ITO, Nurpur V. M/s Brijsons Hetreat, Kangra

ITA 1235/CHANDI/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1347 (ITAT-CHANDIGARH)
• Duration Of Justice: 4 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 10-03-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 29-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S KHEMWAL
• Keywords: Set aside
• Section: 143(3); 250; 80IC; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI D.K.SRIVASTAVA, ACCOUNTANT MEMBER AND MS SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 1234/CHD/2010 ASSESSMENT YEAR: 2007-08 THE ITO, VS M/S BRIJSONS WIRE PRODUCTS, NURPUR, V&PO REHAN, (H.P.) TEHSIL NURPUR, DISTT. KANGRA PAN NO. AACFB1168Q & ITA NO. 1235/CHD/2010 ASSESSMENT YEAR: 2007-08 THE ITO, VS M/S BRIJSONS HETREAT, NURPUR, VPO BHADROYA (H.P.) TEHSIL NURPUR, DISTT. KANGRA PAN NO. AADFB1616J (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.S.KHEMWAL RESPONDENT BY: NONE ORDER PER SUSHMA CHOWLA, JM BOTH THE APPEALS BY THE REVENUE ARE AGAINST THE SE PARATE ORDERS OF CIT(A), SHIMLA DATED 22.8.2010 RELATING TO ASSESSME NT YEAR 2007-08 AGAINST THE ORDER PASSED UNDER SECTION 143(3) OF TH E I.T. ACT. 2. THE ASSESSEE HAS RAISED THE FOLLOWING COMMON GRO UNDS OF APPEAL IN BOTH THE APPEALS: - 1. ON THE FACTS AND CIRCUMSTANCES, THE LD. CIT(A) ERRE D IN HOLDING THAT THE PROCESS OF DRAWING WIRE FROM WIRE RODS FROM WIRE OR RODS OF THICKER GAUGE, FOLLOWED BY FIN ISHING PROCESSES LIKE ANNEALING, WOULD AMOUNT TO MANUFACTU RE OR 2 PRODUCTION AND CONSEQUENTLY WHETHER THE ASSESSEE WA S ELIGIBLE FOR DEDUCTION UNDER SECTION 80 IC OF THE I NCOME TAX ACT. 2. WHETHER THE IMPUGNED JUDGMENT IS CONTRARY TO THE RA TIO OF THE JUDGMENT OF THE HON'BLE SUPREME COURT IN COLLEC TION CENTRAL EXCISE VS. TECHNOWLD INDUSTRIES. 3. THE ASSESSEE MOVED AN APPLICATION FOR ADJOURNMEN T WHICH WAS REFUSED AS WE FIND THAT THE ISSUE IS COVERED BY THE ORDER OF THE TRIBUNAL. 4. THE ONLY ISSUE ARISING IN THE PRESENT APPEAL IS WITH REGARD TO THE DEDUCTION CLAIMED U/S 80 IC OF THE ACT. THE ASSESSE E IS ENGAGED IN THE PROCESS OF MANUFACTURING OF STEEL WIRES. THE DEDUC TION CLAIMED U/S 80 IC OF THE ACT WAS DENIED TO THE ASSESSEE BY THE ASSESS ING OFFICER FOLLOWING THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN COLLECTOR OF CENTRAL EXCISE VS. TECHNOWLD INDS DATED 27.2.2003. THE CIT (A) ALLOWED THE CLAIM OF THE ASSESSEE FOLLOWING THE RATIO LAID DOWN BY THE CHANDIGARH BENCH OF THE TRIBUNAL IN HIMACHAL WIRE INDUSTRIES ( P) LTD & OTHERS IN ITA NO. 382/CHD/2009 VIDE ORDER DATED 30.11.2009 AN D ALLOWED THE CALIM OF THE ASSESSEE. 5. WE FIND THAT THE ISSUE RAISED IN THE PRESENT APP EAL IS COVERED BY CONSOLIDATED ORDER OF THE TRIBUNAL DATED 30.11.2009 , WHO HAD DELIBERATED UPON THE ISSUE AT LENGTH. THE JUGEMENT OF THE HON' BLE SUPREME COURT IN COLLECTOR OF CENTRAL EXCISE VS. TECHNOWLD INDS (SUP RA), WAS ALSO REFERRED TO BY THE TRIBUNAL VIDE ORDER DATED 30.11.2009 IN T HE CASE OF HINDUSTAN WIRE INDUSTRIES (P) LTD AND OTHERS (SUPRA) AND IT W AS HELD AS UNDER:- 3 9. THE CONTROVERSY SQUARELY INVOLVES INTERPRETATIO N AND, CONSTRUCTION OF THE WORDS MANUFACTURE AND, PRODU CTION. THE WORD 'MANUFACTURE' WAS NOT DEFINED UNDER THE AC T, UPTILL THE INSERTION OF SECTION 2(29BA) BY THE FINANCE (NO .2) ACT, 2009, W.R.E.F. 1.4.2009, WHICH READS AS UNDER:- 29BA MANUFACTURE, WITH ITS GRAMMATICAL VARIATI ONS, MEANS A CHANGE IN A NON-LIVING PHYSICAL OBJECT OR A RTICLE OR THING,- A) RESULTING IN TRANSFORMATION OF THE OBJECT OR ART ICLE OR THING INTO A NEW AND DISTINCT OBJECT OR ARTICLE OR THING HAVING A DIFFERENT NAME, CHARACTER AND USE; OR B) BRINGING INTO EXISTENCE OF A NEW AND DISTINCT OBJEC T OR ARTICLE OR THING WITH A DIFFERENT CHEMICAL COMPOSIT ION OR INTEGRAL STRUCTURE; THE ABOVE INSERTION HAS BEEN MADE EFFECTIVE FROM 1.4.2009, WHILE WE ARE DEALING WITH ASSESSMENT YEAR S PRIOR TO 1.4.2009. HITHERTO, THE EXPRESSIONS MANUFACTURE AND PRODUCTION HAVE BEEN UNDERSTOOD IN TERMS OF THE J UDGE MADE LAW. THE VARIOUS COURTS OF THE COUNTRY HAVE RENDERE D NUMEROUS JUDGEMENTS ELUCIDATING VARIOUS PRINCIPLES OR TESTS TO EVALUATE WHETHER A PARTICULAR PROCESS