JUDGMENT judgment of court was delivered by S. Ravindra Bhat J.-The questions of law which Revenue urges in support of these appeals, directed against three orders of Income-tax Appellate Tribunal for assessment years 2003-04, 2004-05, 2005-06 and 2006-07 are: "(1) Whether assessee is engaged in activity which can be termed'manufacture' so as to claim benefit of section 10B of Income-tax Act, 1961 (hereafter'the Act')? and (2) Whether activity (of collection, collation, formatting of data and information and its export) fulfils conditions stipulated in section 10B(2)(i) of Act?" brief facts of case that assessee, individual, in her return claimed exemption under section 10B of Act to tune of Rs. 39,32,654. She claimed to be software exporter to Netherlands. importer was one Mr. Rolli Janssen B. V. claim was disallowed by Assessing Officer ("the AO") who added back Rs. 39,32,654 and finalised assessment. Dissatisfied by view of Assessing Officer, assessee appealed to Commissioner of Income-tax (Appeals), who confirmed those findings. Aggrieved by order of Commissioner of Income-tax (Appeals), assessee successfully appealed to Incometax Appellate Tribunal. Revenue is, therefore, in appeal under section 260A of Act. Mr. Balbir Singh, learned counsel for Revenue, argued that Income- tax Appellate Tribunal fell into error on both questions. Stating that process deployed by assessee was neither "manufacture" nor did it amount to creation of software, he supported orders of Assessing Officer and Commissioner of Income-tax (Appeals). He urged that assessee was unable to establish that computer software is manufactured or produced by it. He contended that conditions specified in section 10B, Explanation 2(1), viz., "any customised electronic data or any product or service of similar nature, as may be notified by Central Board of Direct Taxes, which is transmitted or exported from India to any place outside India by any means" had pre- condition for successful claim under Act. He argued that Income-tax Appellate Tribunal fell into error in disturbing concurrent finding of authorities below. Learned counsel relied upon terms of Notification No. S. O. 890(E), dated September 26, 2000 (see [2000] 245 ITR (St.) 102), to say that Income-tax Appellate Tribunal failed to uphold findings of Commissioner of Income-tax (Appeals) that assessee's activities did not fit description of any of processes mentioned. It was argued that mere compilation of data without anything more, could not be said to have resulted in customised or "legal database". database had to be such as was capable of use by customer or client, as software. Else, activity of any description even if it could not be characterised as "manufacture" or "production" would successfully claim benefit under section 10B. Learned counsel relied on judgment of Supreme Court reported as CIT v. Gem India Manufacturing Co. [2001] 249 ITR 307 (SC). It was inter alia, held in that judgment that (page 308): "There can be little difficulty in holding that raw and uncut diamond is subjected to process of cutting and polishing which yields polished diamond, but that is not to say that polished diamond is new article or thing which is result of manufacture or production. There is no material on record upon which such conclusion can be reached." Counsel also relied upon terms of Central Board of Direct Taxes circular, which reads as follows: "S. O. 890(E).-In exercise of powers conferred by clause (b) of item (i) of Explanation 2 to section 10A, clause (b) of item (i) of Explanation 2 to section 10B and clause (b) of Explanation to section 80HHE of Income-tax Act, 1961 (43 of 1961), Central Board of Direct Taxes hereby specifies following information technology enabled products or services, as case may be, for purpose of said clauses, namely:- (l) Back-office operations; (ii) Call centres; (iii) Content development or animation; (iv) Data processing; (v) Engineering and design; (vi) Geographic information system services; (vii) Human resources services; (viii) Insurance claim processing; (ix) Legal databases; (x) Medical transcription; (xi) Payroll; (xii) Remote maintenance; (xiii) Revenue accounting; (xiv) Support centres; and (xv) Web-site services." It was submitted that preparation of data for its ready printing use could not amount to manufacture of software, entitling assessee to claim benefit of section 10B. Income-tax Appellate Tribunal noticed that, in this case, there are four stages for completion of assessee's product. first stage is where assessee collects raw material that goes into making of final files. This comprises mainly of text and photographs. providers of these materials depending on subject of book are various authors, photographers, photo agencies. data is sourced from different places including internet. Income-tax Appellate Tribunal cited specific work of assessee, book titled 100 Wonders of India and noticed that freelancer, Mr. Nirad Grover was engaged for collection of photographs necessary for production of book. assessee also relied on agreement with Mr. Nirad Grover and stated that materials were in edited state. next stage in process is design and layout. Here designers use said material to prepare layout of book within given parameter and specifications of clients. This involves designing and lay out of materials in manner which fits size and number of pages given for particular book. This stage is specialised and assessee's book designers are experts in field of making uniquely user friendly layouts. third stage is scanning and colour correction. For that images used in book have to be of good print quality and have to go through "scanning and colour correction" stage. Every photograph (provided to designers in hard format) is scanned and digitally colour corrected; it involves user of software such as Acrobat Reader and QuarkX Press, manipulation of data, photographs and colours