COMMISSIONER OF INCOME TAX Vs. GOMATESH GRANITES

JUDGEMENT

(1.) THE question referred to us at the instance of the Revenue is as to whether the Tribunal was right in holding that the activity in extracting granite from the hills and processing it by cutting rough edges before export amounted to manufacture or production of articles or things. THE assessment years are 1982-83 and 1983-84. THE question arises in the background of the claim made by the assessee, who is engaged in the business of excavating granite and exporting the blocks for the benefit claimable under Section 80J and Section 80HH of the Income-tax Act, 1961. In the order of the Tribunal, the business of the assessee is described thus :

(2.) THE benefit of Section 80J and Section 80HH of the Income-tax Act was denied to the assessee by the Income-tax Officer and by the appellate authority. THE Tribunal disagreeing with them, having allowed the assessee's appeal, the Revenue has sought this reference. THE Tribunal has held that the assessee was producing things or articles, by extracting granite from the earth, and it was adding value to the original product by converting them into exportable size.

(3.) LEARNED counsel for the assessee, on the other hand, supported the order of the Tribunal and submitted that the words "manufacture" and "production" are words of wider import and neither expression having been defined in the Act, the terms were required to be construed as in their natural meaning and when so construed, the activity of blasting rock formation for the purpose of extracting granite blocks, and thereafter, subjecting, them to a process of cutting rough edges, testing them for cracks, etc., is an activity which is capable of being regarded both as manufacture and production. It was submitted that the block of granite, after it is extracted and made fit for export is commercially a different article, which has commercial value and is traded in the commercial world unlike the granite formation, which is attached to the earth from out of which the block is extracted. Blasting the block formation and removing the block, dressing the same, etc., it was submitted, involves skill and labour and by the application of such skill and labour, a new article is brought into existence which undeniably has high commercial value, and being an exportable commodity, yields substantial foreign exchange.