CAN BE UND ERSTOOD AS MANUFACTURE OR PRODUCTION. THE EXPRESSION 'MANU FACTURE' IN ITS ORDINARY ACCEPTANCE HAS A WIDER CONNOTATION, IT MEANS MAKING OF ARTICLES, OR MATERIAL COMMERCIALLY DIFFER ENT FROM THE BASIC COMPONENTS, BY PHYSICAL LABOUR OR MECHANI CAL PROCESS, AND A MANUFACTURER IS A PERSON BY WHOM, OR UNDER WHOSE DIRECTION OR CONTROL THE ARTICLES OR MATERIAL S ARE MADE. THE WORD 'MANUFACTURE' USED AS VERB IS GENERALLY UN DERSTOOD TO MEAN AS BRINGING INTO EXISTENCE A NEW SUBSTANCE AND DOES NOT MEAN MERELY TO PRODUCE SOME CHANGE IN A SUBSTAN CE. AS IS GENERALLY UNDERSTOOD AND ALSO STATED IN SECTION 2(2 9BA) OF THE ACT, MANUFACTURE IMPLIES A CHANGE, AND SUCH C HANGE MUST ENTAIL A TRANSFORMATION; A NEW AND DIFFERENT A RTICLE MUST EMERGE HAVING A DISTINCTIVE NAME, CHARACTER OR USE. THUS, MANUFACTURE, ORDINARILY SIGNIFIES EMERGENCE OF NE W AND DIFFERENT GOODS AS UNDERSTOOD IN RELEVANT COMMERCIA L CIRCLES. THE CORPUS JURIS SECUNDUM DEFINES IT AS THE PRODUC TION OF ARTICLES FOR USE FROM RAW OR PREPARED MATERIALS BY GIVING THESE MATERIALS NEW FORMS, QUALITIES, PROPERTIES, O R COMBINATIONS, WHETHER BY HAND LABOUR OR MACHINERY; ALSO ANYTHING MADE FOR USE FROM RAW OR PREPARED MATERIAL S. ACCORDING TO WEBSTERS DICTIONARY, MANUFACTURE MEAN S TO WORK, RAW OR PARTLY WROUGHT MATERIALS, INTO SUITABL E FORMS FOR USE, AS, TO MANUFACTURE WOOL, IRON, ETC., TO MAKE ( WARES OR OTHER PRODUCTS) BY HAND, BY MACHINERY OR OTHER AGEN CY. THUS, LITERALLY SPEAKING, THE PROCESS OF MANUFACTURE INVO LVES SOME TRANSFORMATION OR CHANGE IN THE MATERIAL AS A RESUL T OF APPLICATION OF ART OR A MECHANICAL MANIPULATION. T HE MATERIAL, WHICH IS THUS FASHIONED INTO A NEW PRODUC T, MAY BE DISTINCT IN FORM OR IN USE. 4 9.1. NOW, WE MAY REFER TO SOME OF THE JUDICIAL PREC EDENTS ON THE ISSUE. THE HON'BLE J & K HIGH COURT IN THE MATTER OF CIT V. ABDUL AHAD NAJAR, 248 ITR 744 (J&K) CONSIDER ED THE QUESTION, WHETHER THE UNDERTAKING OF AN ASSESSEE EN GAGED IN EXTRACTION OF TIMBER FROM FOREST AND CONVERSION OF SAME INTO LOGS, PLANKS, ETC. CONSTITUTED AN INDUSTRIAL UNDERT AKING WITHIN THE MEANING OF SECTION 80J(4) OF THE ACT OR NOT ? I N THIS CASE, THE ASSESSEE CLAIMED THAT IT WAS ENGAGED IN THE MAN UFACTURE AND PRODUCTION OF ARTICLES. THE CASE OF THE ASSESSE E WAS THAT THE PLANKS SAWN OUT OF LOGS AND, ARTICLES PRODUCED THEREFROM WERE DIFFERENT IN SHAPE FROM THE LOGS AND THE TREES . HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AS ACCORDING TO HIM THE ASSESSEE DID NOT M ANUFACTURE OR PRODUCE ANY ARTICLE. ACCORDING TO THE ASSESSING OFFICER, THE PROCESS OF CONVERTING TREES INTO LOGS DID NOT I NVOLVE MUCH SAWING OPERATIONS AS AFTER FELLING THE TREES, IT HA D BEEN CUT INTO LOGS AND SOLD AS SUCH. THE REVENUE ALSO CONTEN DED THAT THE PROCESS OF SAWING OF LOGS INTO PLANKS ALSO DID NOT INVOLVE ANY MANUFACTURE OF ARTICLES AND THAT MANUFACTURING PROCESS COULD NOT BE CARRIED OUT BY BARE HANDS WITHOUT THE AID OF MACHINERY. THE CLAIM OF THE ASSESSEE WAS, HOWEVER A CCEPTED BY THE APPELLATE COMMISSIONER, WHO HELD THAT THE US E OF MACHINERY WAS NOT INDISPENSIBLE TO A MANUFACTURING PROCESS AND EVEN FOR THE CONVERSION OF THE STANDING TREES I NTO LOGS, LABOUR WAS REQUIRED AS SOMETHING IS CONVERTED INTO SOMETHING ELSE VIZ. LOGS. HE WAS OF THE VIEW THAT THE LOGS CO ULD BE SAID TO BE A NEW PRODUCT EMERGING OUT OF MANUFACTURING P ROCESS. HE ACCORDINGLY HELD THAT THE ASSESSEE WAS ENTITLED TO DEDUCTION UNDER SECTION 80J OF THE INCOME-TAX ACT, WHICH WAS CONFIRMED BY THE TRIBUNAL. THE MATTER WAS CONSIDERE D BY THE HON'BLE HIGH COURT ON THE ABOVE FACTS. THE HON'BLE HIGH COURT WAS OF THE VIEW THAT IN ORDER TO CLAIM RELIEF UNDER SECTION 80J, AN INDUSTRIAL UNDERTAKING MUST MANUFAC TURE OR PRODUCE ARTICLES AND IT WAS A CONDITION PRECEDENT. THE HON'BLE HIGH COURT OBSERVED THAT THE ASSESSEE CUT T REES IN THE FOREST, CONVERTED THEM NOT ONLY INTO LOGS BUT ALSO INTO PLANKS AND OTHER ARTICLES FOR THE PURPOSE OF SALE. AS A FO REST LESSEE, THE ASSESSEE'S BUSINESS WAS TO CUT STANDING TREES A ND TO EXTRACT TIMBER AND CONVERT THE SAME INTO FORM OF LO GS, PLANKS, ETC. FOR THE PURPOSE OF SALE. IT WAS OBSERVED