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2. Whether on the facts and in the circumstances of the case the Ld. CIT(A) was justified in law in importing the scope of the term 'manufacture' from the SEZ Act, 2005, being an enactment subsequent to section 10A of the I. T. Act, 1961, regardless of the fact that no proviso has been inserted in section 10A for such widening of scope."

5. The Ld. Counsel for the assessee took our attention to page nos. 38, 39 and 40 of the paper book wherein the Special Bench in assessee's own case in ITA No. 2089/Kol/2007 for AY 2004-05 has taken note of the Hon'ble Kerala High Court's order in Girnar Industries Vs. CIT (2011) 338 ITR 277 (Ker), and in the case of Tata Tea Ltd. Vs. ACIT 338 ITR 285 (Ker) wherein the Hon'ble High Court has taken note ITA Nos.1517 to 1519/Kol/2014 Narendra Tea Co. (P) Ltd.. AYs 2009-10 to 2011-12 of the decision of the Hon'ble Supreme Court in Tara Agencies (supra) which the revenue relies on its ground no. 1 (supra) to assail the decision of Ld. CIT(A) and the Special Bench in assessee's own case held as under:

That the ratio of the above decision would be squarely applicable in the case of the assessee because the facts are identical.

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ITA Nos.1517 to 1519/Kol/2014 Narendra Tea Co. (P) Ltd.. AYs 2009-10 to 2011-12

31. The Hon'ble Kerala High Court reiterated the same view in the case of Tata Tea Ltd. Vs. ACIT - (2011) 338 ITR 285 (Ker). In that case, the assessee was exclusively engaged in blending, packaging and export of tea bags, tea packets and bulk tea packs. The assessee's division enjoys recognition as a 100% EOU, which is granted by the Development Commissioner, Ministry of Commerce & Industry, Govt. of India. The assessee claimed exemption u/s. 10B of the Act for the AYs 1996-97 onwards, which was granted upto the AY 2000-01. However, for the AYs 2001-02 and 2002-03, exemption was declined for the reasons that by the Finance Act 2000, the definition of 'manufacture' which included 'processing' contained in section 10B of the Act was deleted w.e.f. 01.04.2001. Hon'ble High Court noted that the department's stand is that manufacture or production had liberal meaning under the definition clause contained in section 10B of the Act until its deletion which covers even processing and, therefore, blending and packaging of tea for export was treated as 'manufacture' or 'production' of an article qualifying for exemption. Hon'ble Kerala High Court considered the contention of the assessee that the scheme of income tax exemption available to units in the SEZ u/s. 10A of the Act and units in the free trade zone provided u/s. 10AA of the Act and the exemption available to 100% EOU u/s. 10B of the Act are very similar in nature and the wordings of the statutory provisions are similar in nature. Hon'ble Kerala High Court also considered the judgment in the decision of Supreme Court in Tara Agencies, supra relied on by the Sr. Standing Counsel for the revenue, wherein Hon'ble Supreme Court clearly held that blending of tea does not amount to 'manufacture' or 'production' of an article, but is only processing. Hon'ble High Court allowing the appeal of the assessee held that the assessee was exclusively engaged in blending and packing of tea for export and was not manufacturing or producing any other article or thing. It was recognised as a 100% EOU division and the Department had no case that the assessee's unit engaged in export of tea bags and tea packets was not a 100% EOU. If exemption was denied on the ground that products exported were not produced or manufactured in the industrial unit of the assessee's 100% EOU, it would defeat the very object of section 10B of the Act. Further, industrial units engaged in the very same activity, i.e., blending, packing and export of tea in the special economic zones and free trade zones, would continue to enjoy tax exemption under section 10A of the Act and section 10AA of the Act respectively. The assessee was entitled to exemption on the profit derived by its 100% EOU engaged in blending, packing and export of tea bags and tea packets. Hon'ble High Court held as under:

Consequently, we allow the appeals by reversing the orders of the Tribunal and by restoring the orders of the first appellate authority declaring the appellant's entitlement for exemption."

32. The provisions of section 10AA of the Act was inserted on the statute book by the Special Economic Zones Act, 2005 w.e.f. l0.02.2006. Even prior to the enactment of the said SEZ Act, Special Economic Zones (including units therein) were all along treated like EQU / FTZ / EPZ for all purposes whatsoever and were dealt within the Exim Policy accordingly. Section 2(k) of the Special Economic Zone Act, 2005 defines the expression "Existing Special Economic Zone" to mean every Special Economic Zone which is in existence on or before the commencement of the said Act. Section 2(e) defines the expression "existing unit" to mean every unit which has been set up on or before the commencement of the said Act in an existing Special Economic Zone. In other words, admittedly all Special Economic Zones were also being governed by the Exim Policy prior to the enactment of SEZ Act, 2005. Clause (iii) of Explanation 1 to section 1OAA lays down that the expression "manufacture" shall have the same meaning as assigned to it in section 2(r) of the Special Economic Zones Act, 2005, which definition is as under:

36. We, in view of the above, hold that when the products for which the assessee's unit is recognized as a 100% EOU are tea bags, tea in packets and tea in bulk packs and the assessee is exclusively engaged in blending and packing of tea for export may not be manufacturer or producer of any other article or thing in common parlance. However, for the purpose of Section 10A, 10AA and 10B, we have to consider the definition of the word "manufacture" as defined in Section 2(r) of SEZ Act, Exim Policy, Food Adulteration Rules, 1955, Tea (Marketing) Control Order, 2003, etc. We also find that the definition of 'manufacture' as per Section 2(r) of the SEZ Act, 2005 is incorporated in Section 10AA of the Income-tax act with effect from 10.02.2006. Hon'ble Kerala High Court in the case of Girnar Industries (supra) had held such amendment in Section 10AA to be of clarificatory in nature. The definition of 'manufacture' under the SEZ Act, Exim Policy, Food Adulteration Rules and Tea (Marketing) Control Order is much wider than what is the meaning of the term 'manufacture' under the ITA Nos.1517 to 1519/Kol/2014 Narendra Tea Co. (P) Ltd.. AYs 2009-10 to 2011-12 common parlance, and it includes processing, blending, packaging etc. In view of the above and respectfully following the decision of Hon'ble Kerala High Court in the case of Girnar Industries (supra) and Tata Tea Limited (supra), we hold that the assessee is entitled for exemption under Section 10B of the Act on account of blending of tea. Similarly, in our view, the industrial units engaged in the very same activity i.e. blending, packing and export of tea in the free trade zone shall also be entitled to enjoy tax exemption under Section 10A of the Act."