The Commissioner of Income Tax-I vs Chiranjjeevi Wind Energy Limited

F.M. Ibrahim Kalifulla, J.—The revenue has come forward with this appeal and the substantial question of law sought to be raised by the

Appellant reads as under:

Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal was right in law in holding that, the Assessee

company is eligible for deduction u/s 80IB of the Income Tax Act, 1961, even though the Assessee company assembled different parts of the

Wind Mills together, it does not undergo any process by which as a new and distinct article?

We heard Mr. J. Naresh Kumar, learned Standing Counsel for the Appellant. In order to appreciate the question raised, the facts are required

to be stated.

The assessment year pertains to 2005-2006. The Respondent Assessee was engaged in the activity of procuring different parts for assembling

Wind Mills. The question for consideration is whether such assembling of different parts and thereby ultimately Wind Mill is brought into existence,

would amount to the activity of ""manufacture"", in order to entitle the Respondent - Assessee for deduction as provided u/s 80IB of the Income Tax

Act.

According to the Appellant, since the Respondent - Assessee merely procured the different parts of the Wind Mill and assembled the same, it

will not amount to either ""manufacture"" or ""production"" of any article or thing, as spelt out in Section 80IB(2)(iii) of the Income Tax Act. Such

contention put forth by the Appellant was rejected by the Tribunal in the order impugned in this appeal.

In this respect, we need not dilate the issue in deep inasmuch as the Hon''ble Supreme Court in a recent decision reported in India Cine

Agencies Vs. Commissioner of Income Tax, Madras, has laid down the test to determine what activity would amount to ""manufacture"". The ratio

laid down by the Hon''ble Supreme Court has been set out in paragraph 7, which reads as under:

To put it differently, the test to determine whether a particular activity amounts to ""manufacture"" or not is: Do new and different goods emerge

having distinctive name, use and character. The moment there is transformation into a new commodity commercially known as a distinct and

separate commodity having its own character, use and name, whether it be the result of one process or several processes ""manufacture"" takes

place and liability to duty is attracted. Etymologically the word ""manufacture"" properly construed would doubtless cover the transformation. It is

the transformation of a matter into something else and that something else is a question of degree, whether that something else is a different

commercial commodity having its distinct character, use and name and commercially known as such from that point of view, is a question

depending upon the facts and circumstances of the case.(See. Empire Industries Limited and Others Vs. Union of India and Others,

The Hon''ble Supreme Court also considered the meaning of the word ""production"" and in that context, referred to its earlier decision reported in

Commissioner of Income Tax Vs. Sesa Goa Ltd., , and the relevant portion extracted from the said judgment, is to the following effect:

The matter can be looked at from another angle. In Commissioner of Income Tax Vs. Sesa Goa Ltd., this Court considered the meaning of the

word ""production"". The issue in that case was whether the extraction and processing of iron ore amounted to manufacture or not in view of the

various processes involved and the various processes would involve production within the meaning of Section 32A of the Act. It was, inter alia,

observed as under:

In Words and Phrases 2nd Edn. by Justice R.P. Sethi the expressions ""produce"" and ""production"" are described as under:

In Webster''s New International Dictionary, the word ''produce'' means something that is brought forth either naturally or as a result of effort and

work; a result produced. In Black''s Law Dictionary, the meaning of the word ''produce'' is to ''bring into view or notice; to bring to surface''.

A reading of the aforesaid dictionary meanings of the word ''produce'' does indicate that if a living creature is brought forth, it can be said that it is

produced. (See Commissioner of Income Tax, Bangalore Vs. Venkateswara Hatcheries (P) Ltd. etc. etc., ; Commissioner of Income Tax, Orissa

and Others Vs. N.C. Budharaja and Company and Others, .

Production or produce The word ''production'' or ''produce'' when used in juxtaposition with the word ''manufacture'' takes in bringing into

existence new goods by a process, which may or may not amount to manufacture. It also takes in all the by-products, intermediate products and

residual products, which emerge in the course of manufacture of goods. The expressions ''manufacture'' and ''produce'' are normally associated

with movables, articles and goods, big and small but they are never employed to denote the construction activity of the nature involved in the

construction of a dam or for that matter a bridge, a road and a building. (See Moti Laminates Pvt. Ltd. and Others Vs. Collector of Central

Excise, Ahmedabad, .

Applying the above test to the case on hand, the different parts procured by the Respondent - Assessee by themselves cannot be treated as a

Wind Mill. Those different parts bear distinctive names and when assembled together, thereafter it gets transformed into an ultimate product which

is commercially known as a ""Wind Mill"". There can, therefore, be no difficulty in holding that such an activity carried on by the Respondent -

Assessee would amount to ""manufacture"" as well as ""production"" of a thing or article as set out in Section 80IB(2)(iii) of the Income Tax Act. In

such circumstances, the conclusion of the Tribunal in accepting the plea of the Respondent - Assessee cannot be found fault with. We, therefore,

do not find any question of law, much less substantial question of law, to entertain this appeal.

The appeal fails and the same is dismissed. No costs.