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TMI Blog2007 (7) TMI 364X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 80-IB. The Assessing Officer reasoned that, there is a difference in "manufacturing" and "processing". The processing is one of the stages of manufacturing activity. "Manufacturing" means, producing articles from raw materials. Here, the nature and character of finished product is entirely different from raw materials, i.e. the identity of the goods changes completely. But in processing the article or thing only passed to a different physical form and identity of the raw material is partly or fully restored in the finished product. In the instant case, the plastic granules are pulverized to produce plastic powder. Hence, there is only a change in physical form and nature and character of the raw material remains in the finished product. Accordingly, the Assessing Officer disallowed the claim for deduction under section 80-IB. Upon the assessee's appeal the learned Commissioner of Income-tax (Appeals) elaborately discussed the issue and held that he was convinced that the assessee was engaged in manufacture/production of various polymer powders for the following reasons: "(i) The assessee-company manufactures various polymer powders (fusing powders) by using the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2] 257 ITR 737 (P H); Aspinwall and Co. Ltd. v. CIT [2001] 251 ITR 323 (SC); and CIT v. Tamil Nadu Heat Treatment and Fetting Services P. Ltd. (No. 1) [1999] 238 ITR 529 (Mad). Accordingly, the learned Commissioner of Income-tax (Appeals) allowed the assessee's appeal. We have heard the rival contentions and perused the relevant records. Before us, the assessee's submissions are as under: "The assessee is manufacturing various products of polymer alloys. These polymer alloys are manufactured using a combination of various polymers like LDPE, LLDPE, HDPE, EVA (of different technical parameters viz., melting point, MFI, specific gravity etc.) along with speciality chemicals. The finished products manufactured are in powder form. The products manufactured by the assessee are not mere plastic powders but they are specialized polymer alloys in powder form. The assessee manufactures various polymer alloys which find application in different industries. Each product is different in nature, character and use and technically different and can be used only for the specific application. The raw material used for the above products are of different grades, specifications, melti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es are made to reputed companies for different use. The assessee is one of the major manufacturers of such type of powders in the country. The process employed is a complex one and not merely limited to pulverization or crushing as wrongly understood by the Assessing Officer, who was also invited to visit the factory and satisfy himself as to the processes. But the learned Assessing Officer has totally ignored the submissions of facts made during the assessment and has come to an incorrect conclusion on facts and has based his interpretation of law as to what is meant by manufacture with reference to such incorrect understanding of the fact." Learned counsel for the assessee further submitted that the granules can be used for making other products also. The final product in this case is recognised in the trade as distinct commodity from the raw material. Learned counsel further placed reliance upon CEGAT decision in the case of Rotomould (India) P. Ltd. v. Collector of Central Excise [1998] 102 ELT 270 (Tri), for the proposition that pulverizing plastic granules into plastic moulding powder is a process of manufacture and the moulding powder is an excisable commodity falling fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dly, in this case, there is no dispute that there is a new industrial undertaking as envisaged in the Act. The matter requiring adjudication is whether the undertaking can be said to be manufacturing or producing any article or thing. We also find in this case that the Assessing Officer has proceeded on a premise that the assessee is not entitled to deduction under section 80-IB as according to the Assessing Officer, the assessee is engaged in processing and not manufacturing. In our opinion, this is an erroneous approach and the distinction made is an extraneous interpolation in the sanguine provisions of section 80-IB. We may also mention that amongst other conditions for claiming deduction, under section 80-IB(2) in clause (iii) has been stated as under: "It manufactures or produces any article or thing, not being any article or thing specified in the list in the Eleventh Schedule or, operates one or more cold storage plant or plants, in any part of India." The word "produce" tantamounts to processing of goods. In fact, the word "manufacture" or "produce" in this section shall have to be read independently and separately, otherwise only the word "manufacture" could have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. v. CIT [2001] 251 ITR 323 (SC): In this case, the hon'ble apex court, while determining what would amount to 'manufacture' has expounded as under: "This court while determining as to what would amount to a manufacturing activity held in Deputy CST (Law), Board of Revenue (Taxes) v. Pio Food Packers [1980] 46 STC 63; [1980] Supp. SCC 174: that the test for determination whether manufacture can be said to have taken place is whether the commodity which is subjected to the process of manufacture can no longer be regarded as the original commodity, but is recognised in the trade as a new and distinct commodity. It was observed: 'Commonly, manufacture is the end result of one or more processes through which the original commodity is made to pass. The nature and extent of processing may vary from one case to another, and indeed there may be several stages of processing and perhaps a different kind of processing at each stage. With each process suffered, the original commodity experiences a change. But it is only when the change, or a series of changes, take the commodity to the point where commercially it can no longer be regarded as the original commodity but instead is recog ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t allowance under section 32A." (5) CIT v. Premier Tobacco Packers P. Ltd. [2006] 284 ITR 222 (Mad): In this case, hon'ble jurisdictional High Court has held that: "Though the assessee was doing only processing work and was not involved in manufacture, the process is a manufacturing process when it brings out a complete transformation in the original article so as to produce a commercially different article or commodity. That process itself may consist of several processes. The different processes are integrally connected which results in the production of a commercially different article. If a commercially different article or commodity results after processing then it would be a manufacturing activity. The assessee after thrashing and redrying, which is called as virginia flue-cured tobacco (VFT) in commercial parlance, converts them into lamina and N.R. stems, etc. The end product is used in the manufacture of cigarettes and the raw materials, namely, virginia flue-cured tobacco (VFT) could not be used directly in the manufacture of cigarettes. The assessee after processing the raw virginia flue-cured tobacco converts them into tobacco which is a commercially different com ..... X X X X Extracts X X X X X X X X Extracts X X X X
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