Tea blending is not manufacture or production when no new commercially distinct commodity emerges for deduction purposes.

Blending different grades and varieties of tea purchased by a trader does not amount to manufacture or production of an article or thing for deduction under section 80-IB(2)(iii). The controlling test is whether the activity brings into existence a new and commercially distinct commodity; mere processing that improves quality, flavour, or marketability is insufficient. On that principle, blended tea remains tea and no new product emerges. The wider meaning of "produce" does not extend to such marketing-oriented processing, and the activity also does not fit agricultural income principles because the trader is not the grower.

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Issues: Whether blending of different grades and varieties of tea purchased by a trader amounts to manufacture or production of an article or thing so as to qualify for deduction under section 80-IB(2)(iii) of the Income-tax Act, 1961.

Analysis: The distinction between manufacture and production was examined in the light of the statutory language and the controlling tests that a new and commercially distinct commodity must emerge. Blending of tea by a trader was found to be only a process that changes quality, flavour and marketability, but does not convert tea into a new article or thing distinct from tea itself. The wider meaning of "produce" was held not to cover mere processing for marketing where no new commodity comes into existence. The activity also did not fall within agricultural income principles, as the assessee was not the grower and was dealing with already made tea.

Conclusion: Blending of tea by the trader does not amount to manufacture or production for the purposes of section 80-IB(2)(iii), and the deduction is not available.

Ratio Decidendi: For section 80-IB(2)(iii), manufacture or production requires the emergence of a new commercially distinct commodity; mere blending or processing that only improves marketability without creating such a commodity does not satisfy the statutory condition.

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