COMMISSIONER OF INCOME TAX Vs. PANACHAYIL INDUSTRIES

JUDGEMENT

(1.) The Revenue is before us in all the appeals. The following questions were raised for consideration at the time of admission:

(2.) The Commissioner of Income-tax (Appeals) allowed the appeal of the assessee following the decision of the Tribunal in Panchayil Industries (I.T.A. Nos. 336, 337 & 338/Coch/2002) and directed the Assessing Officer to allow the deductions claimed by the assessee. Aggrieved by the said order of the first appellate authority, the Revenue went before the Tribunal challenging the order of the Commissioner of Income-tax (Appeals). The Tribunal following the law laid down in the case of Deputy CIT v. Poabson Granite Products P. Ltd. in I.T.A. No. 495/Coch/2004 dated August 4, 2005, and Panchayil Industries (I.T.A. Nos. 336, 337 & 338/Coch/2002), confirmed the opinion of the Commissioner of Income-tax (Appeals) rejecting the claim of the Revenue. Aggrieved by the same, the Revenue is before this court contending that the activity carried on in the crushing units of the respondent-assessee can neither be called as manufacturing activity or the outcome of the process can be termed as production.

(3.) Learned standing counsel representing the Revenue took us through the earlier decision of the Tribunal in Panchayil Industries (I.T.A. Nos. 336, 337 & 338/Coch/2002) wherein the Tribunal, after referring to several judgments, opined that the commercial activity is to be considered in the light of the respective trade practice or if no such trade practice is available it has to be considered in the common parlance in order to arrive at the conclusion whether it is a case of manufacturing activity, the input and output would be commercially different or not. As a matter of fact, the learned standing counsel tried to convince us by submitting that whether the product is used as a boulder or crushed granite piece, it is used in the construction activity, therefore, there is no process of manufacturing involved. In other words, according to him, boulders being crushed into smaller pieces of granite will change the nature of product being called as granite stone, therefore, there is no manufacturing process involved and there is no product which can be commercially termed as a different product in the trade practice concerned.