2009 (9) TMI 953 - HC - Income Tax

Summary

Issues involved:
The judgment deals with the issue of deduction under section 10B of the Income-tax Act for an assessee engaged in processing stone, marble, and granite for export. The Assessing Officer denied the deduction, but the ITAT ruled in favor of the assessee, leading to an appeal by the revenue under section 260A of the Act.

Details of the Judgment:

1. Claim of Deduction under Section 10B:
The assessee, operating an Exports-oriented unit processing stone, marble, and granite, filed for deduction under section 10B of the Income-tax Act. The Assessing Officer rejected the claim, stating the assessee did not qualify as engaged in the required activities. However, the ITAT overturned this decision, deeming the assessee's activities as a manufacturing process, meeting the criteria of section 10B. The High Court affirmed this decision based on precedents like CIT v. Sophisticated Marbles & Granite Industries, emphasizing the transformation of raw materials into marketable products through various processes.

2. Interpretation of 'Manufacture or Produce':
The judgment discussed the interpretation of 'manufacture or produce' under section 10B, citing the addition of Explanation 4 by the Finance Act, 2003. The Explanation clarified that cutting and polishing of precious and semi-precious stones fall under 'manufacture or produce.' The revenue contended that this Explanation limited the scope to only these activities. However, the Court disagreed, stating that the Explanation was inclusive and not restrictive, applying general principles to determine manufacturing activity eligibility.

Conclusion:
The High Court dismissed the appeal, concluding that the assessee's processing activities qualified as a manufacturing process under section 10B. The judgment highlighted the broader interpretation of 'manufacture or produce' and the application of general principles in determining eligibility for the deduction.