Retrospective tax amendment and manufacturing test govern deductions under Sections 80HHC and 80I, with one claim failing and one remanded.

A fiscal amendment is not retrospective unless express or necessarily implied, so the later introduction of Schedule XII could not validate Section 80HHC deduction for earlier years; the claim failed on that issue. Deduction under Section 80I depends on proof that the activity amounts to manufacture or production, and the existing record was insufficient to decide whether cutting and polishing granite slabs met that test. The manufacturing question required fresh factual examination, so the matter was remanded to the Assessing Officer for reconsideration.

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Issues: (i) Whether the deduction under Section 80HHC could be granted on the basis that the amendment introducing Schedule XII operated retrospectively from earlier assessment years. (ii) Whether the assessee was entitled to deduction under Section 80I despite the absence of evidence that the activity amounted to manufacture or production.

Issue (i): Whether the deduction under Section 80HHC could be granted on the basis that the amendment introducing Schedule XII operated retrospectively from earlier assessment years.

Analysis: The governing principle applied was that a statute is presumed to operate prospectively unless retrospective effect is expressly provided or necessarily implied. In light of the Supreme Court ruling that cut and polished granite remained within the excluded category of minerals under the unamended provision, the later amendment and the accompanying circular could not be treated as retrospectively validating the deduction for the earlier years in question.

Conclusion: The issue was answered against the assessee and in favour of the Revenue.

Issue (ii): Whether the assessee was entitled to deduction under Section 80I despite the absence of evidence that the activity amounted to manufacture or production.

Analysis: Deduction under Section 80I depends on the industrial undertaking manufacturing or producing an article or thing. The record before the Tribunal did not contain sufficient material to determine whether cutting and polishing granite slabs constituted manufacture or production in the relevant factual setting. Applying the settled test that manufacture requires a transformation resulting in a new and different article, the matter required fresh factual examination by the Assessing Officer.

Conclusion: The issue was remanded to the Assessing Officer for fresh consideration.

Final Conclusion: The Revenue succeeded on the retrospective operation issue, while the deduction claim under Section 80I was not finally determined and was sent back for factual adjudication.

Ratio Decidendi: A fiscal amendment is not retrospective unless such operation is expressly or necessarily implied, and entitlement to deduction for manufacture-based incentives depends on evidence showing that the process results in a new and distinct product.

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