2012 (10) TMI 479 - HC - Income Tax

Converting limestone into limestone powder - whether the process is a manufacturing activity within the meaning of Section 80IA and 80IB - Held that - As decided in Lucky Minmat Pvt. Ltd. Versus Commissioner of Income-Tax 2000 (8) TMI 6 - SUPREME COURT the conversion into lime and lime dust or concrete by stone crushers can legitimately be considered to be a manufacturing process while the mere mining of limestone and marble and cutting the same would not be so considered. The observation of the Supreme Court cannot be termed to be obiter dicta since the Supreme Court has held that the process of conversion of limestone into lime and lime dust is a manufacturing process - in favour of the assessee

Summary

Issues:
1. Whether converting limestone into limestone powder qualifies as a manufacturing activity under Section 80IA/80IB of the Income Tax Act, 1961?
2. Whether the Tribunal's reliance on specific judgments in determining manufacturing activity was appropriate?
3. Whether the Tribunal misconstrued the evidence on record?

Analysis:

Issue 1: Converting limestone into limestone powder as a manufacturing activity
The central issue in this case revolves around determining whether the process of converting limestone into limestone powder constitutes a manufacturing activity under Section 80IA/80IB of the Income Tax Act, 1961. The court delves into the definition of "manufacture" as per Black's Law Dictionary, emphasizing the transformation of raw materials into new forms or combinations. Drawing from precedents like M/s. Sterling Foods v. State of Karnataka, the court highlights that processed goods retain their original identity even after undergoing various processing stages. Applying this principle, the court concludes that converting limestone into limestone powder indeed qualifies as a manufacturing process. The court references Commissioner of Income Tax v. Relish Foods to support this interpretation within the realm of income tax provisions.

Issue 2: Tribunal's reliance on specific judgments
The Tribunal's reliance on judgments such as M/s. Lucky Minmat Pvt. Ltd. vs. CIT and M/s. Sacs Eagle Chicory vs. CIT is scrutinized in this judgment. The court evaluates whether the Tribunal's choice to rely on specific cases was appropriate in the context of determining manufacturing activities. Notably, the court emphasizes the significance of the Apex Court's decisions in providing clarity on what constitutes manufacturing. By referencing cases like Indian Hotels Co. Ltd. and others v. Income Tax Officer and others, the court reaffirms the principles governing manufacturing processes, particularly in relation to processing raw materials into consumable items.

Issue 3: Misconstruction of evidence by the Tribunal
The final issue pertains to whether the Tribunal misconstrued the evidence on record while assessing the nature of the activity in question. The court meticulously examines the material facts and legal precedents to ascertain the accuracy of the Tribunal's interpretation. By citing cases like Aspinwall and Co. Ltd. v Commissioner of Income Tax, the court underscores the transformative nature of manufacturing processes. Ultimately, the court refutes the revenue's contentions and rules in favor of the assessee, affirming that the conversion of limestone into limestone powder indeed constitutes a manufacturing activity. Consequently, the court dismisses the revenue's arguments and resolves all questions in favor of the assessee, without imposing any costs.

In conclusion, the judgment clarifies the legal intricacies surrounding manufacturing activities, emphasizing the transformative aspect of processes involving raw materials. By drawing from established legal principles and precedents, the court provides a comprehensive analysis to resolve the contentious issues raised in the appeals before it.