TMI Blog2014 (2) TMI 605X X X X Extracts X X X X X X X X Extracts X X X X ..... d only they are connected with these panels and ducting - Though the assessee calls it as an air-conditioning plant, the air-conditioners, which are purchased as raw material continues to perform the very same function after its installation - No new product comes into existence after the assessee purchases these goods - the authorities have called it as assembly and for the purpose of assembly, they may manufacture ducting and electrical panel controls and other installations - But merely because those anciliary goods are manufactured, it does not mean that the assessee is manufacturing air conditioning plant - the authorities were justified in declining to extend the benefit of Section 80IA to the assessee – there was no error committed by the authorities in holding that the assessee is not involved in manufacturing or production and therefore is not entitled to benefit of tax deduction – Decided against Assessee. - ITA No. 733/2007 - - - Dated:- 17-12-2013 - N Kumar And Rathnakala, JJ. For the Appellants : Shri A Shankar Shri M Lava, Advs. For the Respondent : Shri Indrakumar, Sr Adv. JUDGEMENT:- PER : N Kumar This appeal is preferred by the assessee c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strial undertaking will be entitled to deduction under Section 80IA, in case it is manufacturing or producing an article or thing. Therefore, the Tribunal framed the question to the effect, whether the air-conditioning system can be called an article or thing? Keeping in view the judgment of the Apex Court in the case of N. C. Bhudaraja and Company reported in 204 ITR 412, it held that the assessee is only engaged in assembling the various parts. The only manufacturing activity, if any, carried out by the assessee is in respect of the ducting system manufactured by it and installed. The air-conditioning system is not different from the airconditioners. Through this system, air-conditioners is installed at one point and the benefit of air-conditioning is communicated to the desired rooms/halls. In a case where the assessee installs a pipe line to carry water from the storage tank to the overhead tank through motor, can it be said that the assessee is engaged in the manufacturing of an article or thing. Perhaps the answer is no. Therefore, the word manufacture is to be understood in the same commercial sense, as it is understood by the prudent business man and therefore, it was of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it manufactures or produce any article or thing, and not being any article or that specified. The Apex Court had an occasion to consider Section 80IA along with Section 32AB and Section 80HH and in particular the words 'manufacture' and 'produce'. In the case of India Cine Agencies V/s. Commissioner of Income-Tax reported in (2009) 308 ITR 98 (SC). After reviewing the entire case law, the Apex Court held as under: As noted above, the core issue is whether activity undertaken was manufacture or production. In Black's Law Dictionary, (5th Edition), the word 'manufacture' has been defined as, the process or operation of making goods or any material produced by hand, by machinery or by other agency; by the hand, by machinery, or by art. The production of articles for use from raw or prepared materials by giving such materials new forms, qualities, properties or combinations, whether by hand labour or machine . Thus by process of manufacture something is produced and brought into existence which is different from that, out of which it is made in the sense that the thing produced is by itself a commercial commodity capable of being sold or supplied. The material from which t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommercially different commodity whereas in the case of processing it is not necessary to produce a commercially different article. (See M/s. Saraswati Sugar Mills and others v. Haryana State Board and others (1992 (1) SCC 418). The prevalent and generally accepted test to ascertain that there is 'manufacture' is whether the change or the series of changes brought about by the application of processes take the commodity to the point where, commercially, it can no longer be regarded as the original commodity but is, instead, recognized as a distinct and new article that has emerged as a result of the process. There might be borderline cases where either conclusion with equal justification can be reached. Insistence on any sharp or intrinsic distinction between 'processing and manufacture', results in an oversimplification of both and tends to blur their interdependence. (See Ujagar Prints v. Union of India (1989 (3) SCC 488). To put it differently, the test to determine whether a particular activity amounts to 'manufacture' or not is: Does a new and different good emerge having distinctive name, use and character. The moment there is transformation into a new commodity comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thers v. CIT [1996] 217 TTR 185 and CIT v. Mercantile Construction Co. [1994] 74 Taxman 41 (Cal) and the Delhi High Court in CIT v. Univmine (P.) Ltd, [1993] 202 ITR. The Revenue has not questioned any of these decisions, at least not successfully, and the position of law, therefore, was taken as settled. The reasoning given by the High Court, in the decisions noted by us earlier, is, in our opinion, unimpeachable. This court had, as early as in 1961, in Chrestian Mica Industries Ltd. v. State of Bihar [1961] 12 STC 150, defined the word Production albeit, in connection with the Bihar Sales Tax Act, 1947. The definition was adopted from the meaning ascribed to the word in the Oxford English Dictionary as meaning amongst other things that which is produced; a thing that results from any action, process or effort, a product; a product of human activity or effort;. From the wide definition of the word production , it has to follow that mining activity for the purpose of production of mineral ores would come within the ambit of the word production since ore is a thing , which is the result of human activity or effort. It has also been held by this court in CIT v. N.C. Budhara ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of containers. (ii) re-packing from bulk packages to retail packages, and (iii) the adoption of any other method to render the product marketable. 'Production' in relation to a feature film, includes any of the activities in respect of the making thereof. (Cine Workers and Cinema Theatre Workers (Regulations of Employment) Act (50 of 1981) S.2(i). The word 'production' may designate as well a thing produced as the operation of producing; (as) production of commodities or the production of a witness. 'Manufacture' includes any art, process or manner of producing, preparing or making an article and also any article prepared or produced by manufacture. (Patent and Designs Act (2 of 1911), S.2(10). 'Manufacture' includes any process- (i) incidental or ancillary to the completion of a manufactured product; and (ii) which is specified in relation to any goods in the section or Chapter notes of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) as amounting to manufacture, or, and the word 'manufacturer' shall be constructed accordingly and shall include not only a person who employs hired labour in the production or manufact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duction does not amount to manufacture. In fact subsequently, the word manufacture has also been defined in the Income-tax Act under Section 2(29BA)as under "manufacture", with its grammatical variations, means a change in a non-living physical object or article or thing,- (a) resulting in transformation of the object or article or thing into a new and distinct object or article or thing having a different name, character and use; or (b) bringing into existence of a new and distinct object or article or thing with a different chemical composition or integral structure. 10. Viewed from this background in the instant case, the assessee claims that it is in the business of manufacture and installation of air-conditioning systems and plants for large business and industrial establishments. For the said purpose, it has an in-built capacity to manufacture ducting, erection of systems, providing electrical paneling controls, installations etc. However, it purchases air conditioners, blowers, freezers, Cooling equipment etc. The case of the assessee is after purchasing these parts it manufacures an air-conditioning plant and delivers the same to his customers. Therefore, after ..... X X X X Extracts X X X X X X X X Extracts X X X X
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