2021 (8) TMI 569 - HC - Income Tax

Benefit of deduction u/s 10-B - revenue contended that, assessee is not engaged in manufacture of any article or thing - exercise of processing and not that of manufacture undertake by assessee - process through which the quarried rough stone goes through before it becomes a polished granite slab or tile or any other article - Tribunal allowed benefit as confirmed by CIT-A - HELD THAT - The law on subject is no longer res integra and in this regard, we refer to the decision of the Hon'ble Supreme Court in Income-Tax Officer, Udaipur v. Arihant Tiles Marbles (P) Ltd. 2009 (12) TMI 1 - SUPREME COURT and the decision in the case of Commissioner of Income-Tax, Chennai v. Pallava Granite Industries (I) (P) Ltd. 2013 (12) TMI 1210 - MADRAS HIGH COURT . Both the above mentioned decisions deal with granite and marble blocks. In the case on hand, the CIT(A) had elaborately examined the process through which the quarried rough stone goes through before it becomes a polished granite slab or tile or any other article. We are of the considered view that the Tribunal was right in confirming the order passed by the CIT(A) - Decided against revenue.

Summary

Issues:
1. Interpretation of eligibility for deduction under Section 10-B of the Income Tax Act.
2. Consideration of the definition of "manufacture" under Section 10-B.
3. Examination of the export-oriented unit's entitlement for exemption under Section 10-B based on the nature of processed granite blocks.

Analysis:
1. The primary issue in the case revolved around the eligibility of the assessee for a 100% deduction under Section 10-B of the Income Tax Act for being an export-oriented unit engaged in the granite business. The Assessing Officer initially rejected the claim, stating that the assessee was not involved in the manufacture of any article or thing as required by Section 10-B for the relevant assessment year. The appeal before the Commissioner of Income Tax (Appeals) was allowed, leading to the Revenue's appeal before the Tribunal.

2. The Tribunal considered various precedents, including the decision of the Hon'ble Supreme Court in Income-Tax Officer v. Arihant Tiles & Marbles, which highlighted the importance of the manufacturing process in the granite industry. The argument presented by the Senior Standing Counsel for the Revenue focused on the absence of specific definitions in the relevant statutory provisions during the assessment years. However, the Tribunal, relying on past judgments, emphasized that the scope of "manufacture" should be interpreted broadly to include processes resulting in the production of new articles with different characteristics.

3. The Tribunal's decision was further supported by the analysis of the activity of the assessee in transforming quarried rough stones into polished granite slabs or tiles. The distinction between mere processing and actual manufacturing was crucial in determining the eligibility for the Section 10-B deduction. Reference was made to the case law and judgments, such as Lucky Minmat Pvt. Ltd. v. Commissioner of Income-Tax, Jaipur, to differentiate between activities like mining, cutting, and sizing, and the actual manufacturing or production processes that qualify for tax benefits.

4. Ultimately, the Tribunal upheld the order passed by the CIT(A) in favor of the assessee, dismissing the Revenue's appeals. The decision was based on a comprehensive analysis of the manufacturing processes involved in the granite industry, aligning with previous judicial interpretations and emphasizing the need for a broader understanding of "manufacture" for tax exemption purposes. The judgment concluded by answering the substantial questions of law against the Revenue, with no costs imposed on either party.