Case: Commnr. Of Income Tax, Kerala Vs. M/S. Tara Agencies

Brief facts which are necessary to dispose of this appeal are as under:The assessee is a registered firm engaged in the business of export of tea. The respondent assessee purchases tea of diverse grades and brands and blends the same by mixing different kinds of tea. In this appeal, we are called upon to examine whether the business activity of the respondent assessee falls within the ambit of production, manufacturing or processing? The respondent assessee would be entitled to weighted deduction under section 35B(1A) of the Act in case the goods exported were manufactured or produced in small scale industrial undertaking but, in case it falls short of production or manufacture, then the respondent would not be entitled to the benefit under section 35B(1A) of the Act. The said benefit, according to the relevant statute, is restricted to only goods produced or manufactured in the small scale industrial undertaking for export. The benefit cannot be extended in case the goods are merely processed by the small scale industrial undertaking. In order to derive benefit under section 35B (1A) the goods have to be either manufactured or produced by the small scale industrial35B (1A) was introduced with effect from 01.04.1978 and the respondent assessee claimed entitlement to weighted deduction being a small scale exporter. The Income Tax Officer disallowed the claim of the respondentrespondent assessee aggrieved by the said order preferred an appeal before the Commissioner of Income Tax (Appeals). 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, Kerala State. The respondent was engaged in purchasing different kinds of tea and blending the same for the purpose of export and was entitled to the weighted deduction under section 35B (1A) of the Act.6. In an appeal filed by the appellant against the decision of the Commissioner of Income Tax (Appeals), the Income Tax Appellate Tribunal endorsed the view of the Commissioner of Income Tax (Appeals). The Tribunal in its order relied on the decisions of the Calcutta High Court in G.A. Renderian Ltd. v. Commissioner of Income-Tax, West Bengal-I 1984 (145) ITR 387  and also of this court in Chowgule & Co. (P) Ltd. & Another v. Union of India & Others (1981) 1 SCC 653  and held that the respondent assessee was entitled to weighted deduction under section 35B (1A) of theRevenue challenged the judgment of the Tribunal before the High Court. The High Court upheld the judgment of the Tribunal. The Revenue, aggrieved by the impugned judgment of the High Court, has preferred thisorder to properly comprehend the controversy involved in this case, it would be proper to reproduce section 35B (1A) & (2) as introduced by the Finance Act,Notwithstanding anything contained in sub-section (1), no deduction under this section shall be allowed in relation to any expenditure incurred after the 31st day of March, 1978, unless the following conditions are fulfilled, namely:-a) the assessee referred to in that sub-section is engaged in:-(i) the business of export of goods and is either a small scale exporter or a holder of an Export House Certificate; or(ii) the business of provision of technical know-how, or the rendering of services in connection with the provision of technical know how, to persons outside India; andb) the expenditure referred to in that sub-section is incurred by the assessee wholly and exclusively for the purpose of the business referred to in sub-clause (1) or, as the case may be, sub-clause (ii) of clause (a).Explanation: For the purpose of this sub-section(a) "small-scale exporter" means a person who exports goods manufactured or produced in any small scale industrial undertaking or undertakings owned by him;Provided that such persons do not own any industrial undertaking which is not a small-scale industrial undertaking.(b) "Export House Certificate" means a valid Export House Certificate issued by the Chief Controller of Imports and Exports, Government of India;(c) "provision of technical know-how" has the meaning assigned to it in sub-section (2) of Section 80MM;(d) "small-scale industrial undertaking" has the meaning assigned to it in clause (2) of the Explanation below sub-section (2) of section 32A.(2) Where a deduction under this section is claimed and allowed for any assessment year in respect of any expenditure referred to in sub-section (1), deduction shall not be allowed in respect of such expenditure under any other provision of this Act for the same or any other assessmentthe three stages, namely, production, manufacturing and processing of tea can be enumerated as under. The tea is produced in the tea gardens. This first stage is called production of tea. The second stage is manufacture of tea. In this stage, the tea leaves are plucked from the tea bushes and by mechanical process, tea leaves are converted to tea. This second stage is considered manufacturing of tea. The third stage is blending of different qualities of tea in order to smoothen its marketability. This third stage is considered processing ofcontroversy involved in this case revolves around construction and meaning of terms "manufacture", "production" and "process", therefore, we deem it appropriate to deal with these terms in detail as enumerated in various dictionaries and by the decided cases to properly comprehend the distinction in these terms.

Reasoning: legal position seems to be clear and consistent that it is the bounden duty and obligation of the court to interpret the statute as it is. It is contrary to all rules of construction to read words into a statute which the legislature in its wisdom has deliberately notclear construction and interpretation of section 35B(1A) of the Act, we are clearly of the opinion that the respondents activity amounts to processing only and the activity does not amount to either production or manufacture. The term processing has not been included in section 35 B(1A) of the Act, therefore, the respondent is not entitled for weighted deduction under section 35B(1A) of the Act.