TMI Blog1997 (3) TMI 170X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the ore from the mines, cutting the same into size, screening of ore, etc. The Assessing Officer rejected the claim of the assessee. The reason given by him was that the activity of the assessee was merely processing activity and the same did not amount to manufacturing or producing any article or thing. In this connection, be relied on the Supreme Court decision in the case of Chowgule Co. (P.) Ltd. v. Union of India [1981] 47 STC 124. He also relied on the decision of the Tribunal in the case of Sesa Goa Ltd. in [Income-tax Appeal No. 1752 (Pune) of 1987 and 1703 (Pune) of 1987]. On appeal, the CIT(Appeals) accepted the claim of the assessee on the ground that his predecessor had allowed the assessee's claim for assessment year 1989-90. Aggrieved by the same, present appeal has been preferred by the revenue. 3. The learned Senior Departmental representative has vehemently assailed the order of the CIT(Appeals) by arguing that the activity of the assessee neither could be said of manufacturing nor producing of any article or thing and it was merely processing activity as held by the Hon'ble Supreme Court in the case of Chowgule Co. (P.) Ltd. He also relied upon the decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment allowance in respect of the same activity. If the Legislature did not want to grant investment allowance in respect of the mining activity it could have included such activity in the prohibitive list i.e. Eleventh Schedule. He further drew our attention to the provisions of section 35E which use the words "extraction or production of any minerals". According to him, it shows that the activity of mining amounts to production. He further submitted that the decision of the Hon'ble Supreme Court in the case of Chowgule Co. (P.) Ltd. is distinguishable on facts of the case. It was also submitted by him that the decision of the Supreme Court in the case of N. C. Budharaja Co. has been considered by various High Courts and still those Courts have allowed the investment allowance in respect of mining activity. In support of his contention, he relied on various decisions, viz. CIT v. Mercantile Construction Co. [1994] 74 Taxman 41 (Cal.). Empire Industries Ltd. v. Union of India [1986] 162 ITR 846 at page 870 (SC), CIT v. Singareni Collieries Co. [1997] 90 Taxman 185 (AP), CIT v. Best Chem Limestone Industries (P.) Ltd. [1994] 210 ITR 883 (Raj.), Second ITO v. G.N. Agrawal (HUF) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... General Finance Investment Co. Ltd. [1987] 1 SCC 424 : " Interpretation must depend on the text and the context. They are the basis of interpretation. One may well say if the text is the texture context is what gives the colour. Neither can be ignored. Both are important. That interpretation is best which makes the textual interpretation match the contextual. " 5.3 There is another aspect of the matter. The provisions of section 32A being beneficial provisions are to be construed liberally as held by the Apex Court in the case of Bajaj Tempo Ltd. v. CIT [1992] 196 ITR 188/62 Taxman 480. The following observations of their Lordships are noteworthy : " The provision in a taxing statute granting incentives for promoting growth and development should be construed liberally ; and since the provision for promoting economic growth has to be interpreted liberally, restrictions on it too has to be construed so as to advance the objective of the provision and not to frustrate it. " 5.4 Therefore, the dispute between the parties has to be resolved keeping in view the aforesaid observations of their Lordships of the Hon'ble Supreme Court. The conditions for granting investment allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for, or extraction or production of, any mineral specified in the Seventh Schedule. Seventh Schedule refers to various ores including iron ore. Conjoint reading of section 35E with Seventh Schedule shows that the Legislature has used the word 'production' with reference to various ores including iron ore. The deduction under section 35E has been allowed by the Legislature if the assessee is engaged in the production of iron ore. 5.7 In view of the aforesaid discussions, we are of the view that the Legislature has used the word 'production' in sections 32A and 35E in wider sense and therefore, the activity carried on by the assessee would fall within the ambit of the word 'production' used by the Legislature in section 32A. 5.8 Let us consider this issue also in the light of the case law referred to by the parties. The issue whether the word 'production' would take within its ambit the activity of mining is, in our opinion, covered by the decision of the Apex Court in the case of Chrestian Mica Industries Ltd. wherein it was held that processing of mining mica is a process of production. In that case, sale of mica produced or manufactured in the State of Bihar was chargeable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vibrating screens of desired sizes (10 mm). This 10 mm material is fed to a spiral classifier where size below 0.15 mm is separated and the + 0.15 mm is dewatered. After screening and dressing, the ore is conveyed from mine site to the desired place and stocked in different stock piles according to its physical and chemical compositions. Thereafter, it is blended to achieve the required specification. All this process is an integrated process as held by the Supreme Court in the case of Chowgule Co. (P.) Ltd.. In our opinion, the item so produced is clearly different from the ore lying under the earth. The activity carried on by the assessee therefore, in our opinion, constitutes a process of production. 5.10 The decision of the Hon'ble Supreme Court in the case of Chowgule Co. (P.) Ltd. heavily relied upon by the revenue is also distinguishable on facts of the case. In that case, the Supreme Court was never concerned about the meaning of the word 'production'. The only question with which the Hon'ble Supreme Court was concerned was whether the activity of blending of various types of ores constituted an activity of manufacturing or processing. That case arose under the provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re made : " The word 'production' or 'produce' when used in juxtaposition with the word 'manufacture' takes in bringing into existence new goods by a process which may or may not amount to manufacture ". The emphasis of the learned Senior Departmental representative was to the extent that goods which emerge out of process must be new and different. We have already held that the final product obtained by the assessee is entirely different commercial item from the crude ore lying under the earth. Therefore, the test laid down by the Supreme Court in the above case is fully satisfied. Recently, the Hon'ble Andhra Pradesh High Court in the case of Singareni Collieries Co. had to consider this issue. The issue before the Court was whether the winning or excavating coal could be considered as an activity of production. The Hon'ble Court after considering the decision of the Apex Court in the case of N.C. Budharaja Co. held the activity of winning or excavating coal from the mines could be described as production activity. Similarly, the Calcutta High Court in the case of Mercantile Construction Co. has to consider the similar issue. It was held by that Court that raising of coal fr ..... 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