TMI Blog2012 (7) TMI 699X X X X Extracts X X X X X X X X Extracts X X X X ..... mmercially it can no longer be regarded as the original commodity, but instead is recognized as a new and distinct article, then it can be said that 'manufacture' takes place. In the present case, the assessee had broken the boulders in small pieces, but there is no change in the composition of the boulder. Only the big size had been reduced to small size. So, it cannot be said that breaking of boulders into small pieces of stone is a manufacturing activity - the assessee has not carried on the integrated activity of mining, processing and polishing and it is engaged only mining and crushing into small pieces - against assessee. Dis allowance of claim for grant of TDS - Held that:- If the TDS is relating to the assessment year under consideration and AO whenever determines an amount of tax due from the assessee, he should consider the TDS certificate relevant to assessment years under consideration. Accordingly, we direct the Assessing Officer to consider the TDS certificate filed by the assessee relating to these assessment years and give credit for the same - in favour of assessee. Disallowance being employee share of contribution to PF - Held that:- As decided in CIT vs. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mere change of opinion. However, after discussing the factual position and referring to the proviso to section 147 of the Act, the Assessing Officer rejected such contention. She further noted that during the assessment proceedings for A.Y. 2006-07, while calling for details of excise duty liability, the assessee has filed a letter on 17.11.2008 stating that Jumbo Mining Ltd., purchases/ excavates minerals and process the same for different sizes and the final product is same as input and no other materials are added in such process. Hence, it is not subjected to excise duty. She further noted that such submission led to the new fact that the goods produced by the assessee company are not subjected to excise duty and the same caused the Assessing Officer to believe that income in this case has escaped assessment by allowance of excess deduction u/s. 80IB(5) for A.Y. 2005-06. 5. During the assessment proceedings, in response to query from the Assessing Officer to substantiate their claim of deduction made u/s. 80IB(5), the assessee has submitted that their company is into the business of production of PF Lumps, FE Lumps, PF Powder, Clay, PF Quartz and Chips from mined feldspar, qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other two items, obtained during crushing activity. She further mentioned that, the above fact contradicts the claim of the assessee that raw materials when extracted from mines are of insignificant value. With the above observations, the Assessing Officer concluded that the assessee company is not involved in manufacturing of any product as required u/s. 80IB(5) of the Act. She thus held that the assessee is not entitled to deduction u/s. 80IB of the Act. Therefore, she disallowed the claim of the assessee for deduction u/s. 80IB for an amount of Rs. 51,91,951 and completed the assessment accordingly u/s. 143(3) r.w.s. 147 of the Act. 7. The learned AR submitted that the assessee company is engaged in the business of extraction, processing and trading of mineral ores. It has set up a unit for processing and manufacture of ores at Kadthal, Mahboobnagar District, Andhra Pradesh. The commercial production started in financial year 2004-05. For A.Y. 2005-06, the assessee company has filed return of income on 1.11.2005 showing Income at Nil, after claiming deduction u/s. 80IB(5) of the Act, under the normal provisions and total income of Rs. 69,41,576 computed u/s. 115JB of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pertinent to reproduce the entire observations made by the Assessing Officer in the said assessment order, before computation of total income and tax calculation made in that order: The assessee, M/s. Jumbo Mining Limited, Hyderabad, in the activity of extracting and processing of mines, has filed return of income for the A.Y. 2005-06 on 1.11.2005 declaring nil income under normal provisions and a book profit of Rs. 69,41,578/- as per section 115JB of the Income Tax Act, 1961. The same was processed u/s. 143(1) on 28.3.2007. Subsequently, the case has been selected for scrutiny by CASS and notice u/s. 143(2) was issued on 16.3.2007. In response to notices u/s, 143(2), assessee's Authorised Representative Shri Manoj Patel, ITP, has appeared from time to time and produced details called for. The information produced has been examined. After verification of details filed and discussion with the assessee's A.R., the assessment is completed accepting income returned. 