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In the present case, the assessee company was only a manufacturer of snacks and not engaged in business of processing, preservation and packaging of fruits or vegetables. The inherent difference between manufacturing and processing can be applied in the assessee's case. The activities undertaken by the assessee results in the changing of the name, character, chemical composition or integral structure of the vegetable which would be classified as manufacturing as it brings into existence a new product. As per provisions of section 801B(11A), the assessee was entitled to claim deduction under the said provisions if it fulfils all the conditions specified therein which was not justified in the assessee's company case. However, in the assessee's company case, the assessee company was engaged in the business of manufacturing and sales of different types of potato based snacks and namkeen and not in the eligible business of processing, preservation and packaging of fruits or vegetables. Since the assessee company was not deriving its profit from the eligible business as per provisions of section 80IB(11A) of the Act. He has relied upon the order of A.O as well as the decision of Mumbai Bench of Tribunal dated 05.03.1995. 


                                                       Prataap Snacks Limited



     C)           PACKAGING:

     It      is     submitted   that   subsequent    and   consequent      to
production of the Chips, the same is packed in individual packs with nitrogen filing. This process preserves the chips for longer period of time and also makes the product marketable.
11.7 Thus, the Ld. AR has submitted that in light of the above, it is perspicuous that the appellant company complies with all three technical requirements and conditions of Processing, preservation and packaging and is therefore, eligible for deduction u/s 80 IB (11A) of the Income Tax Act, 1961. He has relied upon the ruling of Authority for Advance Ruling reported in Mrs. Delna Rustum Boyce reported in 318 ITR 455.

12. We have considered rival submissions as well as relevant materials on record. The revenue has raised common grounds in these appeals. There is no dispute that the assessee company is engaged in the business of manufacturing and sales of different types of potato based chips, snacks and namkeen. Sub Section 11A of Section 80IB provides for the deduction in respect of profits made from certain industrial undertakings other than infrastructure undertakings and the amount of deduction in the undertaking deriving profit from the business of processing, preservation and packaging of fruits or vegetables or meat and meat products or poultry or marine or dairy products or from the integrated business of holding storage and transportation of the food grains. Therefore Sub Section 11A of Section 80IB of the Act provides the deduction to undertakings which deriving profits interalia from the business of processing, preservation and packaging of fruits and vegetables. The business activity of the assessee company is stated to be confined only to the processing of vegetables, preservation and packaging. Thus the activity of Prataap Snacks Limited processing and preservation are relating to the vegetable or fruits and in case of assessee only vegetable. The assessee claimed that after the vegetable undergoing the process of making chips, snacks and namkins it is also requires packaging. The A.O has denied the claim of deduction on the ground that the business activity of the assessee is not confined to processing of vegetables but it is in the manufacturing of chips and namkins from the potato and therefore, held that the assessee is not deriving the profit from the business of vegetable. The assessee has explained the steps in the process of making the chips, namkins and other snacks in the chart as under:

"6. The question is whether the business of the proposed undertaking is one of processing, preservation and packaging of fruits. In my view, the answer should be plainly in the affirmative. The integrated activities of processing, preservation and packaging of fruits or vegetables are embraced within the scope of sub-section (11A) of section-80IB. The only aspect which needs some elaboration is whether the ingredient of processing is satisfied. Is it a business of processing (including preservation) of fruits? Whether the series of steps taken to produce fruit based drink mixes or concentrates or fruit powder amount to processing of fruits or do they cross the boundaries of processing as commonly understood? In other words, whether the finished/packaged Prataap Snacks Limited product is the result of something that cannot be appropriately characterized as processing? Or, is it something more than processing.