2014 (3) TMI 576 - HC - Income Tax

Deduction u/s 80HH and 80I - Whether the conversion of granite boulders into small pieces of different size amount to production or manufacture Held that - The process carried on in different units of the respondent/assessee clearly indicated that the commercial identity of the boulder which is used as raw-material to bring into existence altogether a different product, i.e. rubbles (crushed metal granite) and also M Sand of different sizes - The products manufactured by the assessee have distinct and different utility - If boulder could be used for the purpose of foundation, M Sand and crushed metal granite, cannot be used for the same purpose for which boulders are used - In that sense all the products are different though come from same raw-material - Relying upon CIT v. Mysore Minerals Ltd. 1999 (9) TMI 10 - KARNATAKA High Court - In the light of the process being undertaken which ultimately results in a different marketing product, in the units of the assessee, both processes are present, i.e. manufacture and also production thus, the Tribunal was justified in confirming the orders of CIT(A). Deduction u/s 80HH and 80I of the Act Applicability of Commissioner of Income-Tax Versus Gem India Manufacturing Co. 2000 (12) TMI 7 - SUPREME Court Held that - The decision in Joint Commissioner of Income-tax Versus Mandideep Engineering And Packing India P. Limited 2006 (4) TMI 75 - SUPREME Court followed - if various deductions are independent in nature available to an assessee under different circumstances, they all have to be allowed if they come within the application of a particular provision of law in terms of Sections 80HH, 80I and 80IB, if claims are made for deductions by assessee in the same year at the same time, if it is found relevant for the purpose of giving deductions, all are to be extended - It does not depend upon existence of other provision - if the benefit is extended under one provision, the assessee cannot be denied the benefit of other provision which is altogether for a different purpose Decided against Revenue.

Summary

Issues:
1. Entitlement to deduction under section 80HH and 80I of the Income Tax Act
2. Determination of whether conversion of granite boulders into small pieces constitutes production or manufacture
3. Entitlement to deduction under Sections 80HH and 80I considering the nature of the activity

Analysis:

Issue 1: Entitlement to deduction under section 80HH and 80I
The case involved the respondent, running metal crushing units, claiming deductions under Sections 80HH and 80I. The Assessing Officer contended that the manufacturing process did not result in a product meeting the criteria for 'production.' The CIT(Appeals) and the Tribunal allowed the deductions, citing precedents. The High Court examined relevant judgments, including those of the Supreme Court, emphasizing that the term 'production' has a broader scope than 'manufacture.' The Court concluded that the respondent's activities resulted in distinct products with different commercial identities, justifying the deductions under Sections 80HH and 80I.

Issue 2: Determination of production or manufacture
The Revenue argued that the crushing units' activities did not amount to manufacturing or production. Reference was made to judgments like Lucky Minmat Pvt. Ltd. and Arihant Tiles, which discussed the distinction between mere processing and actual manufacturing. The Court analyzed the process undertaken by the respondent, involving various stages from crushing boulders to producing granite aggregates. It observed that the end products were commercially different from the raw material, indicating both manufacturing and production activities. The Court relied on precedents to support its finding that the respondent's operations constituted production within the meaning of the Income Tax Act.

Issue 3: Entitlement to deductions under Sections 80HH, 80I, and 80IB
The Court addressed the simultaneous claims for deductions under different sections, emphasizing that if the conditions for deductions are met, they should be allowed. Citing the Supreme Court's decision in Joint Commissioner of Income Tax v. Mandideep Engineering, the Court clarified that an assessee could avail benefits under multiple provisions if the requirements were fulfilled. Therefore, the respondent was entitled to deductions under Sections 80HH, 80I, and 80IB based on the specific circumstances of the case. The Court upheld the Tribunal's decision, ruling in favor of the respondent and confirming the orders granting the deductions.

In conclusion, the High Court ruled in favor of the respondent, upholding the deductions claimed under Sections 80HH and 80I, based on the nature of the activities undertaken and the commercial identity of the end products resulting from the manufacturing and production processes carried out by the crushing units.