ITO, Baddi V. M/s J.B. Conductors & Cables, Solan

ITA 18/CHANDI/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57663 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 06-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K SAINI
• Assessee Lawyers: ASHWANI KUMAR ADITYA KUMAR
• Keywords: Set aside
• Section: 80IB; 250; 263; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI H.L.KARWA, HON'BLE, VICE PRESIDENT AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO. 18/CHD/2012 ASSESSMENT YEAR: 2008-09 THE ITO, VS M/S J.B. CONDUCTORS & CABLES, BADDI DISTT. SOLAN PAN NO. AABFJ0572D (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI N.K. SAINI RESPONDENT BY : S/SHRI ASHWANI KUMAR/ADITYA KUMAR DATE OF HEARING : 16.2.2012 DATE OF PRONOUNCEMENT : 21.2.2012 ORDER PER H.L.KARWA, VP THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF CIT(A), SHIMLA DATED 21.10.2011 RELATING TO ASSESSM ENT YEAR 2008-09. 2. GROUND NO.1 OF THE APPEAL READS AS UNDER:- 1 ON THE FACTS AND IN THE CIRCUMSTANCES, THE LD. CI T(A) HAS ERRED IN ALLOWING THE DEDUCTION CLAIMED U/S 80I C AMOUNTING TO RS. 90,35,729/-. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE IS CARRYING ON THE BUSINESS OF DRAWING OF COPPER AND ALUMINUM WIRE S SINCE 7.3.1990. THE ASSESSEE CLAIMED DEDUCTION U/S 80IC OF THE INCOME T AX ACT, 1961 (IN SHORT 2 'THE ACT'). IN THE CASE OF THE ASSESSEE FOR ASSESS MENT YEARS 2004-05 TO 2007- 08, IT WAS HELD THAT ACTIVITIES OF DRAWING WIRES O F THINNER GAUGES FROM WIRES AND RODS OF THICKER GAUGES DID NOT AMOUNT TO MANUFA CTURE OR PRODUCTION, AS THE ORIGINAL COMMODITY I.E. WIRE DID NOT UNDERGO AN Y CHANGE IN THE PROCESS AND THE RESULTANT COMMODITY WAS ALSO WIRE, ALBEIT O F DIFFERENT DIMENSIONS. THE PLEA OF THE ASSESSEE WAS THAT IT WAS MANUFACTUR ING INSULATION WIRES AND STRIPS OF COPPER AND ALUMINUM WHICH IS A DIFFERENT PRODUCT FORM ITS ORIGINAL RAW MATERIAL TERMED AS WIRE RODS, THEREFORE, THE ASSESSEE CONTENDED THAT IT FULFILLS ALL THE THREE CONDITIONS REQUIRED FOR QUAL IFYING AS A MANUFACTURER. THE ASSESSEE ALSO CONTENDED BEFORE THE ASSESSING OF FICER THAT ITAT CHANDIGARH BENCH VIDE ORDER DATED 13.11.2009 PASSED IN ITA NO. 215/CHANDI/2009 IN THE CASE OF ASSESSEE FOR ASSESSM ENT YEAR 2005-06 HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. HOWEV ER, THE ASSESSING OFFICER OBSERVED THAT THE REVENUE HAS NOT ACCEPTED THIS DEC ISION OF THE TRIBUNAL AND FILED AN APPEAL BEFORE THE HON'BLE HIGH COURT OF HI MACHAL PRADESH. THE HON'BLE HIGH COURT VIDE ORDER DATED 1.7.2010 PASSED IN ITA NO. 20 OF 2010 HAS ADMITTED THE APPEAL ON FOLLOWING SUBSTANTIAL QU ESTIONS OF LAW:- (I) WHETHER THE PROCESS OF DRAWING WIRE OF THINNER GAUG E FROM WIRE OR RODS OF THICKER GAUGE, FOLLOWED BY FIN ISHING PROCESS LIKE ANNEALING WOULD AMOUNT OF MANUFACTURE OR PRODUCTION AND CONSEQUENTLY WHETHER THE ASSESSEE W AS ELIGIBLE FOR DEDUCTION U/S 80IC OF THE INCOME-TAX A CT. (II) WHETHER THE IMPUGNED JUDGMENT IS CONTRARY TO T HE RATIO OF THE JUDGMENT OF THE HON'BLE SUPREME COURT IN COLLECTOR CENTRAL EXCISE V. TECHNOWELD INDUSTRIES? IN VIEW OF THE ABOVE, THE ASSESSING OFFICER HELD TH AT THE DEDUCTION U/S 80IC OF THE ACT ON THE INCOME DRAWN FROM THE ACTIVITY OF DRAWING WIRE CANNOT BE 3 HELD TO BE ELIGIBLE FOR DEDUCTION U/S 80IC OF THE A CT. THEREFORE, THE DEDUCTION CLAIMED U/S 80IC OF THE ACT AMOUNTING TO RS. 90,35,729/- WAS DISALLOWED BY THE ASSESSING OFFICER. ON APPEAL, TH E CIT(A) FOLLOWING THE DECISION OF THE ITAT CHANDIGARH BENCH OF THE TRIBUN AL DATED 30.11.2009 IN ASSESSEES OWN CASE FOR ITA NO. 215/CHANDI/2009 ALL OWED THE CLAIM OF THE ASSESSEE AND HENCE THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE ALS O PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE IS SUE IN HAND IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE R EVENUE BY THE DECISION OF ITAT CHANDIGARH BENCH B DATED 30.11.2009 IN ASSES SEES CASE IN ITA NO. 215/CHANDI/2009 RELATING TO ASSESSMENT YEAR 2005-06 . THE ISSUE BEFORE THE TRIBUNAL WAS WHETHER PROCESS OF DRAWING OF WIRES FO RM WIRE RODS CONSTITUTE MANUFACTURE OR PRODUCTION AS TO ENTITLE THE ASSESSE E FOR DEDUCTION U/S 80IC(1) READ WITH SECTION 80IC(2) OF THE INCOME TAX ACT, 19 61 (IN SHORT 'THE ACT'). THE TRIBUNAL DECIDED THE ISSUE IN FAVOUR OF THE ASS ESSEE OBSERVING AS UNDER:- 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUS ED THE MATERIAL ON RECORD, ORDERS OF THE AUTHORITIES BELOW AND, VARIOUS JUDICIAL PRONOUNCEMENTS RELIED UPON BY BOTH THE SID ES AT THE BAR. THE SHORT CONTROVERSY BEFORE US RELATES TO THE PROV ISIONS OF SECTION 80IC, WHICH HAVE BEEN INTRODUCED BY THE FIN ANCE ACT 2003 AND, WERE MADE EFFECTIVE FROM 01.04.2004 I.E. FROM ASSESSMENT YEAR 2004-05 ONWARDS. SECTION 80IC(1) PROVIDES FOR DEDUCTION IN RESPECT OF PROFITS AND GAINS DERIVED B Y AN UNDERTAKING OR ENTERPRISE REFERRED TO IN SUB-SECTIO N 80IC(2), IN COMPUTING THE TOTAL INCOME OF AN ASSESSEE. THE PROV ISIONS OF SECTION 80IC(1) ARE AS FOLLOWS: (1) WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INCLUDES ANY PROFITS AND GAINS DERIVED BY AN UNDERTAKING OR AN ENTERPRISE FROM ANY BUSINESS REFERRED TO IN SUB-SECTION (2), THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF TH IS 4 SECTION, BE ALLOWED, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION FROM SUCH PROFITS AND GAI NS, AS SPECIFIED IN SUB-SECTION (3). 