Stone crushing activities deemed manufacturing under IT Act sec 80IB by Tribunal, upholding CIT(A) decision. Assessee eligible for exemption.

The Tribunal upheld the CIT(A)'s decision, determining that the stone crushing activities qualified as manufacturing under section 80IB of the IT Act. The Tribunal found that breaking boulders into grits transformed the product into a marketable item, distinguishing it from previous case law. Consequently, the assessee was deemed eligible for exemption, with the Tribunal ruling in their favor and dismissing the revenue's appeal.

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Issues involved:
The judgment involves the issue of whether the assessee company is eligible for exemption u/s 80IB of the IT Act for the assessment year 2006-07 based on its activities as a stone crusher.

Details of the judgment:

1. The Assessing Officer (AO) rejected the assessee's claim for exemption u/s 80IB, stating that the process of breaking stone boulders into smaller pieces did not amount to manufacturing as it did not result in a new article with different composition, characteristics, and use. The AO compared the process to manual labor and cited case laws to support the decision.

2. The Commissioner of Income Tax (Appeals) [CIT(A)] accepted the assessee's contention that the stone boulders became marketable only after being cut into sizes. The CIT(A) noted that the end products, stone boulders, and stone grits had different uses, and allowed the appeal based on a previous ITAT decision.

3. The revenue appealed against the CIT(A)'s decision, arguing that the Supreme Court's decision in Lucky Minmat Pvt. Ltd. vs. CIT was applicable in this case.

4. The assessee's counsel cited various case laws to support the contention that the activities of the assessee constituted manufacturing and production, entitling them to the benefit under section 80IB of the Income Tax Act, 1961.

5. The Tribunal upheld the CIT(A)'s order, stating that the process of breaking boulders into grits amounted to manufacturing as it made the product marketable. The Tribunal distinguished the case from Lucky Minerals (P) Ltd. vs. CIT and other decisions relied upon by the revenue.

6. Based on the discussions and precedents, the Tribunal decided the issue in favor of the assessee, upholding the CIT(A)'s order and dismissing the revenue's appeal.

This judgment highlights the interpretation of the term "manufacturing" under section 80IB of the IT Act in the context of stone crushing activities and the eligibility of the assessee for exemption based on the nature of their operations.

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