THAT THE LOGS AND PLANKS COULD NEVER BE KNOWN AS TREES ; THAT THE TWO ARE UNDOUBTEDLY DIFFERENT FROM THE STANDING TREES. THE HON'BLE HIGH COURT ACCORDINGLY UPHELD THE STAND OF THE ASSE SSEE. IT IS CLEAR FROM THE ABOVE THAT THE ACTIVITY OF THE FORES T LESSEES OF EXTRACTION OF TIMBER FROM THE FOREST AND CONVERSION OF THE SAME INTO LOGS, PLANKS, ETC. IS UNDERSTOOD TO BE A MANUFACTURING PROCESS. THE HON'BLE HIGH COURT ON TH E QUESTION OF MANUFACTURING FURTHER HELD AS UNDER:- 'OTHERWISE ALSO, IT IS CLEAR THAT THE ACTIVITY UNDE RTAKEN BY THE ASSESSEE CLEARLY AMOUNTS TO MANUFACTURE AND PRODUCT ION OF ARTICLES. THE EXPRESSIONS 'MANUFACTURE' AND 'PRODUC E' HAVE NOT BEEN DEFINED IN THE INCOME-TAX ACT. THE DICTIONARY MEANING OF 5 'MANUFACTURE' IS 'TRANSFORM OR FASHION NEW MATERIAL S INTO A CHANGED FORM FOR USE'. IN COMMON PARLANCE, MANUFACT URE MEANS PRODUCTION OF ARTICLES FROM RAW OR PREPARED M ATERIALS BY GIVING THESE MATERIALS NEW FORMS, QUALITIES, PRO PERTIES OR COMBINATIONS, WHETHER BY HAND LABOUR-OR BY MECHANIC AL PROCESS. IN OTHER WORDS, IT MEANS MAKING OF ARTICLE S OR MATERIALS COMMERCIALLY DIFFERENT FROM THE BASIC COM PONENTS BY PHYSICAL LABOUR OR MECHANICAL PROCESS, IN ITS OR DINARY CONNOTATION, MANUFACTURE SIGNIFIES EMERGENCE OF NEW AND DIFFERENT GOODS AS UNDERSTOOD IN RELEVANT COMMERCIA L CIRCLES. SO FAR AS THE MEANING OF THE WORD 'PRODUCE' IS CONC ERNED, THOUGH THE WORD 'PRODUCE' HAS A WIDER CONNOTATION T HAN THE WORD 'MANUFACTURE', WHEN USED IN JUXTAPOSITION WITH THE WORD 'MANUFACTURE', IT TAKES IN BRINGING INTO EXISTENCE NEW GOODS BY A PROCESS WHICH MAY NOT AMOUNT TO MANUFACTURE. T HE ACTIVITY OF EXTRACTION OF WOOD BY THE ASSESSEE FROM THE FOREST BY FELLING THE TREES AND CONVERTING THE SAME INTO L OGS, PLANKS, SLEEPERS AND OTHER ARTICLES, UNDOUBTEDLY, FALLS WIT HIN THE DEFINITION OF 'MANUFACTURE'.' 9.2. THE HON'BLE SUPREME COURT IN THE MATTER OF CIT V. N.C. BUDHARAJA & CO. [1993] 204 ITR 412 (S.C) CONSI DERING A SIMILAR POINT OF LAW HELD, 'THE TEST FOR DETERMININ G WHETHER MANUFACTURE CAN BE SAID TO HAVE TAKEN PLACE IS WHET HER THE COMMODITY WHICH IS SUBJECTED TO THE PROCESS OF MANU FACTURE CAN NO LONGER BE REGARDED AS THE ORIGINAL COMMODITY BUT IS RECOGNISED IN THE TRADE AS A NEW AND DISTINCT COMMO DITY.' 9.3. THE HON'BLE SUPREME COURT IN THE CASE OF CIT V . SESA GOA LTD. REPORTED IN 271 ITR 331 WHILE CONSIDERING THE QUESTION UNDER SECTION 32A(2)(B)(III) FOR GRANT OF INVESTMENT ALLOWANCE DEALT WITH THE QUESTION OF PRODUCTION I N A CASE WHERE THE ASSESSEE'S INDUSTRIAL UNDERTAKING WAS ENG AGED IN THE BUSINESS OF EXCAVATING, MINING AND PROCESSING M INERAL ORE. MINERAL ORE WAS NOT EXCLUDED BY THE ELEVENTH S CHEDULE. THE ONLY QUESTION WAS WHETHER SUCH BUSINESS WAS ONE OF MANUFACTURE OR PRODUCTION OF ORE. THE HON'BLE SUPRE ME COURT NOTED THAT THE ISSUE WAS DEALT WITH BY DIFFERENT HI GH COURTS OVER A PERIOD OF TIME, AND IT WAS HELD THAT THE ACT IVITY AMOUNTED TO 'PRODUCTION' AND ANSWERED THE ISSUE IN QUESTION IN FAVOUR OF THE ASSESSEE. THE HON'BLE SUPREME COUR T HELD AS UNDER :- 'THE REASONING GIVEN BY THE HIGH COURT, IN THE DECI SIONS NOTED BY US EARLIER, IS, IN OUR OPINION, UNIMPEACHA BLE. THIS COURT HAD, AS EARLY AS IN 1961, IN CHRESTIAN MICA I NDUSTRIES LTD. V. STATE OF BIHAR [1961] 12 STC 150, DEFINED T HE WORD 'PRODUCTION', ALBEIT, IN CONNECTION WITH THE BIHAR SALES TAX ACT, 1947. THE DEFINITION WAS ADOPTED FROM THE MEAN ING ASCRIBED TO THE WORD IN THE OXFORD ENGLISH DICTIONA RY AS MEANING 'AMONGST OTHER THINGS THAT WHICH IS PRODUCE D; A THING THAT RESULTS FROM ANY ACTION, PROCESS OR EFFORT; A PRODUCT; A PRODUCT OF HUMAN ACTIVITY OR EFFORT'. FROM THE WIDE DEFINITION OF THE WORD 'PRODUCTION', IT HAS TO FOLLOW THAT MIN ING ACTIVITY FOR THE PURPOSE OF PRODUCTION OF MINERAL ORES WOULD COME 6 WITHIN THE AMBIT OF THE WORD 'PRODUCTION' SINCE ORE IS 'A THING', WHICH IS THE RESULT OF HUMAN ACTIVITY OR EF FORT ... IT IS, THEREFORE, NOT NECESSARY, AS HAS BEEN SOUGHT TO BE CONTENDED BY LEARNED COUNSEL FOR THE REVENUE, THAT THE MINED ORE MUST BE A COMMERCIALLY NEW PRODUCT ... LEARNED COUNSEL APPEARING ON BEHALF OF THE ASSESSEE , CORRECTLY