Manufacture or production under section 10B can cover customized electronic data exported as computer software.

A multi-stage process that transforms collected material through design, scanning, editing and export preparation into a distinct commercial output can amount to manufacture or production for section 10B purposes. The court also treated computer software broadly enough to include customized electronic data and similar notified services, so the exported ready-to-print files qualified as computer software within the provision. On that basis, the deduction claim was upheld and the revenue's challenge failed.

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Issues: (i) Whether the assessee's activity of collecting, collating, designing, scanning, editing and exporting data for ready-to-print books amounted to manufacture or production for the purpose of section 10B; (ii) Whether the exported end product constituted computer software or customized electronic data within Explanation 2 to section 10B.

Issue (i): Whether the assessee's activity of collecting, collating, designing, scanning, editing and exporting data for ready-to-print books amounted to manufacture or production for the purpose of section 10B.

Analysis: The activity involved multiple stages of transformation, beginning with collection of raw material, followed by design, layout, scanning, digital colour correction and final preparation of exportable files. The process resulted in a different commercial product from the input material. The expression "manufacture" was applied in its wider sense and "produce" was treated as broader than manufacture.

Conclusion: The assessee's activity amounted to manufacture or production.

Issue (ii): Whether the exported end product constituted computer software or customized electronic data within Explanation 2 to section 10B.

Analysis: The court held that the expression "computer software" under section 10B was broad enough to include customized electronic data and similar notified services. The notified category of content development, data processing and legal databases covered the activity, and the final electronic output exported abroad satisfied the statutory requirement.

Conclusion: The exported product constituted customized electronic data and computer software within section 10B.

Final Conclusion: The revenue's challenges to the deduction claim failed, and the exemption under section 10B was upheld.

Ratio Decidendi: A multi-stage process that transforms collected material into a customized electronic exportable product can amount to manufacture or production, and the resulting output may qualify as computer software under section 10B where it is customized electronic data exported from India.

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