AI Drafter 
TaxTMI 
TaxTMI 
2004 (4) TMI 68
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....se, the Appellate Tribunal was right in law in upholding the order of the Commissioner of Income-tax (Appeals) reversing the order of the Assessing Officer that the assessee-company was not eligible for deduction under section 80-I of the Income-tax Act?" The facts giving rise to the aforesaid reference are as follows: The assessee is a company engaged in the business of raising granites from mines, polishing them and exporting them outside India. The assessee apart from doing mining also purchases granite blocks and after subjecting granite blocks to further processing, exports the polished granites. For the assessment years 1986-87 and 1987-88, the assessee claimed investment allowance in respect of cranes and in respect of the assessment year 1988-89, the company claimed allowance under section 32A of the Income-tax Act (hereinafter referred to as lithe Act"). The Assessing Officer disallowed the claim, firstly on the ground that cranes were transport vehicles' and further on the ground that no manufacturing process was involved in cutting the granites and polishing them. On appeal, the appellate authority accepted the contention of the assessee to the effect that the mach....
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....k or hill, though it involves skill, labour and effort and perhaps use of machinery as well, is not an activity which can properly be regarded as manufacture/ even after the widest possible meaning is ascribed to that term. The granite hills are a natural bounty and merely removing a portion of it does not involve a process of manufacture. It is more properly to be regarded as mining." It was further held as follows: "The process involved in the work carried out by the assessee has already been set out. It does not indicate the existence of process involving any complexity or the transformation of what was already embedded in the larger mass into something new and different after the completion of the process. The granite block which is cut from the larger formation continues to remain granite only. The fact that labour and skill is required to remove the block from the larger mass by itself, cannot be regarded as amounting to production. Transporting the same cannot be regarded as production. Cutting a larger mass of granite with a view to obtain a block of granite which without any further process of any significance-the only thing done by the assessee herein being just was....
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.... to a process of cutting and polishing which yields the polished diamond, but that is not to say that the polished diamond is a new article or thing which is the result of manufacture or production. There is no material on record upon which such a conclusion can be reached. The appeal is, therefore allowed. The order under challenge is set aside. The question quoted above is answered in the negative and in favour of the Revenue." In Collector of Central Excise v. Associated Stone Industries (Kota) Ltd. [2003] 10 SCC 771, the question was raised in the context of sections 2(f) and 3 of the Central Excise Act. The Supreme Court observed: "It cannot be held that cutting, edging, trimming, polishing and other processes on the marble slabs amount to a process of manufacture as it does not bring in a distinct product." In CIT v. Pooshya Exports P. Ltd. [2003] 262 ITR 417 (Mad), the assessee was a company doing the business of mining and quarrying granite stones and exporting them as finished goods. Before exporting those granite stones as per the specification of the customers, the stone underwent various types of manual and machinery processes such as removal of over burden,....
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....decision of the Karnataka High Court in CIT v. Mysore Minerals Ltd. [1994] 205 ITR 461 and had not agreed with such conclusion. Learned counsel appearing for the assessee has placed strong reliance upon the decision of the Supreme Court reported in Aspinwall and Co. Ltd. v. CIT [2001] 251 ITR 323. In the said case, the question was whether the assessee's activity of curing coffee amounts to manufacturing, entitling the assessee to the benefit under section 32A of the Act. The Tribunal had come to the conclusion that the following nine processes are involved in curing of coffee: "(1) Receipt of coffee from the estates; (2) Storage of coffee in covered godowns; (3) Drying of coffee to the required standards prescribed by the Coffee Board in drying yards; (4) Hulling/pealing/polishing; (5) Grading of coffee mechanically; (6) Colour sorting; (7) Garbling and manual grading; (8) Out-turning of garbled coffee; and (9) Bulking". The High Court had accepted the factual position, but came to the conclusion that the processes did not show any kind of change or commercially a different commodity. While reversing the decision of the High Court, the Supreme Cour....