* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ ITA No.519-2009
Date of decision : 11th August, 2009
COMMISSIIONER OF INCOME TAX ...Appellant.
Through: Ms. Prem Lata Bansal, Advocate with
Mr. Paras Chaudhry, Advocate.
VERSUS
SOPHISTICATED MARBLES & GRANITE INDUSTRIES
....Respondent
Through:
CORAM:
HON’BLE MR. JUSTICE A. K. SIKRI
HON’BLE MR. JUSTICE VALMIKI J.MEHTA
1. Whether the Reporters of local papers may be allowed to see
the judgment?
2. To be referred to the Reporter or not?
3. Whether the judgment should be reported in the Digest?
% JUDGMENT A. K. SIKRI , J (ORAL)
1. The question that arose for consideration before the Tribunal was as to
whether the process activity undertaken by the assessee would fall within the
ITA-519/2009 Page 1
expression „manufacturing process‟. Manufacturing process is not defined in
the Income Tax Act though Finance Amendment Act, 2009 defines this
expression. In the case titled as Aspinwall and Company Limited Vs. CIT
251 ITR 323 the Supreme Court opined that in the absence of any expressed
definition of the word „manufacture‟ it has to be given a meaning as is
understood in common parlance. It is to be understood as meaning to be the
production of articles for use from raw or prepared materials by giving such
materials new forms, qualities or combinations whether by hand labour or
machines. If the change made in the article results in a new and different
article then it would amount to manufacturing activity. Applying the test in
the said case, the Apex Court held that process of manufacturing coffee
beans from raw berries amounted to manufacturing activity as coffee beans
produced from the raw berries had distinct identity. This process of
manufacturing was explained in the following manner:
“The factual observation of the Tribunal as a result of the
inspection found that the following nine processes are
involved in curing of coffee:
(1) Receipt of coffee from the estates;
(2) Storage of coffee in covered godowns;
(3) Drying of coffee to the required standards prescribed by
the coffee board in drying yards;
(4) Hulling/pealing/polising;
ITA-519/2009 Page 2
(5) Grading of coffee mechanically;
(6) Colour sorting;
(7) Garbling and munual grading;
(8) Out-turning of garbled coffee; and
(9) BulkingThe Tribunal also found that to deal with the nine processes,
the assessee has the factory area where godowns for storage
of uncured/clean coffee, coffee drying yards, machine rooms,
garbling sheds, etc., are located.”
2. In the present case, the assessee is dealing with the manufacture and
sale of marble stones. It has come on record that following activities are
undertaken by the assessee:
“(a) Purchase of block or slabs;
(b) Cutting of blocks on gang show machine of the
approximate average size of 7‟ x4‟ (ft). We don‟t have
arrangements of cutting blocks for making slabs we get this
work done through outside in our strict and direct supervision
having constant check over quality control. Such slabs are
brought to our factory. In case of purchase of slab itself the
same comes to the factory of further manufacturing/processing
activities;
(c) The first process to make end product out of slabs is to
put full size fibre on one side of the slab which is technically
required to give support to the slab, otherwise it will get cracks
or it gets broken;
(d) In the slabs, there are invariably various holes and cracks.
To make it marketable which is the main object of our business,
this separate process is adopted. We have to mix up different
types of chemicals marble powders or marble cutting for
applying slabs to cover holes and cracks;
(e) With mixing chemicals and powders etc., the chemical is
applied on holes or cracks by which the same gets filled up.
ITA-519/2009 Page 3
After the holes and cracks are filled the slab is taken to the
polishing machines;
(f) There are 5-7 stages of polishing the slab by different
machines. In the polishing section different types of abrasives
being 0-5 size are used in continuity to give proper effect of
polish;
(g) In the process of polishing alongwith the ue of abrasives
continuous water is used;
(h) For bringing the shinning on the slab, different types of
tin oxide is applied and thus the slab comes to a finished stage;
(i) The finished slab is thereafter cut to proper size and shape
from which the marketable size of slabs, moulded pieces, edged
pieces and tiles are make;
(j) In case of moulded pieces of marble, a delicate and
critical process is applied through grinding machines of
different types which are used by good technical persons to
make a specific type of moulded marble as per different types of
cuttings, shaping and edging;
(k) To comply with the requirement of the customer, we have
to prepare and suggest different types of designs and drawings
and after the selection of our specific drawings and designs, the
marble pieces are moulded;
(l) Invariably, our product being very costly, the customers
require edging of the marble pieces. For this with the help of
specific technicians and works we edge the process with the
help of specific papers alongwith small tools and thus after
edging the sides of the pieces becomes extremely smooth and
good looking;
(m) During the state of moulding or even edging again certain
scratches, holes or cracks are found in the pieces. The items
being very much decorative and costly, the special treatment of
covering the holes, scratches or cracks, the same are filled by
applying specific chemicals, marble powers with matching
colours as per the colour of the marble pieces;
(n) The normal thickness of the marble slab happens to be
around 18-20 mm whereas in general, the new fashion has
developed to use thinner size of the marble for which we again
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cut the slabs into the average size of around 8-10mm. For this
again cutting machine with the specific care is applied and thus
the marble thinner thickness is produced”
3. It is clear from the above that after purchasing of blocks of slabs and
getting them cut by cutting machines from outside, the process which is
undertaken by the assessee is to put full size fibre on one side of the slab
which is technically required to give support to the slab; to fill holes and
cracks in these slabs to make it marketable by applying chemicals on holes
and cracks; mixing of chemicals and powder for the aforesaid purpose is
done by the assessee; polishing the slab by different machines; for bringing
shine on the slab applying different types of tix oxide and thereafter cutting
the finished slabs to proper size and shapes from which the marketable size
of slabs, moulded pieces, edged pieces and tiles are made.
