Granite Quarrying Qualifies as Manufacturing for Investment Allowance

The High Court held that quarrying and cutting granite qualifies as manufacturing or production for investment allowance under section 32A. The court affirmed the assessee's entitlement to the investment allowance. Additionally, the court ruled in favor of the assessee regarding relief under section 80HHC for exports of finished granite products, distinguishing between raw and processed granite items as per a Board circular, and allowing deductions for the export of finished granite items like slabs, monuments, and tiles.

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Issues:
1. Whether the activity of quarrying and cutting granite qualifies for investment allowance u/s 32ARs.
2. Whether the assessee is entitled to relief u/s 80HHC on exports of finished granite productsRs.

Issue 1:
The respondent-assessee, engaged in mining and exporting granite, claimed investment allowance under section 32A of the Income-tax Act. The Assessing Officer initially denied the claim. However, the Appellate Commissioner allowed the claim, stating that the assessee was indeed entitled to the investment allowance. The Revenue appealed to the Tribunal, which upheld the decision of the Appellate Commissioner. The High Court, referring to a previous judgment, affirmed that the activity of quarrying and cutting granite qualifies as manufacturing or production entitling the assessee to investment allowance u/s 32A.

Issue 2:
Regarding the entitlement of the assessee to relief u/s 80HHC on exports of finished granite products, the High Court noted a discrepancy in the framing of the question by the Tribunal. The Tribunal's decision implied that deductions were allowed on all granite exports, including raw and finished products. However, the assessee had claimed deductions only on the export of finished granite items like slabs, monuments, and tiles. Citing a Board circular, the High Court emphasized the distinction between raw and processed granite products. The circular specified that exports of cut and polished granite qualify for relief under section 80HHC. Therefore, the High Court concluded that the assessee is entitled to the relief under section 80HHC for the export of finished granite items, in line with the circular, and ruled in favor of the assessee.

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