6.1. SUB-SECTION (2) OF SECTION 80IC ENUMERATES DOW N THE UNDERTAKINGS AND, ENTERPRISES TO WHICH THE SAID SEC TION APPLIES (HEREINAFTER REFERRED TO AS THE ELIGIBLE UNDERTAKI NGS), IN THE FOLLOWING WORDS: (2) THIS SECTION APPLIES TO ANY UNDERTAKING OR ENTERPRISE,- (A) WHICH HAS BEGUN OR BEGINS TO MANUFACTURE OR PRODUCE ANY ARTICLE OR THING, NOT BEING ANY ARTICLE OR THING SPECIFIED IN THE THIRTEENTH SCHEDULE, OR WHIC H MANUFACTURES OR PRODUCES ANY ARTICLE OR THING, NOT BEING ANY ARTICLE OR THING SPECIFIED IN THE THIRTEE NTH SCHEDULE AND UNDERTAKES SUBSTANTIAL EXPANSION DURIN G THE PERIOD BEGINNING- (I) ON THE 23RD DAY OF DECEMBER, 2002 AND ENDING BEFORE THE 1ST DAY OF APRIL, 2012, IN ANY EXPORT PROCESSING ZONE OR INTEGRATED INFRASTRUCTURE DEVELOPMENT CENTRE OR INDUSTRIAL GROWTH CENTRE OR INDUSTRIAL ESTATE OR INDUSTRIAL PARK OR SOFTWARE TECHNOLOGY PARK OR INDUSTRIAL AREA OR THEME PARK, A S NOTIFIED BY THE BOARD IN ACCORDANCE WITH THE SCHEME FRAMED AND NOTIFIED BY THE CENTRAL GOVERNMENT IN TH IS REGARD, IN THE STATE OF SIKKIM; OR (II) ON THE 7TH DAY OF JANUARY, 2003 AND ENDING BEF ORE THE 1ST DAY OF APRIL, 2012, IN ANY EXPORT PROCESSIN G ZONE OR INTEGRATED INFRASTRUCTURE DEVELOPMENT CENTR E OR INDUSTRIAL GROWTH CENTRE OR INDUSTRIAL ESTATE OR INDUSTRIAL PARK OR SOFTWARE TECHNOLOGY PARK OR INDUSTRIAL AREA OR THEME PARK, AS NOTIFIED BY THE BOARD IN ACCORDANCE WITH THE SCHEME FRAMED AND NOTIFIED BY THE CENTRAL GOVERNMENT IN THIS REGARD, IN THE STATE OF HIMACHAL PRADESH OR THE STATE OF UTTARANCHAL; OR (III) ON THE 24TH DAY OF DECEMBER, 1997 AND ENDING BEFORE THE 1ST DAY OF APRIL, 2007, IN ANY EXPORT PROCESSING ZONE OR INTEGRATED INFRASTRUCTURE DEVELOPMENT CENTRE OR INDUSTRIAL GROWTH CENTRE OR INDUSTRIAL ESTATE OR INDUSTRIAL PARK OR SOFTWARE TECHNO-LOGY PARK OR INDUSTRIAL AREA OR THEME PARK, AS NOTIFIED BY THE BOARD IN ACCORDANCE WITH THE SCHEME FRAMED AND NOTIFIED BY THE CENTRAL GOVERNMENT IN THIS REGARD, IN ANY OF THE NORTH- EASTERN STATES; (B) WHICH HAS BEGUN OR BEGINS TO MANUFACTURE OR PRODUCE ANY ARTICLE OR THING, SPECIFIED IN THE FOURTEENTH SCHEDULE OR COMMENCES ANY OPERATION 5 SPECIFIED IN THAT SCHEDULE, OR WHICH MANUFACTURES O R PRODUCES ANY ARTICLE OR THING, SPECIFIED IN THE FOURTEENTH SCHEDULE OR COMMENCES ANY OPERATION SPECIFIED IN THAT SCHEDULE AND UNDERTAKES SUBSTANTI AL EXPANSION DURING THE PERIOD BEGINNING- (I) ON THE 23RD DAY OF DECEMBER, 2002 AND ENDING BEFORE THE 1ST DAY OF APRIL, 2012, IN THE STATE OF SIKKIM; OR (II) ON THE 7TH DAY OF JANUARY, 2003 AND ENDING BEF ORE THE 1ST DAY OF APRIL, 2012, IN THE STATE OF HIMACHA L PRADESH OR THE STATE OF UTTARANCHAL; OR (III) ON THE 24TH DAY OF DECEMBER, 1997 AND ENDING BEFORE THE 1ST DAY OF APRIL, 2007, IN ANY OF THE NO RTH- EASTERN STATES. 6.2. THE PROVISIONS OF SECTION 80IC(2) OF THE ACT T HUS PROVIDE FOR TWO TYPES OF ELIGIBLE UNDERTAKINGS. CLAUSE (A) PROVIDES FOR DEDUCTION IN CASE OF INDUSTRIAL UNDERTAKINGS, WHICH ARE: I) SITUATED IN ANY NOTIFIED EXPORT PROCESSING ZONE OR INTEGRATED INFRASTRUCTURE DEVELOPMENT CENTRE OR IND USTRIAL GROWTH CENTRE OR INDUSTRIAL ESTATE OR INDUSTRIAL PA RK OR SOFTWARE TECHNOLOGY PARK OR INDUSTRIAL AREA OR THEM E PARK (NOTIFIED AREAS) IN SIKKIM, HIMACHAL PRADESH, UTTARANCHAL, OR ANY NORTH EASTERN STATE, AS DEFINED U/S 80IC(8)(VII); (HEREINAFTER REFERRED AS ELIGIBLE ST ATES); AND II) ARE NOT ENGAGED IN THE MANUFACTURE OR PRODUCTIO N OF ANY ARTICLE OR THING SPECIFIED IN THIRTEENTH SCHEDU LE OF THE ACT. CLAUSE (B), ON THE OTHER HAND, DEALS WITH INDUSTRIA L UNDERTAKINGS, WHICH ARE: I) SITUATED IN ANY OF THE ELIGIBLE STATES, BUT NOT IN ANY NOTIFIED AREAS; AND II) ARE ENGAGED IN THE MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING SPECIFIED IN THE FOURTEENTH SCHEDU LE OF THE ACT. 6.3. A CAREFUL PERUSAL OF THE ABOVE WOULD SHOW THAT , CLAUSE (A) OF SUB-SECTION (2) OF SECTION 80IC OF THE ACT PROVI DES THAT, THIS SECTION APPLIES TO ANY UNDERTAKING OR ENTERPRISE WH ICH HAS BEGUN OR BEGINS TO MANUFACTURE OR PRODUCE ANY ARTICLE OR THING AND, WHICH IS NOT ENGAGED IN THE MANUFACTURE OR PRODUCTI ON OF ANY ARTICLE OR THING SPECIFIED IN THIRTEENTH SCHEDULE O F THE ACT THUS, AN ELIGIBLE UNDERTAKING IS REQUIRED TO MANUFACTURE OR PRODUCE ANY ARTICLE OR THING BEFORE IT BECOMES ENTITLED TO DEDUCTION U/S 80IC OF THE ACT. THE CLAIM OF THE RESPONDENT REVEN UE IS THAT THE PROCESS UNDERTAKEN BY THE APPELLANTS DO NOT CONSTIT UTE MANUFACTURE OR PRODUCTION AND ACCORDINGLY THE P ROFITS AND 6 GAINS DERIVED BY THEM FROM SUCH ACTIVITY HAVE BEEN DENIED THE DEDUCTION U/S 80IC OF THE ACT. 7. ACCORDING TO THE APPELLANTS, THE PROCESS OF DRAW ING WIRE FROM WIRES-RODS CONSTITUTE MANUFACTURE OR PRODUCTIO N OF ARTICLE OR THING IN TERMS OF CLAUSE (A) OF SUB SECTION (2) READ WITH SECTION 80IC(1) OF THE ACT AND THEREFORE, THE PROFI TS AND GAINS DERIVED FROM SUCH ACTIVITY ARE ELIGIBLE FOR DEDUCTI ON UNDER SECTION 80IC OF THE ACT. ALL THE CAPTIONED APPELLAN TS BEFORE US HAVE FILED WRITTEN SUBMISSIONS, APART FROM EXTENSIV E ORAL ARGUMENTS. THE MATERIAL PLACED BY THE APPELLANTS IN THE RESPECTIVE PAPER BOOKS ALSO CONTAIN REFERENCE TO TH E VARIOUS PROCESSES UNDERTAKEN BY THEM. THE VARIOUS PROCESSES UNDERTAKEN BY THE CAPTIONED APPELLANTS HAVE ALSO BEEN SUCCINCT LY NOTED BY THE ASSESSING OFFICER IN THE RESPECTIVE ORDERS. ON THE BASIS OF THE MATERIAL ON RECORD, THE PROCESSES UNDERTAKEN BY THE APPELLANTS CAN BE APPRECIATED AS FOLLOWS. IT IS STATED THAT, I N THE PROCESS OF DRAWING OF WIRES FROM WIRE RODS, THE INPUT IS FIRST LY REDUCED IN SIZE THROUGH CARBIDE DIES I.E. WIRE-ROD IS DRAWN TO SMALLER SIZES SUCH AS INTERMEDIATE WIRE, FINE WIRE AND, ULTRA FIN E WIRE. THESE WIRE RODS, WHICH CONSTITUTE RAW MATERIAL, COULD EIT HER BE STEEL RODS OR COPPER RODS OR ALUMINUM RODS. IT HAS BEEN F URTHER STATED THAT, TO FACILITATE THE DRAWING OF WIRE AT HIGH SPE EDS, THE WIRE IS PASSED THROUGH A DRY POWERED LUBRICANT SO AS AVOID STICKING OF THE WIRE TO THE DIE SURFACE AND, THIS PROCESS DONE AT HIGH SPEEDS, RESULTS IN TENSILE PULLING OF THE WIRE, WHICH PRODU CES RESIDUAL STRESSES AND, INCREASES ITS TEMPERATURE. THESE STR ESSES CAN CAUSE DISTORTIONS IN THE WIRE, CRACKING AND EMBRITTLEMENT OF THE WIRE, WHICH COULD RESULT IN PREMATURE BREAKING IN SERVICE . TO OVERCOME THESE DEFICIENCIES, THE WIRE IS HEATED ABOVE ITS RE -CRYSTALLIZATION TEMPERATURE TO ALLOW THE METAL GRAINS TO REFORM AND