Sanjiv Khanna, J.

1. These two appeals by the Revenue relating to assessment years 2007-08 and 2008-09 require adjudication on the following substantial question of law:

“Whether the respondent assessee is entitled to benefit under Section 10B of the Income Tax Act, 1961 as he was engaged in manufacture or production of an article or thing?

2. These appeals arise from a common order of the Income Tax Appellate Tribunal (Tribunal, for short) dated 18th April, 2013.

3. The respondent assessee is a company engaged in the business of manufacture, trading and export of engineering goods etc. and also has a factory located in Noida Export Processing Zone, Uttar Pradesh. The said unit is a 100% export oriented and located in customs bounded area.

4. For the assessment year 2007-08, the respondent assessee had filed return declaring loss of Rs.4,11,190/- and had claimed deduction/exemption under Section 10B of the Income Tax Act, 1961 (Act, for short) on profit of Rs.69,69,429/- from the Noida Unit. The Assessing Officer did not allow deduction under Section 10B on the ground that the assessee had not manufactured any goods in the Noida Unit. He referred to reply received from R.N. Metals, Jaipur, M/s Sustul Engg. Corp. Mumbai, M/s Chanderpur Works Yamuna Nagar (Haryana) to the effect that they had manufactured and exported various goods on behalf of respondent assessee. He observed that the aforesaid letters showed that the assessee itself had not undertaken manufacturing activities. The assessing officer noticed that the asessee had incurred electricity expenditure of Rs.19,771/- during the year and Rs.2,27,694/- in the previous year, through they had turnover of Rs.18.92 lacs and had shown opening stock of work in progress of Rs.1.6 crores. The total turnover from Noida unit as declared was Rs.6,19,35,990/-.

5. For the assessment year 2008-09, the assessment order is more detailed and elaborate. The assessee had filed return declaring NIL income and had claimed exemption/deduction under Section 10B of Rs.12,17,41,816/-. The assessee had claimed that they had earned exempt income as they had carried out upgradation of cement plant in Zambia and also received consideration for design, fabrication and commissioning of a steel rolling mill in Kazakhastan. The assessee had filed a flow chart to explain the nature of work undertaken to support their claim under Section 10B of the Act. It was asserted that the respondent was a multifaceted project engineering company having highly qualified engineers, technocrats etc., who had extensive experience, and expertise in executing turnkey projects of diverse nature. The Assessing Officer, however, held that the assessee was not carrying on manufacturing and assembling activities as they had erected the steel rolling mill and the cement plant abroad. The assessee himself did not manufacture any goods but had removed various parts after testing and disassemble them for the purpose of export. Testing, painting or prepackaging for export cannot be construed as manufacture or assembling activity. The assessee himself did not possess adequate plant, machinery or infrastructure to carry out manufacturing activities. Written down value of plant and machinery in the Noida unit was only Rs.1,81,153/-. The assessee had also purchased plant and machinery worth Rs.6,45,659/- during the year, out of which Rs.1,43,950/- were paid for air conditioners and EPABX. On site inspection at Noida, it was noticed that the assessee had installed lathe machines, welding sets, cutting machine, weighing machine, cranes, electric hoists and chain pully. The said plant and machinery were for loading, unloading of materials received, upkeep, painting etc. for exports. The assessee had incurred electricity expenses of Rs.29,184/- on export turnover of Rs.26,00,63,634/-. The assessee had not debited any generator expenses. The