Law:

Section:

[2008] 175 Taxman 361 (SC)/[2009] 308 ITR 98 (SC)/[2008] 220 CTR 223 (SC) [2008] 175 TAXMAN 361 (SC) SUPREME COURT OF INDIA India Cine Agencies v. Commissioner of Income-tax *, Madras DR. ARIJIT PASAYAT AND DR. MUKUNDAKAM SHARMA, JJ. CIVIL APPEAL NOS. 3649-3650 OF 2003, 6835-6836 OF 2005, 1522 & 3720 OF 2007 AND 451-452 OF 2008 NOVEMBER 12, 2008 Section 32AB, read with sections 80HH and 80-I, of the Income-tax Act, 1961 - Investment deposit account - Assessee, carrying on business of conversion of Jumbo rolls of photographic films into small flats and rolls in desired sizes, claimed deductions under sections 32AB, 80HH and 80-I - Whether activity undertaken by assessee amounted to manufacture or production and, therefore, it was entitled to deductions as claimed - Held, yes FACTS The assessee was carrying on business of conversion of Jumbo rolls of photographic films into small flats and rolls in the desired sizes. It claimed deductions under sections 32AB, 80HH and 80-I. The lower authorities disallowed the assessee's claim on the ground that the activity undertaken by it was not either manufacture or production. The High Court also held that in any event because of item 10 of the Eleventh Schedule of the Act, no deduction was permissible. On appeal to the Supreme Court : HELD By process of manufacture, something is produced and brought into existence which is different from that, out of which it is made, in the sense that the thing produced is, by itself, a commercial commodity capable of being sold or supplied. [Para 3] Naturally, manufacture is the end result of one or more processes through which the original commodities are made to pass. The nature and extent of processing may vary from one class to another. There may be several stages of processing, a different kind of processing at each stage. With undergoing each process, the original commodity experiences a change. Whenever a commodity undergoes a change as a result of some operation performed on it or in regard to it, such operation would amount to processing of the commodity. But it is only when the change or a series of changes take the commodity to the point where commercially it can no longer…

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