TaxTMI 
TaxTMI 
TaxTMI 
2014 (2) TMI 605
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.... companies, the assessee installs the air-conditions systems. It purchases required air-conditioners and the electrical panels and installs them as per the requirement of the customers. The nature of activity carried on by the assessee is that of assembling various air-conditioners with the ducts and providing the electrical connection. It is merely in the nature of assembling parts and therefore, it cannot be treated as manufacturing activity. Therefore, the Assessing Authority held that the assessee is not entitled to deduction under Section 80IA as the assessee is not engaged in the manufacture of any article or thing. 3. Aggrieved by the said order, the assessee preferred an appeal to the Commissioner of Income-tax (Appeals). The Commissioner was of the view that the word manufacture has not been defined in the Act. Therefore, the word is to be understood on the basis of the observation made in this regard in various judicial pronouncements. The process of manufacture should result in a commercially different commodities/different article with a different commercial identity, when compared with the input that are subjected to manufacturing process. In the instant case, the ass....
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....bstitution is, what is applicable and not the substituted Section. Sub-Section (4) of Section 80IA earlier read as under: (4) This section applies to - (i) .............. (ii) ............. (iii) any undertaking which develops, develops and operates or maintains and operates an industrial park or special economic zone notified by the Central Government in accordance with the scheme framed and notified by that Government for the period beginning on the 1st day of April, 1997 and ending on the 31st day of March, 2006: Provided that in a case where an undertaking develops an industrial park on or after the 1st day of April, 1999 or a special economic zone on or after the 1st day of April, 2001 and transfers the operation and maintenance of such industrial park or such special economic zone, as the case may be, to another undertaking (hereafter in this section referred to as the transferee undertaking), the deduction under sub-section (1) shall be allowed to such transferee undertaking for the remaining period in the ten consecutive assessment years as if the operation and maintenance were not so transferred to the t....
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....processing at each stage. With each process suffered, the original commodity experiences a change. Whenever a commodity undergoes a change as a result of some operation performed on it or in regard to it, such operation would amount to processing of the commodity. But it is only when the change or a series of changes takes the commodity to the point where commercially it can no longer be regarded as the original commodity but instead is recognized as a new and distinct article that a manufacture can be said to take place. Process in manufacture or in relation to manufacture implies not only the production but also various stages through which the raw material is subjected to change by different operations. It is the cumulative effect of the various processes to which the raw material is subjected to that the manufactured product emerges. Therefore, each step towards such production would be a process in relation to the manufacture. Where any particular process is so integrally connected with the ultimate production of goods that but for that process processing of goods would be impossible or commercially inexpedient, that process is one in relation to the manufacture. (See Collecto....
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....ase. (See Empire Industries Ltd. v. Union of India (1985 (3) SCC 314). The aforesaid aspects were highlighted in Kores India Ltd., Chennai v. Commissioner of Central Excise, Chennai (2005 (1) SCC 385) in the background of Central Excise Act, 1944 (in short the 'Excise Act') and Central Excise Rules, 1944 (in short the 'Excise Rules') and Central Excise Tariff Act, 1985 (in short the 'Tariff Act'). The stand of the revenue was that it amounted to & "manufacture", contrary to what has been pleaded in these cases. This Court held that it amounted to manufacture. The matter can be looked at from another angle. In Commissioner of Income Tax v. Sesa Goa Ltd. (2004 (271) ITR 331) this Court considered the meaning of word 'production'. The issue in that case was whether the extraction and processing of iron ore amounted to manufacture or not in view of the various processes involved and the various processes would involve production within the meaning of Section 32A of the Act. It was inter alia observed as under: There is no dispute that the plant in respect of which the assessee claimed deduction was owned by it and was installed after March 31, 1976, in the a....
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.... In "Words and Phrases" 2nd Edn. by Justice R. P. Sethi the expressions 'produce' and 'production' are described as under: In Webster's New International Dictionary, the word "produce" means something that is brought forth either naturally or as a result of effort and work; a result produced. In Black's Law Dictionary, the meaning of the word 'produce' is to 'bring into view or notice; to bring to surface'. A reading of the aforesaid dictionary meanings of the word 'produce' does indicate that if a living creature is brought forth, it can be said that it is produced. (See Commissioner of Income Tax v. Venkateswara Hatcheries (P) Ltd. (1999 (3) SCC 632), Commissioner of Income Tax, Orissa and Ors. v. M/s N.C. Budharaja and Company and Ors. (1994 Supp 1 SCC 280). Production or produce- The word 'production' or 'produce' when used in juxtaposition with the word 'manufacture' takes in bringing into existence new goods by a process, which may or may not amount to manufacture. It also takes in all the byproducts, intermediate products and residual products, which emerge in the course of manufacture of goods. The expressions 'manufacture' and 'pro....
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.... article is the result of treatment, labour. Naturally, manufacture is the end result of one or more processes through which the original commodities are made to pass. The nature and extent of processing may vary from one case to another. There may be several stages of processing, a different kind of processing at each stage. With each process suffered, the original commodity experiences a change. Whenever a commodity undergoes a change as a result of some operation performed on it or in regard to it, such operation would amount to processing of the commodity. The process in manufacture or in relation to manufacture implies not only the production but also various stages through which the raw material is subjected to change by different operations. It is the cumulative effect of the various processes to which the raw material is subjected that the manufactured product emerges. 'Manufacture' is a transformation of an article, which is commercially different from the one, which is conferred. The essence of manufacture is the change of one object to another for the purpose of making it marketable. The essential point thus is that in manufacture something is brought into existence, whi....
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....they are all installed at the customer's place and to make it functional and use ducting electrical panel controls and other installations. The air-conditioners freezers, blowers which are purchased as raw materials for the said air condition plant are not processed. They are used as it is. No manufacturing activity takes place insofar as those items are concerned. They are installed as it is and only they are connected with these panels and ducting. Though the assessee calls it as an air-conditioning plant, the air-conditioners, which are purchased as raw material continues to perform the very same function after its installation. The case laws relied on by the appellant on TV, diesel generating set, etc., are distinguishable on facts. No new product comes into existence after the assessee purchases these goods. Therefore, rightly, the authorities have called it as assembly and for the purpose of assembly, they may manufacture ducting and electrical panel controls and other installations. But merely because those anciliary goods are manufactured, it does not mean that the assessee is manufacturing air conditioning plant. Therefore, the authorities were justified in declining to ex....