Roasting groundnuts not "manufacture" under Income Tax Act. Appellant denied tax benefits.

The court held that roasting groundnut does not amount to "manufacture" under Sections 80IA and 80IB of the Income Tax Act as it does not result in a new commodity. Comparing the process to legal precedents, the court found that the identity and character of groundnut remained unchanged post-roasting. Therefore, the appellant was denied tax benefits under the Act, ruling in favor of the revenue.

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Issues:
1. Whether roasting groundnut amounts to manufacture under Section 80IA and 80IB of the Income Tax Act.
2. Whether the process of roasting groundnut results in a new commodity.
3. Whether the judgments cited support the contention that roasting groundnut constitutes manufacture.
4. Whether the appellant is entitled to the benefits under Sections 80IA or 80IB of the Income Tax Act.

Issue 1: Roasting Groundnut as Manufacture
The central issue in this judgment is whether the process of roasting groundnut constitutes "manufacture" under Section 80IA and 80IB of the Income Tax Act. The court examined various legal definitions of "manufacture" and referenced cases like M/s. Sterling Foods v. State of Karnataka and another, where processed shrimps, prawns, and lobsters were still considered the same commodity. The court also highlighted the decision in Commissioner of Income Tax v. Relish Foods, emphasizing that processed food items may not qualify as manufactured goods. Additionally, the court discussed Commissioner of Income Tax v. Gem India Manufacturing Co., where cutting and polishing raw diamonds were not considered manufacturing.

Issue 2: New Commodity from Roasting Groundnut
The court analyzed whether roasting groundnut results in a new commodity. It compared the process of roasting groundnut to cases like Sacs Eagles Chicory, where roasting chicory roots did not amount to manufacture. The court differentiated the transformation of raw coffee berries into roasted coffee beans in Aspinwall and Co. Ltd. v Commissioner of Income Tax, where a new and distinct commodity was recognized. The court examined Computer Graphics Ltd. v. Commissioner of Income Tax, where the production of a commercial commodity capable of being sold or supplied was considered manufacturing.

Issue 3: Support from Legal Precedents
The judgment extensively referred to legal precedents to determine the definition of "manufacture" in the context of roasting groundnut. It cited cases like Indian Hotels Co. Ltd. and others v. Income Tax Officer, highlighting that processing raw food items into edible items may not constitute manufacturing. The court also discussed Aspinwall and Co. Ltd. v Commissioner of Income Tax, where the process of manufacturing coffee beans from raw berries was recognized as manufacture due to the creation of a new and distinct commodity.

Issue 4: Entitlement to Tax Benefits
Ultimately, the court concluded that roasting groundnut into roasted groundnut did not result in a new and distinct product, therefore not meeting the criteria for "manufacture" under Sections 80IA or 80IB of the Income Tax Act. The court compared the simplicity of the roasting process to other cases involving processing of food items and determined that the identity and character of groundnut remained unchanged after roasting. Consequently, the court ruled in favor of the revenue and against the appellant, denying the tax benefits under the relevant sections of the Income Tax Act.

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