9. According to AR, from the above, it may be seen that there is no reference at all to section 80IB of the Act in the said assessment order. There is no mention regarding verification of any claim made by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imed the entire amount of Rs. 95.14 lakhs as deduction. The expenses incurred by the assessee is payment for acquisition of software which is capital in nature. Hence the assessment is reopened to disallow the same. On appeal to the Tribunal, it was held that there was no material coming to the possession of the Assessing Officer on the basis of which the assessment completed u/s. 143(1) was reopened and this position has not been disputed even by the DR. Being so, in the present case we are not in a position to apply the ratio laid down by that decision because clause (b) to Explanation 2 to proviso 2 of section 147 clearly authorises the Assessing Officer to reopen the assessment. This provision is to be considered for the purpose of adjudicating this issue. This ground relating to reopening of assessment is decided against the assessee." 11. In the present case the assessment was reopened on noticing that excess deduction to the extent of Rs. 51,91,951 was granted to the assessee. This re-opening of assessment is falling under the purview of clause (b) to Explanation 2 to proviso 2 of section 147 of the Act. Being so, considering this fact and following the ratio laid down by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate, referring to provisions of Sec. 36(1)(va) of the Act, the Assessing Officer disallowed the said amount. The Assessing Officer further noticed that the assessee has debited an amount of Rs, 43,909/- to P L a/c. towards loss on sale of assets. The same being a capital loss, the Assessing Officer disallowed the said amount. He further noted that though the assessee has debited an amount of Rs. 52,950 towards donations, it has disallowed only a sum of Rs. 51,750, in the computation of income. Since the balance amount of Rs. 1,200 has not been added back, the Assessing Officer disallowed the same. Further, though the assessee has claimed deduction for a sum of Rs. 1,200 u/s. 80G of the Act, stating that it has not produced any documentary evidence for such donation, the Assessing Officer disallowed the same. 15. As stated above, in the return the assessee has claimed deduction for an amount of Rs. 1,00,78,425 u/s. 80-IB. However, according to the Assessing Officer the assessee was not manufacturing any new article or thing as required u/s. 80IB of the Act. Therefore, during the assessment proceedings, he has asked the assessee to explain as to why such claim should not be disallo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enses', that was for the purpose of simple mining, transportation, loading and unloading etc. The same cannot be construed as manufacturing expenses. He noted that the assessee is simply engaged in processing activity. In this regard, he relied on the following decisions- 1. Bharat Forge and Press Industries Pvt. Ltd. CCE (1 SCC 532) 2. Union of India vs. J.G. Glass Industries Ltd., (1998) (2 SCC 32) 3. Devi Dass Gopal Krishnan vs. State of Punjab (AIR 1967 SC 1895) 4. Empire Industries Ltd. vs. Union of India (1985) (3 SCC 314) 5. Gramophone Co. of India Ltd. vs. Collector of Customs (1 SCC 549) 6. Collector of Central Excise vs. Rajasthan State Chemical Works (4 SCC 473) 7. Nilgiri's case (10 STC 500)(Bom) 8. Chowgule's case (1981)(1 SCC 653) 17. The Assessing Officer further noted that the assessee is not assessable to Central Excise duty because its business activity does not fall under purview of 'manufacture of any thing or article', that attracts the provision of Central Excise Act. He further noted that the assessee is simply extracting the mineral from the earth and then simply crushing the same into smaller pieces of vario ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly the same minerals of smaller sizes. There is no change in physical and chemical composition, after subjecting the original ores to different stages of processing at its plant at Kadthal Village. In the letter dated 17/11/2008, filed before the Assessing Officer, the assessee has admitted that Jumbo Mining Ltd., purchase / excavate mineral and process it for the different sizes. It is further stated that the final product is same as input and no other materials are added in the .process, Thus, the entire activity at their plant at Kadthal Village, can be categorized as crushing of the ores/ minerals, extracted from the mines. It is not engaged in any manufacturing activity. It is not manufacturing any new article or thing involving change both in physical and chemicals composition. In Clause (a) to the newly inserted section 2(29BA), while defining 'manufacture', there is reference