1997 (6) TMI 62 - AT - Income Tax

Summary

Issues:
1. Eligibility of investment allowance on Fork Lifts.
2. Entitlement to relief under section 80HHC of the IT Act.
3. Classification of activities as manufacturing or production for deduction under section 80HHC.

Detailed Analysis:
1. The appeal was filed by the Revenue against the order of the CIT (Appeals) concerning the grant of investment allowance on Fork Lifts and the entitlement to relief under section 80HHC of the IT Act. The CIT (Appeals) directed the Assessing Officer to grant investment allowance on Fork Lifts and held that the assessee is entitled to relief under section 80HHC. The Tribunal considered the activities of the assessee, which involved quarrying and mining of granite stones exported after cutting, polishing, and processing. The Revenue contended that exporting mining minerals and metals would not qualify for section 80HHC benefits.

2. The Tribunal analyzed the definition of manufacturing or production under section 80HHC and examined various case laws and circulars. The Tribunal noted that the process of extracting granite, cutting, and processing it into different forms amounted to manufacturing or production. It cited the decision in CITv. M.R. Gopal, where converting boulders into small stones using machinery was considered a manufacturing process. Additionally, the Tribunal referred to other cases where extraction of slate from quarries was deemed manufacturing, entitling the assessee to benefits under section 80HH.

3. The Tribunal also referenced Circular No. 729 issued by the CBDT, which clarified that profits derived from the export of processed granite blocks would attract benefits under section 80HHC. The circular emphasized that applying processes like cutting, dressing, and polishing to granite altered its nature from a rough mineral to a dimensional commodity, making it eligible for deduction under section 80HHC. In this case, the Tribunal concluded that the assessee's activities involved manufacturing or production of articles, specifically granite extracted from the earth and processed into acceptable sizes. Consequently, the Tribunal upheld the order of the CIT (Appeals) granting relief under section 80HHC and investment allowance on Fork Lifts.

4. Ultimately, the Tribunal dismissed the appeal filed by the Department, affirming the decision that the assessee was entitled to benefits under section 80HHC based on the manufacturing activities involving granite extraction and processing.