COMMISSIONER OF INCOME TAX Vs. PANKAJ JAIN

JUDGEMENT

(1.) THIS appeal challenges order dt. 25th April, 2005, passed by the Income -tax Appellate Tribunal, Amritsar Bench (Tribunal), in ITA No. 495/Asr/2004 [reported as Pankaj Jam v. ITO Ed.] holding respondent -assessee entitled to deduction under Section 80IB of the IT Act.

(2.) THE assessee is engaged in preparation of bread at Gangyal, Jammu, under the name and style of Aagam Food Industries. It is registered with the Directorate of Industries, holding a power license of 104 HP, as an industry. The unit is installed in industrial area and has employed more than ten workers for making bread.

(3.) THE respondent -assessee took an appeal against this before the Commissioner of Income -tax (Appeals) [CIT(A)], distinguishing the Supreme Court judgment (supra) and explaining the process of converting the raw material like maida, yeast, etc. into bread. But the CIT(A) also followed the view taken by the AO and disallowed the deduction in the following terms:. After considering the case law relied upon by the AO referred to above and also after considering the objection of the appellant's counsel carefully, I am constrained to hold that the appellant's activity in converting the raw foodstuffs i.e., maida, sugar, yeast, etc. into bread can at best be said to be an activity of processing of food and not that of manufacture of food. Even if appellant's contention regarding use of machinery at various stages of production is taken into consideration, still the appellant's case remains to be that of food processor and not that of manufacturer of food. The above finding is in consonance with the decision of the Hon'ble Supreme Court in the case of Indian Hotels Co. Ltd. and Ors. v. ITO and Ors. : [2000]245ITR538(SC) as well as the decision of Hon'ble Madras High Court in the case of CIT v. P. Devasahayam : [1999]236ITR885(Mad) . Further, once the activity of processing of baking, packing, etc. of bread is over, it does not make any difference whether after such processing the goods are sold through the sales/delivery network or directly or indirectly to the customers. In view of the above, the AO was justified in rejecting the appellant's claim of deduction under Section 80IB amounting to Rs. 16,06,870 and, therefore, this issue is decided against the appellant..