to the word transformation. However, even though, following the crushing of the ore at the plant at Kadthal, there is transformation to the original raw material, since the above newly inserted section (inserted vide Finance Act, 2009) shall be effective from 01/04/2009 the same is not applicable to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT v. Emptee Poly-Yarn P .Ltd. (320 ITR 665) (SC) 11. CIT v. Oracle Software India Ltd. (320 ITR 546) (SC) 12. ITO v. Arihant Tiles and Marbles P. Ltd. (320 ITR 79) (SC) 13. Vijay Ship Breaking Corpn. Ors.v. CIT (314 ITR 309) (SC) 14. Orissa State Warehousing Corporation v. CIT (237 ITR 589) (SC) 15. CIT v. Eastern Book Company (322 ITR 605) (All) 16. CIT v. Dimac Industries (2 DTR 355) (Bom) 17. CIT v. Mercantile Construction Co. (74 Taxman 41) (Cal) 18. CIT v. Ramsons Organics Ltd. (31 DTR 83) (Del) 19. CIT v. Univmines Pvt. Ltd. (202 ITR 825) (Del) 20. CIT v. R.C. Construction (222 ITR 658) (Gauhati) 21. CIT v. Shri Janak Raj Bansal ( 2010-TIOL-10-HC-HP-IT ) 22. CIT v. M/s. Shiv Ram Veg Food Industries ( 2010-TIOL-114-HC-HP-IT ) 23. D.J. Stone Crusher v. CIT. (33 DTR 267) (HP) 24. CIT vs. Mysore Minerals Ltd. (250 ITR 725) (Karn) 25. CIT v. Gopal (MR) (58 ITR 598) (Mad) 26. CIT v. Tata Locomotive and Engineering Co. Ltd. (68 ITR 325) (Bom) 27. CIT v. Gogte Minerals (No. 2) (225 ITR 60) (Karn) 28. CIT v. Air Survey Co. of India (P) Ltd. (232 ITR 707) (Cal) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 389) (Mad) 64. Neyveli Lignite Corporation Ltd v. ACIT (2 SOT 863) (Chenn) 65. DCIT vs. Gem Granites (64 ITD (Mad) 296) 66. ITO v. Punchline Forms (278 ITR 165) (Mum) 67. ITO v. Agarwal Stone Industries (21 ITD 622) (Jaipur) 68. Suraj Marbles (P) Ltd and Ors v. ITO (104 TTJ 192) (Jaipur) 69. ITO vs. World Wide Stones (115 TTJ 613) (Jaipur) 70. Aravali Minerals and Chemicals Industries (P) Ltd. v. ACIT (108 ITD 163) (Jodh) 71. ACIT v. Wolkem India Ltd. (107 TTJ 439) (Jodh) 72. ACIT v. Tirupati Microtech (P) Ltd. (111 TTJ 149) (Jodh) 73. Kushal Bagh Marbles I(P) Ltd v. ACIT (111 TTJ 122) (Jodh) 74. ACIT v. National Lamination Industries (Ahd.) 75. V.M. Jog Engg. Ltd. v. Jt. CIT (104 TTJ 487) (Pune) 76. Dy. CIT v. SociedadeDe Fomento Industrial Ltd. (59 TTJ 481) (Pune) 77. CIT v. Oswal Woollen Mills Ltd. (289 ITR 261) (P H) 78. CIT v. Shri Mahesh Chandra Sharma (308 ITR 222) (P H) 79. M/s. Midas Polymer Compounds (P) Ltd. v. ACIT (ITA No. 84 of 2009) (Ker) 21. The learned DR submitted that the assessee has stated that it has claimed deduction in respect of the profit derived from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ench, that by breaking big boulders into 'gitty' or small pieces of stone, it cannot be said that the assessee was engaged in manufacturing of article and hence, it is not entitled for deduction u/s. 80-IB of the Act. In this context, it is pertinent to refer to the following observations made by the Hon'ble Tribunal in para 6.8 of the said decision: "6.8. The Hon'ble Supreme Court in the case of Aman Marble Industries (P.) Ltd. v. CCE [2003J 58 RLT 595 has held that cutting of marble block into marble slabs or tiles does not amount to manufacture, as in both the forms, marble remains marble. In the present case the boulder is the big stone while the pieces of the boulders i.e., gitty or bajri are small stones but there is no change in the composition of the material, so it cannot be said that the breaking of boulders into 'gitty' (small stones) is a manufacturing activity. Since activity of the assessee was not a manufacturing, the deduction under section 80-IB was not available to the assessee. In that way of the matter, for this issue, we reverse the orders of the learned CIT (Appeals) and restore that of the Assessing Officer." 24. The DR submitted that in support of its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uments of both the parties and perused the material on record. The crucial issue to be decided before us is whether the crushing the lump ore extracted from the mines, for obtaining smaller pieces of various sizes is eligible for deduction under Section 80-IB or not. The deduction under Section 80-IB is available to an Industrial Undertaking if it manufactures or produces any article or thing not being any article or thing specified in the list in the Eleventh Schedule. The words 'Industrial Undertaking' has not been defined in the Income-tax Act, however, cropped up many a time before the Hon'ble Supreme Court and various High Courts. In the present case, interpretation of the words 'Industrial Undertaking' does not pose much difficulty before us because nobody has disputed that the assessee is an industrial undertaking. It is true that each and every industrial undertaking would not be eligible for the deduction under Section 80-IB of the Income-tax Act because it is only the industrial undertaking which specifies test indicated in Section 80-IB, would only be eligible and qualified for such deduction. An 'industrial undertaking' which is engaged in manufacture and production of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally prevalent test is whether the article produced is regarded in the trade, by those who deal in it, as distinct in identity from the commodity involved in its manufacture. 