SUBMITTED THAT THE OTHER PROVISIONS OF TH E ACT, PARTICULARLY SECTION 33(1)(B)(B) READ WITH ITEM NO. 3 OF THE FIFTH SCHEDULE TO THE ACT, WOULD SHOW THAT MINING O F ORE IS TREATED AS 'PRODUCTION'. SECTION 35E ALSO SPEAKS OF PRODUCTION IN THE CONTEXT OF MINING ACTIVITY. THE LANGUAGE OF THESE SECTIONS IS SIMILAR TO THE LANGUAGE OF SECTION 32A( 2). THERE IS NO REASON FOR US TO ASSUME THAT THE WORD 'PRODUCTIO N' WAS USED IN A DIFFERENT SENSE IN SECTION 32A.' [ UNDERL INED FOR EMPHASIS BY US] 9.4. THUS, HAVING REGARD TO THE PROPOSITION AS DISC USSED ABOVE, PARTICULARLY IN VIEW OF THE DECISION IN SESA GOA LTD (SUPRA) IT IS EVIDENT THAT, THAT THE WORD 'PRODUCTI ON' HAS BEEN USED IN A VERY WIDE SENSE TO MEAN-TO BRING OUT A NE W PRODUCT, ALBEIT NOT A COMMERCIALLY NEW PRODUCT. INFACT, IT M AY BE RELEVANT TO STATE HERE THAT, IN THE AFORESAID JUDGE MENT, THE HON'BLE SUPREME COURT AFFIRMED THE JUDGEMENT OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT V. MYSORE M INERALS LTD. 250 ITR 725 (KAR.) WHEREIN ACTIVITY OF CUTTING GRANITE BLOCKS INTO SLABS AND SIZES AND POLISHING THEM WAS HELD TO BE MANUFACTURING OR PRODUCTION OF GOODS. IT WAS HELD T HEREIN AS UNDER: ' SECTION 80-I ALSO REFERS TO PROFITS AND GAINS IN RESPECT OF AN INDUSTRIAL UNDERTAKING. IN VIEW OF THE DECISION GIV EN IN THE CASE OF THE ASSESSEE, WE ARE OF THE VIEW THAT THE A PPELLATE TRIBUNAL IS RIGHT IN LAW IN COMING TO THE CONCLUSIO N THAT THE ORIGINAL ASSESSMENT WHICH GRANTED THE RELIEF UNDER SECTIONS 32A AND 80-I TO THE ASSESSEE WAS NOT ERRONEOUS AND THE INFERENCE OF THE COMMISSIONER OF INCOME-TAX UNDER S ECTION 263 WAS NOT PROPER. THE TRIBUNAL IS ALSO RIGHT IN L AW IN HOLDING THAT EXTRACTING GRANITE FROM QUARRY AND CUT TING IT TO VARIOUS SIZES AND POLISHING SHOULD BE CONSIDERED AS MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING A ND THE ASSESSEE'S BUSINESS ACTIVITY MUST BE CONSIDERED AS AN INDUSTRIAL UNDERTAKING FOR THE PURPOSE OF GRANTING RELIEFS UNDER SECTIONS 32A AND 80-I OF THE INCOME-TAX ACT, 1961.' 9.5. FURTHER, FOLLOWING THE JUDGEMENTS IN THE CASE OF SESA GOA LTD. (SUPRA), MYSORE MINERALS LTD (SUPRA) AND, ANOTHER JUDGEMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF KORES INDIA LTD V CCE REPORTED IN 174 ELT 7 (2004), THE H ON'BLE RAJASTHAN HIGH COURT IN THE CASE OF ARIHANT TILES A ND MARBLES LTD V ITO 295 ITR 148 (RAJ) HELD AS UNDER: APPARENTLY, THE PRINCIPLE APPLIED BY THE SUPREME C OURT WAS THAT IF WITHOUT APPLYING THE PROCESS A THING IN ITS RAW FORM 7 CANNOT BE USABLE AND IT IS MADE USABLE FOR PARTICUL AR PURPOSE, IT AMOUNTS TO MANUFACTURE. THE COURT APPROVED THE PRINCIPLE ENUNCIATED IN SARA SWATI SUGAR MILLS V. HARYANA STATE BOARD [1992] 1 SCC 418 THAT ESSENCE OF MANUFACTURE IS A CHANGE OF ONE OBJECT TO ANOTHER FOR THE PURPOSE OF MAKING IT MARKETABLE. ON THIS PRINCIPLE, THE COURT ACCEPTED THE CONTENTIO N THAT BY CUTTING JUMBO ROLLS INTO SMALLER SIZES, A DIFFERENT COMMODITY HAS COME INTO EXISTENCE AND THE COMMODITY WHICH WAS ALREADY IN EXISTENCE SERVES NO PURPOSE AND NO COMMERCIAL US E, AFTER THE PROCESS. A NEW NAME AND CHARACTER HAS COME INTO EXISTENCE. THE ORIGINAL COMMODITY AFTER PROCESSING DOES NOT POSSESS ORIGINAL IDENTITY. OBVIOUSLY, SO FAR AS PHY SICAL CHARACTERISTIC OF JUMBO ROLLS AND ITS SHORTER VERSI ON IN THE FORM OF TYPEWRITER AND TELEX ROLL MAY HAVE THE SAME PHYSICAL PROPERTIES, NONE THE LESS ON THE BASIS OF THEIR DIF FERENT USE AS A MARKETABLE COMMODITY AND AFTER BEING CUT, THE SAM E CANNOT BE USED FOR THE PURPOSE FOR WHICH IT COULD BE USED IN ORIGINAL SHAPE, THE ACTIVITY WAS HELD TO BE MANUFACTURE. THE PRINCIPLE APTLY APPLIES TO THE PRESENT CASE. HE RE ALSO, THE ORIGINAL COMMODITY, NAMELY, MARBLE BLOCK COULD N OT BE USED FOR BUILDING PURPOSES AS SUCH UNTIL IT IS CUT INTO DIFFERENT SIZ ES TO BE USED AS BUILDING MATERIAL. IT IS ONLY BY THE PROCESS OF CUTTING THE MARBLE BLOCK INTO SLABS AND TILES THAT IT IS MADE M ARKETABLE. THE MARBLE BLOCK CANNOT BE USED FOR THE SAME PURPOS E AS THE MARBLE SLAB OR TILE CAN BE USED AND AFTER THE MARBL E BLOCK HAS BEEN CUT INTO DIFFERENT SIZES, THE END PRODUCT BY P UTTING IT SIMULTANEOUSLY