S. 80P(2)(a)(iii) : Deduction – Co-operative societies – Marketing of agricultural produce grown by its members – Manufacture – Sugar in to sucrose – To decide what is manufacture the department should have a panel of experts
The assessee is a co-operative sugar mill. The assessee buys sugarcane from its members. It undertakes a particular operation whose final outcome is final product in the form of sugar. The assessee claimed the deduction under section 80P(2)(iii) of the Act. The question before the Apex Court was whether the final product (sugar) would make the assessee (s) entitled to claim the benefit of section 80P(2)(iii) of the Income tax Act 1961, in respect of marketing of the agricultural produce grown by it members.? Whether the operation undertaken by the assessee(s) constitute manufacture.?. The assessee contended that the process undertaken by the assessee is not a ‘manufacture’. Broadly, according to the assessee sugar (also called ‘sucrose’) hence the process is not manufacture. According to department process constitute ‘manufacture’. The Department referred the judgment of Apex court in CIT v. Oracle Software India Ltd. (____) 340 ITR 546 (SC), wherein it has been observed that, the terms ‘manufacture’ implies a change, but every change is not a manufacture, despite the fact that every change in article is that the result of a treatment of labour and manipulation. However, this test of manufacture needs to be seen in the context of the above process. If an operation/process renders a commodity or article for its use for which it is otherwise not fit, the operation /process falls within the meaning of the word ‘manufacture’. The court said the question whether conversion of sugar in to sucrose is ‘manufacture’ should be decided by experts. The Court remitted the matter to the file of Commissioner (Appeals) to decide the issue after getting the opinion of experts and giving an reasonable opportunity to the assessee. (C.A. No. 2445 of 2005 dated 26-9-2012 and others)
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