TaxTMI 
TaxTMI 
2014 (12) TMI 16
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.... Therefore, the profits derived there from were not eligible for the said deduction. Aggrieved to the said order, the assessee preferred an appeal. 3. The Commissioner of Income Tax (Appeals) after taking note of the process undertaken by the assessee and also other documents produced and the decisions relied on and the fact that the goods manufactured by the assessee was excisable to Central Excise held that the job work of the assessee is in the nature of manufacturing activity and therefore, he directed the Assessing Authority to allow the claim of assessee under Section 80-IA of Act. Aggrieved by the said order, the Revenue preferred an appeal to the Tribunal. 4. The Tribunal on reappreciation of the entire material on record held, the various processes and steps taken by the assessee in the job of printing, dyeing, mercerizing, bleaching and designing the plain glazed ceramic tiles resulted in change or transformation of material. The said process of job emerges and creates a new and different article having a distinct and different from what was prior to such job work and therefore, it held, the Appellate Authority was justified in holding that the job work of the asses....
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....necessary for us to find out what exactly the nature of activity is undertaken by the assessee in the name of job work. 9. The material on record discloses, the assessee commenced on 24.11.1994 its activity of processing of 132000 sq. mts. of plain glazed ceramic tiles, for decoration, per annum, with a capital outlay of Rs. 259.50 lakhs. The Department of Industries and Commerce, Government of Karnataka had issued a certificate in that behalf, dated 17.2.1995. The assessee after obtaining necessary permission for entering into financial technical collaboration with TTE Sri Italy, had imported plant and machinery from the TTE Sri Italy. The assessee has also obtained sanction for 92 HP power connections from the Karnataka Electricity Board on 24.9.1993. The assessee's project was financed jointly by the Karnataka State Industrial Investment and Development Corporation for Rs. 135.7 lakhs and Karnataka State Financial Corporation for Rs. 42.86 lakh. The assessee has obtained labour license under the Contract Labour Act, 1970 on 30.3.1995. It had also obtained license from the Department of Explosives, Government of India for storing bulk LPG (with a capacity of 10000 kgs), wh....
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....rocess. By the said process of job work emerges a new different article having a distinct and different from what the same was prior to subjected to the said job work. 12. The Apex Court had an occasion to consider Sections 80-HH and 80-IA along with Section 32-AB and in particular the words 'manufacture' and 'produce' in the case of India Cine Agencies v. CIT reported in 308 ITR 98 (SC). After the review of the entire case laws the Apex Court has held as under: "To put it differently, the test to determine whether a particular activity amounts to `manufacture' or not is: Does a new and different good emerge having distinctive name, use and character. The moment there is transformation into a new commodity commercially known as a distinct and separate commodity having its own character, use and name, whether be it the result of one process or several processes `manufacture' takes place and liability to duty is attracted. Etymologically the word `manufacture' properly construed would doubtless cover the transformation. It is the transformation of a matter into something else and that something else is a question of degree, whether that something els....
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....ms of Section 80-IA of the Income Tax Act, 1961. Before concluding, we would like to make one observation. If the contention of the Department is to be accepted, namely that the activity undertaken by the respondents herein is not a manufacture, then, it would have serious revenue consequences. As stated above, each of the respondents is paying excise duty, some of the respondents are job workers and the activity undertaken by them has been recognised by various Government Authorities as manufacture. To say that the activity will not amount to manufacture or production under Section 80-IA will have disastrous consequences, particularly in view of the fact that the assessees in all the cases would plead that they were not liable to pay excise duty, sales tax etc. because the activity did not constitute manufacture. Keeping in mind the above factors, we are of the view that in the present cases, the activity undertaken by each of the respondents constitutes manufacture or production and, therefore, they would be entitled to the benefit of Section 80-IA of the Income Tax Act, 1961.' 14. This Court in the case of CIT v. Darshak Ltd. [2001] 247 ITR 489 (Kar.) has held as under....
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....orming the plain glassware into decorative glassware with a process which is irreversible and the end-product is distinct and different in character. It is marketed as a different commodity than plain glass.' 15. This Court in the case of KOOLNEST (P.) LTD. vs. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 2(2) reported in (2014) 43 TAXMANN.COM 245 (KARNATAKA) has held as under : "From the aforesaid definition of the word "manufacture", it implies a change but every change is not manufacture, yet every change of an 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....
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....ufacture is the end result of one or more processes through which the original commodities are made to pass. 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. 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. The test for determining whether the manufacture can be said to have been taken place is whether the commodity, which is subjected to process can no longer be regarded as the original commodity but is recognized in trade as a new and distinct commodity. The word "manufacture" implies a change but every change is not manufacture. The 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 maki....