These are three appeals by assessee against common order of CIT(A) dt. 1st Sept., 2005 pertaining to asst. yrs. 1997-98, 1998-99 and 1999-2000. In all these appeals solitary issue involved is regarding denial of deduction under s. 80-IA of IT Act, 1961 (in short Act ) to assessee in respect of profits of its Parwanoo Unit on ground that assessee was not carrying out any manufacturing activity so as to qualify for benefit under aforesaid section. assessee before us is partnership firm owning factory established i n industrially backward area of Himachal Pradesh. factory of assessee is registered with Director of Industries, H.P. under Small Scale Industry and also under Factories Act. assessee produces automobile filter elements, which are used in manufacture of automotive filters for automobiles. It manufactures product for M/s Puralator India Ltd. who is manufacturer of automobile filter. income derived by assessee from such business was considered exempt in terms of s. 80-IA of Act. AO was of view that assessee was not entitled to deduction under s. 80-IA of Act on ground that process carried out by assessee did not yield any new or commercially different product and, therefore, assessee was not engaged in production or manufacture of any article or thing. AO perused manufacturing process carried out by assessee, and concluded that it did not amount to manufacture. According to AO, process listed by assessee involves merely pleating paper which is then passed through precuring oven so that position of pleats is permanent; it is then cut and sealed; then round vertical paper is inserted into outer retainer and end caps are fitted then with adhesive. processes are merely assembling processes and do not involve any production or manufacture. Nothing new or commercially different is evolved in processes through which paper passes. It remains paper except that it is pleated and fitted into perforated outer and inner retainers which too are supplied by customer. According to AO, everything namely outer and inner retainers, PVC adhesive, paper, etc. is provided by other concern and work carried out is mainly in nature of job work. processes involved merely change form of components without producing anything different. AO held that since assessee did not fulfil basic condition, it was not entitled to benefits of s. 80-IA of Act. conclusions drawn by AO was challenged in appeal unsuccessfully by assessee before CIT(A). CIT(A) has sustained stand of AO on basis of reasoning adopted by AO. As result assessee is presently in appeal before us. stand of assessee before us is to effect that it is eligible for benefit under s. 80-IA; that process of manufacture undertaken by assessee results in manufacture of product which in sum and substance is different from raw material. learned counsel has referred to para 5 of order of CIT(A) wherein is referred process undertaken by assessee to manufacture automobile filter element. learned counsel submitted that product manufactured by assessee undergoes transformation by way of various processes involved and ultimate product is different form raw material. learned counsel also demonstrated in Court room various raw materials being used and final product which is produced after carrying out assembly and various processes involved. In support of his submissions learned counsel has referred to various judgments in order to demonstrate that principles enunciated by legal precedents support view of assessee that assessee is engaged in process of manufacturing. learned counsel has referred to various decisions, viz., Narne Tulaman Manufacturers (P) Ltd. vs. CCE (1990) 183 ITR 577 (SC), CIT vs. Shankar Construction Co., CIT vs. Suresh Malpani & Co., CIT vs. Buildmet (P) Ltd. and CIT vs. Universal Borewell Agencies (1993) 114 CTR (SC) 420: (1993) 204 ITR 412 (SC), CIT vs. Tata Locomotive & Engineering Co. Ltd. (1968) 68 ITR 325 (Bom) and CIT vs. Supreme Graphics Creations (P) Ltd. & Anr. (2005) 197 CTR (Bom) 657: (2005) 276 ITR 668 (Bom), etc. On other hand, learned Departmental Representative has assailed arguments of learned counsel by placing reliance on order of lower authorities. Apart form placing reliance on various authorities learned Departmental Representative pointed out that assessee was merely carrying out job work for M/s Purolator India Ltd. That entire raw materials are supplied by said concern. He, therefore, argued that no production or manufacture was being carried out by assessee on its own account and that it was merely engaged in the. assembly of filter parts. learned Departmental Representative pointed out observations of AO that concern M/s Purolator India Ltd. had also confirmed that assessee has been assigned job work of assembling of semi-finished filters. In this regard he referred to decision of Madras High Court in case of India Cine Agencies vs. CIT (2003) 180 CTR (Mad) 41: (2003) 261 ITR 491 (Mad). According to learned Departmental Representative profits earned by assessee from carrying out of job work cannot be equated with profits derived by manufacturer by selling products manufactured by it. With respect to process of manufacture carried