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2006 (6) TMI 157 - AT - Income TaxDeduction u/s 80-IA - industrial undertaking - the activities of sawing of marble blocks into sizeable blocks and tiles before selling them into market - considered a 'manufacturing' or 'production' activity? - difference of opinion between the learned Members - Third member Order - Whether the cutting of marble blocks into marble slabs amounts to manufacture for the purpose of the Central Excise Act? J.M. - HELD THAT - We have no hesitation in holding that the production process employed by the assessee involves manufacturing activity. Accordingly, it is entitled to deduction u/s 80-IA of the Act as per law. We are also satisfied that the word 'produced' even wider in meaning and, therefore, even on that count, the assessee's claim u/s 80-IA deserves to be allowed. The AO is accordingly directed to allow the claim of the assessee u/s 80-IA of the Act in both the years under consideration. In the result, the appeals of the assessee are allowed. A.M. - HELD THAT - The activities undertaken by the assessee for converting the marble blocks into marble slabs and tiles do not amount to 'manufacture' or 'production' in view of the judgment of the Hon'ble Rajasthan High Court in the case of CIT vs. Lucky Mineral (P) Ltd. 1996 (2) TMI 26 - RAJASTHAN HIGH COURT and of Hon'ble Supreme Court in the case of Lucky Minmat (P) Ltd. 2000 (8) TMI 6 - SUPREME COURT . Therefore, the assessee is not entitled to deduction u/s 80-IA. Accordingly, the order of CIT(A) does not merit any interference and all the grounds of appeal of the assessee for both the assessment years are rejected. In the result, the appeals of the assessee are dismissed. Third Member - HELD THAT - Assessee has purchased marble blocks and the same have been cut to various sizes, part of which has been exported and part sold in India. It is also pertinent to mention that the assessee is also engaged in doing the job work of cutting the marble blocks into marble slabs on payment of job charges. The assessee also makes marble tiles by cutting the marble slabs and polishing and buffing the same. The issue to be determined is as to whether the decision of the Hon'ble Supreme Court in the case of Lucky Minmat (P) Ltd. vs. CIT 2000 (8) TMI 6 - SUPREME COURT , is applicable to the facts of the present case or the decision of Hon'ble Supreme Court in the case of CIT vs. Sesa Goa Ltd., or none is applicable. In the case of Lucky Minmat (P) Ltd., the assessee was a mine owner, the marble blocks had been cut into marble blocks and as such a distinction in the facts has got to appreciated insofar as what was excavated from the mines was sold after cutting the same into smaller blocks the product remaining the same. In the case of Sesa Goa Ltd. 2004 (11) TMI 14 - SUPREME COURT , their Lordships of the Supreme Court held that mining activity for the purpose of production of mineral ores would come within the ambit of the word 'production'. Their Lordships referred to its decision in the case of CIT vs. N.C. Budharaja Co. 1993 (9) TMI 6 - SUPREME COURT , to hold that the word 'production' is much wider than the word 'manufacture'. Whether the sawing of marble blocks into marble slabs and tiles with or without polishing amounts to production of article or thing - The contention advanced on behalf of the assessee that the decisions to the effect that the activities carried on by the assessee do not amount to manufacture of article or thing would not come in the way of the assessee insofar as even the production of article or thing not amounting to manufacture also enables the assessee to get the deduction u/s 80-IA is also bereft of substance. In the case of CCE vs. Fine Marble Minerals (P) Ltd. 1984 (5) TMI 256 - CEGAT NEW DELHI , has specifically pointed out that cutting of marble blocks into marble slabs does not amount to manufacture or production of article or thing. In the case of Fine Marble Minerals (P) Ltd. is referred to in the order of the Tribunal in the case of Aman Marble Industries (P) Ltd. vs. CCE 2003 (9) TMI 81 - SUPREME COURT , and has been relied upon by the learned JM of CEGAT whose decision has ultimately been upheld by the Hon'ble Supreme Court. It is evident from the above decision of the Central Excise Tribunal that the activities carried on by the assessee do not also fall within the ambit of production of article or thing and, therefore, the assessee is not entitled to deduction under s. 80-IA. Thus, the cutting of marble blocks into marble slabs and tiles and selling the same after polishing does not amount to either production or manufacture of any article or thing. I, therefore, concur with the view expressed by the learned AM. In conformity of the opinion of the majority of the Members of the Tribunal who have heard these cases, for the reasons cited in the orders, we adjudicate the issue apropos of the point of difference against the assessee. In the result, both the appeals stand dismissed.