CANNOT BE USED AS A BLOCK. THE PRINC IPLE IN KORES INDIA LTD.'S CASE [2004] 3 RC 613 (SC) SUPPOR TS THE CONTENTION OF APPELLANT. [UNDERLINED FOR EMPHASIS BY US] 9.6. ALSO, THE AFORESAID VIEW HAS BEEN FOLLOWED BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT V FATE H GRANITE (P) LTD 314 ITR 32 (BOM.) AND, THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT V SOPHISTICATED GRANI TE MARBLE INDUSTRIES REPORTED 225 CTR 410 (DEL) AND, IT WAS H ELD THAT, PROCESS OF PURCHASING MARBLE SLABS AND THEN CONVERT ING THESE INTO TILES BY APPLYING VARIOUS PROCESSES LIKE CUTTI NG, SIZING, POLISHING SO AS TO PRODUCE MARKETABLE TILES CONSTIT UTES MANUFACTURING AN ARTICLE. 10. NOW, WE MAY REVERT BACK TO THE FACTS OF THE CAP TIONED APPEALS. ON CONSIDERATION OF THE PRINCIPLES STATED ABOVE AND, THE DIFFERENT STEPS OF MANUFACTURING THROUGH WHICH THE RAW MATERIALS I.E. WIRE RODS ARE PROCESSED, WE ARE OF T HE CONSIDERED OPINION THAT, WIRE SO MANUFACTURED CAN N O LONGER BE REGARDED AS THE ORIGINAL COMMODITY. INFACT, THE FINAL PRODUCT IS RECOGNIZED IN THE TRADE AS A NEW AND DIS TINCT COMMODITY. OSTENSIBLY, THE WIRE ROD HAVING UNDERGON E VARIOUS MECHANIZED AND CHEMICAL BASED PROCESSES LIKE ANNEAL ING, 8 GALVANIZING ETC. RESULTS INTO MANUFACTURE OF WIRE W ITH DISTINCT NAME, CHARACTER AND USE. THE NAME OF THE RAW MATERI AL, ORIGINALLY IS WIRE ROD BEFORE PROCESSING AND AFTER PROCESSING, IT BECOMES WIRE OF DIFFERENT TYPES, SAY PAPER/ENAME L INSULATED WIRES OR STRIPS OR BARBED WIRE, GSS/STAY EARTH WIRE , CHAINLINK, ETC. THEREFORE, IT IS COMMERCIALLY DISTI NCT COMMODITY WITH A DISTINCT NAME. THE WIRES SO PRODUC ED ARE USED FOR POWER CABLES, INDUSTRIAL CONTROL CABLES, E LECTRIC MOTORS, TRANSFORMERS, ETC. BUT WIRE ROD AS A RAW MA TERIAL CANNOT BE USED AS SUCH. THEREFORE, A NEW AND DISTIN CT COMMODITY IS MANUFACTURED AND PRODUCED BY THE ASSES SEE NAMELY WIRE. INFACT, IN UNION OF INDIA AND OTHERS V . J.G. GLASS INDUSTRIES LTD. AND OTHERS (1998) 2 SCC 32, T HE HON'BLE SUPREME COURT HAD LAID DOWN A TWO-FOLD TEST FOR DETERMINING WHETHER A PARTICULAR PROCESS AMOUNTS TO 'MANUFACTURE OR NOT ? FIRST, WHETHER BY THE SAID P ROCESS A DIFFERENT COMMERCIAL COMMODITY COMES INTO EXISTENCE OR WHETHER THE IDENTITY OF THE ORIGINAL COMMODITY CEAS ES TO EXIST. SECONDLY, WHETHER THE COMMODITY WHICH WAS ALREADY I N EXISTENCE WOULD NOT SERVE THE DESIRED PURPOSE BUT F OR THE SAID PROCESS. APPLYING THIS TWO-FOLD TEST TO THE FACT SI TUATION OF THE APPELLANTS, IT IS IRRESISTIBLE TO HOLD THAT THE PRO CESS UNDERTAKEN BY THE APPELLANTS AMOUNT TO MANUFACTURE. 11. INFACT, HONBLE MADRAS HIGH COURTS DECISION IN THE CASE OF TAMIL NADU HEAT TREATMENT & FETTING SERVICE S (P) LTD. (SUPRA) SUPPORTS THE CASE OF THE APPELLANT. I N THIS CASE, THE ASSESSEE WAS RECEIVING UN-TREATED CRANKSHAFTS, FORGINGS AND CASTINGS FROM ITS CLIENTS AND WAS SUBJECTING TH EM TO HEAT TREATMENT TO TOUGHEN THEM UP FOR BEING USED AS AUTO MOBILE SPARE PARTS. THE SAID ACTIVITY WAS HELD TO BE A MA NUFACTURING ACTIVITY BY THE HONBLE HIGH COURT. THE HONBLE MA DRAS HIGH COURT HELD AS UNDER: 12.IN THE BACKDROP AND SETTING OF THE PRINCIPLES, AS ENUNCIATED BY THE SUPREME COURT AND VARIOUS HIGH CO URTS AS RELATABLE TO THE ACTIVITY OF MANUFACTURE OF PROC ESSING OF GOODS AND IN THE LIGHT OF THE VARIOUS LITERATURE A ND BOOKS OF FOREIGN AUTHORS, RELATABLE TO THE QUALITATIVE CHANG E HAVING BEEN BROUGHT ABOUT BY WELL TERMED PROCESS, AS REFER RED TO ABOVE, WE MAY NOW PROCEED TO CONSIDER AND DECIDE TH E MOOT QUESTION AS TO WHETHER THE ACTIVITIES CARRIED ON BY THE ASSESSEE NAMELY, RECEIVING UNTREATED CRANKSHAFTS AN D FORGINGS AND CASTINGS FROM ITS CLIENTS AND SUBJECTING THEM T O HEAT TREATMENT TO TOUGHEN THEM UP FOR BEING USED AS AUTO MOBILE SPARE PARTS CAN EVER THE CONSTRUED AS ACTIVITIES RE LATABLE TO MANUFACTURE AND, CONSEQUENTLY ENABLE IT TO CLAIM IN VESTMENT ALLOWANCE UNDER S. 32A OF THE IT ACT. 13.WE HAVE TO TAKE NOTE OF THE FACT THAT THE PROCE SS OF HEAT TREATMENT TO CRANKSHAFT, ETC. WERE ABSOLUTELY ESSEN TIAL FOR RENDERING IN MARKETABLE. AUTOMOBILE PARTS AS CRANK SHAFTS, NEED TO BE SUBJECTED TO HEAT TREATMENT TO INCREASE THE WEAR AND