TaxTMI 
TaxTMI 
2012 (5) TMI 341
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.... 1995-96, ITA No. 936/Chandi/1998 and ITA No. 897/Chandi/1998 were filed by the assessee-respondent and revenue-appellant respectively. Both the appeals were decided by the Tribunal vide common order dated 2.4.2004. The Tribunal has rejected the appeal of the revenue and partly allowed the assessee's appeal for statistical purposes. 2. Few facts may first be set out, which are taken from ITA No. 28 of 2004, pertaining to Assessment Year 1994-95. The assessee-respondent is a Limited Company, which had filed its return of income for the Assessment Year 1994-95, declaring income at Rs. 1,47,810/-. The assessee-respondent derived its income from the manufacturing and trading of hosiery garments such as pullovers, mufflers and blankets etc.. The assessment was completed by the Assessing Officer under Section 143(3) of the Act on 28.2.1997 and addition of Rs. 26,63,090/- was made by dis-allowing deduction under Section 80-HHC and 80-I of the Act besides other minor additions (A-1). According to the Assessing Officer, the assessee-respondent did not manufacture Flats (knitted sides of pullovers) used in the making of pullovers and had affected purchase of that item from its sister concer....
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....) is converted into finished pullover. It was on the basis of the aforesaid arguments that the CIT(A) in paragraphs 5.2 and 5.3 held as under: "5.2 I have carefully considered the facts of the case and find some substance in the explanation furnished by the Ld. AR. It is seen that in the case of pullovers, substantial processing is done by the appellant. The processing so done is costing Rs. 45/- per piece. The A.O. has not disputed this claim of the appellant. During the course of discussion, the Ld. AR had referred to the judgments of Hon'ble Supreme Court in the case of Delhi Cold Storage Pvt. Ltd. v. C.I.T. 191 ITR 656 and Chillies Exports House Ltd. v. C.I.T. 225 ITR 814. In the first case, it was held by the Hon'ble Judges of the Supreme Court that no processing is done in a cold storage as such the cold storage is not an industrial company. However, it was observed that "in common parlance, the processing is understood as an action which brings forth some change or alteration of goods or material subjected to the act of processing. "5.3 In the second case of Chillies Export House Ltd., the case was remanded to the Hon'ble Court with certain observations. Thus, it would be ....
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....ning of 'manufacture'? This issue was considered by the Hon'ble Supreme Court in the case of Union of India v. Delhi Cloth & Genl. Mills Co. Ltd., AIR (1963) Supreme Court 791, where the Hon'ble Apex Court observed that 'manufacture' implies a change but every change is not manufacture and yet every change of article is the result of treatment, labour and manipulation. But something more is necessary and there must be transformation, a new and different article must emerge having a distinctive character, name and use. Thus, it is clear that every process does not tantamount to manufacture and it is only when the process results in the mergence of a new and different articles having a distinctive name, character or use that 'manufacture' can be said to have taken place. In fact, 'production' is still wider than 'manufacture', though every manufacture can be characterized as a production. From the wording of section 80-I, it is very clear that the intention of the Legislature is to extend such benefit only to such industrial undertaking, which is engaged in the business of manufacturing and not to an undertaking engaged in the business of processing. However, it must be noted that wh....
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....the Ld. CIT(A) that the assessee is entitled to deduction u/s 80-I in respect of income derived from manufacture of pullovers. We confirm the order of the CIT(A) and dismiss all the grounds of revenue's appeal." 7. We have heard learned counsel for the parties at a considerable length and are of the view that these appeals are devoid of merit and the question raised by the revenue-appellant have to be answered against it. In order to decide the controversy, we may point out at the outset that Hon'ble the Supreme Court has taken a consistent view in various judgments holding that the word 'production' is wider in its scope as compared to the word 'manufacture'. In that regard reference may be made to the judgment of Hon'ble the Supreme Court in the case of Union of India v. Delhi Cloth & General Mills, AIR 1963 SC 791. In that case, their Lordships observed that the expression 'manufacture' implies a change but every change is not 'manufacture' and yet every change of article is the result of treatment, labour and manipulation. Therefore something more is necessary and there must be transformation of such a nature that a new and different article must emerge having a distinctive ch....
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....facture or production" in terms of Section 80IA. In this connection, our view is also fortified by the following judgments of this Court which have been fairly pointed out to us by learned Counsel appearing for the Department." [Emphasis supplied] "22 .... we are of the view that blocks converted into polished slabs and tiles after undergoing the process indicated above certainly results in emergence of a new and distinct commodity. The original block does not remain the marble block, it becomes a slab or tile. In the circumstances, not only there is manufacture but also an activity which is something beyond manufacture and which brings a new product into existence and, therefore, on the facts of these cases, we are of the view that the High Court was right in coming to the conclusion that the activity undertaken by the respondents-assessees did constitute manufacture or production in terms of Section 80IA of the Income Tax Act, 1961." 9. It would be appropriate to notice the provisions of Section 2(29BA) and Section 80IA(2)(iii) of the Act, which are set out below: "2(29BA) "manufacture" with its grammatical variations, means a change in a non-living physical object or article ....