RELIEVE THE STRESS. THIS PROCESS IS CALLED ANNEALING. FURTHER, TO PROTECT FROM OXIDATION, WHICH WOULD EFFECT THE MECHANICAL AND PH YSICAL PROPERTIES, THE WIRE IS GALVANIZED. IN OTHER WORDS, THE PROCESS OF DRAWING OF WIRE INVOLVES FOLLOWING STEPS - ANNEALIN G, PICKLING AND, GALVANIZING, WHICH CAN BE BRIEFLY DESCRIBED AS HEREUNDER: A) ANNEALING: ANNEALING IS A HEAT TREATMENT IN WHICH A MATERIAL IS EXPOSED TO AN ELEVATED TEMPERATURE FOR AN EXTENDED TIME PERIOD AND THEN SLOWLY COOLED. IT IS THE PROCESS BY WHICH METALS AND OTHE R MATERIAL ARE TREATED TO RENDER THEM LESS BRITTLE AN D MORE WORKABLE. ANY ANNEALING PROCESS CONSISTS OF THREE STAGES, FIRSTLY, HEATING TO THE DESIRED TEMPERATURE, SECONDLY, HOLDING OR SOAKING AT THAT TEMPERATURE AND, COOLING, USUALLY TO ROOM TEMPERATURE. THIS PROVIDES THE FOLLOWING BENEFITS TO THE MATERIAL; RELIEVES STRESSES; INCREASES SOFTNESS, DUCTILITY AND TOUGHNESS; PRODUCES A SPECIFIC MICROSTRUCTURE OR HOMOGENIZES THE EXITING MICROSTRUCTURE; IMPROVES MACHINABILITY, 7 ELECTRICAL PROPERTIES, DIMENSIONAL STABILITY AND FORMABILITY FOR COLD WORKING, SUCH AS COLD HEADING AND STAMPING. B) QUENCHING, ACID PICKLING AND FLUX APPLICATION: AFTER THE ANNEALING PROCESS, THE WIRE IS QUENCHED IN A WATER BATH. THIS STEP IS NECESSARY TO PREVENT OVERHEATING OF THE ACID, THE NEXT STEP IN THE PROCESS. IN THE ACID PICKLING STEP , THE WIRE IS PASSED THROUGH A HYDROCHLORIC ACID SOLUTION. PICKLING REMOVES OXIDES RESULTING FROM THE HOT WIRE BEING EXPOSED TO OXYGEN AND, IT REMOVE ANY REMAINING LEAD COATING ON THE WIRE FROM THE MOLTEN LEAD BATH. THESE CONTAMINANTS MUST BE REMOVED OR THEY WILL INTERFERE WITH THE ZINC GALVANIZING PROCESS.ON PASSING THE WIRE THROUGH THE HYDROCHLORIC ACID BATH, THE ACID REACTS WITH ANY REMAINING LEAD TO FORM LEAD CHLORIDE. THE LEAD CHLORIDE IS A BYPRODUCT FROM THE PROCESS. IN ADDITION, THE HYDROCHLORIC ACID BATHS ARE DISCARDED PERIODICALLY WHEN THEY HAVE BECOME CONTAMINATED. ANY REMAINING TRACES OF ACID ARE THEN REMOVED BY RISING THE WIRE WITH HOT WATER. THE RINSING PROCES S IS A MULTITANK, COUNTER-FLOW, HOT WATER RINSE SYSTEM. THE COUNTER FLOW IS NECESSARY TO ENSURE THAT THE WATER IS THE LAST TANK REMAINS RELATIVELY CLEAN AND FREE OF CONTAMINANTS. THE WATER IS HOT T O MINIMIZE BOTH THE PROCESS TIME AND THE POTENTIAL FOR SURFACE OXIDE FORMATION. THE RINSING PROCESS RESULTS IN ACIDIC WASTEWATER THAT IS NEUTRALIZED PRIOR TO DISPOSAL. SUBSEQUENTLY, THE WIRE IS DIPPED IN A FLUX BATH, USUALLY A ZINC AMMONIUM CHLORIDE SOLUTION FLUX IS AN ANTI-OXIDANT, DISSOLVING ANY RESIDUAL OXIDES AND PREVENTING FURTHER OXIDATION OF THE SURFACE PRIOR TO GALVANIZING. ANY OXIDIZED OR CONTAMINATED AREA ON THE WIRE CAN CAUSE POOR ADHESION OF THE ZINC COATING THE GALVANIZING PROCESS, LEADING TO BLACK SPOTS AND FLAKING. THE FLUX DOES NOT CAUSE ADHESION OF ZINC AND STEEL BUT ONLY COMPENSATES FOR INADEQUATE CLEANING. C) GALVANIZING: GALVANIZING IS THE PRACTICE OF IMMERSING CLEAN, OXIDE-FREE IRON OR STEEL INTO MOLTEN ZINC AT ABOUT 860F(ABOVE THE MELTING TEMPERATURE OF 780F) IN ORDER TO FORM A ZINC COATING THAT IS METALLURGICALLY BONDED TO THE IRON OR STEEL SURFACE. THE ZINC COATING PROTECTS THE SURFACE AGAINST CORROSION, OXIDATION AND MOISTURE. IT SHIELDS THE BASE METAL FROM THE ATMOSPHERE AND, FURTHER THE ZINC PROVIDES ANODIC (OR SACRIFICIAL) 8 PROTECTION. THE ZINC PROTECTS THE STEEL GALVANIZING, THUS GIVING THE PROCESS ITS NAME. WHEN THE STEEL IS DIPPED IN THE ZINC BATH, IT HEATS UP TO ABOVE THE MELTING TEMPERATURE AND A ZINC IRON REACTION OCCURS, CREATING SEVERAL LAYERS OF INTER- METALLIC ALLOYS THAT BOND THE OUTER LAYER OF PURE ZINC TO THE STEEL. THE REACTION CAN ONLY OCCUR IF THE IRON IN THE STEEL IS IN INTIMATE CONTACT WITH T HE LIQUID ZINC AND ANY SURFACE CONTAMINATION WILL IMPAIR THIS REACTION. D) FOLLOWING THE ZINC HOT DIP, THE WIRE IS QUENCHED IN WATER TO FREEZE THE ZINC LAYER AND IS THEN COILED OR SPOOLED, WHICH IS MARKETED AS GALVANIZED WIRE. 8. NOTABLY, THE REVENUE HAS NOT DISPUTED THE ABOVE STATED PROCESSES, YET CONTENDS THAT, SUCH PROCESSES DO NOT CONSTITUTE MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING W ITHIN THE MEANING OF SECTION 80IC OF THE ACT. THE STAND OF TH E REVENUE IS ESSENTIALLY BASED ON THE JUDGMENT OF THE HON'BLE SU PREME COURT IN THE CASE OF M/S TECHNOWELD INDUSTRIES LTD. (SUPR A). 9. THE CONTROVERSY SQUARELY INVOLVES INTERPRETATION AND, CONSTRUCTION OF THE WORDS MANUFACTURE AND, PRODU CTION. THE WORD 'MANUFACTURE' WAS NOT DEFINED UNDER THE ACT, U PTILL 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 VARIATIO NS, MEANS A CHANGE IN A NON-LIVING PHYSICAL OBJECT OR A RTICLE OR THING,- (A) RESULTING IN TRANSFORMATION OF THE OBJECT OR ARTICLE 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 OBJECT OR ARTICLE OR THING WITH A DIFFERENT CHEMICAL COMPOSITION OR INTEGRAL STRUCTURE; THE ABOVE INSERTION HAS BEEN MADE EFFECTIVE FROM 1. 4.2009, WHILE WE ARE DEALING WITH ASSESSMENT YEARS PRIOR TO 1.4.2009. HITHERTO, THE EXPRESSIONS MANUFACTURE AND PRODUC TION HAVE BEEN UNDERSTOOD IN TERMS OF THE JUDGE MADE LAW. THE VARIOUS COURTS OF THE COUNTRY HAVE RENDERED NUMEROUS JUDGEM ENTS ELUCIDATING VARIOUS PRINCIPLES OR TESTS TO EVALUATE WHETHER A PARTICULAR PROCESS CAN BE UNDERSTOOD AS MANUFACTUR E OR PRODUCTION. THE EXPRESSION 'MANUFACTURE' IN ITS O RDINARY ACCEPTANCE HAS A WIDER CONNOTATION, IT MEANS MAKING OF ARTICLES, 9 OR MATERIAL COMMERCIALLY DIFFERENT FROM THE BASIC C OMPONENTS, BY PHYSICAL LABOUR OR MECHANICAL PROCESS, AND A MANUFA CTURER IS A PERSON BY WHOM, OR UNDER WHOSE DIRECTION OR CONTROL THE ARTICLES OR MATERIALS ARE MADE. THE WORD 'MANUFACTURE' USED AS VERB IS GENERALLY UNDERSTOOD TO MEAN AS BRINGING INTO EXIST ENCE A NEW SUBSTANCE AND DOES NOT MEAN MERELY TO PRODUCE SOME CHANGE IN A SUBSTANCE. AS IS GENERALLY UNDERSTOOD AND ALSO STAT ED IN SECTION 2(29BA) OF