Issues Involved:
1. Whether the activities of the assessee amount to "manufacture" or "production" under Section 80-IA of the IT Act, 1961. 2. Applicability of the Supreme Court decision in the case of Lucky Minmat (P) Ltd. vs. CIT to the assessee's case. 3. Interpretation of "manufacture" and "production" for the purpose of tax benefits under Section 80-IA. 4. Consistency of the assessee being recognized as a manufacturer/producer by various government departments. Issue-wise Detailed Analysis: 1. Whether the activities of the assessee amount to "manufacture" or "production" under Section 80-IA of the IT Act, 1961: The assessee, a private limited company, engaged in sawing marble blocks into slabs and tiles, claimed deductions under Section 80HHC and 80-IA of the IT Act, 1961. The Assessing Officer (AO) disallowed the claim under Section 80-IA, stating that the activities did not qualify as "manufacture" or "production" as per the Supreme Court's decision in Lucky Minmat (P) Ltd. vs. CIT. The CIT(A) upheld the AO's decision, leading to the assessee's appeal to the ITAT. The ITAT examined the processes involved in converting marble blocks into slabs and tiles, which included sorting, processing on saw machines, sawing, reinforcing, polishing, edge cutting, and buffing. The assessee argued that these processes constituted manufacturing or production, supported by various government registrations and benefits recognizing the company as a manufacturer. 2. Applicability of the Supreme Court decision in the case of Lucky Minmat (P) Ltd. vs. CIT to the assessee's case: The AO relied on the Supreme Court's decision in Lucky Minmat (P) Ltd. vs. CIT, where it was held that mere mining and cutting of marble blocks did not amount to manufacturing or production. The assessee contended that the facts of their case were distinguishable, as their activities involved comprehensive processes beyond mere cutting, transforming the marble blocks into commercially different products. The ITAT agreed with the assessee that the processes undertaken resulted in new products with distinct names, characters, and uses, differentiating the case from Lucky Minmat. The Tribunal noted that the assessee's activities were consistently recognized as manufacturing by various government departments, including the Central Excise and Sales-tax Departments. 3. Interpretation of "manufacture" and "production" for the purpose of tax benefits under Section 80-IA: The ITAT discussed various legal definitions and judicial interpretations of "manufacture" and "production." It emphasized that manufacturing involves transforming raw materials into new products with distinct identities, while production encompasses broader activities, including manufacturing. The Tribunal cited multiple cases supporting the view that significant processing and transformation qualify as manufacturing or production. The Tribunal concluded that the assessee's activities met the criteria for manufacturing and production, as they resulted in new and distinct products. It distinguished the assessee's case from Lucky Minmat, where the activities were limited to mining and basic cutting. 4. Consistency of the assessee being recognized as a manufacturer/producer by various government departments: The ITAT highlighted that the assessee was registered as a manufacturer with the Ministry of Commerce and Industries, received sales-tax exemptions, and was recognized by the Central Excise Department. These recognitions supported the assessee's claim of being engaged in manufacturing activities. The Tribunal noted that the AO and CIT(A) had not disputed the processes involved but had only questioned whether they constituted manufacturing or production. Given the comprehensive processes and consistent recognition by government authorities, the ITAT held that the assessee's activities qualified as manufacturing or production under Section 80-IA. Separate Judgments Delivered by the Judges: Majority Opinion: The majority of the Tribunal members, including the Vice President, concluded that the assessee's activities amounted to manufacturing or production. They directed the AO to allow the deduction under Section 80-IA for both assessment years. Dissenting Opinion: One member disagreed, arguing that the activities did not constitute manufacturing or production, relying on the Supreme Court's decision in Lucky Minmat. This member emphasized that the processes involved were primarily cutting and polishing, which did not transform the marble blocks into new products. Final Decision: In conformity with the majority opinion, the Tribunal adjudicated the issue against the assessee, dismissing the appeals and upholding the disallowance of the deduction under Section 80-IA.
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