COMMISSIONER OF INCOME TAX Vs. RAMSONS ORGANICS LTD.

JUDGEMENT

(1.) THE assessee is engaged in running 100 per cent exports oriented unit at Dhoka, Gurgaon and dealing in the business of processing of stone, marble, granite etc. and exporting the same around the world. The assessee filed its return of income on 1st Nov., 2004 declaring nil income for the assessment year in question and same was assessed under the provisions of Section 143(3) of the Act. The assessee had claimed deduction under Section 10B of the IT Act, which claim was turned down by the AO in his order while framing the assessment order dt. 1st Dec, 2006 holding that the assessee was neither engaged in the business of export of 'computer software' nor engaged in the 'manufacture or produce of article or thing', which was necessary ingredient to qualify for deduction under Section 10B of the Act. The Tribunal, however, set aside the order of the AO holding that the activity of the assessee amounted to manufacture or produce of article or thing and thus, satisfy the requirement of Section 10B of the Act. The Tribunal has affirmed this order thereby dismissing the appeal preferred by the Revenue against the order of the Tribunal. This is how the Revenue is before us in the present appeal filed under Section 260A of the Act. Precisely the same business activity with which the assessee is dealing here, namely, processing of stone, marble, granite etc. came up for consideration before this Court in IT Appeal No. 519 of 2009 entitled CIT v. Sophisticated Marbles and Granite Industries reported at : (2009) 27 DTR (Del) 177 : (2009) 225 CTR (Del) 410. Vide orders, dt. 11th Aug., 2009 dismissing the appeal of the Revenue it was held that such an activity amounted to manufacturing process. Following portion of the said judgment, which equally applies to the present case as well, is reproduced: 3. ft is clear from the above that after purchasing of blocks of slabs and getting them cut by cutting machines from outside, the process which is undertaken by the assessee is to put full size fibre on one side of the slab which is technically required to give support to the slab to; fill holes and cracks in these slabs to make it marketable by applying chemicals on holes and cracks; mixing of chemicals and powder for the aforesaid purpose is done by the assessee; polishing the slab by different, machines; for bringing shine on the slab applying different types of tin oxide and thereafter cutting the finished slabs to proper size and shapes from which the marketable size of slabs, moulded pieces, edged pieces and tiles are made. 4. Applying the test formulated by the Supreme Court, this activity would clearly fall within the definition of 'manufacturing process'. It is clear from the above that the raw form blocks are purchased and then those slabs undergo various processes before they become marketable and the final product is clearly much different from the product initially purchased by the assessee. Had it been a case of purchasing of blocks and slabs, cutting the same in that very form and thereafter selling those tiles, there could have been an arguable case as to whether this amounts to manufacturing process or not. However, in the present case the activities are not confined to cutting of the blocks or slabs after the purchase but it has to undergo various processes with the help of machines and labour and after applying various kinds of chemicals. In these circumstances, we are of the opinion that the Tribunal rightly relied upon the judgment of the Rajasthan High Court in the case of Arihant Tiles and Marbles (P) Ltd. v. ITO (2007) 211 CTR 169 v: (2007) 295 ITR 148 (Raj). In this case, Rajasthan High Court, after taking into account the various judgments of the Supreme Court and other High Courts observed as under: 6. The language used in Section 10B is 'manufacture or production'. This language is similar to the language used in Section 80 -IB. The Supreme Court in CIT v. Sesa Goa Ltd. : (2004) 192 CTR (SC) 577 had an occasion to consider the expression 'production'. The Rajasthan High Court in Arihant Tiles and Marbles (P) Ltd. v. ITO (supra) for the purpose of Section 80 -IB was pleased to hold that the activity namely sawing of marble blocks and subsequent activities of cutting and polishing, will fall within the meaning of the expression 'production' and therefore, assessee was entitled to benefit under Section 80 -IB. The expression 'manufacture' or 'production' are different expressions and the word 'production' has a wider meaning as explained by the apex Court in Sesa Goa. Ltd. (supra). In our opinion, the word 'production' under Section 10B considering similar expression in Section 80 -IB will have to be given this wider meaning. Considering that the expressions are not defined in the Act but the expressions are used in the same Act. The only difference between Section 80 -IB and Section 10B is that Section 10B is applicable to a 100 per cent EOU, whereas Section 80 -IB can be in respect of any unit. In our opinion, therefore, the expression 'production' will have the same meaning as in Sesa Goa Ltd. (supra) and consequently, the question framed is devoid of merits. 5. We may also note that Bombay High Court in the case of CIT v. Fateh Granite (P) Ltd. : (2009) 20 DTR (Bom) 257 : (2009) 222 CTR (Bom) 638 : (2009) 314 ITR 32 (Bom), was concerned with the identical issue, namely, manufacture of granite tiles and held the same to be a manufacturing process as is clear from the following discussion contained thereunder: The language used in Section 10B is 'manufacture or production'. This language is similar to the language used in Section 80 -IB. The Supreme Court in CIT v. Sesa Goa Ltd. : (2004) 192 CTR (SC) 577 had an occasion to consider the expression 'production'. The Rajasthan High Court in Arihant Tiles & Marbles (P) Ltd. v. ITO (supra) for the purpose of Section 80 -IB was pleased to hold that the activity namely sawing of marble blocks and subsequent activities of cutting and polishing, will fall within the meaning of the expression 'production' and therefore, assessee was entitled to benefit under Section 80 -IB'.

(2.) WHEN Mr. Sabharwal was confronted with the aforesaid judgment, his submission was that the matter needs consideration in view of Expln. 4 to Section 10B of the IT Act, 1961. This Explanation reads as under: For the purpose of this section, 'manufacture or produce' shall include the cutting and polishing of precious and semi -precious stones.

(3.) SUBMISSION of Mr. Sabharwal, based on the aforesaid Explanation, was that it is only cutting and polishing of precious and semi -precious stones which is covered by the expression 'manufacture or produce' and, therefore, the benefit sought to be extended was only when the activity involves cutting and polishing of precious and semi -precious stones.