Sec 10B /10A IT Act _ 'produces' or 'manufactures'

[bkmahapatra]

Can beneficiation of Ore (particularly if it  involves process wherein chemicals are also used to  make it suitable for specific markets) is  "produce or manufacture"  for sec 10A/10B of IT Act?

After amendment per sec.2(29BA) from AY 2009-10,  it may not fulfill definition of "manufacture". However, it satisfies criteria of 'production' keeping in view the judgments of Supreme Court in:

1. CIT vs Sesa Goa Ltd. (2004) 271 ITR 331 (SC) wherein it was held that extraction and processing of iron ore amounts to "production" within the meaning of the word in section 32A(2)(b)(iii) of IT Act
 
2. CIT Vs. N. C. Budharaja & Co., (1994) 204 ITR 412 (SC):
       "The word production has a wider connotation than the word manufacture. While every manufacture can be characterised as production, every production need not amount to manufacture


3. Vijay Ship Breaking Corpn. & Ors. s CIT (2009) 314 ITR 309 SC:
   "the Legislature has used the words 'manufacture' or 'production'. Therefore, the word 'production' cannot derive its colour from the word 'manufacture'. Further, even according to the dictionary meaning of word 'production', the word 'produce' is defined as something which is brought forth or yielded either naturally or as a result of effort and work (Webster's new international dictionary). It is important to note that the word 'new' is not used in the definition of the word 'produce'". 
The Apex Court overruled Guj HC decision which held that assessee was not entitled to claim the benefit u/s. 80HH / 80I Act as there was neither production nor manufacture of new goods by the process of ship breaking.

Other inputs/ views will be of great help.

BKMahapatra
brajamahapatra@gmail.com

[ashutosh majumdar]

Beneficiation of Ore is directly covered by Sesa Goa 271 ITR 331 (SC) as you have rightly pointed out.

crushing the manganese ore to the manganese powder was held to be production in Cit vs Dimac Industries on the basis that the expression "production" is of much wider amplitude than the expression manufacture and the finding, of fact recorded, even if it is held that the act does not amount to manufacture it still will amount to production.

In B.G. Chitale vs Deputy Commissioner Of Income 116 TTJ Pune 658 the Special Bench held that the process of standardization and pasteurization of milk amounts to processing but does not amount to manufacture / production for the purpose of claiming deduction under Sections 80-I and 80HHA of the Act.

Of course, mere cutting of marble blocks into marble slabs and tiles and selling the same after polishing does not amount to either production or manufacture of any article or thing as held in Luck Minmat 245 ITR 830 (SC)

Hope this helps.

Can beneficiation of Ore (particularly if it  involves process wherein chemicals are also used to  make it suitable for specific markets) is  "produce or manufacture"  for sec 10A/10B of IT Act?

After amendment per sec.2(29BA) from AY 2009-10,  it may not fulfill definition of "manufacture". However, it satisfies criteria of 'production' keeping in view the judgments of Supreme Court in:

1. CIT vs Sesa Goa Ltd. (2004) 271 ITR 331 (SC) wherein it was held that extraction and processing of iron ore amounts to "production" within the meaning of the word in section 32A(2)(b)(iii) of IT Act
 
2. CIT Vs. N. C. Budharaja & Co., (1994) 204 ITR 412 (SC):
       "The word production has a wider connotation than the word manufacture. While every manufacture can be characterised as production, every production need not amount to manufacture


3. Vijay Ship Breaking Corpn. & Ors. s CIT (2009) 314 ITR 309 SC:
   "the Legislature has used the words 'manufacture' or 'production'. Therefore, the word 'production' cannot derive its colour from the word 'manufacture'. Further, even according to the dictionary meaning of word 'production', the word 'produce' is defined as something which is brought forth or yielded either naturally or as a result of effort and work (Webster's new international dictionary). It is important to note that the word 'new' is not used in the definition of the word 'produce'". 
The Apex Court overruled Guj HC decision which held that assessee was not entitled to claim the benefit u/s. 80HH / 80I Act as there was neither production nor manufacture of new goods by the process of ship breaking.

Other inputs/ views will be of great help.

BKMahapatra
brajamahapatra@gmail.com