Law:

Section:

Section 80-IB of the Income-tax Act, 1961 - Deductions - Profits and gains from industrial undertakings other than infrastructure development undertakings - Whether word 'production' is wider in its scope as compared to word 'manufacture' and when word 'production' is used in juxtaposition with word 'manufacture', it will take in bringing into existence new goods by a process, which may or may not amount to manufacture - Held, yes - Whether word 'production' takes in all by-products, intermediate products and residual products, which emerge in course of manufacture of goods - Held, yes - Whether, therefore, activity of converting boulder into grits/stone chips/powder may not be a manufacturing activity, but since such activity would be producing grits/stone chips/powder, same would be production - Held, yes - Whether, therefore, section 80-IB deduction would be allowable to an assessee engaged in such activity - Held, yes [In favour of assessee] Words & Phrases: 'Production' as occurring in section 80-IB of the Income-tax Act, 1961 FACTS The assessee was engaged in mining activity, in the course whereof, it procured from riverbeds or by blasting, boulders from earmarked mining areas leased out to the assessee and thereupon crushed the same through stone crushing equipments for the purpose of converting such boulders into grits/stone chips/powder. The Assessing Officer held that the process of converting boulder into grits/stone chips/powder did not tantamount to manufacturing activity since the word 'manufactures' or 'produces', as used in section 80-IA(2)(iii), denote manufacture; and that every change is not manufacture. The Assessing Officer, therefore, refused to give benefit of section 80-IB to the assessee. The appellate authority, however, held that since activities of the assessee involved excavating boulders from mountains and riverbeds and getting them crushed into grits/stone chips/powder, which were commercially marketable commodities, such activities of the assessee were manufacturing activities. The department, thereupon, went before the Tribunal, who held that the boulders cannot be used for the same purpose as the grits can be used and after…

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