Granite Processing Qualifies as Manufacturing under sec. 80IB

The ITAT ruled that the extraction and processing of granite boulders by the assessees constituted "manufacture or production" under sec. 80IB. The absence of a valid Small Scale Industrial (SSI) certificate did not disqualify them from claiming the deduction under sec. 80IB. The Tribunal held that the mechanical processes involved in producing granite aggregates resulted in new commodities, meeting the criteria of "manufacture." Additionally, registration under the Industrial Development Regulation Act was not mandatory for claiming the deduction, as long as the ownership and value of plant and machinery criteria were met.

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Issues Involved:
1. Whether the activity of extraction and processing of granite boulders constitutes "manufacture or production" u/s 80IB and u/s 32(1)(iia) of the Income Tax Act.
2. Whether the absence of a valid Small Scale Industrial (SSI) certificate disentitles the assessee from claiming deduction u/s 80IB.

Summary:

Issue 1: "Manufacture or Production" u/s 80IB and u/s 32(1)(iia):
The assessees, engaged in extracting granite boulders and producing granite aggregates through mechanical processes, claimed deductions u/s 80IB. The Assessing Officer (AO) rejected these claims, arguing that the activities did not fall under the definition of "manufacture" as per sec. 2(29BA), and cited case laws to support this view. The CIT(A) upheld the AO's decision for the assessment year 2009-10, stating that the activities did not meet the criteria of "manufacture" under sec. 2(29BA).

The ITAT analyzed whether the activities of the assessee could be considered "manufacture" or "production." The Tribunal referred to various judgments, including the Supreme Court's decision in Arihant Tiles & Marbles (P.) Ltd., which held that converting marble blocks into slabs and tiles constitutes "manufacture or production." The Tribunal concluded that the activities of the assessees, involving mechanical processes to produce granite aggregates, sand, and dust from boulders, resulted in new and distinct commodities with different names, characters, and uses. Therefore, these activities constituted "manufacture" and "production" under sec. 80IB.

Issue 2: Absence of SSI Certificate and Deduction u/s 80IB:
The AO also denied the deduction u/s 80IB for the assessment year 2008-09 on the grounds that the assessee failed to produce a valid SSI certificate. The CIT(A) upheld this decision. The ITAT examined whether furnishing an SSI certificate was mandatory for claiming deduction u/s 80IB. Referring to the Delhi High Court's decision in Praveen Soni v. CIT, the Tribunal held that registration under the Industrial Development Regulation Act is not a prerequisite for treating an assessee as a small-scale industrial undertaking. The relevant criteria are the ownership and value of plant and machinery as per the Central Government's notification. Since the assessees met these criteria, the absence of an SSI certificate did not disentitle them from claiming the deduction u/s 80IB.

Conclusion:
The ITAT allowed the appeals, holding that the activities of the assessees constituted "manufacture or production" and that the absence of an SSI certificate did not bar the deduction u/s 80IB.

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