out, learned Departmental Representative pointed out that in para 12 CIT(A) has concluded that after completion of process there was no activity which could be said to have altered main commodities used by assessee. He, therefore, submitted that original identity of all raw materials i.e. filter paper, steel sheet components (centre tube/outer retainer and end caps) and adhesives do not change. That, therefore, it was wrong to argue that finished product was commercially different product from raw material. In reply learned counsel submitted that raw material used by assessee were filter paper, steel sheet components and adhesives. Demonstrating products in person, learned counsel pointed out that it could not be said that filter paper or steel sheet component, etc. which are used in manufacturing process have same characteristics and qualities as that of automotive filter element; therefore, it is to be understood that process undertaken by assessee yields commercially different product. learned counsel further submitted that there was no requirement in law for assessee to manufacture product on its own account for purposes of claiming deduction under s. 80-IA of Act. According to learned counsel, as long as process carried out by assessee resulted in "manufacture", profits derived by undertaking such manufacture for other concerns on job work basis, would constitute income derived from manufacturing activity and thus eligible for benefit under s. 80-IA of Act. In support learned counsel has relied upon decision of CIT vs. Taj Fire support learned counsel has relied upon decision of CIT vs. Taj Fire Works Industries (2006) 204 CTR (Mad) 108 and Gorawara Plastics & General Industries (P) Ltd. vs. Dy. CIT (1999) 63 TTJ (Del) 329. We have considered rival submissions carefully. crux of dispute i.e. presently before us is to establish as to whether or not assessee is engaged in manufacture of article or thing so as to qualify for deduction under s. 80-IA of Act. Before we proceed to dilate on legal position, it would be appropriate to understand fact position with regard to process canvassed by assessee. finished product of assessee is automobile filter element. raw materials used are: Filter paper Steel sheet components (a) Centre tube/outer retainer (b) End caps Adhesives. manufacturing process considered by lower authorities is detailed as below: Paper passes through marathon machine for pleating. After pleating of paper, paper passes through precuring oven so that position of pleats has to be permanent. Paper is being cut as per specified length. Both ends of particular length of paper are being sealed with help of clip at side sealer machine. After sealing of ends, round shape (Vertical) has to be given to paper and inserted into outer retainer along with centre true inside paper pack. It is called sub-assembling. PVC adhesive to be filled in end cap with help of PVC dispenser machine. Place cap on one end of sub-assembly and pass it through jeller having constant temperature for curing of adhesive. Fill another cap with adhesive with help of dispenser, place on other end and pass it through FCO at specified temperature of curing of PVC adhesive and paper. Final product Semi-finished automotive filter. finished product of assessee i.e. automobile filter element is semi-finished automotive filter, which is supplied to original equipment manufacturer in automotive filter industry i.e. M/s Purolator India Ltd. Having noted process which is involved, we have to examine whether activity carried out by assessee amounts to manufacture and if yes, then what does it manufacture. From process noted above that assessee b r i n g s together various raw materials, components and by carrying intermittent processes, assembles them together so that they can work as one equipment which is termed as semi-finished automotive filter. semi- finished automotive filter, which assessee manufactures as result of various processes is product, which is distinct by character as also in its use than each of raw materials. This is for reason that none of components or raw material used can partake character of or be substitute for functions performed by finished product of assessee. expression "manufacture" or production" is not defined specifically under Act. However, various judgments of Higher Courts on subject lay down various tests which can determine as to whether or not particular activity amounts to manufacture or not. plea of assessee is that it is carrying out assembly of various components byway of certain processes which yields commodity which is commercially distinct and functionally different from original components or raw material. Hon ble Apex Court in case of Union of India vs. Delhi Cloth & General Mills Co. Ltd. (1963) (Supp) SCR 586 observed that manufacture implies change, but every change is not manufacture and yet every change of article is result of treatment, labour and manipulation. But something more is necessary and there must be transformation; new and different article must emerge having distinctive name, character or use for it to be termed as manufacture. Therefore, question is whether finished