TEAR RESISTANCE TO REMOVE THE INORDINATE STRESS AND INCREASE TENSILE STRENGTH . THE RAW UNTREATED CRANKSHAFTS AND 9 THE LIKE CAN NEVER BY USED IN AN AUTOMOBILE INDUSTR Y. THUS, IN THE CRANKSHAFTS SUBJECTED TO THE PROCESS OF HEAT TREATMENT ETC., A QUALITATIVE CHANGE IS EFFECTED, TO BE FIT F OR USE IN AUTOMOBILES, ALTHOUGH THERE IS NO PHYSICAL CHANGE I N THEM. IN SUCH STATE OF AFFAIRS, IT CANNOT AT ALL THE STATED THAT THE CRANKSHAFTS, SUBJECTED TO HEAT TREATMENT, ETC. CANN OT AT ALL CHANGE THE STATUS OF NEW PRODUCTS OF DIFFERENT QUAL ITY FOR A DIFFERENT QUALITY FOR A DIFFERENT PURPOSE ALTOGETHER. IN THIS VIEW OF THE MATTER, WE ARE OF THE VIEW THAT THE ACT IVITIES OF THE ASSESSEE IN RELATION TO RAW OR UNTREATED CRANKSHAFT S BEING SUBJECTED TO HEAT TREATMENT, ETC., IS DEFINITELY A MANUFACTURING ACTIVITY ENTITLING IT TO CLAIM IN VESTMENT ALLOWANCE UNDER S. 32A OF THE I. T. ACT. WE ANSWER QUESTIONS NO. 2 AND 3 ACCORDING. [UNDERLINED FOR EMPHASIS BY US] 12. FROM PERUSAL OF THE SAID JUDGEMENT, IT IS EVIDE NT THAT EVEN QUALITATIVE CHANGES EFFECTED IN THE RAW MATERI AL THROUGH HEATING, ALSO AMOUNTS TO A MANUFACTURING ACTIVITY . THE AFORESAID VIEW HAS ALSO BEEN FOLLOWED BY THE AHMEDA BAD BENCH OF THE TRIBUNAL IN THE CASE OF ANIL STEEL TRA DERS (SUPRA) TO HOLD THAT THE ACTIVITY OF ANNEALING OF S TEEL RODS AND COILS AS PER THE CUSTOMER SPECIFICATIONS, AMOUNTS T O MANUFACTURE. THUS, IN LIGHT OF THE AFORESAID JUD GEMENTS ALONE, WE DO NOT FIND ANY JUSTIFICATION IN THE STAN D OF THE REVENUE THAT THE ASSESSEE DID NOT CARRY OUT ANY ACT IVITY OF MANUFACTURING. UNDOUBTEDLY, THE PROCESS UNDERTAKEN BY THE ASSESSEE RESULTS IN QUALITATIVE CHANGE IN THE INPUT S INITIALLY USED IN THE PROCESS OF MANUFACTURING. THE ARGUMENT OF THE REVENUE, AS MANIFESTED IN THE ASSESSMENT ORDERS, IS THAT, THE ACTIVITY DOES NOT BESTOW ANY PHYSICAL CHANGE IN THE ARTICLE TO WHICH THE HEAT TREATMENT WAS GIVEN BY THE ASSESSEE. IN OUR VIEW, CONSIDERED IN THE LIGHT OF THE JUDGEMENT OF T HE HONBLE MADRAS HIGH COURT, WHICH AGAIN HAS REFERRED TO VARI OUS CASE LAWS ON THE ISSUE, THE AFORESAID ARGUMENT OF THE RE VENUE IS NOT SUSTAINED. 13. FURTHER, EVEN IF THE TEST OF MARKETABILITY IS A PPLIED TO THE FACTS OF THE CASE OF THE APPELLANTS, THE PROCES S CARRIED OUT BY THEM CONSTITUTES MANUFACTURE, AS ENUNCIATED BY T HE HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF ARIHANT TILES A ND MARBLES (P) LTD V ITO (SUPRA) FOLLOWING THE JUDGEME NT OF THE HON'BLE SUPREME COURT IN THE CASE OF SESA GOA LTD. (SUPRA) AND, KORES INDIA (SUPRA), SINCE THE ORIGINAL COMMOD ITY, NAMELY, WIRE ROD COULD NOT BE USED FOR TRANSFORMERS , POWER CABLES, ETC. AS SUCH, UNTIL IT IS DRAWN INTO ENAMEL ED/INSULATED WIRES. IT IS ONLY BY THIS PROCESS THAT, INPUT IS MA DE MARKETABLE AS A DISTINCT COMMODITY AND, THEREFORE W E HOLD, IN THE FACTS AND, CIRCUMSTANCES OF THE CASE, THE PROCE SS UNDERTAKEN BY THE APPELLANTS AMOUNTS TO MANUFACTURE OF THING OR ARTICLE WITHIN THE MEANING OF SECTION 80IC OF TH E ACT. 14. IN ANY CASE, THE PROCESS AMOUNTS TO PRODUCTION, AS INTERPRETED BY THE HON'BLE SUPREME COURT IN THE CAS E OF SESA GOA LTD. (SUPRA) WHEREIN IT HAS BEEN HELD THAT, THE WORD 'PRODUCTION' HAS BEEN USED IN A VERY WIDE SENSE TO MEAN TO BRING OUT A NEW PRODUCT, MAY BE NOT A COMMERCIALLY NEW 10 PRODUCT. IN THIS CASE, UNDISPUTEDLY AND, IRREFUTABL Y NEW PRODUCT HAS BEEN PRODUCED AS A RESULT OF THE VARIOU S PROCESSES UNDERTAKEN BY THE APPELLANT AND, AS SUCH, EVEN ON THIS GROUND, THE APPELLANTS ARE ELIGIBLE FOR CLAIM OF DEDUCTION U/S 80IC OF THE ACT. 15. NOW, SO FAR AS THE JUDGMENT OF THE HON'BLE SUPR EME COURT IN THE CASE OF TECHNOWELD INDUSTRIES (SUPRA), WHICH HAS BEEN HEAVILY RELIED UPON REVENUE, THE SAME, IN OUR CONSIDERED OPINION, IS FULLY INAPPLICABLE TO THE FACTS OF THE CAPTIONED INSTANT CASES. IT IS EVIDENT FROM THE AFORESAID JUD GEMENT THAT, ASSESSEE IN THAT CASE, WAS ENGAGED IN THE BUSINESS OF WIRE DRAWING FROM THICKER GAUGE TO THINNER GAUGE BY COLD DRAWING PROCESS AND, NOT IN THE MANUFACTURE OF WIRE WITH DI FFERENT CHEMICAL/ELECTRICAL/MECHANICAL PROPERTIES/ END USE AND, THAT TOO AFTER UNDERGOING VARIOUS PROCESSES, WHICH