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Income Tax Appellate Tribunal, “A” BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI S. JAYARAMAN
आदेश /O R D E R
PER S. JAYARAMAN, ACCOUNTANT MEMBER:
This is an appeal filed by the Revenue against the order of the Commissioner of Income Tax (Appeals)-1, Chennai in (New No. ITA 224/CIT(A)-1/2014-15), dated 19.01.2017.
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The sole substantive ground raised by the Revenue is that the CIT(A) erred in directing the Assessing Officer to allow deduction u/s. 10B without appreciating the explanations and also definition of “Manufacture” defined under section 2(29BA) of the Act and the Financial Act, 2009.
The Brief facts are that the assessee company is engaged in the business of exporting granite art pieces and monuments etc. While completing the assessment for assessment year 2011-12, the AO disallowed the deduction claimed u/s. 10B for the reason that the AO observed from Form 56G that the nature of business of undertaking is “Manufacturers of processed dimensional granite dressed, cut and polished granite slabs/granite monuments moulded bronze and ornamental pieces for fixing in granite, synthetic diamond tools used in production of granite products”. Since the nature of business seem to be only cutting and polishing granites into required shapes, the assessee was asked by the AO to substantiate its claim of deduction u/s. 10B in the light of introduction of the definition of manufacture introduced in s. 2(29AB) by Finance Act, 2009 w.e.f 01.04.2009.
The AO further stated that though the assessee described the steps involved in conversion of crude granite block into a usable granite monument, it does not reveal that the process is manufacturing., the process involved in conversion is a mere ‘sculpturing’ or ‘engraving’ or ‘carving’ of the granite block into a memorial stone, the block does not lose its character or its use.
:-3-: I.T.A. N0. 811/Mds/2017 Since, either the block or the monuments can be placed as memorial stones, the value addition made by the assessee by polishing and cutting into or chipping into a different shape does not all together transform the block into a new and distinct object. The fact that the labour and skill was required to remove the block from the larger mass and washing and polishing the block and cutting rough edges cannot be regarded as amounting to production and accordingly he rejected the exemption claimed by the assessee u/s. 10B on the ground that the process of conversion of granite block into monument does not amount to manufacture. On an appeal to the CIT(A)-1, Chennai, the CIT(A), inter alia, found that the Hon’ble ITAT Chennai in assessee’s own case for assessment year 2010-11, on the issue of manufacture of production, vide order in dated 31.03.2016 upheld the order of the CIT(A) and decided the issue in favour of the assessee and hence allowed the appeal. Aggrieved, the Revenue filed this appeal.
The DR argued the case on the lines of the AO and grounds of appeal.
None appeared on behalf of the assessee. We heard the DR and gone through relevant material.
The relevant portion of this Tribunal order in the assessee’s case for assessment year 2010-11 in dated 31.03.2016 is extracted as under:
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“7. We heard the rival submissions, perused the material on record and judicial decision cited. The ld. Departmental Representative argued that the Commissioner of Income Tax (Appeals) has misinterpreted the definition of manufacture without going into actual process system as there is only value addition to the product and no new distinct item is produced. We find the submission of the ld. Departmental Representative are restricted to the exclusive definition of manufacture without considering the process of chipping, cutting, polishing and milling which are necessarily carried out for monuments and fixed in the memory of deported soul such distinct product has emerged from raw material having separate identity and sold independently. The deduction u/s.10B of the Act applies to any undertaking as under:- ‘’(i) it manufactures or produces any article or thing or computer software; (ii) it is not formed by the splitting up, or the reconstruction, of a business already in existence: Provided that this condition shall not apply in respect of any undertaking which is formed as a result of the re- establishment, reconstruction or revival by the assessee of the business of any such industrial undertaking as is referred to in section 33B, in the circumstances and within the period specified in that section; (iii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose’’. The assessee company has complied the conditions for claiming 10B deduction as there is no dispute except the allegation that process is not ‘’Manufacture’’. On perusal of definition u/sec. 2(29BA) of the Act as under:- “manufacture” with its grammatical variation, means a change in a non-living physical object or article or thing –
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(a) resulting in transformation of the object or article or thing into a new and distinct object or article or thing having a different name, character and use or , (b) bringing into existence of a new and distinct object or article or thing with a different chemical composition or integral structure’’. Manufacture definition has come into effect from 01.04.2009, further on combined reading of both the conditions of Sec. 10B of Income Tax Act and definition of manufacture. The main requirement of product is activity should be in manufacturing items and should result in transformation of the object or article or thing into a new and distinct object with different character. The granite raw block is mounted and with the process of cutting, clipping and polishing into a monument has distinct character and usage. The ld. Authorised Representative supported and relied on decision of ITO vs. Arihant Tiles & Marbles (P) Ltd 320 ITR 0079 (SC) were the conversion of marble block into polished slabs and tiles constitutes ‘’manufacture or production ‘’ as it results in emergence of a new and distinct commodity, therefore, assessee undertaking such activity is entitled to the benefit of Sec.80IA. So, considering the apparent facts, definitions, usage and the process of manufacturing, and assessee’s own case on the nature of business of manufacturing of monuments and the process of conversion of raw material into finished product is identified and saleable and we rely on Apex Court decision of Arihant Tiles & Marbles (P) Ltd (supra) were the lordship has considered conversion of marble block into polished slabs and tiles constitutes manufacture and same analogy apply for process of granite block. Therefore, we are not inclined to interfere with the order of Commissioner of Income Tax (Appeals) who has dealt the issue in detail viz-a-viz the explanations of the assessee and we uphold the :-6-: I.T.A. N0. 811/Mds/2017 order of the Commissioner of Income Tax (Appeals) and dismiss the Revenue appeal. 8. In the result, the appeal of the Revenue in is dismissed.”
Since, there is no change in the fact or in law, following the above decision, the revenue’s appeal is dismissed.
In the result, the revenue’s appeal is dismissed.
Order pronounced on Wednesday, the 07th day of June, 2017 at Chennai.