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Judgment
V. K. SINGHAL, J. :
The Tribunal, Jaipur Bench, Jaipur has referred the following question of law arising out of its order dt. 25th July, 1990 in respect of the asst. yrs. 1977-78 and 1978-79 :
"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the activity of the assessee is clearly in the nature of manufacturing and, therefore, it is entitled to investment allowance under s. 32A(2) of the IT Act, 1961 ?"
The brief facts of the case are that during the course of assessment proceedings a claim in respect of investment allowance was made by the assessee. The ITO found that the assessee is not manufacturing or producing any articles or things but extracting lime stone from mines and selling the same. During these process some time he has to face hard stone veins which are extracted and sold in the shape of Rodi. The ITO came to the conclusion that the assessee is not a Small Scale Industrial Undertaking for the purpose of business of manufacture or production of any other article or things and, therefore, is not entitled for investment allowance.
An appeal was preferred before the CIT (A), who also came to the conclusion that the industry is engaged in the business of extracting lime stone and its sale either as such or after converting it into lime and lime dust or concrete by stone crusher and this does not amount to manufacture or production of any article or thing and, therefore, the order of the ITO was upheld. The matter was challenged before the Tribunal where it was submitted that the lime stone in the raw form is being extracted from the mines and then it is crushed and converted into lime or lime dust or Rodi. The Tribunal came to the conclusion that the nature of business of the assessee is not (sic) of manufacturing and, therefore, the assessee is not (sic) entitled for investment allowance.
The submission of Mr. Bapna on behalf of the Revenue is that excavation of mineral does not amount to manufacture and, therefore, the assessee is not entitled for investment allowance.
Arguments of the learned counsel for the Revenue have been considered. In accordance with the provisions of s. 32A investment allowance is payable in respect of plant and machinery and in the present case the claim of the assessee was a small scale industrial undertaking which is engaged in the business of manufacture or production of any article or thing. Excavation of mineral is not a process of manufacture but if after excavation minerals so extracted are put to a crusher through plant or machinery which result in the business of manufacture or production of any article or thing than it will amount to manufacture and deduction under s. 32A has to be allowed. Crushing of the mineral so extracted which result in production of Rodi and powder is a process of manufacture. The word "manufacture" has not been defined in the Act except under s. 10A(8) Expln. (iii) which was added by Act No. 11 of 1981 w.e.f. 1st April, 1981. Manufacture involves bringing into existence of a new product which may have a different physical or chemical composition and is understood differently in common and commercial parlance. This Court has held in Commercial Taxes Officer Vs. Bikaner Gypsum Ltd., that excavation of gypsum from the mine is not a process of manufacture. So far as the conversion of the mineral in the form of Rodi and power (is concerned) it is evident that it does not retain the physical shape which the raw material has and is understood as a different commercial commodity by the business community. In these circumstances, the Tribunal was justified in coming to the conclusion that conversion of lime stone by crushing into Rodi or lime dust is a process of manufacture.
In these circumstances, the Reference is answered in favour of the assessee and against the Revenue. No order as costs.