Case: M/S. India Cine Agencies Vs. Commnr. Of Income Tax, Madras

In all these cases the issue is 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. 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 these appeals have been filed by the assesses.

Reasoning: The matter can 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 does not arise. The Eleventh Schedule, which was inserted by Finance (No.2) Act, 1977 w.e.f. 1.4.1978 has reference to Sections 32A, 32AB, 80CC (3)(a)(i), 80-I(2), 80J(4) and 88A (3)(a)(i) of the Act.