2014 (6) TMI 259 - HC - Income Tax

Conversion of granite boulders into small pieces of different sizes - Activity amounts to manufacture or not Held that - Following CIT v. Mysore Minerals Ltd. 1999 (9) TMI 10 - KARNATAKA High Court - extraction and processing of iron ore did not amount to manufacture - after extraction of iron ore, various processes involve production within the meaning of section 32A(2)(b)(iii) of the Act, thus, the assessee is allowed to have the benefit of investment allowance u/s 32A - the word production is wider in ambit and it has a wider connotation than the word manufacture - while every manufacture can constitute production, every production need not amount to manufacture. 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 - in the commercial world, products are quite different in terms of trade though both the materials could be used in the construction activity - The products manufactured by the assessee have distinct and different utility- the identity is also different - 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 - all the products are different though come from the same raw-material - both processes are present, i.e., manufacture and also production the Tribunal was justified in confirming the orders of the CIT(A). Entitlement for deduction u/s 80HH and 80I of the Act Held that - Following CIT v. Mandideep Eng. and Pkg. Ind. P. Ltd. 2006 (4) TMI 75 - SUPREME Court - 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, 80-I and 80-IB, if claims are made for deductions by the 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 the 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 sections 80HH and 80-I of the Income-tax Act.
2. Determination of whether the conversion of granite boulders into small pieces constitutes production or manufacture.
3. Entitlement to deductions under sections 80HH and 80-I in view of the conversion process.

Analysis:
1. The case involved the respondent-assessee running metal crushing units claiming deductions under sections 80HH and 80-I. The Assessing Officer rejected the claims stating that the process did not amount to production or manufacturing. The Commissioner of Income-tax (Appeals) allowed the deductions, and the Tribunal upheld this decision based on precedents. The High Court analyzed the process undertaken by the assessee, which involved various stages resulting in different products from raw-material boulders. The court held that the products had distinct utility and commercial identity, justifying both manufacturing and production activities. The Tribunal's decision was affirmed, granting the deductions under sections 80HH and 80-I.

2. The Revenue contended that the crushing units' activities did not constitute manufacturing or production, as the product was used in construction without a change in nature. The court referred to judgments like Arihant Tiles and Marbles P. Ltd. and Lucky Minmat P. Ltd., emphasizing the distinction between mere mining and actual manufacturing processes. The court highlighted that the process undertaken by the respondent resulted in new products with different commercial identities, supporting the manufacturing and production aspects. Therefore, the Revenue's argument was dismissed.

3. Regarding the entitlement to deductions under multiple sections simultaneously, the court cited the case of Joint CIT v. Mandideep Eng. and Pkg. Ind. P. Ltd., stating that if claims for deductions under different provisions are relevant and independent, they must all be allowed. The court clarified that an assessee can benefit from all relevant provisions simultaneously if the conditions are met. Therefore, the respondent-assessee was entitled to deductions under sections 80HH, 80-I, and 80-IB based on the specific circumstances of the case. The court upheld the Tribunal's decision, confirming the orders of the Commissioner of Income-tax (Appeals) against the appellant-Revenue.