Manufacture/Production — Conversion of jumbo rolls of photographic films into small flats and rolls in the desired sizes amounted to manufacture /production of a article or thing.

[India Cine Agencies v. CIT, (2009) 308 ITR 98(SC)]

In all the appeals before the Supreme Court the common
question that was involved was related to the entitlement of benefit in terms
of S. 32AB, S. 80HH and S. 80-I of the Income-tax Act, 1961 (in short the
‘Act’). In all the cases the issue was the effect of conversion of jumbo rolls
of photographic films into small flats and rolls in the desired sizes. The
assessees’ contention was that the same amounted to manufacture/production, as
the case may be. The stand of the Revenue was that it was not either
manufacture or production. In some cases the High Court held that in any
event, because of item 10 of the Eleventh Schedule, no deduction was
permissible. The High Court decided in favour of the Revenue and, therefore,
the appeals were filed by the assessee before the Supreme Court. The Supreme
Court after referring the dictionary meaning of the words ‘manufacture’ and
‘produce’ and noting the precedents on the subject held that the assessee was
entitled to the allowance u/s.32AB, u/s.80HH and u/s.80I of the Act. The
Supreme Court observed that the matter could yet be looked from another angle.
If there was no manufacturing activity, then the question of referring to item
10 of the Eleventh Schedule for the purpose of exclusion did not arise. The
Eleventh Schedule, which was inserted by the Finance (No. 2) Act, 1977, with
effect from 1-4-1978, has reference to S. 32A, S. 32AB, S. 80CC(3)(a)(i), S.
80-I(2), S. 80J(4) and S. 80A(3)(a)(i) of the Act. The appeals were allowed.

Authors’ Note :

Finance (No. 2) Act, 2009 has introduced definition of the
term ‘manufacture’ in S. 2(29BA) w.e.f. 1.4.09.