HAVE ALREADY BEEN ELABORATEDLY CULLED OUT ABOVE AND SUCH PROCESS ES ARE NOT SHOWN TO HAVE BEEN CARRIED OUT IN THE CASE OF TECHN OWELD INDUSTRIES (SUPRA). IT IS THUS EVIDENT THAT, SAID JUDGEMENT HAS NO SEMBLANCE OF RESEMBLANCE TO THE FACTS OF THE INS TANT CASE. IT IS SETTLED LAW THAT, A JUDGMENT IS A PROPOSITION FOR WHAT IT ACTUALLY DECIDES AND NOT WHAT CAN BE LOGICALLY OR R EMOTELY DEDUCED THERE-FROM, AS HAS BEEN HELD IN THE FOLLOWI NG JUDGMENTS: A) GOODYEAR INDIA LTD. V. STATE OF HARYANA (SC) 188 ITR 402 (SC) B) PADMASUNDARA RAO V. STATE OF TAMIL NADU 255 ITR 153 (SC) C) CIT V. SUN ENGINEERING WORKS P. LTD. 198 ITR 297 (S.C). INFACT, THE FOLLOWING OBSERVATION IN THE CASE OF PA DMASUNDARA RAO (SUPRA) ARE WORTHY OF NOTICE :- COURTS SHOULD NOT PLACE RELIANCE ON DECISIONS WITH OUT DISCUSSING AS TO HOW THE FACTUAL SITUATION FITS IN WITH THE FACT SITUATION OF THE DECISION ON WHICH RELIANCE IS PLAC ED. THERE IS ALWAYS PERIL IN TREATING THE WORDS OF A SPEECH OR J UDGMENT AS THOUGH THEY ARE WORDS IN A LEGISLATIVE ENACTMENT, A ND IT IS TO BE REMEMBERED THAT JUDICIAL UTTERANCES ARE MADE IN THE SETTING OF THE FACTS OF A PARTICULAR CASE, SAID LOR D MORRIN IN HERRINGTON V. BRITISH RAILWAYS BOARD [1972] 2 WLR 5 37 (HL). CIRCUMSTANTIAL FLEXIBILITY, ONE ADDITIONAL OR DIFFE RENT FACT MAY MAKE A WORLD OF DIFFERENCE BETWEEN CONCLUSIONS IN T WO CASES. 15.1 IN FACT, THE HON'BLE SUPREME COURT IN TECHNO WELD INDUSTRIES (SUPRA) CASE, HAS REFERRED TO THE DECISI ON OF THE EXCISE TRIBUNAL IN THE CASE OF JYOTI ENGINEERING CO RPORATION VS. COLLECTOR OF CENTRAL EXCISE, (1989) 42 ELT100 (TRIBUNAL).IN THE CASE OF JYOTI ENGINEERING CORPORA TION (SUPRA) ALSO THE ISSUE BEFORE THE TRIBUNAL WAS ALSO IN RESPECT 11 OF WIRE DRAWN FROM THICKER GAUGE TO THINNER GAUGE. THE PROCESS OF ANNEALING AND THE OTHER PROCESSES UNDE RTAKEN BY THE APPELLANTS ARE NOT SHOWN TO HAVE BEEN INVOLVED EVEN IN THE CASE OF JYOTI ENGINEERING CORPORATION (SUPRA). IN THE CASE OF CAPTIONED APPELLANTS, AFTER DRAWING OF WIRE , THE DRAWN WIRE IS SUBJECTED TO VARIOUS OTHER MECHANIZED, CHEM ICAL AND OTHER PROCESSES WHICH BRINGS INTO EXISTENCE A TOTAL LY NEW PRODUCT, HAVING DIFFERENT PROPERTIES AND DIFFERENT INTEGRAL STRUCTURE. IN THE CASE OF TECHNOWELD INDUSTRIES (S UPRA) ONLY PROCESS UNDERTAKEN WAS DRAWING OF WIRE, WHEREAS IN THE PRESENT CASES, OTHER PROCESSES ARE ALSO CARRIED OUT AFTER DRAWING OF WIRE. IT IS ONLY AFTER CONSIDERING THE ENTIRE SET OF PROCESSES UNDERTAKEN BY THE APPELLANTS, IT CAN BE S AID THAT A NEW PRODUCT COMES INTO EXISTENCE AND THE SAME AMOUN TS TO MANUFACTURING. THUS, FACTUALLY SPEAKING, THE PROCES S AND THE PRODUCT CONSIDERED IN THE CASE OF TECHNOWELD INDUST RIES (SUPRA) STAND ON A DIFFERENT FOOTING THAN THOSE IN THE PRESENT CASES. 15.2. PLACED IN THE FACTUAL SCENARIO THAT HAS EMERG ED, IN OUR HUMBLE OPINION, THE DECISION IN THE CASE OF TEC HNOWELD INDUSTRIES (SUPRA) RELIED UPON BY THE REVENUE, DOES NOT SUPPORT ITS STAND, WHEREIN THE TEST OF MARKETABILIT Y WAS NEITHER CONTENDED AND, NOR DECIDED. INFACT, EVEN TH E EXPRESSION PRODUCTION WAS NEVER A SUBJECT MATTER OF CONSIDERATION. LIKEWISE, IN THE CASE OF LAL KUNWA S TONE CRUSHER (P) LTD (SUPRA) RELIED UPON BY THE REVENUE, THE ACTIVITIES OF THE ASSESSEE THEREIN CONSISTED OF CON VERSION OF BOULDER STONE INTO GITTY AFTER CUTTING THE BOULDERS . IT WAS IN THIS BACKDROP THAT THE HON'BLE COURT CAME TO THE CO NCLUSION THAT CUTTING OF BOULDERS MIGHT HAVE BEEN WITH THE A ID OF MACHINERY BUT THE ORIGINAL COMMODITY RETAINED A SUB STANTIAL IDENTITY INSPITE OF PROCESSING CARRIED OUT BY THE A SSESSEE AND WAS, AS SUCH, NOT REGARDED AS MANUFACTURING OR PROD UCING ANY ARTICLE OR THING. AS AGAINST THIS, IN THE CAPTIONED CASES, THE RAW WIRE ROD HAS UNDERGONE DISTINCT CHANGE AS A RES ULT OF THE VARIOUS PROCESSES UNDERTAKEN AND, HAS THUS NOT RETA INED ITS ORIGINAL SUBSTANTIAL IDENTITY. ON THE OTHER HAND, R ECENTLY THE HON'BLE SUPREME COURT IN THE CASE OF INDIAN CINE AG ENCIES (SUPRA) HAS HELD THAT, CONVERSION OF JUMBO ROLLS OF PHOTOGRAPHIC FILMS INTO SMALL FLATS AND, ROLLS IN D ESIRED SIZES IS MANUFACTURE. IT WAS ALSO OBSERVED THEREIN AS UND