M/S. INDIA CINE AGENCIES versus COMMISSIONER OF INCOME TAX, MADRAS

Citation: [2008] 15 S.C.R. 1122 · Decided: 12-11-2008 · Supreme Court of India · Bench: ARIJIT PASAYAT · Disposal: Appeal(s) allowed

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Judgment (excerpt)

A 
B 
[2008] 15 s. c. R. 1122 
MIS. INDIACINE AGENCIES 
.. COMMJSSIQ~ER OF l~COME TAX, MADRAS 
(Civil.AppeaLNos. 3649-3650 of 2003) 
NOVEMBER. 12, 2008 
[DR. AR1jrr PASAYAJ AND DR. 
0
MUKUNDAKAM 
SHARMA,.JJ.] . 
Income ·rax Act, 1961; Ss. 32AB, 80HH.and 801 and 
C Schedule 11. inserted by Finance (Ac.t N0.2), .1977:. 
Permissible deduction - Conversion of Jumbo rolls of 
photographic. film into small rolls...;. Whether amounting to 
manufacture/production for claiming deduction in terms of Ss. 
0 32AB, 80HH and s.801of1961 Act- Held: Such a conversion 
could· be termed as manufacture/production of small rolls of 
,... 
E 
. photographic film for claiming benefit of permissible 
deduction urider the relevant provisions of the 1961 Act. 
·•·· Words and Phrases. 
. . 
. 
'Manufacture', ;Production', 'Prodl1ce' - Meaning of, in the 
context of'Ss'.32AB, 80HH and 801 of the Income Tax Act, 
1961; 
. ,' 
··The ··i.sslJe ~'1ich arose· for. determi~atlon. ln·:thes~ 
F appeals wa$as to.whether the conversion of Jumbo rolls 
. ofphotographiC 'films into small rolls of different sizes not 
amounted .to manufacture/production as contended by 
the Revenue or amounted to manufacture/production as 
claimed by the assessee for the purpo'se of claiming 
G benefit of permissible deduction under . Ss. 32AB, 'SOHH 
and 801 of the Income Tax Act, 1961. 
AUoWing the .appeals, the Court 
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1122 
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INDIA CINE AGENCIES v. COMMISSIONER OF INCOME 1123 
TAX, MADRAS 
HELD:1.1. Manufacture is production of articles for · A 
use from raw or prepared materials by giving such 
materials new forms, qualities, properties or 
combinations, whether by hand. labour or m~chines. 
· .·[Para 3) [1126-C] 
Deputy Commissioner of Sales Tax (Law), Board of · 8 
Revenue (Taxes), Emakulam v. Mis. Coco Fibres, (1992) 
Supp;1 sec 290, relied on. 
Black's Law Dictionary, 5th Edition, referred to. 
1.2 Manufacture implies a ctaange but every change 
C 
is not manufacture, yet every change of an article is the 
result of treatment, labour and manipulation. Naturally, 
·. manufacture is the end result of one or more processes 
through which the orig.inal commodities are made .to 
. pass. The nature and extent of processing may vary from P · 
one ·class to another. [Para 4] [1126-E~F] 
1.3. Whenever a commodity undergoes a change as 
a result of some operation performed on it or in regard 
to it, such operation would a.mount to processing of the E . 
. commodity. But it is only when the change or a series of 
changes takes the commodity to the point where 
commercially it can no longer be regarded as the original 
commodity but instead is recognized as a new and 
distinct article that a manufacture can be said to take 
place. Each step towards the production would be a F 
process in relation to the manufacture.[Para 4] [1126-G-
H; 1127-A, B] 
Collector of Central Exdise, Jaipur· v. RajastJ?an State 
Chemical Works, Deedwana, Rajasthan, .(199_1) 4 SCC 473,. G 
relied on. 
. 
. · 1 ;4. The essence of _manufacture is the change of one . 
object to another for the purpose of making it marketable. 
The essential point thus is that, in manufacture something 
is brought into existence, which is different from that, 
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1124 
SUPREME COURT REPORTS 
[2008] 15 S.C.R. 
A whi_ch originally existed in the sense that the thing 
produced is by itself a commercially different commodity 
whereas in the case of processing it is not necessary to 
produce a commercially different article. [Para 5] [1127-
D-E] 
8 
Mis. Saraswati Sugar Mills and others v. Haryana State 
Board and others, (1992) 1 sec 418, relied on. 
1.5. The prevalent and generally accepted test to 
ascertain that there is ·manufacture' is whether the 
c change or the series of changes brought about by the 
application of processes take the commodity to the point 
where, commercially, it can no longer be regarded as the 
original commodity but is, instead, recognized as a 
distinct and new article that has emerged as a result of 
0 the process. [Para ~) [1127-F.;G) 
Ujagar Prints v. Union of India, (1989) 3 SCC 488, relied 
on. 
1.6. The moment there is transformation into a new 
commodity commercially known as a distinct and 
E separate commodity having its own character, use and 
name, whether be it 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 
F t

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