Appellant-Assessee v. The Commissioner Of Income Tax, Kota

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 450/2011 Smt. Shakuntala Devi W/o Shri Shashikant Jain Aged 52 years,M/s. Nakoda Crashers & Engineers, Ralayati, Distt. Jhalawar ----Appellant-Assessee Versus The Commissioner of Income Tax, Kota ----Respondent For Appellant(s) : Mr. Mahendra Gargeiya (Through V.C.) Mr. Devang Gargeiya For Respondent(s): Mr. Shantanu Sharma Mr. Anurag Mathur HON'BLE MR. JUSTICE AVNEESH JHINGAN HON'BLE MR. JUSTICE ASHUTOSH KUMAR Order 31/07/2024 1.This appeal is filed against order of the Income Tax AppellateTribunal dated 29.08.2008. 2.Brief facts are that the appellant engaged in the business ofproduction of gitti from sand stone blocks. In assessment year2003-04 deduction under Section 80IA of the Income Tax Act,1961 (for short ‘the Act’) was claimed. The Assessing Officerrejected the claim vide order dated 28.03.2006 on the ground thatactivity of the appellant cannot be categorized as ‘manufacturing’or ‘production’. Reliance was placed upon decision of the SupremeCourt in the case of Lucky Minmat Pvt. Ltd. Vs. Commissioner of Income Tax, Jaipur reported in [2000] 245 ITR 830 (SC);and decision of this Court in Commissioner of Income Tax Vs.Lucky Mineral Pvt. Ltd. reported in [1997] 226 ITR 245. Aggrieved of the order, the petitioner filed an appeal before theCommissioner of Income Tax (Appeals) and succeeded. The appealfiled by the Department was accepted by the tribunal vide orderdated 29.08.2008, hence the present appeal. 3.While admitting the appeal on 07.09.2012, followingsubstantial question of law was formulated:- “i.Whether the expression ‘production’used under Section 80IB of the Income-tax Act,1961 in which expressions ‘manufacture’ and‘production’ both have been used are synonymswith each other or the word ‘production’ has awider meaning than ‘manufacture’ so as toinclude within the preview, an activity, whichmay not amount of ‘manufacture’ but may stillamount to ‘production’ as held in the case ofArihant Tiles & Marbles (P) Ltd. Vs. ITO, (2007)211 CTR (Raj.) 169, following the decision in CITVs. Sesa Goa Ltd., (2004) 271 ITR 331 (SC),?” 4. Learned counsel for the appellant relies upon decision of the Supreme Court in the case of Income Tax Officer Vs.Arihant Tiles & Marbles P. Limited reported in [2010] 320ITR 79 (SC). 5.Learned counsel for the respondent relies upon the decisionof this Court in the case of CIT Vs. Lucky Mineral Pvt. Ltd.(supra). 6.The substantial question of law arising in the present appealis no longer res-integra and has been decided by the SupremeCourt in Income Tax Officer Vs. Arihant Tiles & Marbles P.Limited (supra). The relevant portion of the judgment isreproduced below:- 19.Applying the above tests laid down by thisCourt in N.C. Budharaja & Co.’s case (supra) tothe facts of the present cases, we are of theview that blocks converted into polished slabs and tiles after undergoing the process indicatedabove certainly results in emergence of a newand distinct commodity. The original block doesnot remain the marble block, it becomes a slabor tile. In the circumstances, not only there ismanufacture but also an activity which issomething beyond manufacture and whichbrings a new product into existence and,therefore, on the facts of these cases, we are ofthe view that the High Court was right incoming to the conclusion that the activityundertaken by the respondents-assessees didconstitute manufacture or production in termsof section 80-IA of the Income-tax Act, 1961. and tiles after undergoing the process indicatedabove certainly results in emergence of a newand distinct commodity. The original block doesnot remain the marble block, it becomes a slabor tile. In the circumstances, not only there ismanufacture but also an activity which issomething beyond manufacture and whichbrings a new product into existence and,therefore, on the facts of these cases, we are ofthe view that the High Court was right incoming to the conclusion that the activityundertaken by the respondents-assessees didconstitute manufacture or production in termsof section 80-IA of the Income-tax Act, 1961. 20.Before concluding, we would like to makeone observation. If the contention of theDepartment is to be accepted, namely that theactivity undertaken by the respondents herein isnot a manufacture, then, it would have seriousrevenue consequences. As stated above, eachof the respondents is paying excise duty, someof the respondents are job workers and theactivity undertaken by them has beenrecognised by various Government Authoritiesas manufacture. To say that the activity will notamount to manufacture or production underSection80-IAwillhavedisastrousconsequences, particularly in view of the factthat the assessees in all the cases would pleadthat they were not liable to pay excise duty,sales tax etc. because the activity did notconstitute manufacture. Keeping in mind theabove factors, we are of the view that in thepresent cases, the activity undertaken by eachof the respondents constitutes manufacture orproduction and, therefore, they would beentitled to the benefit of section 80-IA of theIncome-tax Act, 1961. 7.Before parting, it would be appropriate to mention that thedecision relied upon by the learned counsel for the Departmentwas considered in the decision of Income Tax Officer Vs.Arihant Tiles & Marbles P. Limited (supra). 8.In view of the above, the appeal is allowed. The substantial question of law is answered in favour of the assessee. (ASHUTOSH KUMAR),J (AVNEESH JHINGAN),J Monika Chugh/Tanisha/10 Whether Reportable:Yes