Calcutta High Court
Commissioner Of Income Tax vs M.K. Industries on 19 January, 2024
Author: Rajarshi Bharadwaj
Bench: Rajarshi Bharadwaj
ORDER OD-40
IN THE HIGH COURT AT CALCUTTA
SPECIAL JURISDICTION (INCOME TAX)
ORIGINAL SIDE
ITA/113/2012
COMMISSIONER OF INCOME TAX, KOLKATA - XI
VS
M.K. INDUSTRIES
BEFORE :
THE HON'BLE JUSTICE SURYA PRAKASH KESARWANI
HON'BLE JUSTICE RAJARSHI BHARADWAJ
Date: 19th January 2024.
Appearance :
Mr. Aryak Dutt, Advocate.
....for appellant.
Mr. J.P. Khaitan, Sr. Advocate
Ms. Swapna Das, Advocate
Mr. Siddhartha Das, Advocate
...for respondent.
1. Heard Sri Aryak Dutt, learned senior standing counsel for the
appellant / Income Tax Department and Sri J.P. Khaitan, learned senior
advocate, assisted by Sm. Swapna Das, learned counsel for the respondent
assessee.
2. Allured with the exemption scheme of Section 10B of the Income Tax
Act, 1961 [hereinafter referred to as 'the Act, 1961'] as it then existed, the
respondent assessee has established a 100% export oriented unit in the
financial year 1999-2000 for manufacture of tea by blending. At that point of
time, when the unit was established, the provisions of Section 10B of the Act,
1961 also contained an expansive definition of 'manufacture' which includes
processing. Subsequently, by Finance Act, 2000, the aforesaid Section 10B
was amended. In the amended Section 10B, the definition of the word
'manufacture' as it existed in the unamended provision, was absent. The
first proviso to the amended Section 10B provides that where in
computing the total income of an undertaking in any assessment year,
its profits and gains had not been included by application of the
provisions of this Section as it stood immediately before its substitution
by the Finance Act, 2000, the undertaking shall be entitled to the
deduction referred in this sub-section only for the unexpired periods of
aforesaid 10 consecutive years. That apart, the purpose and object of the
amended and unamended Section 10B remained the same i.e. to grant
exemption from tax on profits and gains derived by an assessee from a 100%
export oriented undertaking.
3. The assessee claimed exemption from tax on profits and gains derived
from the aforesaid 100% export oriented unit for the assessment year 2001-
02, which was allowed by the assessing officer. Subsequently, the
assessment was sought to be reopened by the assessing officer under Section
147 of the Act, 1961. The assessing officer passed a reassessment order
under Section 147/148 of the Act, 1961 denying the exemption to the
respondent assessee under Section 10B of the Act, 1961. Aggrieved with the
reassessment order, the respondent assessee filed an appeal before the CIT(A),
which was dismissed upholding the finding of the assessing officer that
blending of tea is not manufacture. In the absence of any definition of
'manufacture' in the amended provision, the blending of tea cannot be treated
as manufacture. Aggrieved with the order of the CIT (A), the respondent
assessee filed an appeal before the Income Tax Appellate Tribunal, which was
allowed by the impugned order dated 19.12.2013. The Tribunal allowed the
appeal of the respondent assessee holding that firstly reopening by the
assessing officer / reassessment order under Section 147/148 is bad and
secondly blending of tea amounts to manufacture even under the amended
provision. Aggrieved with the order of the Income Tax Appellate Tribunal, the
revenue has filed the present appeal before this Court under Section 260A of
the Act, 1961.
4. Learned counsel for the appellant/revenue submits that the
controversy involved in the present appeal is squarely covered by a co-
ordinate Bench judgment of this Court in Principal CIT v. V.N. Enterprises
Ltd. (2021) 439 ITR 624 (Calcutta), wherein it has been held that blending of
tea did not amount to manufacture. Hence a tea-blending unit is not entitled
to exemption from tax on income under the amended Section 10B of the Act,
1961. He, therefore, submits that since the only question of availability of
exemption under Section 10B of the Act, 1961 is in issue in the present
appeal and the issue itself being covered by a co-ordinate Bench judgment in
the case of V.N. Enterprises Ltd. (supra), this appeal deserves to be allowed.
5. Learned counsel for the respondent assessee submits that the co-
ordinate Bench judgment in the case of V.N. Enterprises Ltd. (supra) requires
reconsideration inasmuch as firstly, it misread the Constitution Bench
judgment in the case of Commissioner of Customs (Import), Mumbai v. Dilip
Kumar and Company and Others (2018) 9 SCC 1 [paragraphs 52, 53 and 65];
secondly, the ambiguity being in principal legislation i.e. amended Section
10B, the benefit must go to the subject/assessee and not to the revenue and
it is only when ambiguity is in a subordinate legislation i.e. exemption
notification that benefit of ambiguity has to be conferred to the revenue;
thirdly, the judgment in Dilip Kumar and Company's case (supra) with
respect to the ambiguity was clarified by a subsequent judgment of Hon'ble
Supreme Court in Government of Kerala and Another v. Mother Superior
Adoration Convent (2021) 5 SCC 602 [paragraphs 19-27] but the co-ordinate
Bench judgment of this Court in V.N. Enterprises Ltd. (supra) had not noticed
that judgment and fourthly, since no contrary intention appears in the
amended provision than the unamended provision, therefore, in the absence
of a definition of 'manufacture' in the amended provision, the same meaning
as provided in the unamended provision has to be attached to the words used
in the amended provision of Section 10B as held by Hon'ble Supreme Court in
Chariman, Indore Vikas Pradhikaran v. Pure Industrial Coke & Chemicals
Ltd. (2007) 8 SCC 705 [paragraphs 70 and 71].
6. Learned counsel for the respondent assessee further submits that the
Income Tax Appeal being ITAT No.63 of 2014 [Commissioner of Income Tax,
Kolkata - XI, Kolkata v. M.K. Industries] has been filed by the revenue in
relation to assessment years 2001-02, 2003-04, 2004-05 and 2005-06, which
is pending before this Court, in which the basic question involved is one and
the same as involved in the present appeal. Additionally, the question of
validity of the reassessment under Section 147 is also involved.
7. Both the learned counsel for the parties jointly submit that the present
appeal and the aforesaid ITAT No.63 of 2014 may be heard together so as to
avoid possibility of any conflicting decision.
8. As jointly prayed by learned counsel for the parties, put up on
22.01.2024 at 10:30 a.m. along with records of ITAT No.63 of 2014
[Commissioner of Income Tax, Kolkata - XI, Kolkata v. M.K. Industries]. The
department is directed to ensure that the record of the aforesaid income tax
appeal is placed before this Court on 22.01.2024.
(SURYA PRAKASH KESARWANI, J.)
(RAJARSHI BHARADWAJ, J.)
S. Kumar
