Law: Income Tax Act, 1961

Section: 80HH

Section 80HH of the Income-tax Act, 1961 - Deductions - Profits and gains of hotels/industrial undertakings, etc., in backward areas - Assessment year 1978-79 - Assessee was engaged in business of mining of limestones and marble blocks and thereafter cutting and sizing same before being sold - Whether activities carried on by assessee amounted to manufacture or production so as to entitle it to benefit of section 80HH - Held, no FACTS The assessee-company was engaged in the business of mining of lime-stones and marble blocks and thereafter cutting and sizing the same before being sold in the market. The assessee claimed itself to be an industrial undertaking for the purpose of section 80HH. The Assessing Officer did not accept the same as according to him, the assessee was not engaged in manufacture or production of goods. The Commissioner (Appeals) accepted the claim of the assessee. The Tribunal sustained the order of the Commissioner (Appeals). On reference, the High Court held that it is well-settled that while dealing with the articles used for business purposes, a term is required to be interpreted in a purely commercial sense. It should not be interpreted in any technical sense. The meaning of the word 'manufacture' in the context of the language of section 80HH is, therefore, required to be construed in the popular sense in which it is commonly understood by the people. 'Manufacture' implies a change, but every change is not 'manufacture', although every change in the article is the result of the treatment, labour and manipulation. To bring about the change qualifying as manufacture something more is necessary and that something is transformation, i.e., a new and different article having a distinct name, character or use, must emerge. Although at some point processing and manufacturing will merge, but where the commodity retains a continuing substantial identity through the processing stage, one cannot say that it has been manufactured. In the instant case, the activities of the assessee-company consisted of excavating limestone and marble boulders and after cutting the boulders into slabs, selling them. After cutting the boulders into slabs, may be…

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