Section 54G deduction upheld for magazine used to store explosives and repack them, as the activity qualified as manufacture.

Section 54G deduction was available where the transferred premises was a magazine regulated under the Explosives Rules, 2008 and used for storing bulk explosives and repacking them for retail sale. Reading section 54G(1) with the Explosives Act, 1884 and the Explosives Rules, the Court treated that activity as falling within the inclusive statutory meaning of manufacture. The premises was therefore regarded as used for the business of an industrial undertaking shifted from an urban area to a non-urban area, and the Tribunal's approach was upheld. The assessee was entitled to the deduction, and the Revenue's challenge failed.

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Issues: Whether deduction under section 54G of the Income-tax Act, 1961 was available where the transferred property was a magazine used for storage of explosives and repacking, and whether such activity and premises could be treated as used for the business of an industrial undertaking shifted from an urban area to a non-urban area.

Analysis: The Court noted that the transferred premises was not a mere godown in the ordinary sense but a magazine governed by the Explosives Rules, 2008. The statutory scheme showed that a magazine is intended for storage of explosives and that storage, possession and sale are strictly regulated. Reading section 54G(1) with the Explosives Act, 1884 and the Explosives Rules, 2008, the Court held that the activity of storing bulk explosives and repacking them for retail sale fell within the inclusive statutory meaning of manufacture. On that basis, the premises was regarded as used for the business of an industrial undertaking, and the Tribunal's factual and legal approach was found to be correct.

Conclusion: The assessee was entitled to deduction under section 54G of the Income-tax Act, 1961, and the Revenue's challenge failed.

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