TMI Blog2003 (7) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... dgment of the court was delivered by F.I. REBELLO J.-All these appeals are being disposed of by a common order as the same question of law arises in them, except for the amounts. The question of law as formulated by the Department reads as under: "Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in holding that the assessee is entitled for deduction on investment allowance under section 32A of the Income-tax Act, in respect of machinery used in mining activity, ignoring the fact that the assessee is engaged in extraction and processing of iron ore, not amounting to manufacture or production of any article or thing?" It is not necessary to refer to all the previous orders, except that the Income-tax Appellate Tribunal in appeal filed by the Deputy Commissioner of Income-tax against M/s. D.B. Bandodkar and Brothers on the issue of investment allowance had relied on the judgment of the Karnataka High Court in the case of CIT v. Gogte Minerals (No.2) [1997] 225 ITR 60, wherein a Division Bench of the Karnataka High Court had held that mining operations being carried out for excavating iron ore, amount to manufacture. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect of ships acquired or machinery or plant installed after May 31, 1974. However, it has been continued for a limited period in certain cases from June 1, 1974, to May 31, 1977. It is then pointed out that section 32A was introduced by the Finance Act 1976, with effect from April 1, 1976. If the language in section 32A(2)(b)(iii) is considered along with the language in section 33(1)(b)(B) and considering that mineral ore does not fall in the Eleventh Schedule, the intent of Parliament is clear, that though development rebate is excluded, the benefit of investment allowance has been made available. It is next contended that the Act itself contains internal evidence which would show that raw ore is being treated differently from processed ore and for that purpose reliance is placed on section 80HHC(2)(b)(ii) of the said Act. It is also contended that the provision is a beneficial provision and that being the case, the court should be given intent to the mandate of Parliament. Lastly, it is contended that various High Courts have taken the view that in respect of mining operations, the benefits of section 32A can be availed of by a person/company involved in the business of mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal has proceeded on the footing that it amounts to manufacture/production, we will consider the issue whether extraction of iron ore will fall within the expression "manufacture" or "production". Both the terms, in our opinion, are no longer res integra, in so far as income-tax is concerned as they have been the subject matter of various judgments, either under the Sales Tax Act or the Central Sales Tax Act and which have been approved under the Income-tax Act. In so far as "manufacture" is concerned, a classic exposition of the law would be as set out by the apex court in the case of Deputy CST (Law), Board of Revenue (Taxes) v. Pio Food Packers [1980] 46 STC 63. The expression, "manufacture" was being considered in the context of the provisions of the Kerala General Sales Tax Act. The apex court while answering the issue on "manufacture", held that the test for considering whether it amounts to manufacture is to be applied thus: Does the processing of the original commodity bring into existence a commercially different and distinct article? Explaining the issue, the apex court observed as under: "Commonly, manufacture is the end result of one or more processes through ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... result of treatment, labour and manipulation. But something more is necessary and there must be transformation; a new and different article must emerge having a distinctive nature, character or use." For the purpose of finding out whether mining operation would amount to manufacture, gainful reference again may be made to the judgment of the apex court in the case of Chowgule and Co. Pvt. Ltd. v. Union of India [1981] 47 SIC 124. Considering the test as to when manufacture can take place, the apex court answered the issue as under: "The test that is required to be applied is, does the processing of the original commodity bring into existence a commercially different and distinct commodity? On an application of this test, it is clear that the blending of different qualities of ore possessing differing chemical and physical composition so as to produce ore of the contractual specifications cannot be said to involve the process of manufacture, since the ore that is produced cannot be regarded as a commercially new and distinct commodity from the ore of different specifications blended together. What is produced as a result of blending is commercially the same article, namely, ore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that the process involved is a manufacturing activity. It may be noted that what the Division Bench of the Karnataka High Court observed was that mere removing from the earth by itself is not manufacture, but various processes which thereafter are applied would amount to manufacture. The next judgment we have is the case of CIT v. Mysore Minerals Ltd. (No. 1) [2001] 250 ITR 725 (Karn). This was a case in respect of mining of granite. The Division Bench held that it would amount to manufacture relying on an earlier judgment in the case of CIT v. Mysore Minerals Ltd. [1994] 205 ITR 461 (Karn). The criticism against this judgment is that this judgment relied upon an earlier judgment in the case of Mysore Minerals, which has been reversed by the apex court in CIT v. Mysore Minerals Ltd. [2001] 247 ITR 301, and as such would no longer be a good law. Considering that aspect, we do not propose to consider the ratio of the said judgment. The next judgment relied upon is Deputy CIT v. Mysore Minerals Ltd. [2001] 250 ITR 730 (Karn). In this case also what was involved was mining of granite. The learned Division Bench of the Kamataka High Court relied upon the judgment in CIT v. N.C. Budh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce new goods by a process which mayor may not amount to manufacture. Three High Courts, at least, have taken the view that the extraction of ore would amount to "production". We first have the judgment of the Andhra Pradesh High Court in CIT v. Singareni Colleries Co. Ltd. [1996] 221 ITR 48. A Division Bench of the Andhra Pradesh High Court was considering the expression "production". The Andhra Pradesh High Court noted the argument of the Revenue against the finding of the Tribunal which had held that extracting coal or winning coal from a coal mine is an article or thing produced. The argument was then noted that the contention of the Revenue that coal which is extracted from the mine is not an article or thing. What was contended is that winning or excavating coal is not an activity of production. The learned Division Bench then relied on the judgment in the case of CIT v. N.C. Budharaja and Co. [1993] 204 ITR 412 (SC) and also placing reliance on Webster's New International Dictionary, for the word "produce", which is defined to mean "something that is brought forth or yielded either naturally or as a result of effort and work". In Shorter Oxford English Dictionary, the meanin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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