4. Applying the test formulated by the Supreme Court, this activity
would clearly fall within the definition of „manufacturing process‟. It is
clear from the above that the raw form blocks are purchased and then those
slabs undergo various processes before they become marketable and the final
product is clearly much different from the product initially purchased by the
assessee. Had it been a case of purchasing of blocks and slabs, cutting the
same in that very form and thereafter selling those tiles, there could have
ITA-519/2009 Page 5
been an arguable case as to whether this amounts to manufacturing process
or not. However, in the present case the activities are not confined to cutting
of the blocks or slabs after the purchase but it has to undergo various
processes with the help of machines and labour and after applying various
kinds of chemicals. In these circumstances, we are of the opinion that the
Tribunal rightly relied upon the judgment of the Rajasthan High Court in the
case of Arihant Tiles and Marbles Pvt. Ltd. Vs. Income Tax Officer 295
ITR 148(Raj.). In this case, Rajasthan High Court, after taking into account
the various judgment of the Supreme Court and other High Courts observed
as under:
“6. The language used in Section 10B is “manufacture or
production”. This language is similar to the language used in
Section 80-IB. The Supreme Court in CIT Vs. Sesa Goa Ltd.
MANU/SC/1123/2004 had an occasion to consider the
expression “production”. The Rajasthan High Court in Arihant
Tiles & Marbles (P) Ltd. Vs. ITO (Supra) for the purpose of
Section 80-IB was pleased to hold that the activity namely
sawing of marble blocks and subsequent activities of cutting
and polishing, will fall within the meaning of the expression
“production” and therefore, assessee was entitled to benefit
under Section 80-IB.
The expression “manufacture” or “production” are different
expressions and the word “production” has a wider meaning as
explained by the apex Court in Sesa Goa Ltd. (supra). In our
opinion, the word “production” under Section 10B considering
similar expression in Section 80IB will have to be given this
wider meaning. Considering that the expressions are not
ITA-519/2009 Page 6
defined in the Act but the expressions are used in the same Act.
The only difference between Section 80-IB and Section 10B is
that Section 10B is applicable to a 100 per cent EOU, whereas
Section 80-IB can be in respect of any unit. In our opinion,
therefore, the expression “production” will have the same
meaning as in Sesa Goa Ltd. (supra) and consequently, the
question framed is devoid of merits.”
5. We may also note that Bombay High Court in the case of CIT Vs.
Fateh Granite (P) Ltd. 314 ITR 32, was concerned with the identical issue,
namely, manufacture of granite tiles and held the same to be a manufacturing
process as is clear from the following discussion contained thereunder:
“The language used in Section 10B is “manufacture or
production”. This language is similar to the language used
in Section 80-IB. The Supreme Court in CIT Vs. Sesa Goa
Ltd. MANU/SC/1123/2004 had an occasion to consider the
expression “production”. The Rajasthan High Court in
Arihant Tiles & Marbles (P) Ltd. Vs. ITO (Supra) for the
purpose of Section 80-IB was pleased to hold that the
activity namely sawing of marble blocks and subsequent
activities of cutting and polishing, will fall within the
meaning of the expression “production” and therefore,
assessee was entitled to benefit under Section 80-IB.”
6. Ms. Prem Lata Bansal, learned counsel for the revenue has placed
emphasis on the judgment of the Madras High Court in C.I.T. Vs. Vijay
Granite Pvt Ltd. 267 ITR 606 (Mad.). In that case, the process was confined
to cutting and polishing of granite slabs and on that basis the Madras High
Court opined that it would not amount to production and manufacture of
ITA-519/2009 Page 7
articles. We have our reservation about the view taken in the aforesaid case
as we are of the prima facie view that even polishing of granite slabs may
amount to manufacturing process. However, it is not necessary for us to
express our view finally in respect of that judgment as much as in the case in
hand, apart from the polishing of the tiles, particularly various other
processes as indicated above are also done including the filling up holes and
cracks with chemical after mixing chemicals and powders at the premises of
the assessee and putting full size fibre on one side of the slab which is
technically required to give support to the slab. Therefore, in any case, that
judgment has no application.
7. In view thereof, no substantial question of law arises in the present
case.
8. Dismissed.
A.K.SIKRI, J
VALMIKI J.MEHTA, J
August 11, 2009
Ne
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