THE ACT, MANUFACTURE IMPLIES A CHANGE, AND SUCH CHANGE MUST ENTAIL A TRANSFORMATION; A NEW AND DIFF ERENT ARTICLE 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 PRODUCTION OF ARTICLES FOR USE FROM RAW OR PREPARED MATERIALS BY GIVING TH ESE MATERIALS NEW FORMS, QUALITIES, PROPERTIES, OR COMBINATIONS, WHETHER BY HAND LABOUR OR MACHINERY; ALSO ANYTHING MADE FOR US E FROM RAW OR PREPARED MATERIALS . ACCORDING TO WEBSTERS DICTIONARY, MANUFACTURE MEANS TO WORK, RAW OR PARTLY WROUGHT MA TERIALS, INTO SUITABLE FORMS FOR USE, AS, TO MANUFACTURE WOOL, IR ON, ETC., TO MAKE (WARES OR OTHER PRODUCTS) BY HAND, BY MACHINER Y OR OTHER AGENCY. THUS, LITERALLY SPEAKING, THE PROCESS OF M ANUFACTURE INVOLVES SOME TRANSFORMATION OR CHANGE IN THE MATER IAL AS A RESULT OF APPLICATION OF ART OR A MECHANICAL MANIPULATION. THE MATERIAL, WHICH IS THUS FASHIONED INTO A NEW PRODUCT, MAY BE DISTINCT IN FORM OR IN USE. 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) CONSIDERED THE QUESTION, WHETHER THE UNDERTAKING OF AN ASSESSEE ENGAGED IN E XTRACTION OF TIMBER FROM FOREST AND CONVERSION OF SAME INTO LOGS , PLANKS, ETC. CONSTITUTED AN INDUSTRIAL UNDERTAKING WITHIN THE ME ANING OF SECTION 80J(4) OF THE ACT OR NOT ? IN THIS CASE, TH E ASSESSEE CLAIMED THAT IT WAS ENGAGED IN THE MANUFACTURE AND PRODUCTION OF ARTICLES. THE CASE OF THE ASSESSEE WAS THAT THE PLA NKS SAWN OUT OF LOGS AND, ARTICLES PRODUCED THEREFROM WERE DIFFEREN T IN SHAPE FROM THE LOGS AND THE TREES. HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AS ACCORD ING TO HIM THE ASSESSEE DID NOT MANUFACTURE OR PRODUCE ANY ARTICLE . ACCORDING TO THE ASSESSING OFFICER, THE PROCESS OF CONVERTING TR EES INTO LOGS DID NOT INVOLVE MUCH SAWING OPERATIONS AS AFTER FEL LING THE TREES, IT HAD BEEN CUT INTO LOGS AND SOLD AS SUCH. THE REV ENUE ALSO CONTENDED THAT THE PROCESS OF SAWING OF LOGS INTO P LANKS ALSO DID NOT INVOLVE ANY MANUFACTURE OF ARTICLES AND THAT MA NUFACTURING PROCESS COULD NOT BE CARRIED OUT BY BARE HANDS WITH OUT THE AID OF MACHINERY. THE CLAIM OF THE ASSESSEE WAS, HOWEVER A CCEPTED BY THE APPELLATE COMMISSIONER, WHO HELD THAT THE USE O F MACHINERY WAS NOT INDISPENSIBLE TO A MANUFACTURING PROCESS AN D EVEN FOR THE CONVERSION OF THE STANDING TREES INTO LOGS, LABOUR WAS REQUIRED AS SOMETHING IS CONVERTED INTO SOMETHING ELSE VIZ. LOG S. HE WAS OF 10 THE VIEW THAT THE LOGS COULD BE SAID TO BE A NEW PR ODUCT EMERGING OUT OF MANUFACTURING PROCESS. HE ACCORDINGLY HELD T HAT THE ASSESSEE WAS ENTITLED TO DEDUCTION UNDER SECTION 80 J OF THE INCOME-TAX ACT, WHICH WAS CONFIRMED BY THE TRIBUNAL . THE MATTER WAS CONSIDERED BY THE HON'BLE HIGH COURT ON THE ABO VE FACTS. THE HON'BLE HIGH COURT WAS OF THE VIEW THAT IN ORDER TO CLAIM RELIEF UNDER SECTION 80J, AN INDUSTRIAL UNDERTAKING MUST M ANUFACTURE OR PRODUCE ARTICLES AND IT WAS A CONDITION PRECEDENT. THE HON'BLE HIGH COURT OBSERVED THAT THE ASSESSEE CUT TREES IN THE FOREST, CONVERTED THEM NOT ONLY INTO LOGS BUT ALSO INTO PLA NKS AND OTHER ARTICLES FOR THE PURPOSE OF SALE. AS A FOREST LESSE E, THE ASSESSEE'S BUSINESS WAS TO CUT STANDING TREES AND TO EXTRACT T IMBER AND CONVERT THE SAME INTO FORM OF LOGS, PLANKS, ETC. FO R THE PURPOSE OF SALE. IT WAS OBSERVED THAT THE LOGS AND PLANKS COUL D NEVER BE KNOWN AS TREES ; THAT THE TWO ARE UNDOUBTEDLY DIFFE RENT FROM THE STANDING TREES. THE HON'BLE HIGH COURT ACCORDINGLY UPHELD THE STAND OF THE ASSESSEE. IT IS CLEAR FROM THE ABOVE T HAT THE ACTIVITY OF THE FOREST LESSEES OF EXTRACTION OF TIMBER FROM THE FOREST AND CONVERSION OF THE SAME INTO LOGS, PLANKS, ETC. IS U NDERSTOOD TO BE A MANUFACTURING PROCESS. THE HON'BLE HIGH COURT ON THE QUESTION OF MANUFACTURING FURTHER HELD AS UNDER:- 'OTHERWISE ALSO, IT IS CLEAR THAT THE ACTIVITY UNDERTAKEN BY THE ASSESSEE CLEARLY AMOUNTS TO MANUFACTURE AND PRODUCTION OF ARTICLES. THE EXPRESSIONS 'MANUFACTURE' AND 'PRODUCE' HAVE NOT BE EN DEFINED IN THE INCOME-TAX ACT. THE DICTIONARY MEANI NG OF 'MANUFACTURE' IS 'TRANSFORM OR FASHION NEW MATERIALS INTO A CHANGED FORM FOR USE'. IN COMMON PARLANCE, MANUFACTURE MEANS PRODUCTION OF ARTICLES FROM RAW OR PREPARED MATERIALS BY GIVING THESE MATERIALS NEW FORMS, QUALITIES, PROPERTIES OR COMBINATIONS, WHETHER BY HAND LABOUR-OR BY MECHANICAL PROCESS. IN OTHER WORDS, IT MEANS MAKING OF ARTICLES OR MATERIALS COMMERCIALLY DIFFERENT FRO M THE BASIC COMPONENTS BY PHYSICAL LABOUR OR MECHANICAL PROCESS, IN ITS ORDINARY CONNOTATION, MANUFACTURE SIGNIFIES EMERGENCE OF NEW AND DIFFEREN T GOODS AS UNDERSTOOD IN RELEVANT COMMERCIAL CIRCLES. SO FAR AS THE MEANING OF THE WORD 'PRODUCE' IS CONCERNED, THOUGH THE WORD 'PRODUCE' HAS A WIDER CONNOTATION THAN THE WORD 'MANUFACTURE', WHEN USED IN JUXTAPOSITION WITH THE WORD 'MANUFACTURE', IT TA KES IN BRINGING INTO EXISTENCE NEW GOODS BY A PROCESS WHICH MAY NOT AMOUNT TO MANUFACTURE. THE ACTIVITY O F EXTRACTION OF WOOD BY THE ASSESSEE FROM THE FOREST BY FELLING THE TREES AND CONVERTING THE SAME INTO LOGS , PLANKS, SLEEPERS AND OTHER ARTICLES, UNDOUBTEDLY, F ALLS WITHIN THE DEFINITION OF 'MANUFACTURE'.' 11 9.2. THE HON'BLE SUPREME COURT IN THE MATTER OF CIT V. N.C. BUDHARAJA & CO. [1993] 204 ITR 412 (S.C) CONSIDERIN G A SIMILAR POINT OF LAW HELD, 'THE TEST FOR DETERMINING WHETHER MANUFACTURE CAN BE SAID TO HAVE TAKEN PLACE IS WHETHER THE COMM ODITY WHICH IS SUBJECTED TO THE PROCESS OF MANUFACTURE CAN NO L ONGER BE REGARDED AS THE ORIGINAL COMMODITY BUT IS RECOGNISE D IN THE TRADE AS A NEW AND DISTINCT COMMODITY.' 