ORDER
N.K. Saini, A.M.
This is an appeal filed by the department against the Commissioner (Appeals)s order dated 10-5-1994 for the assessment year 1988-89 passed under section 251/143(3) of the Income Tax Act, 1961.
2. The appeal is time-barred by nine days. On the basis of the application dated 19-9-1994-and also as per the arguments advanced by the learned Departmental Representative, we condone the delay on merit and the appeal is admitted.
3. The department took the following ground in this appeal:
“The learned Commissioner (Appeals) was not justified in directing the assessing officer to collect date to come to a finding whether the appellant-company did carry on Tea blending operation using the stipulated number of employees and thereby fulfil the requirement of section 80-I(2)(iv) when such business of Tea blending did not come under the expression manufacture or processing of goods to be able to enjoy the benefit of section 80-I”.
4. To start the argument, the learned Departmental Representative relied on the order of the assessing officer and mentioned that the assessee is claiming deduction in respect of profit and gains from industrial undertaking under section 80-I but the assessee is not engaged in the manufacturing process as required under section 80-I(2)(iv). He has drawn our attention to the object of the section 80-I which provides that deduction is available to an assessee whose gross total income includes any profit and gains derived from an industrial undertaking which fulfils all the conditions laid down in section 80-I(2). He further submitted that the tea blending is not involving any industrial process, so the same cannot be called as manufacturing activity. In support of his argument, he relied on the ratio laid down by the Bombay High Court in the case of J.B. Advani & Co. (P.) Ltd. v. CIT (1992) 193 ITR 781. Lastly, he justified the addition made by the assessing officer.
5. On the other hand, the learned authorised representative relied on the order of the Commissioner (Appeals) and submitted that in the previous assessment years 1985-86 and 1986-87, similar dispute came before the Tribunal (ITA No. 1068 (Cal) of 89 and 329 (Cal.) of 90). The Tribunal in its order dated 28-9-1992 and 29-6-1993 (copies on record) discussed the issue and by following the ratio laid down by the jurisdictional High Court in the case of G.A. Renderian Ltd. v. CIT (1984) 145 ITR 387 (Cal), accepted the plea of the assessee and dismissed the departmental appeals. At the end, he made a request that the appeal in hand may kindly be dismissed.
6. We have heard both the parties at length and gone through the materials available on record from which it appears that the assessee is engaged in the tea blending activities.
The word “blending” is not defined in the Income Tax Act. However, the dictionary meaning of the blending is the mixing or the mixture. As per Websters Dictionary, “process” means “to subject to some special process or treatment, to subject (especially raw material) to a process of manufacture development or preparation for the market, etc., to convert into marketable form as livestock by slaughtering, grain by milling, cotton by spinning, milk by pasteurizing, fruits and vegetables by sorting and repacking.” Similarly, it is defined in section 2(m) of Oil Industries Development Act. The jurisdictional High Court in the case of G.A. Renderian Ltd. (supra) discussed the word “process” used in the definition of the industrial company in section 2(7)(c) of the Finance Act, 1978. The Honble jurisdictional High Court observed that
“The nature and extent of processing may vary from case to case; in one case the processing may be slight and in another it may be extensive; but with each process suffered, the commodity would experience a change. Wherever a commodity undergoes a change as a result of some operation performed on it or in regard to it, such operation would amount to processing of the commodity. The nature and extent of the change is not material. The question is not whether there is manual application of energy or there is application of mechanical force. Whatever be the means employed for the purpose of carrying out the operation, it is the effect of the operation on the commodity, that is material for the purpose of determining whether the operation constitutes processing”.
The assessee, who carried on the business of purchasing tea of different qualities, blending the same by mixing one type with another and selling it, claimed that it was an industrial company, within the meaning of section 2(7)(c) of the Finance Act, 1978 entitled to concessional rate of tax.”
From this judgement it is clear that the Honble High Court never discussed section 80-I which is involved in the present case. Subsequently, the Bombay High Court specifically dealt with the similar issue in the case of J.B. Advani & Co. (supra) wherein it was observed that
“Mere blending of different kinds of tea for the purpose of export does not constitute manufacture of articles within the meaning of section 2(5)(a)(ii) of the Finance Acts, 1966 and 1967. Therefore, a company engaged in such activity is not an industrial company entitled to deduction as per provisions of section 2(5)(a)(ii).”
7. The jurisdictional Calcutta High Court dealt with section 80-I(4) specifically in the case of Appeejay (P.) Ltd. v. CIT (1994) 206 ITR 367 where the words “manufacturing and productions” pertaining to blended tea were discussed. Finally, the Honble High Court observed in that case that the assessee is merely mixing up and blending tea and sold them in the market. The processing of tea did not involve manufacturing of any article or thing. The input and output of the assessees business remained the tea i.e., the thing produced by the assessee was tea and product sold by the assessee was also tea. Therefore, the assessee was not entitled to relief under section 80-J(4)(iii).
8. From the above fact it appears that the assessees case was not covered by the ratio laid down in the case of G.A. Renderian Ltd. (supra), assuming, though not convincing if it was covered, then it was overruled by the jurisdictional High Court in the case of Appeejay (P) Ltd. (supra).
9. It may be mentioned that for the purpose of manufacturing, new product will have to come into existence as per the ratio laid down by the Honble Supreme Court in the case of CIT v. Venkateswara Hatcheries (P) Ltd. (1999) 237 ITR 174 and CIT v. Relish Foods (1999) 237 ITR 592. In another excise caseJ.G. Glass Industries v. Union of India 1992 (62) ELT 291 (Bom.), the Honble Supreme Court dealt with an issue where the company was engaged in the process of screen printing of empty glass bottles. The Honble Supreme Court observed that
“If the product could serve a purpose even without printing and there is no change in the commercial product after the printing is carried out, the process cannot be said to be one of manufacture.”
The benefit under section 80-I is available where the industrial under taking manufactures or produces articles or things, the undertaking employs ten or more workers in a manufacturing process carried on with the aid of power, or employs twenty or more workers in a manufacturing process carried on without the aid of power. In the instant case, the Joint Director of the Industries (Census), West Bengal informed that tea blending activities cannot be termed as manufacturing activity in terms of the circular of the Government of India as well as Small Scale Industries department of of West Bengal Government. (page 3 of the Commissioner (Appeals)s order).
10. By considering the totality of the facts and circumstances of the case and in the light of the above discussion, we are convinced that tea blending is neither manufacturing nor processing activity which attracts the benefit of section 80-I(2). Therefore, we set aside the order of the Commissioner (Appeals) and restore the addition made by the assessing officer.
11. In the result the appeal filed by the department is hereby allowed.