaxPub(DT) 3092 (SC), CTO v. Jalani Enterprises 2011 (266) ELT 289 (SC) : 2011 TaxPub(EX) 520 (SC), ITO v. Arihant Tiles and Marbles Pvt. Ltd. (2010) 320 ITR 79 (SC) : 2010 TaxPub(DT) 1098 (SC), CST v. Pio Food Packers (1980) Supp SCC 174 : 1980 TaxPub(EX) 58 (SC) and Aspinwall & Co. Ltd. v. CIT (2001) 251 ITR 323 (SC) : 2001 TaxPub(DT) 1611 (SC)
FAVOUR : In assessee's favour.
A.Y. :
IN THE CALCUTTA HIGH COURT
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