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 INVESTME NT ALLOWANCE DEALT WITH THE QUESTION OF PRODUCTION IN A CASE W HERE THE ASSESSEE'S INDUSTRIAL UNDERTAKING WAS ENGAGED IN TH E BUSINESS OF EXCAVATING, MINING AND PROCESSING MINERAL ORE. MINE RAL ORE WAS NOT EXCLUDED BY THE ELEVENTH SCHEDULE. THE ONLY QUE STION WAS WHETHER SUCH BUSINESS WAS ONE OF MANUFACTURE OR PRO DUCTION OF ORE. THE HON'BLE SUPREME COURT NOTED THAT THE ISSUE WAS DEALT WITH BY DIFFERENT HIGH COURTS OVER A PERIOD OF TIME , AND IT WAS HELD THAT THE ACTIVITY AMOUNTED TO 'PRODUCTION' AND ANSWERED THE ISSUE IN QUESTION IN FAVOUR OF THE ASSESSEE. THE HO N'BLE SUPREME COURT HELD AS UNDER :- 'THE REASONING GIVEN BY THE HIGH COURT, IN THE DECISIONS NOTED BY US EARLIER, IS, IN OUR OPINION, UNIMPEACHABLE. THIS COURT HAD, AS EARLY AS IN 1961, IN CHRESTIAN MICA INDUSTRIES LTD. V. STATE OF BIHAR [1961] 12 STC 150, DEFINED THE WORD 'PRODUCTION', ALBEIT, IN CONNECTION WITH THE BIHAR SALES TAX ACT, 1947. THE DEFINITION WAS ADOPTED FROM THE MEANING ASCRIBED TO THE WORD IN THE OXFORD ENGLISH DICTIONA RY AS MEANING 'AMONGST OTHER THINGS THAT WHICH IS PRODUCED; A THING THAT RESULTS FROM ANY ACTION, PROCESS OR EFFORT; A PRODUCT; A PRODUCT OF HUMAN ACTIVITY OR EFFORT'. FROM THE WIDE DEFINITION OF TH E WORD 'PRODUCTION', IT HAS TO FOLLOW THAT MINING ACTIVITY FOR THE PURPOSE OF PRODUCTION OF MINERAL O RES WOULD COME WITHIN THE AMBIT OF THE WORD 'PRODUCTION ' SINCE ORE IS 'A THING', WHICH IS THE RESULT OF HUMA N ACTIVITY OR EFFORT ... IT IS, THEREFORE, NOT NECESSARY, AS HAS BEEN SOUGHT TO BE CONTENDED BY LEARNED COUNSEL FOR THE REVENUE, TH AT 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 ITE M NO. 3 OF THE FIFTH SCHEDULE TO THE ACT, WOULD SHOW THAT MINING OF ORE IS TREATED AS 'PRODUCTION'. SECT ION 35E ALSO SPEAKS OF PRODUCTION IN THE CONTEXT OF MIN ING ACTIVITY. THE LANGUAGE OF THESE SECTIONS IS SIMILAR TO THE LANGUAGE OF SECTION 32A(2). THERE IS NO REASON FOR 12 US TO ASSUME THAT THE WORD 'PRODUCTION' WAS USED IN A DIFFERENT SENSE IN SECTION 32A.' [ UNDERLINED 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 LT D (SUPRA) IT IS EVIDENT THAT, THAT THE WORD 'PRODUCTION' HAS BEEN U SED IN A VERY WIDE SENSE TO MEAN-TO BRING OUT A NEW PRODUCT, ALBE IT NOT A COMMERCIALLY NEW PRODUCT. INFACT, IT MAY BE RELEVAN T TO STATE HERE THAT, IN THE AFORESAID JUDGEMENT, THE HON'BLE SUPRE ME COURT AFFIRMED THE JUDGEMENT OF THE HON'BLE KARNATAKA HIG H COURT IN THE CASE OF CIT V. MYSORE MINERALS LTD. 250 ITR 725 (KAR.) WHEREIN ACTIVITY OF CUTTING GRANITE BLOCKS INTO SLA BS AND SIZES AND POLISHING THEM WAS HELD TO BE MANUFACTURING OR PROD UCTION OF GOODS. IT WAS HELD THEREIN AS UNDER: ' SECTION 80-I ALSO REFERS TO PROFITS AND GAINS IN RESPECT OF AN INDUSTRIAL UNDERTAKING. IN VIEW OF TH E DECISION GIVEN IN THE CASE OF THE ASSESSEE, WE ARE OF THE VIEW THAT THE APPELLATE TRIBUNAL IS RIGHT IN LA W IN COMING TO THE CONCLUSION THAT THE ORIGINAL ASSESSME NT 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 SECTION 263 WAS NOT PROPER. THE TRIBUNAL IS ALSO RIGHT IN LAW I N HOLDING THAT EXTRACTING GRANITE FROM QUARRY AND CUTTING IT TO VARIOUS SIZES AND POLISHING SHOULD BE CONSIDERED AS MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING AND THE ASSESSEE'S BUSINESS ACTIVI TY 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, ANOT HER JUDGEMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF KORES I NDIA LTD V CCE REPORTED IN 174 ELT 7 (2004), THE HON'BLE RAJAS THAN HIGH COURT IN THE CASE OF ARIHANT TILES AND MARBLES LTD V ITO 295 ITR 148 (RAJ) HELD AS UNDER: APPARENTLY, THE PRINCIPLE APPLIED BY THE SUPREME COURT WAS THAT IF WITHOUT APPLYING THE PROCESS A TH ING IN ITS RAW FORM CANNOT BE USABLE AND IT IS MADE USA BLE FOR PARTICULAR PURPOSE, IT AMOUNTS TO MANUFACTURE. THE COURT APPROVED THE PRINCIPLE ENUNCIATED IN SARASWATI SUGAR MILLS V. HARYANA STATE BOARD [1992] 1 SCC 418 THAT ESSENCE OF MANUFACTURE IS A CHANGE O F ONE OBJECT TO ANOTHER FOR THE PURPOSE OF MAKING IT MARKETABLE. 13 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 USE, AFTER THE PROCESS. A NEW NAME AND CHARACTER HAS COME INTO EXISTENCE. THE ORIGINAL COMMODITY AFTER PROCESSING DOES NOT POSSES S ORIGINAL IDENTITY. OBVIOUSLY, SO FAR AS PHYSICAL CHARACTERISTIC OF JUMBO ROLLS AND ITS SHORTER VERSI ON IN THE FORM OF TYPEWRITER AND TELEX ROLL MAY HAVE T HE SAME PHYSICAL PROPERTIES, NONE THE LESS ON THE BASI S OF THEIR DIFFERENT USE AS A MARKETABLE COMMODITY AND AFTER BEING CUT, THE SAME CANNOT BE USED FOR THE PURPOSE FOR WHICH IT COULD BE USED IN ORIGINAL SHAP E, 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 NOT 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 PRO CESS OF CUTTING THE MARBLE BLOCK INTO SLABS AND TILES TH AT IT IS MADE MARKETABLE. THE MARBLE BLOCK CANNOT BE USED FOR THE SAME PURPOSE AS THE MARBLE SLAB OR TILE CAN BE USED AND AFTER THE MARBLE BLOCK HAS BEEN CUT INTO DIFFERENT SIZES, THE END PRODUCT BY PUTTING IT SIMULTANEOUSLY CANNOT BE USED AS A BLOCK. THE PRINCIPLE IN KORES INDIA LTD.'S CASE [2004] 3 RC 61 3 (SC) SUPPORTS 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 FATEH GRANIT E (P) LTD 314 ITR 32 (BOM.) AND, THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT V SOPHISTICATED GRANITE MARBLE INDUSTRIES RE PORTED 225 CTR 410 (DEL) AND, IT WAS HELD THAT, PROCESS OF PUR CHASING MARBLE SLABS AND THEN CONVERTING THESE INTO TILES B Y APPLYING VARIOUS PROCESSES LIKE CUTTING, SIZING, POLISHING S O AS TO PRODUCE MARKETABLE TILES CONSTITUTES MANUFACTURING AN ART ICLE. 