ER: 12. THE MATTER CAN YET BE LOOKED FROM ANOTHER ANGL E. IF THERE WAS NO MANUFACTURING ACTIVITY, THEN THE QUESTION OF REFERRING TO ITEM 10 OF THE ELEVENTH SCHEDULE FOR THE PURPOSE OF EXCLUSION DOES NOT ARISE. THE ELEVENTH SCHEDULE, WH ICH WAS INSERTED BY FINANCE (NO. 2) ACT, 1977 WITH EFFECT F ROM 1-4- 1978 HAS REFERENCE TO SECTIONS 32A, 32AB, 80CC(3)(A )(I), 80- 1(2), 80J(4) AND 88A(3)(A)(I) OF THE ACT. 15.3. APPLYING THE AFORESAID PARITY OF REASONING, I T IS NOTEWORTHY THAT WIRE AND WIRE RODS COME UNDER CHAPT ER 74-76 UNDER THE CENTRAL EXCISE CLASSIFICATION WHEREAS INS ULATED WIRES AND, PAPER COATED INSULATED WIRES COME UNDER CHAPTER 12 85 AND, THEREFORE CLASSIFICATION UNDER DIFFERENT CH APTERS ALSO SUPPORT THE STAND THAT, THE INDUSTRIAL UNDERTAKINGS OF THE APPELLANTS ARE MANUFACTURING UNITS. 15.4. IN THE LIGHT OF THE FOREGOING DISCUSSION WE A RE OF THE VIEW THAT THE APPELLANTS, IN THE GIVEN SET OF FACTS , ARE ELIGIBLE FOR DEDUCTION UNDER SECTION 80-IC OF THE ACT, AS TH EIR INDUSTRIAL UNDERTAKINGS CAN BE SAID TO HAVE MANUFAC TURED OR PRODUCED AN ARTICLE OR A THING. 16. THE HON'BLE SUPREME COURT HAS CONSISTENTLY HELD THAT INCENTIVE GRANTING PROVISIONS, WHICH CONFER CONCESS ION, SHOULD BE INTERPRETED IN A LIBERAL MANNER, SO AS TO SUBSERVE THE PURPOSE FOR WHICH THEY ARE INTENDED. IN THE CAS E OF BAJAJ TEMPO LTD. V CIT 196 ITR 188 (S.C), THE HONBLE SUP REME COURT HELD THAT A TAX PROVISION, GRANTING INCENTIVE S FOR PROMOTING GROWTH AND DEVELOPMENT SHOULD BE CONSTRUE D LIBERALLY. INFACT, EVEN IN MYSORE MINERALS LTD. V. CIT 239 ITR 775 (S.C), WHILE CONSIDERING SECTION 32, IT HAS BEE N LAID DOWN THAT THE PROVISIONS THAT CONFER BENEFIT ON THE ASSE SSEE SHOULD BE SO INTERPRETED AND THE WORDS USED THEREIN SHOULD BE ASSIGNED SUCH MEANING AS WOULD ENABLE THE ASSESSEE TO SECURE THE BENEFIT INTENDED TO BE GIVEN BY THE LEGISLATURE TO THE TAX- PAYERS. IT IS ALSO WELL-SETTLED THAT WHERE THERE AR E TWO POSSIBLE INTERPRETATIONS OF A TAXING PROVISION THE ONE WHICH IS FAVOURABLE TO THE ASSESSEE SHOULD BE PREFERRED 17. FURTHER, THE CIT(APPEALS) HAS REFERRED TO CERTA IN JUDICIAL DECISIONS IN THE IMPUGNED ORDERS THOUGH NO T BRINGING OUT ANY REASONS AND THE MANNER IN WHICH THEY ARE AP PLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE C APTIONED APPELLANTS. WE HAVE REFERRED TO VARIOUS JUDICIAL PRONOUNCEMENTS, INCLUDING THOSE OF THE HON'BLE SUPR EME COURT OF INDIA AND THEREUPON, CULLED OUT RELEVANT P RINCIPLES, ON THE BASIS OF WHICH THE CONTROVERSY HAS BEEN DETE RMINED. THE DECISIONS REFERRED TO BY THE CIT(APPEALS), IN O UR CONSIDERED OPINION, DO NOT OPERATE IN CONFLICT WITH THE PRINCIPLES REFERRED TO BY US IN THIS ORDER, THOUGH WE HAVE NOT DISCUSSED EACH OF THE CASE FOR THE SAKE OF BREVITY. 18. IN FINAL ANALYSIS AND, AFTER APPLYING THE JUDIC IAL INTERPRETATION OF THE TERMS MANUFACTURE AND PROD UCTION TO THE FACTS AND CIRCUMSTANCES OF THE CAPTIONED APPELL ANTS, IT IS NOT POSSIBLE TO COME TO THE CONCLUSION THAT ANY LEG AL INFIRMITY EXISTS IN THE CLAIM OF THE APPELLANTS FOR DEDUCTION UNDER SECTION 80IC OF THE ACT. IN SUCH CIRCUMSTANCES, WE ARE OF THE VIEW THAT BOTH THE LOWER AUTHORITIES HAVE FAILED TO APPRECIATE THE FACTS AND CIRCUMSTANCES, AS WELL AS, THE POSITI ON OF THE LAW IN A CORRECT PERSPECTIVE AND, IT IS THUS HELD T HAT, THE APPELLANTS ARE ENTITLED TO CLAIM OF DEDUCTION U/S 8 0IC OF THE ACT ON THE INCOMES DERIVED FROM THEIR INDUSTRIAL UN DERTAKINGS. THUS, THE RESPECTIVE ORDERS OF THE COMMISSIONER OF INCOME-TAX (A) ARE SET ASIDE AND THE ASSESSING OFFICER IS DIRE CTED TO ALLOW THE CLAIM OF DEDUCTION U/S 80IC OF THE ACT AS PER LAW . 13 6. THE ISSUE IN THE PRESENT APPEAL IS IDENTICAL TO THE ISSUE RAISED BEFORE THE TRIBUNAL AND FOLLOWING THE SAME, WE UPHO LD THE ORDER OF CIT(A) AND DISMISS THE GROUND OF APPEAL RAISED BY T HE REVENUE IN BOTH THE APPEALS. 7. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE A RE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 23 RD DAY OF MARCH, 2011. SD/- SD/- (D.K.SRIVASTAVA) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 23 RD MARCH, 2011 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR 14