TaxTMI 
TaxTMI 
2003 (7) TMI 30
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.... M/s. D.B. Bandodkar and Brothers on the issue of investment allowance had relied on the judgment of the Karnataka High Court in the case of CIT v. Gogte Minerals (No.2) [1997] 225 ITR 60, wherein a Division Bench of the Karnataka High Court had held that mining operations being carried out for excavating iron ore, amount to manufacture. It is the contention on behalf of the Revenue that extracting/raising of iron ore does not amount to manufacturing activity and, consequently, such an assessee would not be entitled to the benefit under section 32A of the Income-tax Act, 1961 (hereinafter referred to as "the said Act"). It is then contended that reliance placed on the judgment of the Division Bench of the Karnataka High Court, was misplaced as the apex court in the case of CIT v. N.C. Budharaja and Co. [1993] 204 ITR 412 has explained what is "manufacture" and "production". These tests as explained by the apex court had not been considered by the learned Division Bench of the Karnataka High Court in the case of CIT v. Gogte Minerals (No.2) [1997] 225 ITR 60. It is further pointed out that the apex court in CIT v. Mysore Minerals Ltd. [2001] 247 ITR 301, has set aside the order the....
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.... that the provision is a beneficial provision and that being the case, the court should be given intent to the mandate of Parliament. Lastly, it is contended that various High Courts have taken the view that in respect of mining operations, the benefits of section 32A can be availed of by a person/company involved in the business of mining. There is no view to the contrary taken by any other High Court and in these circumstances, the appeal preferred by the Revenue ought to be rejected. Considering the various contentions, in our opinion, the issue can now be decided. For the applicability of section 32A an assessee must satisfy the following three requirements: (i) The machinery should be owned by the assessee; (ii) It should be wholly used for the purposes of the business carried on by the assessee; (iii) The machinery must come under any of the categories specified in section 32A, sub-section (2). The various steps in the mining operations have been identified by the apex court in Chowgule and Co. Pvt. Ltd. v. Union of India [1981] 47 STC 124. The processes involved in mining ore commencing from extracting of iron ore to selling it for export are identified as under: (i) ....
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....est for considering whether it amounts to manufacture is to be applied thus: Does the processing of the original commodity bring into existence a commercially different and distinct article? Explaining the issue, the apex court observed as under: "Commonly, manufacture is the end result of one or more processes through which the original commodity is made to pass. The nature and extent of processing may vary from one case to another, and indeed there may be several stages of processing and perhaps a different kind of processing at each stage. With each process suffered, the original commodity experiences a change. But it is only when the change, or a series of changes, take the commodity to the point where commercially it can no longer be regarded as the original commodity but instead is recognised as a new and distinct article that a manufacture can be said to take place. Where there is no essential difference in identity between the original commodity and the processed article it is not possible to say that one commodity has been consumed in the manufacture of another. Although it has undergone a degree of processing, it must be regarded as still retaining its original identity.....
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....ractual specifications cannot be said to involve the process of manufacture, since the ore that is produced cannot be regarded as a commercially new and distinct commodity from the ore of different specifications blended together. What is produced as a result of blending is commercially the same article, namely, ore, though with different specifications than the ore which is blended and hence it cannot be said that any process of manufacture is involved in blending of ore." The apex court thereafter proceeded further and observed as under: "Now there can be no doubt, and indeed this could not be seriously disputed that the process of mining comes to an end when ore is extracted from the mines, washed, screened and dressed in the dressing plant and stacked at the mining site and the goods purchased by the assessee for use in the subsequent operations could not therefore be regarded as goods purchased for use 'in mining'." The apex court in the case of CIT v. N.C. Budharaja and Co. [1993] 204 ITR 412, has again reiterated the expression "manufacture" used in Deputy CST (Law), Board of Revenue (Taxes) v. Pio Food Packers [1980] 46 STC 63 (SC). The apex court noted both the words "m....
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.... we do not propose to consider the ratio of the said judgment. The next judgment relied upon is Deputy CIT v. Mysore Minerals Ltd. [2001] 250 ITR 730 (Karn). In this case also what was involved was mining of granite. The learned Division Bench of the Kamataka High Court relied upon the judgment in CIT v. N.C. Budharaja and Co. [1993] 204 ITR 412 (SC) and explained and distinguished it. In that case the process involved extracting granite and converting it into slabs, cutting and polishing them. This was held to be a manufacturing activity. In CIT v. Mysore Minerals Ltd. (No.2) [2001] 250 ITR 728 (Karn), again the matter involved granite. The Division Bench observed that it stands concluded in view of the judgment in CIT v. Mysore Mineral Ltd [2001] 250 ITR 725 (Karn). Therefore, if the tests as laid down in the judgments of the apex court and considered in the various judgments of the High Courts and even considering that various processes are involved, would mere extraction of iron ore from the earth amount to "manufacture"? In the instant case, considering the material on record, as noted by the apex court, iron ore is merely extracted by removing the top soil. That by itself wo....
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....v. N.C. Budharaja and Co. [1993] 204 ITR 412 (SC) and also placing reliance on Webster's New International Dictionary, for the word "produce", which is defined to mean "something that is brought forth or yielded either naturally or as a result of effort and work". In Shorter Oxford English Dictionary, the meaning given is : "To bring forward, bring forth or out; to bring into being or existence". In Black's Law Dictionary, the expression "produce" is "To bring forward; to show or exhibit; to bring into view or notice; to bring to the surface". Considering the language used and also placing reliance on the provisions of section 35E of the Income-tax Act, the learned Division Bench noted that "production of mineral" is used in the allied provisions of the Act itself and it is a definite point that Parliament employed the expression "production" to the minerals extracted from underneath the surface. For all those reasons, the learned Division Bench took the view that it amounted to "production". Another learned Division Bench of the Delhi High Court in CIT v. Univmine (p.) Ltd. [1993] 202 ITR 825, observed that mining of marble would amount to carrying on business of production and fo....