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 THE CONSIDE RED OPINION THAT, WIRE SO MANUFACTURED CAN NO LONGER BE REGARDE D AS THE ORIGINAL COMMODITY. INFACT, THE FINAL PRODUCT IS RE COGNIZED IN THE TRADE AS A NEW AND DISTINCT COMMODITY. OSTENSIBLY, THE WIRE ROD HAVING UNDERGONE VARIOUS MECHANIZED AND CHEMICAL BA SED PROCESSES LIKE ANNEALING, GALVANIZING ETC. RESULTS INTO MANUFACTURE OF WIRE WITH DISTINCT NAME, CHARACTER A ND USE. THE 14 NAME OF THE RAW MATERIAL, ORIGINALLY IS WIRE ROD BE FORE PROCESSING AND AFTER PROCESSING, IT BECOMES WIRE OF DIFFERENT TYPES, SAY PAPER/ENAMEL INSULATED WIRES OR STRIPS OR BARBED WI RE, GSS/STAY EARTH WIRE, CHAINLINK, ETC. THEREFORE, IT IS COMMER CIALLY DISTINCT COMMODITY WITH A DISTINCT NAME. THE WIRES SO PRODUC ED ARE USED FOR POWER CABLES, INDUSTRIAL CONTROL CABLES, ELECTR IC MOTORS, TRANSFORMERS, ETC. BUT WIRE ROD AS A RAW MATERIAL C ANNOT BE USED AS SUCH. THEREFORE, A NEW AND DISTINCT COMMODITY IS MANUFACTURED AND PRODUCED BY THE ASSESSEE NAMELY WIRE. INFACT, I N UNION OF INDIA AND OTHERS V. J.G. GLASS INDUSTRIES LTD. AND OTHERS (1998) 2 SCC 32, THE HON'BLE SUPREME COURT HAD LAID DOWN A T WO-FOLD TEST FOR DETERMINING WHETHER A PARTICULAR PROCESS AMOUNT S 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 CEASES TO EX IST. SECONDLY, WHETHER THE COMMODITY WHICH WAS ALREADY IN EXISTENC E WOULD NOT SERVE THE DESIRED PURPOSE BUT FOR THE SAID PROCESS. APPLYING THIS TWO-FOLD TEST TO THE FACT SITUATION OF THE APPELLAN TS, IT IS IRRESISTIBLE TO HOLD THAT THE PROCESS UNDERTAKEN BY THE APPELLANTS AMOUNT TO MANUFACTURE. 11. INFACT, HONBLE MADRAS HIGH COURTS DECISION IN THE CASE OF TAMIL NADU HEAT TREATMENT & FETTING SERVICES (P) LT D. (SUPRA) SUPPORTS THE CASE OF THE APPELLANT. IN THIS CASE, THE ASSESSEE WAS RECEIVING UN-TREATED CRANKSHAFTS, FORGINGS AND CAST INGS FROM ITS CLIENTS AND WAS SUBJECTING THEM TO HEAT TREATMENT T O TOUGHEN THEM UP FOR BEING USED AS AUTOMOBILE SPARE PARTS. THE S AID ACTIVITY WAS HELD TO BE A MANUFACTURING ACTIVITY BY THE HON BLE HIGH COURT. THE HONBLE MADRAS HIGH COURT HELD AS UNDER : 12.IN THE BACKDROP AND SETTING OF THE PRINCIPLES, AS ENUNCIATED BY THE SUPREME COURT AND VARIOUS HIGH COURTS AS RELATABLE TO THE ACTIVITY OF MANUFACTURE OF PROCESSING OF GOODS AND IN THE LIGHT OF THE VARIOUS LITERATURE AND BOOKS OF FOREIGN AUTHORS, RELATABLE TO THE QUALITATIVE CHANGE HAVING BEEN BROUGHT ABOUT BY WELL TERMED PROCESS, AS REFERRED T O 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 AND FORGINGS AND CASTINGS FROM ITS CLIE NTS AND SUBJECTING THEM TO HEAT TREATMENT TO TOUGHEN TH EM UP FOR BEING USED AS AUTOMOBILE SPARE PARTS CAN EVE R THE CONSTRUED AS ACTIVITIES RELATABLE TO MANUFACTUR E AND, CONSEQUENTLY ENABLE IT TO CLAIM INVESTMENT 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 ABSOLUTE LY 15 ESSENTIAL FOR RENDERING IN MARKETABLE. AUTOMOBILE PARTS AS CRANKSHAFTS, 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 THE LIKE CAN NEVER BY USED IN AN AUTOMOBILE INDUSTRY. THUS , IN THE CRANKSHAFTS SUBJECTED TO THE PROCESS OF HEAT TREATMENT ETC., A QUALITATIVE CHANGE IS EFFECTED, T O BE FIT FOR USE IN AUTOMOBILES, ALTHOUGH THERE IS NO PHYSICAL CHANGE IN THEM. IN SUCH STATE OF AFFAIRS, IT CANNOT AT ALL THE STATED THAT THE CRANKSHAFTS, SUBJ ECTED TO HEAT TREATMENT, ETC. CANNOT AT ALL CHANGE THE ST ATUS OF NEW PRODUCTS OF DIFFERENT QUALITY FOR A DIFFEREN T QUALITY FOR A DIFFERENT PURPOSE ALTOGETHER. IN THIS VIEW OF THE MATTER, WE ARE OF THE VIEW THAT THE ACTIVITI ES OF THE ASSESSEE IN RELATION TO RAW OR UNTREATED CRANKSHAFTS BEING SUBJECTED TO HEAT TREATMENT, ETC. , IS DEFINITELY A MANUFACTURING ACTIVITY ENTITLING IT TO CLAIM INVESTMENT 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 MATERIAL TH ROUGH HEATING, ALSO AMOUNTS TO A MANUFACTURING ACTIVITY. THE AF ORESAID VIEW HAS ALSO BEEN FOLLOWED BY THE AHMEDABAD BENCH OF TH E TRIBUNAL IN THE CASE OF ANIL STEEL TRADERS (SUPRA) TO HOLD T HAT THE ACTIVITY OF ANNEALING OF STEEL RODS AND COILS AS PER THE CUS TOMER SPECIFICATIONS, AMOUNTS TO MANUFACTURE. THUS, IN LIGHT OF THE AFORESAID JUDGEMENTS ALONE, WE DO NOT FIND ANY JUST IFICATION IN THE STAND OF THE REVENUE THAT THE ASSESSEE DID NOT CARRY OUT ANY ACTIVITY OF MANUFACTURING. UNDOUBTEDLY, THE PROCES S UNDERTAKEN BY THE ASSESSEE RESULTS IN QUALITATIVE CHANGE IN TH E INPUTS 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 THE HON BLE MADRAS HIGH COURT, WHICH AGAIN HAS REFERRED TO VARIOUS CAS E LAWS ON THE ISSUE, THE AFORESAID ARGUMENT OF THE REVENUE IS NOT SUSTAINED. 13. FURTHER, EVEN IF THE TEST OF MARKETABILITY IS A PPLIED TO THE FACTS OF THE CASE OF THE APPELLANTS, THE PROCESS CA RRIED OUT BY THEM CONSTITUTES MANUFACTURE, AS ENUNCIATED BY THE HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF ARIHANT TILES A ND MARBLES (P) LTD V ITO (SUPRA) FOLLOWING THE JUDGEMENT OF TH E HON'BLE SUPREME COURT IN THE CASE OF SESA GOA LTD. (SUPRA) AND, KORES INDIA (SUPRA), SINCE THE ORIGINAL COMMODITY, NAMELY , WIRE ROD COULD NOT BE USED FOR TRANSFORMERS, POWER CABLES, E TC. AS SUCH, UNTIL IT IS DRAWN INTO ENAMELED/INSULATED WIRES. IT IS ONLY BY THIS PROCESS THAT, INPUT IS MADE MARKETABLE AS A DISTINC T COMMODITY 16 AND, THEREFORE WE HOLD, IN THE FACTS AND, CIRCUMSTA NCES OF THE CASE, THE PROCESS UNDERTAKEN BY THE APPELLANTS AMOU NTS TO MANUFACTURE OF THING OR ARTICLE WITHIN THE MEANING OF SECTION 80IC OF THE 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 WOR D 'PRODUCTION' HAS BEEN USED IN A VERY WIDE SENSE TO MEAN TO BRING OUT A NEW PRODUCT, MAY BE NOT A COMMERCIALLY NEW PRODUCT. IN THIS CASE, UNDISPUTEDLY AND, IRREFUTABLY NEW PRODUCT HAS BEEN PRODUCED AS A RESULT OF THE VARIOUS PROCESSES UNDERTAKEN BY THE A PPELLANT AND, AS SUCH, EVEN ON THIS GROUND, THE APPELLANTS ARE EL IGIBLE 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 CONSI DERED OPINION, IS FULLY INAPPLICABLE TO THE FACTS OF THE CAPTIONED INSTANT CASES. IT IS EVIDENT FROM THE AFORESAID JUDGEMENT THAT, ASSES SEE IN THAT CASE, WAS ENGAGED IN THE BUSINESS OF WIRE DRAWING F ROM THICKER GAUGE TO THINNER GAUGE BY COLD DRAWING PROCESS AND, NOT IN THE MANUFACTURE OF WIRE WITH DIFFERENT CHEMICAL/ELECTRI CAL/MECHANICAL PROPERTIES/ END USE AND, THAT TOO AFTER UNDERGOING VARIOUS PROCESSES, WHICH HAVE ALREADY BEEN ELABORATEDLY CUL LED OUT ABOVE AND SUCH PROCESSES ARE NOT SHOWN TO HAVE BEEN CARRI ED OUT IN THE CASE OF TECHNOWELD INDUSTRIES (SUPRA). IT IS THUS EVIDENT THAT, SAID JUDGEMENT HAS NO SEMBLANCE OF RESEMBLANCE TO T HE FACTS