2016 (3) TMI 1413 - AT - Income Tax

Deduction u/s.10B - manufacture defined u/s.2(29BA) - manufacture and usage of conversion of granite block into monuments - HELD THAT - The main requirement of product is activity should be in manufacturing items and should result in transformation of the object or article or thing into a new and distinct object with different character. The granite raw block is mounted and with the process of cutting clipping and polishing into a monument has distinct character and usage. As considering the apparent facts definitions usage and the process of manufacturing and assessee s own case on the nature of business of manufacturing of monuments and the process of conversion of raw material into finished product is identified and saleable and we rely on Apex Court decision of Arihant Tiles Marbles (P) Ltd 2009 (12) TMI 1 - SUPREME COURT were the lordship has considered conversion of marble block into polished slabs and tiles constitutes manufacture and same analogy apply for process of granite block. Therefore we are not inclined to interfere with the order of Commissioner of Income Tax (Appeals) who has dealt the issue in detail viz-a-viz the explanations of the assessee and we uphold the order of the Commissioner of Income Tax (Appeals) and dismiss the Revenue appeal.

Summary

Issues involved:
- Appeal against order of Commissioner of Income-tax (Appeals) regarding deduction u/s.10B.
- Interpretation of the definition of "manufacture" under the Finance Act, 2009.
- Eligibility of the assessee for deduction u/s.10B of the Income Tax Act.
- Dispute over whether the process of converting granite blocks into monuments constitutes "manufacture."

Analysis:
1. The Revenue filed an appeal against the order of the Commissioner of Income-tax (Appeals) concerning the allowance of deduction u/s.10B for the assessment year 2010-2011. The main ground raised was the alleged error in directing the Assessing Officer to allow the deduction without proper appreciation of the definitions of "manufacture" under the Finance Act, 2009. The Assessing Officer contended that the process of converting granite blocks into monuments did not meet the definition of "manufacture" as per the Act.

2. The case involved a company engaged in the production and export of granite monuments, claiming deduction u/s.10B. The Assessing Officer questioned whether the process of cutting and polishing granite blocks into monuments constituted "manufacture" as defined under the Finance Act, 2009. The company argued that the transformation of raw granite blocks into distinct monuments fulfilled the criteria of "manufacture" based on judicial precedents and the legislative intent.

3. The Commissioner of Income Tax (Appeals) extensively analyzed the definitions and judicial decisions related to "manufacture." After considering the submissions and relevant materials, the Commissioner observed that the process undertaken by the appellant qualified as "manufacture" or production of an article or thing under section 10B of the Income Tax Act. The Commissioner allowed the appeal, emphasizing that the final product, i.e., the granite monuments, had a separate identity and distinct character from the raw material.

4. The Revenue challenged the Commissioner's decision before the Tribunal, arguing that the conversion of granite blocks into monuments did not result in the creation of a new and distinct item. The Departmental Representative contended that the process did not align with the definition of "manufacture" introduced by the Finance Act, 2009. In contrast, the appellant reiterated that the process involved in manufacturing granite monuments met the criteria for claiming deduction u/s.10B.

5. The Tribunal carefully examined the arguments presented by both parties, focusing on the definition of "manufacture" and the process involved in converting raw granite blocks into finished monuments. Relying on the Supreme Court decision in ITO vs. Arihant Tiles & Marbles (P) Ltd, the Tribunal held that the conversion of raw material into a distinct and saleable product constituted "manufacture." Therefore, the Tribunal upheld the order of the Commissioner of Income Tax (Appeals) and dismissed the Revenue's appeal.

In conclusion, the judgment revolved around the interpretation of the term "manufacture" in the context of converting granite blocks into monuments for the purpose of claiming deduction u/s.10B of the Income Tax Act. The Tribunal's decision emphasized the transformative nature of the process and its compliance with the statutory provisions and judicial precedents.