Stone conversion into slabs and tiles may qualify as manufacture or production for incentive deduction relief.

Converting slate and sandstone blocks into marketable slabs and tiles was treated as manufacture, or at least production, because the processed goods acquired a distinct commercial identity, character and use; on that basis, deduction under section 80-IB was available. The appellate authority's power to admit an additional claim for deduction under section 80HHC was also recognised where the relevant facts were already on record, and the absence of a claim in the return was not an absolute bar; the claim was therefore admitted and remitted to the assessing authority for examination in accordance with law.

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Issues: (i) Whether the assessee's activity of converting slate and sandstone blocks into slabs and tiles amounted to manufacture or production so as to qualify for deduction under section 80-IB; (ii) Whether the assessee's additional ground claiming deduction under section 80HHC could be admitted and examined.

Issue (i): Whether the assessee's activity of converting slate and sandstone blocks into slabs and tiles amounted to manufacture or production so as to qualify for deduction under section 80-IB.

Analysis: The processing undertaken by the assessee was found to change raw stone blocks into marketable slabs and tiles with a different commercial identity, character and use. The decision drew support from the distinction between mere processing and manufacture, and from the wider meaning of "production" as covering bringing into existence new goods by a process that may or may not amount to manufacture. The incentive provision was also construed liberally in favour of giving effect to its object.

Conclusion: The activity amounted to manufacture or, at least, production, and the assessee was entitled to deduction under section 80-IB.

Issue (ii): Whether the assessee's additional ground claiming deduction under section 80HHC could be admitted and examined.

Analysis: The appellate authority's powers were treated as wide enough to entertain an additional claim where the relevant facts were already on record and the matter required examination in accordance with law. The absence of a claim in the return was not treated as an absolute bar to admission of the ground, though the claim itself required verification by the assessing authority.

Conclusion: The additional ground was admitted and the matter was remitted to the assessing authority for consideration in accordance with law.

Final Conclusion: The Revenue's appeal failed, while the assessee obtained relief on the main deduction issue and succeeded in getting the additional claim entertained for fresh examination.

Ratio Decidendi: Where raw mineral blocks are processed into commercially distinct slabs or tiles, the activity can constitute manufacture or production for incentive deduction purposes, and appellate authorities may admit a legally tenable additional claim for consideration on the existing record.

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