2021 (9) TMI 247 - HC - Income Tax

Deduction u/s 10B - manufacture defined u/s.2(29BA) - whether sculpturing and carving of dimensional block of granites and monument amounted to manufacture ? - HELD THAT - Issue decided in favour of assessee as decided in M/S. JANNANI HOLDINGS 2021 (8) TMI 569 - MADRAS HIGH COURT wherein held CIT(A) had elaborately examined the process through which the quarried rough stone goes through before it becomes a polished granite slab or tile or any other article. We are of the considered view that the Tribunal was right in confirming the order passed by the CIT(A) - Decided against revenue.

Summary

Issues:
1. Eligibility for claiming deduction u/s.10B
2. Whether sculpturing and carving of dimensional block of granites and monument amounted to manufacture

Eligibility for claiming deduction u/s.10B:
The Tax Case Appeal involved a dispute over the eligibility of the assessee for claiming deduction under Section 10-B of the Income Tax Act, 1961. The assessee, engaged in the granite business, filed a return for the Assessment Year 2005-06, seeking 100% deduction under Section 10-B, claiming to be a 100% export-oriented unit involved in the manufacture of granites. The Assessing Officer rejected the claim, stating that the assessee was not engaged in the manufacture of any article or thing as per the Act's provisions. The Commissioner of Income Tax (Appeals) allowed the appeal, which was further confirmed by the Tribunal. The Court referred to relevant case laws, including the decision in the case of Pallava Granite Industries, emphasizing the interpretation of the term "manufacture." The Court highlighted that the absence of specific definitions during the relevant assessment years did not restrict the scope of the term "manufacture." The Court upheld the Tribunal's decision, dismissing the appeal and answering the substantial questions of law against the Revenue.

Sculpturing and Carving of Dimensional Block of Granites and Monument as Manufacture:
The second issue revolved around whether sculpturing and carving of dimensional block of granites and monuments amounted to manufacture. The Revenue contended that the process could be construed as processing rather than manufacturing, citing the absence of specific statutory provisions during the relevant assessment years. The Court, however, relied on precedents such as the decision in Arihant Tiles & Marbles (P) Ltd., emphasizing that activities leading to the production of new articles with different characteristics constitute manufacturing. The Court distinguished cases like Gem India Manufacturing Co., where the process did not result in a new article. Reference was also made to the decision in Lucky Minmat Pvt. Ltd., highlighting the distinction between mere mining activities and processes constituting manufacturing or production. Ultimately, the Court upheld the Tribunal's decision, dismissing the appeal and answering the substantial questions of law against the Revenue.

In conclusion, the High Court of Madras, in a judgment involving eligibility for deduction under Section 10-B and the classification of activities as manufacturing, upheld the Tribunal's decision favoring the assessee. The Court's analysis included references to relevant case laws and emphasized the broad interpretation of the term "manufacture" in the absence of specific statutory definitions during the relevant assessment years. The judgment provided clarity on the issues raised and set a precedent for similar cases.