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2006 (8) TMI 447 - AT - Income TaxDeductions u/s 80-IB - industrial undertaking - Manufacture Or Production - manufacture of polished and finished marble slabs, tiles, table tops etc. from imported and indigenous rough marble blocks - HELD THAT - In the instant case, the assessee transforms rough raw marble blocks into finished polished slabs by subjecting the raw blocks to several processes like peeling, dressing, correcting natural flaws, padding, sorting, grading, shaping, sizing, polishing etc. The resultant finished product is a commercially distinct commodity having distractive name and use. This is evident from the bill of entry of purchase of raw blocks wherein the said item has been defined as rough marble blocks whereas in the sales invoice, the finished product has been described as marble slabs polished . The units of measurement are also different i.e. the rough blocks are measured in metric tons whereas the polished marble slabs are measured in square feet or square meters. It is clear from the sample copies of purchase bills enclosed at assessee s paper book and the copies of sales bills enclosed at assessee s paper book. Accordingly, the processes undertaken by the assessee fulfil all the criteria/tests for constitution manufacture . We agree with the contention of the ld AR on behalf of the assessee that it has carried out manufacturing process on raw blocks. This view is fortified by the judgment in Empire Industries Ltd. s case 1985 (5) TMI 53 - SUPREME COURT and by the CBDT vide Circular No. 693 in which, extent of value addition involved when a rough mineral is polished has also been clarified. Accordingly, we hold that the assessee is engaged in manufacture/production of polished marble slabs, tiles, table tops, etc. in terms of section 80-IB(2)(iii) of the Act. The compliance with other conditions u/s 80-IB has not been disputed by the Revenue authorities. As such, we agree with the contention of the assessee that it is entitled for deduction under the provisions of section 80-IB of the IT Act, 1961. As a result, appeals of the assessee are partly allowed.
Issues Involved:
1. Eligibility for deduction under section 80-IB of the Income Tax Act. 2. Whether the assessee's activities constitute "manufacturing" or "production" under section 80-IB. 3. Treatment of interest income for deduction under section 80-IB. 4. Consequential interest under sections 234A, 234B, and 234C. 5. Prematurity of penalty issue. Issue-wise Detailed Analysis: 1. Eligibility for Deduction under Section 80-IB: The primary issue was whether the assessee was entitled to a deduction under section 80-IB of the Income Tax Act. The assessee, engaged in manufacturing polished marble slabs, tiles, and table tops, claimed a deduction of Rs. 1,54,33,566 under section 80-IB for its industrial undertaking located in Silvasa. The return was processed under section 143(1) but later reassessed under section 147, disallowing the deduction. The CIT(A) upheld the disallowance, which the assessee contested. 2. Manufacturing or Production: The core issue was whether the assessee's activities constituted "manufacturing" or "production" under section 80-IB(2)(iii). The assessee described various processes, including cleaning, dressing, cutting, padding, and polishing rough marble blocks to produce polished slabs and tiles. The Tribunal analyzed these processes and concluded that the assessee's activities transformed rough marble blocks into a commercially distinct product, fulfilling the criteria of "manufacture" or "production." The Tribunal referred to several judicial precedents, including CIT v. Mysore Minerals Ltd. and CIT v. Sesa Goa Ltd., which supported the view that similar activities constituted manufacturing or production. 3. Treatment of Interest Income: The assessee argued that interest income from fixed deposits should be considered for deduction under section 80-IB, asserting that the deposits were made out of business compulsion and had a direct nexus with the industrial undertaking. The Tribunal restored this issue to the Assessing Officer to determine whether the fixed deposits were indeed made out of business compulsion and if the interest earned had a direct nexus with the business. 4. Consequential Interest under Sections 234A, 234B, and 234C: The Tribunal noted that the issue of interest under sections 234A, 234B, and 234C was consequential to the main issue of deduction under section 80-IB. Therefore, it directed that this issue be decided accordingly, based on the outcome of the main issue. 5. Prematurity of Penalty Issue: The Tribunal found the issue of penalty to be premature and dismissed it, noting that no arguments were raised on this account. Conclusion: The Tribunal concluded that the assessee was engaged in the manufacture/production of polished marble slabs, tiles, and table tops as per section 80-IB(2)(iii) and was entitled to the deduction under section 80-IB. The issue of interest income was remanded to the Assessing Officer for further examination. Consequently, the appeals were partly allowed.
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