OF THE INSTANT CASE. IT IS SETTLED LAW THAT, A JUDGMEN T IS A PROPOSITION FOR WHAT IT ACTUALLY DECIDES AND NOT WHAT CAN BE LO GICALLY OR REMOTELY DEDUCED THERE-FROM, AS HAS BEEN HELD IN TH E FOLLOWING JUDGMENTS: (A) GOODYEAR INDIA LTD. V. STATE OF HARYANA (SC) 188 IT R 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 WITHOUT DISCUSSING AS TO HOW THE FACTUAL SITUATION FITS IN WITH THE FACT SITUATION OF THE DECISION ON WHICH RELIANCE IS PLACED. THERE IS ALWAYS PERIL IN TREATI NG THE WORDS OF A SPEECH OR JUDGMENT AS THOUGH THEY AR E WORDS IN A LEGISLATIVE ENACTMENT, AND IT IS TO BE REMEMBERED THAT JUDICIAL UTTERANCES ARE MADE IN THE SETTING OF THE FACTS OF A PARTICULAR CASE, SAID LOR D 17 MORRIN IN HERRINGTON V. BRITISH RAILWAYS BOARD [1972] 2 WLR 537 (HL). CIRCUMSTANTIAL FLEXIBILITY, ONE ADDITIONAL OR DIFFERENT FACT MAY MAKE A WORLD O F DIFFERENCE BETWEEN CONCLUSIONS IN TWO 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 CORPORATI ON VS. COLLECTOR OF CENTRAL EXCISE, (1989) 42 ELT100 (TRIB UNAL).IN THE CASE OF JYOTI ENGINEERING CORPORATION (SUPRA) ALSO THE ISSUE BEFORE THE TRIBUNAL WAS ALSO IN RESPECT OF WIRE DRA WN FROM THICKER GAUGE TO THINNER GAUGE. THE PROCESS OF AN NEALING AND THE OTHER PROCESSES UNDERTAKEN BY THE APPELLANTS AR E NOT SHOWN TO HAVE BEEN INVOLVED EVEN IN THE CASE OF JYOTI ENGINE ERING CORPORATION (SUPRA). IN THE CASE OF CAPTIONED APPEL LANTS, AFTER DRAWING OF WIRE, THE DRAWN WIRE IS SUBJECTED TO VAR IOUS OTHER MECHANIZED, CHEMICAL AND OTHER PROCESSES WHICH BRIN GS INTO EXISTENCE A TOTALLY NEW PRODUCT, HAVING DIFFERENT P ROPERTIES AND DIFFERENT INTEGRAL STRUCTURE. IN THE CASE OF TECHN OWELD INDUSTRIES (SUPRA) 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 AMOUNTS T O 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 PRES ENT CASES. 15.2. PLACED IN THE FACTUAL SCENARIO THAT HAS EMERG ED, IN OUR HUMBLE OPINION, THE DECISION IN THE CASE OF TECHNOW ELD INDUSTRIES (SUPRA) RELIED UPON BY THE REVENUE, DOES NOT SUPPORT ITS STAND, WHEREIN THE TEST OF MARKETABILITY WAS NE ITHER CONTENDED AND, NOR DECIDED. INFACT, EVEN THE EXPRESSION PROD UCTION WAS NEVER A SUBJECT MATTER OF CONSIDERATION. LIKEWISE, IN THE CASE OF LAL KUNWA STONE CRUSHER (P) LTD (SUPRA) RELIED UPON BY THE REVENUE, THE ACTIVITIES OF THE ASSESSEE THEREIN CON SISTED OF CONVERSION OF BOULDER STONE INTO GITTY AFTER CUTTIN G THE BOULDERS. IT WAS IN THIS BACKDROP THAT THE HON'BLE COURT CAME TO THE CONCLUSION THAT CUTTING OF BOULDERS MIGHT HAVE BEEN WITH THE AID OF MACHINERY BUT THE ORIGINAL COMMODITY RETAINED A SUBSTANTIAL IDENTITY INSPITE OF PROCESSING CARRIED OUT BY THE A SSESSEE AND WAS, AS SUCH, NOT REGARDED AS MANUFACTURING OR PRODUCING ANY ARTICLE OR THING. AS AGAINST THIS, IN THE CAPTIONED CASES, THE RAW WIRE ROD HAS UNDERGONE DISTINCT CHANGE AS A RESULT OF THE VA RIOUS PROCESSES UNDERTAKEN AND, HAS THUS NOT RETAINED ITS ORIGINAL SUBSTANTIAL IDENTITY. ON THE OTHER HAND, RECENTLY THE HON'BLE S UPREME COURT IN THE CASE OF INDIAN CINE AGENCIES (SUPRA) HAS HEL D THAT, CONVERSION OF JUMBO ROLLS OF PHOTOGRAPHIC FILMS INT O SMALL FLATS AND, ROLLS IN DESIRED SIZES IS MANUFACTURE. IT WAS ALSO OBSERVED THEREIN AS UNDER: 18 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 ARIS E. THE ELEVENTH SCHEDULE, WHICH WAS INSERTED BY FINANC E (NO. 2) ACT, 1977 WITH EFFECT FROM 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 CHAPTER 74-76 UN DER THE CENTRAL EXCISE CLASSIFICATION WHEREAS INSULATED WIR ES AND, PAPER COATED INSULATED WIRES COME UNDER CHAPTER 85 AND, T HEREFORE CLASSIFICATION UNDER DIFFERENT CHAPTERS ALSO SUPPOR T THE STAND THAT, THE INDUSTRIAL UNDERTAKINGS OF THE APPELLANTS ARE M ANUFACTURING 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 THEIR INDUSTRIAL UNDERTAKINGS CAN BE SAID TO HAVE MANUFACTURED OR PR ODUCED 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 CASE OF BAJAJ TEMPO LTD. V CIT 196 ITR 188 (S.C), THE HONBLE SUPREME COURT HELD T HAT A TAX PROVISION, GRANTING INCENTIVES FOR PROMOTING GROWTH AND DEVELOPMENT SHOULD BE CONSTRUED LIBERALLY. INFACT, EVEN IN MYSORE MINERALS LTD. V. CIT 239 ITR 775 (S.C), WHIL E CONSIDERING SECTION 32, IT HAS BEEN LAID DOWN THAT THE PROVISIONS THAT CONFER BENEFIT ON THE ASSESSEE SHOULD BE SO IN TERPRETED AND THE WORDS USED THEREIN SHOULD BE ASSIGNED SUCH MEAN ING 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 ARE TWO POSSIBLE INTERPRETATIONS OF A T AXING 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 NOT BRINGIN G OUT ANY REASONS AND THE MANNER IN WHICH THEY ARE APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE CAPTIONED APPE LLANTS. WE HAVE REFERRED TO VARIOUS JUDICIAL PRONOUNCEMENTS, I NCLUDING THOSE OF THE HON'BLE SUPREME COURT OF INDIA AND THEREUPON , CULLED OUT RELEVANT PRINCIPLES, ON THE BASIS OF WHICH THE CONT ROVERSY HAS BEEN DETERMINED. THE DECISIONS REFERRED TO BY THE C IT(APPEALS), IN OUR CONSIDERED OPINION, DO NOT OPERATE IN CONFLI CT WITH THE PRINCIPLES REFERRED TO BY US IN THIS ORDER, THOUGH WE HAVE NOT DISCUSSED EACH OF THE CASE FOR THE SAKE OF BREVITY. 19 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 APPELLANTS , IT IS NOT POSSIBLE TO COME TO THE CONCLUSION THAT ANY LEGAL I NFIRMITY 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 FAC TS AND CIRCUMSTANCES, AS WELL AS, THE POSITION OF THE LAW IN A CORRECT PERSPECTIVE AND, IT IS THUS HELD THAT, THE APPELLAN TS ARE ENTITLED TO CLAIM OF DEDUCTION U/S 80IC OF THE ACT ON THE INCOM ES DERIVED FROM THEIR INDUSTRIAL UNDERTAKINGS. THUS, THE RESP ECTIVE ORDERS OF THE COMMISSIONER OF INCOME-TAX (A) ARE SET ASIDE AN D THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE CLAIM OF DEDUCTION U/S 80IC OF THE ACT AS PER LAW. 5. IT IS ALSO OBSERVED THAT THE TRIBUNAL DECIDED TH E IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE IN ASSESSMENT YEAR 2006-07 AND 2007-08 IN ITA NOS. 1320/CHD/2010 AND 1321/CHD/ 2010 VIDE ORDER DATED 10.10.2001 AND 19.10.2011 RESPECTIVELY FOLLOWING TH E EARLIER ORDER OF THE TRIBUNAL DATED 30.11.2009 RELATING TO ASSESSMENT YE AR 20005-06 (SUPRA). 