THE issue before the Bench is - Whether sale of tea manufactured out of purchased green leaves and also blending of purchased and manufactured tea are to be construed as part of business of growing and manufacturing of tea. YES is the answer.
Facts of the case
The assessee is a public limited company, which carries on the business of growing and manufacturing tea. As part and parcel of the said business, the assessee purchases a small quantity of tea manufactured by other tea estates and blends the same with the tea grown and manufactured by it. The assessee also purchases a small quantity of green tea leaves from other tea estates and manufactures black tea out of the same.
++ the aforesaid question is covered by a judgment of HC in the case of Goodricke Group Ltd. vs. CIT(No.1), 2011-TIOL-329-HC-KOL-IT, wherein it was held that the requirement of section 33AB is that the assessee must grow tea leaves and will also convert those leaves into final product by way of processing. Therefore, the moment the substantial amount of tea, thus, manufactured in the form of final product is grown in the garden of the assessee and such amount of "grown tea" is converted into the final form by blending with insignificant amount of other tea purchased from outside, such purchased tea from outside for the purpose of blending forms part of the process of manufacture of the final product of tea grown and manufactured by the assessee and, thus, the requirement of the section is fully complied with. But if in the final product, there is very insignificant amount of tea grown by the assessee in its garden whereas the substantial amount is purchased from outside, the requirement of the section will not be satisfied. Similarly, if the assessee after growing huge amount of tea in his garden sells those to others for blending but he does not manufacture any tea in final form, he will not get the benefit of the section as he is only the grower of tea but not the manufacturer. Likewise, if the assessee after growing tea sells part of such grown tea to others without bringing those in the final form but retains the other part and transforms the retained part after blending with tea purchased from other gardens, he will get benefit of deduction only to that part of profit which he earned by selling the final form of tea after blending provided the final product contains substantial amount of tea grown by the assessee in comparison to the amount purchased from outside; but the profit arising out of the portion of the grown tea sold to others before converting into the form of tea by way of processing will not get the benefit of section 33AM. Thus, the profit arising out of selling its grown tea to others without processing and bringing it into final form of “manufactured tea” will not be eligible for deduction u/s 33AB;
++ in the case before us, the assessee has utilized his entire tea grown by it in its garden and by blending the same with some other amount of tea purchased from outside has manufactured the final product and, thus, the entire profit arising out of such manufacture will get the benefit of section 33AB notwithstanding the fact that for the purpose of blending, some small amount was purchased from outside. It appears that the purchased amount is very trifling in comparison to the amount grown by the assessee and thus, it is not a case where it can be alleged that the purpose of maintenance of the garden by growing insignificant amount of tea in comparison to the final product is only a device to get the benefit of the section. In our opinion, a purposive interpretation of the aforesaid provision should be made instead of literal construction of the same otherwise, the legislative purpose will be frustrated and in rare cases, where a very few fortunate assessees who grow and manufacture different varieties of tea and consequently, do not require purchase of any tea for blending with the final product, can only get the benefit of section 33AB of the Act. Revenue's counsel , did not dispute that the question is covered. In that view of the matter, the question is answered in the negative and in favour of the assessee. The appeal is to that extent allowed