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 recognized as a new and distinct article that a manufacture can be said to take place. 32. It is also relevant to point out that under Clause (iii) to Subsection (2) of Section 80-IB, the Legislature has used two separate words i.e., 'manufactures' and 'produces' any article with an 'or' in between. Thus, both have to be read separately and the meaning assigned to them. These two words cannot have the same meaning. The word 'produce' an article has a wider connotati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticle that a manufacture can be said to take place'. The word 'production' or 'produce' when used in juxtaposition with the word 'manufacture' taken in bringing into existence new goods by a process which may or may not amount to manufacture. It also takes in all the by-products, intermediate products and residual products which emerge in the course of manufacture of goods. 34. From the combined reading of the ratios laid down in the aforesaid referred to cases, it can be concluded that when the change or a series of changes lakes one commodity to the point where commercially it can no longer be regarded as the original commodity, but instead is recognized as a new and distinct article, then it can be said that 'manufacture' takes place. In the present case, the assessee had broken the boulders in small pieces, but there is no change in the composition of the boulder. Only the big size had been reduced to small size. So, it cannot be said that breaking of boulders into small pieces of stone is a manufacturing activity. 35. A similar issue had been considered and decided by the Hon'ble Supreme Court in the case of Commissioner of Sales Tax v. Lai Kunwa Stone Crusher (P.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l. In fact the term 'stone' is wide enough to include the various forms such as gitti, kankar, stone blast. 38. Similarly, in the case of Lucky Minmat (P.) Ltd. v. CIT (245 ITR 830) , Their Lordships of the Hon'ble Apex Court at page No. 831 while distinguishing the judgment of the Hon'ble Rajasthan High Court in the case of CIT v. Best Chem Limestone Industries (P.) Ltd. (210 ITR 883) had observed that the conversion into lime and lime dust or concrete by stone crusher could legitimately be considered to be a manufacturing process while the mere mining of lime stone and marble and cutting the same before it was sold in the market could not be so considered. In the present case also, there was cutting of boulders into small pieces. So, it cannot be said that it was a manufacturing activity, because by breaking the boulders i.e., big stone into small pieces i.e., small stone or bajri no new and distinct commodity came into existence, so it can neither be a production by the process of manufacture or a thing otherwise produced, because in either case, bringing into existence a new product is a necessary condition. 39. The Hon'ble Supreme Court in the case of Aman Marble Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 80HH. It was held by Supreme Court in the case of Dy. CST Anr. Vs. Bherhaghat Minerals Industries (246 ITR 230) that the crushing of dolomite lumps into chips is not a process of manufacture that brings about new commercial commodity. In the case of ACIT vs. Wolkem India Ltd. (107 TTJ 439) (Jodh) held that if the assessee is engaged integrated activity of mining, processing and grinding of wollastonite and calcite products is engaged in the manufacture/production eligible for deduction u/s. 80IA and 80IB of the Act. In other words if an assessee is engaged in the activity of extracting granite, cutting the same into slabs/tiles, polishing and selling the end product in the market, that would amount to production of an article or thing. If the assessee only purchases granite/marble from the market and thereafter carries out further process like cutting, polishing, etc., it would not amount manufacture or production. 41. Adverting to the facts of present case, we find that the assessee has not carried on the integrated activity of mining, processing and polishing and it is engaged only mining and crushing into small pieces. In our opinion, facts of the assessee case are sim ..... X X X X Extracts X X X X X X X X Extracts X X X X
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