2014 (9) TMI 502 - HIMACHAL PRADESH HIGH COURT

Deduction u/s 80IC – Process amounts to manufacture or not - Whether the process of drawing wire of thinner gauge from wire or rods of thicker gauge, followed by finishing processes like annealing would amount to manufacture or production or consequently whether the assessee was eligible for deduction u/s 80IC of the Income Tax Act – Held that:- Following the decision in India Cine Agencies vs. Commissioner of Income Tax [2008 (11) TMI 15 - SUPREME COURT] extracting granite from quarry and cutting it to various sizes and polishing should be considered as manufacture or production of any article or thing and the assessee's business activity must be considered as an industrial undertaking for the purpose of granting reliefs u/s 32A and 80-I of the Income tax Act.

Wire manufactured can no longer be regarded as the original commodity – In fact, the final product is recognized in the trade as a new and distinct commodity - the wire rod having undergone various mechanized and chemical based processes like annealing, galvanizing etc. results into manufacture of wire with distinct name, character and use - The name of the raw material, originally is wire rod before processing and after processing, it becomes wire of different types, say paper/enamel insulated wires or strips or barbed wire, GSS/Stay Earth wire, chainlink, etc. - Therefore, it is commercially distinct commodity with a distinct name - The wires so produced are used for power cables, industrial control cables, electric motors, transformers, etc. but wire rod as a raw material cannot be used as such - even qualitative changes effected in the raw material through heating, also amounts to a 'manufacturing activity'.

The qualitative changes effected in the raw material by various means like annealing, quenching, acid pickling and flux application, galvanizing and following the zinc hot dip, definitely amounts to manufacture - There is a complete transformation of raw materials into a new and different article having a different identity, characteristic and use - The series of changes transform the commodity into a different commercial commodity whereby it can no longer be regarded as the original commodity but recognised as a new and distinct article - the Appellate Tribunal was justified in concluding that the paper insulated wires and strips of copper and aluminium being manufactured/processed by the assessees were commercially different from its raw material and further it is commercially known different in the market - the assessees were engaged in the manufacture of the product were entitled to the deductions claimed u/s 80IC of the Act – Decided against revenue.