ORAL ORDER AKIL KURESHI Assessee has filed this Tax Appeal calling in question the judgment of the Income Tax Appellate Tribunal dated 14.12.12 raising following question for our consideration: “Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the appellant was not a manufacturer/producer of Mathia and Chorafali and therefore, was not entitled to sec.10B relief in respect of profits therefrom?” This appeal concerns the assessment year 2008-09. The assessee was engaged in the business of manufacturing and exporting of food items such as mathia, chorafali, paratha and other tandoor items. The assessee claimed benefit under section 10B of the Income Tax Act, 1961. The Revenue contested the claim on various grounds including that the assessee cannot be stated to be manufacturing or producing an article or thing. Ultimately when the issue reached the Tribunal, by the impugned judgment, the Tribunal split the issue in two parts. Insofar as the majority of the claims of the assessee for deduction was concerned, the plea was accepted holding that the assessee had a manufacturing unit in Kandla Special Economic Zone which was a 100% EOU. The food items manufactured by the assessee thus would qualify for such deduction. The Tribunal held that the assessee is an industrial undertaking and is engaged in manufacturing or producing article or thing when it produced different food preparations. To a limited extent when the assessee did not itself undertake such manufacturing activity, but claimed to have outsourced it, the Tribunal did not accept the assessee’s claim for deduction. The assessee contended that after receiving such items like mathia and chorafali from the outsourced agencies in bulk packaging, the assessee undertook the process of sorting out and then packing the same in consumer packets and thereafter freezing it to minus 180C in deep storage freezer for increasing its shelf life. This according to the assessee amounted to manufacturing activity. The Tribunal, however, was unmoved. The Tribunal considered this issue in following manner: “From the flow chart of manufacturing process in the case of “Mathia”/“Chorafali” submitted by the Ld.A.R. We find that the process id described as under: “Receiving of “mathia” / “Chorafali” in bulk packaging from supplier in the production area, thereafter the process of sorting takes place and then packing in consumer packs and thereafter freezing to -180C in deep storage freezer. Thus from the flow chart it appears that in the case of “mathia” and “chorafali” the assessee does repackaging. Further from the details of sales submitted by the assessee we find that the sales includes sale of “coriander leaves”, “chorafali”, “custard apple pulp” “magaj ladu”, “IQF shredded coconut” and “misc. items”. From the details it appears that the aforesaid items are sourced ready made and not manufactured in the factory of assessee. The total sales of such items as per the summary is Rs.85,68,942/-. We are of the view that for the aforesaid items which have been outsourced and not manufactured in the premises of the assessee but have only been repackaged with some other connected activities at the assessee’s premises cannot be considered to be a manufacturing activity by the assessee.” In the result, on the premise that the breakup of the profit earned from outsourced items was not available, the Tribunal placed the matter back before the Assessing Officer for the limited purpose to determine the profits of the items manufactured by the assessee and to exclude that from the outsourced items. Learned counsel Shri J.P.Shah for the appellant vehemently contended that the Tribunal committed a serious error. The assessee, in addition to manufacturing food items itself, in order to expand its business, outsourced part of its manufacturing activity. Even after receiving prepared items, the assessee undertook detailed exercise of sorting, packing and storing the items in below frozen temperature. Heavy reliance was placed by the learned counsel for the appellant on a decision of this Court in the case of CIT v. Prabhudas Kishordas Tobacco Products (P) Ltd., 282 ITR 568 (Guj.). On the other hand, learned counsel Shri Manish Bhatt for the Revenue opposed the appeal contending that the Tribunal had come to a factual finding that the assessee did not undertake any manufacturing activity on the outsourced items. Section 10B deduction is available to an exporter who manufactures or produces articles or things. Having heard the learned counsel for the parties and having perused the documents on record, it clearly emerges that part of the exports of the assessee comprised of snack items such as, cholafali, mathia, etc. which was not manufactured by the assessee but the manufacturing activity was outsourced. The question therefore is whether for export of such items, deduction under section 10B of the Act would be available. which was not manufactured by the assessee but the manufacturing activity was outsourced. The question therefore is whether for export of such items, deduction under section 10B of the Act would be available. Section 10B of the Act applies to any industrial undertaking which manufactures or produces articles or things and exports it. Admittedly, in the present case, the snacks were manufactured by the suppliers of the assessee and no manufacturing activity was done by the assessee till the stage of preparation of such items. If some follow up action is taken for packing and storing the same would not partake the character of activity amounting to manufacturing or producing an article or thing. The decision of this Court in the case of Prabhudas Kishordas Tobacco Products (P) Ltd. (supra) was rendered in vastly different fact situation. The assessee therein was engaged in preparation of beedies. It procured raw materials such as, tendu leaves and tobacco and supplied it to workers for rolling beedies. It was in this context, the Court held that the activity amounted to manufacturing article or thing. It also referred to outsourcing of the work of rolling beedies as incidental and observed that whether the assessee carries manufacturing itself or certain process gets done outside would not make any difference. The Court relied on the observations of this Court in the case of CIT v. V.B.Narania & Co., 252 ITR 884 (Guj.) wherein it was observed that the real test for deciding whether the contract is one of employment is to find out whether the agreement is for the personal labour and if so, the contract is one of employment, whether the work is time-work or piece work, or whether the employee did the whole of the work himself or whether he obtained the assistance of other persons also. It was, therefore, observed that merely because the assessee gets the work done through contract workers, in other words, enters into a contract with the workers and pays them on per piece basis, the relief cannot be denied. In the present case, the facts are very different. The assessee was not involved at any stage of manufacture of an article or thing. Even the raw material for preparation of the items was not procured and supplied by the assessee. For any food preparation, raw material itself is of great importance. In the present case, the facts are very different. The assessee was not involved at any stage of manufacture of an article or thing. Even the raw material for preparation of the items was not procured and supplied by the assessee. For any food preparation, raw material itself is of great importance. In snack items under consideration, dough, oil, etc. would play a major role in deciding its quality and taste. The assessee did not involve itself even in procuring such basic material and the assessee’s stand that it was only the preparation work which was outsourced and the assessee was all along involved in the manufacturing activity through supervision cannot be accepted. Learned counsel for the assessee relied on the report of the officer of the Company who had reported that the manufacturing activity was undertaken by one of the contractors in a satisfactory manner. In our opinion, this in isolation would not be sufficient to establish that the assessee was engaged in the manufacturing activity directly. The Tribunal having come to a factual finding, we do not see any scope of interference. In the result, the Tax Appeal is dismissed.