2009 (8) TMI 30 - HC - Income Tax

Manufacture or Production Marble Stones Processes after purchasing of blocks of slabs and getting them cut by cutting machines from outside the process which is undertaken by the assessee is to put full size fibre on one side of the slab which is technically required to give support to the slab; to fill holes and cracks in these slabs to make it marketable by applying chemicals on holes and cracks; mixing of chemicals and powder for the aforesaid purpose is done by the assessee; polishing the slab by different machines; for bringing shine on the slab applying different types of tix oxide and thereafter cutting the finished slabs to proper size and shapes from which the marketable size of slabs moulded pieces edged pieces and tiles are made - Tribunal order that the processes are falling within the meaning of expression production or manufacture upheld revenue appeal dismissed.

Summary

Issues:
1. Whether the process activity undertaken by the assessee falls within the expression manufacturing process.

Analysis:
The Tribunal considered whether the process activity undertaken by the assessee in dealing with the manufacture and sale of marble stones would qualify as a manufacturing process. The term "manufacturing process" is not explicitly defined in the Income Tax Act, but the Finance Amendment Act, 2009 provides a definition. Referring to the Supreme Court case of Aspinwall and Company Limited Vs. CIT 251 ITR 323, the Tribunal applied the common parlance understanding of manufacturing, which involves producing articles from raw materials by giving them new forms, qualities, or combinations. The Apex Court in the Aspinwall case held that if the change results in a new and different article, it amounts to manufacturing activity. The Tribunal observed that the process of manufacturing coffee beans from raw berries was considered manufacturing as the coffee beans had a distinct identity after the process.

The Tribunal examined the activities undertaken by the assessee in the present case, which included purchasing blocks or slabs, cutting them, applying chemicals to fill holes and cracks, polishing the slabs, and various other processes to make marketable products like slabs, moulded pieces, and tiles. The Tribunal found that the raw blocks underwent significant transformations through various processes involving machinery, labor, and chemical applications. Based on the Supreme Court's test, the Tribunal concluded that these activities clearly fell within the definition of a manufacturing process.

The Tribunal referenced the judgment of the Rajasthan High Court in the case of Arihant Tiles and Marbles Pvt. Ltd. Vs. Income Tax Officer 295 ITR 148(Raj.) to support its decision. The Rajasthan High Court held that activities like sawing marble blocks, cutting, and polishing fell within the scope of "production" under Section 80-IB, emphasizing the broader interpretation of the term. Similarly, the Bombay High Court in CIT Vs. Fateh Granite (P) Ltd. 314 ITR 32 also considered the manufacture of granite tiles as a manufacturing process.

The revenue's counsel highlighted the judgment of the Madras High Court in C.I.T. Vs. Vijay Granite Pvt Ltd. 267 ITR 606 (Mad.), where the court opined that cutting and polishing granite slabs did not amount to production or manufacture. However, the Tribunal distinguished this case, noting that the assessee's activities involved more than just polishing, including filling holes with chemicals and applying fiber for support. Consequently, the Tribunal found no substantial question of law in the present case and dismissed the appeal.