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2013 (11) TMI 69 - HC - Income TaxDeduction u/s 80IA of the Income Tax Act - Whether coating with oxides of noble metals on titanium metal electrode/anode bringing about a change in its character and user for making it fit for use in the production of chlorine and caustic soda in an electrolytic process is 'manufacture' or 'production' of 'article' or 'thing' within the meaning of section 80-IA of the Income-tax Act, 1961 – Held that:- Once process undertaken by the assessee resulted in production of a "useful commercial commodity" the enquiry had to end there, and the assessee's claim allowed – Reliance has been placed upon the judgment in the case of CIT v. Oracle Software India Ltd. [2010 (1) TMI 9 - SUPREME COURT OF INDIA], wherein the court was called upon to decide as to whether a process by which blank compact discs are transformed into loaded software would constitute manufacture in the context of section 80-I of the Income-tax Act. The court employed the test of fitness. In other words, to come to the conclusion whether the process employed constitutes manufacture one would have to ascertain the efficacy of the process in rendering the commodity or an article fit for use. The Tribunal had to employ the test of fitness in ascertaining whether the process employed by the assessee rendered the free issue material supplied to it (whether referred to as titanium substrates or a titanium metal anode), fit for use in the industry. In the present case, Tribunal lost sight of the fact that a distinct new product had come into existence after it was processed by the assessee. The fact that it had a single purchaser (i.e., UHDE/IPCL) for its coated titanium substrates ought not to have come in the way of the Tribunal allowing the deduction to the assessee. As noticed above, the test is that the transformed article should be marketable. In this case, there could not have been a better evidence of marketability than the assessee's agreement with UHDE – Decided in favor of Assessee.
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