6. THE FACTS OF THE PRESENT YEAR ARE SIMILAR TO THA T OF ASSESSMENT YEAR 2005-06 AND, THEREFORE, RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL DATED 30.11.2009 IN ITA NO. 215/CHANDI/2009 (SUPRA), WE U PHOLD THE ORDER OF CIT(A) AND DISMISS THE GROUND OF APPEAL RAISED BY T HE REVENUE. 7. GROUND NO.2 OF THE APPEAL READS AS UNDER:- 2. THE LD. CIT(A) HAS ERRED IN ALLOWING DEDUCTION U /S 80IC IN RESPECT OF RECEIPTS EARNED, ON ACCOUNT OF JOB WORK CARRIED OUT FOR STESALIT INDUSTRIES LTD. 8. THE ASSESSING OFFICER DID NOT CONSIDER JOB WORK CARRIED OUT FOR STESALIT LDT AMOUNTING TO RS. 42,711/- FOR DEDUCTIO N U/S 80IC DESPITE THE FACT 20 THAT THE SAME MANUFACTURING PROCESS WAS INVOLVED IN THE CASE OF SALES. ON APPEAL , THE CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE OBSERV ING AS UNDER:- 10.3 THE SUBMISSIONS OF THE APPELLANT HAVE BEEN CON SIDERED WITH REFERENCE TO THE FACTS OF THE CASE. THERE IS STRENGTH IN THE ARGUMENTS OF THE APPELLANT THAT THE JOB WORK RECEIP TS ARE DONE IN THE COURSE OF PRODUCTION PROCESS CARRIED OUT IN THE APPELLANTS INDUSTRIAL UNDERTAKING. ACCORDINGLY, T HE JOB WORK RECEIPTS ARE DIRECTLY RELATED TO THE PRODUCTION ACT IVITIES OF THE APPELLANT FIRM. ACCORDINGLY THE SAID RECEIPTS QUAL IFY FOR DEDUCTION U/S 80IC OF THE ACT. THE APPELLANT SUCCE EDS ON THIS GROUND OF APPEAL. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE ALS O PERUSED THE MATERIALS AVAILABLE ON RECORD. IN OUR OPINION, THE CIT(A) HAS CORRECTLY ALLOWED THE CLAIM OF THE ASSESSEE. THE VIEW TAKEN B Y THE CIT(A) IS FULLY SUPPORTED BY THE DECISION OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS IMPEL FORGE AND ALLIED INDUSTRIE S LTD (2010) 326 ITR 27 (P&H). IN THE SAID CASE, THE ASSESSEE WAS ENGAGED IN MANUFACTURING AND TRADING OF TRACTOR AND AUTO PARTS AND ALSO DOING JO B WORKS OF SIMILAR NATURE. IT CLAIMED DEDUCTION U/S 80IB OF THE ACT ON INCOME FRO M JOB WORKS, ALSO WHICH WAS PARTLY ALLOWED BY THE ASSESSING OFFICER. THE C IT(A) UPHELD THE PLEA OF THE ASSESSEE WHICH WAS AFFIRMED BY THE TRIBUNAL. O N APPEAL, THE HON'BLE PUNJAB & HARYANA HIGH COURT HELD THAT WHERE THE ASS ESSEE WAS ENGAGED IN BUSINESS OF MANUFACTURING AND TRADING OF TRACTOR AN D AUTO PARTS AND ALSO IN DOING JOB WORK OF SIMILAR NATURE, IT WOULD BE ENTIT LED TO DEDUCTION U/S 80-IB IN RESPECT OF BOTH INCOMES I.E. INCOME DERIVED FORM ITS OWN MANUFACTURING AND INCOME DERIVED FORM JOB WORK DONE FROM OTHERS. IN OUR VIEW, THE JOB WORK RECEIPTS ARE DIRECTLY RELATED TO THE PRODUCTIO N ACTIVITIES OF THE ASSESSEE FIRM. 21 IN VIEW OF THE ABOVE, WE UPHOLD THE ORDER OF CIT(A) ON THIS ISSUE AND DISMISS GROUND NO.2 OF THE APPEAL. 10. GROUND NO.3 OF THE APPEAL READS AS UNDER:- 3. THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITIO N MADE ON ACCOUNT OF PROCESSING CHARGES TO MEGNA WIRES (P ) LTD. 11. THE ASSESSING OFFICER HAS DISCUSSED THIS ISSUE IN PARA 4 OF THE ASSESSMENT ORDER. THE ASSESSING OFFICER OBSERVED T HAT ASSESSEE HAD PAID PROCESSING CHARGES TO M/S MEGNA WIRES (P) LTD, JALA NDHAR. THE TOTAL WORK DONE BY M/S MEGHNA WIRES (P) LTD WAS RS. 5,59,263/- . THE ASSESSEE INFORMED THAT IT GOT WIRE DRAWING OF 18280.240 KG. THE ASSESSING OFFICER ASKED THE ASSESSEE AS TO WHY DEDUCTION U/S 80IC OF THE ACT SHOULD NOT BE DISALLOWED. HOWEVER, THE ASSESSEE DID NOT FURNISH A NY DOCUMENTARY EVIDENCE IN THIS REGARD. THEREFORE, DEDUCTION U/S 80IC OF T HE ACT ON THIS ASSIGNMENT WAS NOT ALLOWED BY THE ASSESSING OFFICER. ON APPEA L, THE CIT(A) DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER, OBSERVI NG AS UNDER:- 11.2 THE APPELLANTS CONTENTION HAS BEEN CONSID ERED AND IS FOUND TO BE CORRECT. THE AO HAS DULY MENTIO NED THAT THE APPELLANT PAID PROCESSING CHARGES TO M/S M EGNA WIRES (P) LTD. THE GENUINENESS OF THE SAID EXPENSE S HAS NOT BEEN DOUBLED BY THE AO. HE HAS SIMPLY MISLED HIMSELF INTO MISTAKING THE SAID EXPENDITURE FOR INC OME AND THEN BY REFUSING DEDUCTION U/S 80IC ON THE SAME . THERE IS NO GROUND FOR MAKING ANY ADDITION ON ACCOU NT OF EXPENDITURE CLAIMED BY THE APPELLANT AS THE SAME IS NOT SUBJECT MATTER OF CLAIM FOR DEDUCTION U/S 80IC OF THE ACT. THE DISALLOWANCE ON THE SAID HEAD MADE BY THE AO IS ACCORDINGLY DELETED. THE APPELLANT SUCCEEDS ON THIS GROUND OF APPEAL. 22 12. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE AL SO PERUSED THE MATERIALS AVAILABLE ON RECORD. SHRI ASHWANI KUMAR, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS SIMPLY INC URRED AND CLAIMED EXPENDITURE ON ACCOUNT OF JOB WORK CHARGES PAID TO M/S MEGNA WIRES (P) LTD. THEREFORE, THE ASSESSING OFFICER WAS NOT JUST IFIED IN MAKING ANY ADDITION ON ACCOUNT OF EXPENDITURE CLAIMED BY THE A SSESSEE AS THE SAME WAS NOT SUBJECT MATTER OF CLAIM FOR DEDUCTION U/S 80IC OF THE ACT. THERE IS NO MATERIAL ON RECORD TO CONTROVERT THE ABOVE CONTENTI ON OF THE LD. COUNSEL FOR THE ASSESSEE, SHRI ASHWANI KUMAR. IT APPEARS, THAT THE ASSESSING OFFICER HAS SIMPLY MISLEAD HIMSELF INTO MISTAKING THE SAID EXPE NDITURE FOR INCOME AND THEN BY REFUSING DEDUCTION U/S 80-IC ON THE SAME. T HUS, THERE WAS NO JUSTIFICATION IN MAKING THE ADDITION. IN FACT, THE ASSESSING OFFICER HAS NOT DOUBTED THE GENUINENESS OF THE PAYMENT OF RS. 5,59, 263/- TOWARDS PROCESSING CHARGES TO M/S MEGNA WIRES (P) LTD. IN OUR VIEW, TH E CIT(A) HAS CORRECTLY DELETED THE ADDITION. ACCORDINGLY, WE UPHOLD THE O RDER OF CIT(A) ON THIS ISSUE. 13. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 21 ST DAY OF FEBRUARY, 2012. SD/- SD/- (MEHAR SINGH) (H.L.KARWA) ACCOUNTANT MEMBER VICE PRESIDENT DATED : 21 ST FEBRUARY, 2011 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR TRUE COPY BY ORDER ASSISTANT REGISTRAR 23