product of assessee is new and different article which is distinctive in character and/or use than raw materials. In our view, having regard to fact situation referred to above it is difficult to deduce that what assessee produces after subjecting raw material/ components to various processes is not product which is distinct and commercially different than components. AO has not disputed that assessee is carrying out assembly of various components. thrust of arguments of AO is that change/transformation in raw material brought out by process of assessee concern are not irreversible. According to AO, there was mere physical change in goods. On this reasoning, he has concluded that there is no production or manufacture being carried out by assessee. We are unable to appreciate aforesaid reasoning of AO. relevant test that has been referred to by apex Court is that manufacture implies change and that there must be transformation i.e. new and different article must emerge having different name, character or use. It is not necessary that transformation or emergence of new article must always be irreversible so as to qualify to be activity of manufacture. For instance watch is manufactured by using various components. various components in watch are assembled and put together so as to make complete watch. watch can be again dismantled and each of components can be separately retrieved. Can we say for that reason that activity of producing watch does not tantamount to manufacture? answer is obviously no. We fail to understand as to how final product which has distinctive name, functional usage and characteristic different from its raw material can be said as not emerging from process of manufacture, merely because each of components can be broken down and retrieved. At this stage we may refer to judgment of apex Court in case of BPL India Ltd. vs. CCE (2002) 5 SCC 167 wherein assembly of imported kits of component into VTR s/coloured monitors by suing fasteners was held falling with ambit of expression "manufacture". Similarly, in instant case bringing together of various components by using adhesives and putting it through process of curing into semi-finished automotive filter brings it within fold of expression "manufacture". We are unable to disregard stand of assessee that in instant case activity implies change and such activity brings out new and different article with distinctive name, character and use. We may also refer to judgment of apex Court in Gramophone Company India Ltd. vs. Collector of Customs (2000) 1 SCC 549 wherein it is explained that expression manufacture means transformation of goods into new commodity commercially known as distinct and separate commodity having its own character, use and name, whether it be result of one process or several processes. Having regard to above principles, in instant case, we ask ourselves question. Can any of raw material or component assume character, name and usage of final product of assessee? Answer is clearly no . Therefore, we are unable to subscribe to stand of Revenue that assessee does not bring out, through its activity of processing, any commodity having name, character or use different and distinct than raw material or components used to achieve such final product. Therefore having regard to aforesaid discussion, in our view, activity carried out by assessee is to be understood as entailing "manufacture" and it is not possible to agree to stand of Revenue that activity of producing automobile filter element cannot be characterized as manufacture or production of articles or things so as to deny benefit of s. 80-IA of Act to assessee. other objection of Revenue is that assessee does not manufacture on its own account but does it on job work basis for another concern. This objection deserves to be rejected assessee has been supplied raw materials by other concern but other aspects namely labour and other infrastructure, equipments, etc. are met by assessee on its own account. assessee also satisfies test of manufacture by producing new material namely semi-finished automotive filter. assessee, therefore, qualifies to be industrial undertaking . Merely because product is manufactured under job contract it does not distract from fact that it is assessee who is engaged in activity of manufacture. parity of reasoning enunciated by Madras High Court in case of Taj Fireworks Industries (supra) is squarely applicable in instant case. We, therefore, are of opinion that on this issue assessee has to succeed. In result we conclude by holding that assessee is carrying out manufacturing activity and is therefore, entitled to claim benefits of s. 80-IA of Act. We have noted that apart from aforesaid objections there is no other objection brought out by Revenue for denying deduction under s. 80-IA of Act . We, therefore, set aside order of CIT(A) and direct AO to allow deduction to assessee under s. 80-IA of Act with respect to profits derived from its industrial undertaking (Parwanoo Unit). In result since fact situation in all three years stand on identical footing, appeals of assessee are allowed as above. *** ANAND AFFILIATES v. INCOME TAX OFFICER