COMMISSIONER OF INCOME TAX, KERALA versus M/S. TARA AGENCIES

Citation: [2007] 8 S.C.R. 136 · Decided: 09-07-2007 · Supreme Court of India · Bench: ASHOK BHAN · Disposal: Appeal(s) allowed

Cited by 1 judgment(s) · cites 1 · see the full citation network in Lexace

Judgment (excerpt)

A 
COMMISSIONER OF INCOME TAX, KERALA 
v. 
MIS. TARA AGENCIES 
JULY 9, 2007 
B 
[ASHO~ BHAN AND DAL VEER BHANDARI, JJ.] 
Income Tax Act, 1961: 
Section 35-B(JA)-Profits and gains from business-Permissible 
C deduction-Export market development allowance-Weighted deduction-
AY 1979-80-Assessee engaged in purchase of tea of diverse grades and 
brands and blending the same by mixing different kinds of tea for the purpose 
of export-Assessee,s claim for weighted deduction being a small-scale 
exporter under S. 35-B(JA) for the expendJture incurred for its export was 
D disallowed by Assessing Officer on the ground that the activity of the assessee 
did not amount to manufacture-Assessee 's appeal allowed by Tribunal on 
the ground that it was a small-scale industrial unit in the light of certificate 
of registration granted to it by the Directorate of Industries-High Court 
endorsed the decisio~orrectness of-Held: The assessee 's activity amounted 
to "Processing" only and the activity did not amount to either "production" 
E or "manufacture"-The term "processing" has not been included in S. 
35B(J A) and, therefore, the assessee was not entitled to weighted deduction 
under S. 35B(JA). 
F 
G 
H 
Words & Phrases: 
"Manufacture", "production" and "processing"-Meaning of -
Explained. 
The respondent-assessee was a registered firm engaged in the business 
of export of tea. The respondent-assessee purchased tea o( diverse grades and 
brands and blended the same by mixing different kinds of tea for the purpose 
of export. 
The respondent-assessee claimed weighted deduction being a small-
scale exporter under Section 35-B(lA) of the Income Tax Act, 1961 for the 
expenditure incurred for its export for the assessment year 1979-80. The 
136 
I 
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COMMNR. OF INCOME TAX, KERALA v. TARA AGENCIES 
137 
Income Tax Officer disallowed the claim of the respondent-assessee on the A 
ground that the activity of the assessee did not amount to manufacture. 
The appeal filed by the respondent-assessee was allowed on the ground 
that the respondent-assessee was a small-scale industrial unit in the light of 
certificate of registration granted to it by the Directorate of Industries. The 
B 
said decision was endorsed by the Income Tax Appellate Tribunal and the High 
Court Hence the appeal· 
\_ 
The following questions arose before the High Court-
(I) Whether the assessee who was engaged in the purchase of 
different qualities of tea and blending the same for the purpose c 
of export was entitled to weighted deduction under Section 35-
B(IA) of the Income Tax Act, 1961 in respect of expenditure 
incurred for its export for the assessement year 1979-80? 
(2) Whether the business activity of the assessee fell within the 
ambit of production, manufacturing or processing? 
D 
Allowing the appeal, the Court 
HELD: I.I. Undoubtedly, the facts of Nilgiri's case are identical to the 
facts of the present case and the ratio of Nilgiri 's case is fully applicable to 
this case. But it has to hew borne in mind a significant difference in the E 
language employed in Section 8 of the Bombay Sales Tax Act, 1953 in Nilgiri's 
case and the language of Section 35(1) (B) of the Income Tax Act, 1961 in the 
present case. The difference is that the term 'processing' which has been 
specifically incorporated in Nilgiri's case has been specifically omitted in the 
present case. Similarly, in Chowgule's case, the term 'processing' has been 
F 
incorporated in the statute and the activities of the assessee both in Chowgule 's 
and Nilgiri 's cases were held to be processing and, in these respective cases, 
the assessees were held to be entitled to the benefit under the respective 
statutes. In the present case the, same benefit cannot be extended to the 
respondent-assessee because the word 'processing' has been specifically 
· omitted in the statute. The activities of the assessee both in Nilgiri' and G 
Chowgule 's amount to processing. The activity of the respondent-assessee in 
the present case also amounts to 'processing' Section 35(1)(8) governing the 
instant case incorporated the terms 'manufacture' and 'production' and 
~,, 
J 
omitted the term 'processing'. Therefore, the respondent-assessee cannot be 
extended the benefit of Section 35(1)(8) of the Income Tax Act, 1961. 
H 
[Para 59) (156-C-G) 
138 
SUPREME COURT REPORTS 
[2007) 8 S.C.R. 
A 
1.2. The processing is only an intermediate stage of production and/or 
manufacture. The processing of tea of t

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