Judgment:
ORDER
Rajendra Babu, J.
1. Two questions have been referred for our opinion in this reference arising under s. 256(1) of the IT Act and the said questions are as follows :
'(1) Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the guarantee commission paid by the assessee is an admissible revenue expenditure
(2) Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the assessee is entitled to investment allowance on the screening plant and electrical installations used in mining ?'
2. In respect of this very assessee in another reference, we have answered an identical question as has been referred to us as Question No. 1 in ITRC No. 162/1993, disposed of on 10th Jan., 1996 [reported as CIT vs. Gogte Minerals. Following the said decision and for the reasons stated therein, we answer the question referred to us in this case also similarly.
3. Argument in regard to the second question turns upon the interpretation to be placed on the expression used under s. 32A(2)(b)(iii) of the IT Act. The assessing authority took the view that the assessee is engaged in mining operations and when iron ore is excavated, there is no manufacture involving production of any article or thing. However, on appeal to the first appellate authority, he took the view that production of iron ore is to be considered as manufacturing activity and upheld the claim of the assessee under s. 32A of the Act. On further appeal by the Department to the Tribunal, the view of the appellate authority was affirmed following its earlier decision in ITO vs . Agarwal Stone Industries .
4. The learned standing counsel urged that in excavating the iron ore and marketing the same, there is no production of any article or thing. He sought to rely upon the decisions in Hind Nippon Rural Industries Pvt. Ltd. vs . CIT : [1993]201ITR588(KAR) and Chowgule & Co. Pvt. Ltd. & Anr. vs. Union of India & Ors. 47 STC 124. In Hind Nippon Rural Industries Pvt. Ltd.'s case (supra) this Court was concerned in chipping and sizing granite by using some machinery. This Court took the view that the same would not involve any manufacturing or processing of goods and the assessee was not an industrial company for the purpose of s. 2(7)(c) of Finance (No. 2) Act, 1977. In an earlier case in Hind Nippon Rural Industries Pvt. Ltd. vs . CIT 201 STC 501, [sic - this should be : [1993]201ITR581(KAR) ] this Court took the view that if the assessee purchases granite blocks and made to specifications stated by the assessee and granite blocks are brought into existence by employing a contractor and no quarrying was done by the assessee, it was held that the activity of the assessee thereunder would not involve any manufacturing process and, therefore, the assessee would not be an industrial company. That reasoning was adopted and extended in the second case to which we have made reference. Even in that decision, this Court notices a distinction between those cases where the granite blocks are purchased and sized and cases where quarrying activity is done by the assessee. Therefore, Hind Nippon Rural Industries Pvt. Ltd. case (supra) cannot be of any assistance to the Department.
5. The next decision referred to by the Department is Chowgule & Co. Pvt. Ltd.'s case (supra). The Supreme Court in that case was concerned with whether any article is produced as a result of blending and does such article continue to be commercially the same article. In that context, it was observed that there was no manufacturing activity. In the present case, what we are concerned is a mining operation carried on for excavating iron ore and sequestering the same from other material which involves a very big process and there is complete transformation of the material from one form to another altogether and does not continue to be in the same form as it was found in the earth before excavation. When such complicated process is involved, it cannot be said that there is no manufacturing activity because what is brought into existence is iron ore. Thus, it must be stated that the process involved is a manufacturing activity.
6. Indeed, after referring to the Chowgule & Co. Pvt. Ltd. case, the Gujarat High Court in CIT vs . Kutch Oil & Allied Industries Pvt. Ltd. : [1987]163ITR237(Guj) stated that whenever a commodity undergoes a change as a result of some operation performed on it or in regard to it, such operation would amount to processing. A company which carries out pulverising process by treating raw lumps of mineral, chemically and thereafter converting the lumps into powder is engaged in processing of goods and therefore would fall within the definition of 'Industrial company' and is entitled to concessional rate of tax. With respect, we agree with the view stated thereto.
7. In the circumstances, we agree with the view of the Tribunal and answer the question referred to us in the affirmative and against the Department.