V.K. Singhal, J. - (1.) THE Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, has referred the following question of law arising out of its order dated July 25, 1990, in respect of the assessment years 1977-78 and 1978-79 : "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the activity of the assessee is clearly in the nature of manufacturing and, therefore, it is entitled to investment allowance under Section 32A(2) of the Income-tax Act, 1961 ?"
(2.) THE brief facts of the case are that during the course of assessment proceedings a claim in respect of investment allowance was made by the assessee. THE Income-tax Officer found that the assessee is not manufacturing or producing any articles or things but extracting limestone from mines and selling the same. During this process sometimes he has to face hard stone veins which are extracted and sold in the shape of rodi. THE Income-tax Officer came to the conclusion that the assessee is not a small-scale industrial undertaking for the purpose of business of manufacture or production of any other article or thing and, therefore, is not entitled to the investment allowance. An appeal was preferred before the Commissioner of Income-tax (Appeals), who also came to the conclusion that the industry is engaged in the business of extracting limestones and their sale either as such or after converting them into lime and lime dust or concrete by stone crusher and this does not amount to manufacture or production of any article or thing and, therefore, the order of the Income-tax Officer was upheld. The matter was challenged before the Income-tax Appellate Tribunal where it was submitted that limestone is being extracted in the raw form from the mines and then it is crushed and converted into lime or lime dust or rodi. The Income-tax Appellate Tribunal came to the conclusion that the nature of the business of the assessee is of manufacturing and, therefore, the assessee is entitled to the investment allowance. The submission of Mr. Bapna, on behalf of the Revenue, is that excavation of mineral does not amount to manufacture and, therefore, the assessee is not entitled to the investment allowance. The arguments of learned counsel for the Revenue have been considered. In accordance with the provisions of Section 32A, investment allowance is payable in respect of plant and machinery and in the present case the claim of the assessee was as a small-scale industrial undertaking which is engaged in the business of manufacture or production of any article or thing. Excavation of mineral is not a process of manufacture but if after excavation, the minerals so extracted are put in a crusher through plant or machinery which result in the business of manufacture or production of any article or thing then it will amount to manufacture and deduction under Section 32A has to be allowed. The crushing of the mineral so extracted which results in production of rodi and powder is a process of manufacture. The word "manufacture" has not been defined in the Act except under Section 10A(8), Explanation (in), which was added by Act No. 11 of 1987 with effect from April 1, 1981. Manufacture involves the bringing into existence of a new product which may have a different physical or chemical composition and is understood differently in common and commercial parlance. This court has held in CTO v. Bihaner Gypsum Ltd. [1986] 61 STC 264, that excavation of gypsum from the mine is not a process of manufacture. So far as the conversion of the mineral in the form of rodi and powder, it is evident that it does not retain the physical shape which the raw material has and is understood as a different commercial commodity by the business community. In these circumstances, the Income-tax Appellate Tribunal was justified in coming to the conclusion that conversion of limestone by crushing into rodi or lime dust is a process of manufacture. In these circumstances, the reference is answered in favour of the assessee and against the Revenue. No order as to costs. ;