TaxTMI 
TaxTMI 
2002 (10) TMI 40
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....The assessee sells the photographic colour papers to the dealers in the form of small rolls or cut sizes. The photographic paper wound as smaller rolls is of size ranging from 3.5"x275'/575'/775' to 20"x275'. Likewise, the cut sizes are also of different measurements ranging from 34"x54" to 30"x40". The number of cut sheets ranges from 10 to 200 sheets per packet. The assessee's case is that it is entitled to both investment allowance under section 32A and deduction in respect of profits and gains under section 80-I of the Income-tax Act on the ground that the activities involved in reducing the size of the jumbo photographic papers into desired size with the help of slitting machine would amount to manufacturing and processing. The Assessing Officer negatived the assessee's claim on the ground that cutting or slitting of jumbo rolls into flat and small rolls did not amount to either manufacture or production of an article. On appeal, the Commissioner of Income-tax (Appeals) accepted the assessee's contention and found that the assessee is entitled to both investment allowance under section 32A and also deduction under section 80-I and directed the Deputy Commissioner to allow in....
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...., subjecting raw uncut diamonds to a process of cutting and polishing, which yields the polished diamond, cannot be said to amount to manufacture or production of an article or thing, for the purpose of obtaining the deduction under section 80-I of the Income-tax Act. We heard learned counsel appearing on either side and perused the materials on record. Section 32A provides for investment allowance in respect of a ship or an aircraft or machinery or plant specified in sub-section (2), which is owned by the assessee and is wholly used for the purposes of the business carried on by him, there shall, in accordance with and subject to the provisions of this section, be allowed a deduction, in respect of the previous year in which the ship or aircraft was acquired or the machinery or plant was installed or, if the ship, aircraft, machinery or plant is first put to use in the immediately succeeding previous year, then, in respect of that previous year, of a sum by way of investment allowance equal to twenty-five per cent. of the actual cost of the ship, aircraft, machinery or plant. Sub-section (2) of section 32A to which a reference is made in sub-section (1) provides as follows : ....
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....v. Pio Food Packers [1980] 46 STC 63, among other decisions. In the said decision, the test evolved for determining whether manufacture can be said to have taken place is, whether the commodity which is subjected to the process of manufacture can no longer be regarded as the original commodity but is recognised in the trade as a new and distinct commodity. Pathak J., as he then was, stated the test in the following words : '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.' The word 'production' or 'produce' when used in juxtaposition with the word 'manufacture' takes in bringing into existence new good....
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....y reason of processing of the goods after their purchase, there wag no change in their identity and that, in fact, commercially they were to be regarded as the original goods." In the case of CIT v. Madural Pandian Engineering Corporation Ltd. [1999] 239 ITR 375, the Division Bench of this court, while considering the question whether the retreading of old tyres would amount to manufacture or production and the assessee is entitled to the relief under sections 80HH and 80J of the Income-tax Act, 1961, has held as follows : "As pointed out by the apex court, the word 'production' or 'produce' has been used in the section (80HH of the Income-tax Act, 1961), in juxtaposition with the word 'manufacture' and it would take in bringing into existence new goods by a process which may or may not amount to manufacture. The article referred to in the section, therefore, has reference to new articles and brought into existence by a process of manufacture or by any other mode, which can be regarded as production. The resultant article whether it is by manufacture or by way of production must be a new article. The term 'new' is not found in the section. It must be held to be implicit in the w....
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.... Court, the Supreme Court held that the assessee after plucking or receiving the raw coffee berries made them undergo nine processes to give them the shape of coffee beans. The final I product was absolutely different and separate from the input. The change made in the article resulted in a new and different article, which was recognised in the trade as a new and distinct commodity. The coffee beans had an independent identity from the raw material from which they were produced. Conversion of a raw berry into the coffee beans was a manufacturing activity. While holding so, the Supreme Court held as follows : "The word 'manufacture' has not been defined in the Income-tax Act. In the absence of a definition, the word 'manufacture' has to be given a meaning as is understood in common parlance. It is to be understood as meaning the production of articles for use from raw or prepared materials by giving such materials new forms, qualities or combinations whether by hand labour or machines. If the change made in the article results in a new and different article then it would amount to manufacturing activity." In that case, by means of the nine processes as found by the Tribunal, ther....