The main legal point established in the judgment is that the process of extracting and processing granite constitutes manufacturing activity, entitling the assessee to reliefs under the Income Tax Act.

1. The Income Tax Appellate Tribunal has referred the following two questions of law arising out of its order dated December 26, 1991, in respect of the assessment year 1986-87 under Section 256(1) of the Income Tax Act, 1961.

"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in coming to the conclusion that the original assessment which granted the relief under Sections 32A and 80-I to the assessee was not erroneous and the inference of the Commissioner of Income Tax under Section 263 was. not proper ?

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in holding that extracting granite from quarry and cutting it to various sizes and polishing should be considered as manufacture or production of any article or thing and the assessee's business activity must be considered as industrial undertaking for the purpose of granting reliefs under Sections 32A and 80-I of the Income Tax Act, 1961 ?"

2. The assessee is a public limited company. The business of the assessee is extracting granite from quarry, converting the same to slabs, polishing and cutting before effecting the sale of the same. For the assessment year under consideration, it had claimed investment allowance under Section 32A and deduction under Section 80-I which had been allowed by the Assessing Officer.

3. Subsequently, the Commissioner of Income Tax was of the opinion that the activity of the assessee was not one of manufacture which would entitle it to the reliefs contemplated under Sections 32A and 80-I of the Act. Hence, exercising jurisdiction under Section 263 of the Income Tax Act, 1961, the Commissioner withdrew the reliefs granted by the Assessing Officer originally.

4. The Income Tax Appellate Tribunal was of the view that the assessee is entitled for relief under Sections 32A and 80-I of the Income Tax Act. Learned counsel for the Revenue submitted that this court in Foredge Granite Pvt. Ltd. v. State of Karnataka (STRP No. 58 of 1991, dated 12-12-1994), while deciding the matter under the sales tax law has considered the question of converting larger granite slabs into cut sizes and it was held that they continue to be granite blocks and does not involve manufacturing activity. The order passed by the revising authority under the Karnataka Sales Tax Act was not interfered with. On behalf of the assesses reliance is placed on the judgment given in the case reported in CIT Vs. Gogte Minerals (No. 2) 1997 (225) ITR 4, wherein the provisions of Section 32A of the Income Tax Act, were considered and it was observed that the 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".

5. Section 32A refers to investment allowance on plant and machinery. Plant and machinery should be used in manufacture or process of any article or thing and it should be of an industrial undertaking. There are a number of conditions mentioned in the Section. !n order to find out whether a particular activity is a manufacturing activity or not it has to be observed that there should be an action or process of making an article by application of physical or mechanical labour and the product must be commercially a new or different article. Manufacturing results in alteration or change in the nature of the goods which are subjected to process. Granite blocks are converted into slabs and cut into sizes and thereafter polished. It is not the same commodity, i.e., the block. This matter was examined in the case of the assessee in Commissioner of Income Tax Vs. Mysore Minerals Ltd., (1994) 205 ITR 461 KAR, and it was held that the assessee is an industrial undertaking entitled to investment allowance under Section 32A. It is pointed out that the special leave has been granted against the said judgment (see [