to remove blemishes so as to make final product, i.e., book, appealing to eyes of client and customers. hard copy of book 100 Wonders of India was shown to Income-tax Appellate copy of book 100 Wonders of India was shown to Income-tax Appellate Tribunal to establish entire transformation process, and present best results in final product. last stage is embedding of high resolution colour corrected images into lay out and preparation of ready to be exported final files (software), on CD or electronically, onto servers of their client. Addressing question whether assessee could be said to have involved herself in "manufacture" or "produced" any goods or articles, Income-tax Appellate Tribunal relied on Supreme Court rulings in Gramophone Co. of India Ltd. v. Collector of Customs [2000] 1 SCC 549; CIT v. Tara Agencies [2007] 292 ITR 444 (SC); Union of India v. Delhi Cloth and General Mills Co. Ltd. [1963] AIR 1963 SC 791 and CIT v. Lovlesh Jain [2012] 204 Taxman 134 (Delhi) and held as follows (page 170 of 32 ITR (Trib)): "17. In instant case, we find that appellant after collecting raw data and pictures has utilised its expert designing skills in producing ready to print e-book. Shri Syali in his submissions has neatly narrated entire sequence of activities carried on by appellant. samples produced before us were also shown to Assessing Officer, however, he has conveniently chosen to remain quite on this aspect. final product is intended for use of particular customer and, therefore, case under consideration does fit in category of production of'any customised electronic data' as per definition of computer software defined in Explanation 2 to section 10B of Act. above Third Member decision is germane to issue before us and, therefore, it clearly supports case of appellant. In our considered opinion even if it is said that appellant has merely customised data, which was already available and has not created altogether new software then too appellant cannot be deprived of benefit of deduction. It is pertinent to note that definition of'produce' is wider than term manufacture as held by hon'ble Supreme Court in number of decisions (referred to in Lovlesh Jain's case above) and does not require to produce or manufacture altogether new product; but if outcome of process is different product than input, it would fall under definition of 'produce'. In our considered view, whatever form input data is, so long as end product is in form of electronic data which is customised by appellant for end use of particular customer, then benefit of deduction under section 10B of Act cannot be denied." Income-tax Appellate Tribunal also held that assessee's activity involved data processing and export (page 172 of 32 ITR (Trib)): "We find that learned Commissioner of Income-tax (Appeals) has erred in considering definition of'computer software' as per clause (i) of Explanation 2 to section 10B in conjunctive manner and not disjunctive manner without considering that word used in between sub-clauses (a) and (b) is'or'. learned Commissioner of Income-tax (Appeals) has erred in comparing work done by assessee with'computer programme'. Here it is to be noted that it is not assessee's case that its case falls under sub-clause (a) of clause (i) of Explanation 2 to section 10B. It is consistent stand of assessee that its case falls under sub-clause (b) of clause (i) of Explanation 2 to section 10B. Here it is to be seen that whether assessee is engaged in any customisation of electronic data. We find that learned Commissioner of Income-tax (Appeals) has not recorded any finding in this respect in his order. We find also that learned Commissioner of Income-tax (Appeals) has tested assessee's case under section 10BB. However, we find that counsel for assessee had submitted that scope of section 10BB is limited in scope as compared to new definition in new section 10B. In this regard it is to be taken note that post-amendment old section 10B requires 'processing or management of electronic data' whereas new section 10B is larger in scope and only requires'any customised electronic data'. difference is that old section 10B requires that input data must necessarily be in electronic form whereas in new section 10B this requirement is done away with. This interpretation has found favour by Income-tax Appellate Tribunal in Accurum's case (supra) wherein at paragraph 9 (of Third Member order) it has been held that'The data which customer may require, may be gathered either by manual effort or by electronic means, as for example, through internet. By whatever means data is collected, once it is stored in electronic form, it becomes customised electronic data which can be exported to qualify for deduction under section 10A'. requirement of provision (section 10B) is that there should be customised electronic data and such data should be exported outside India. data which customer may require may be gathered either by manual effort or by electronic means, as for example, through internet. By whatever means data is collected, once it is stored in electronic form, it becomes customised electronic data which can be exported to qualify for deduction under section 10A. process of actually collecting data need not be IT enabled. What all is required is that data collected should be in electronic form. exact language of sub-clause (b) of clause (i) of Explanation 2 is'any customised electronic data. Thus, we find that assessee's business involved export of ready to print books which in instant case is the'customised electronic data'. nature of activity done by assessee in EOU was that of producing designs, drawings, layouts and scanning for projects of foreign clients on basis of their parameters and specifications. This activity is done by taking into consideration data collected by assessee itself or from clients. Though steps/stages involved in completion of particular assignment for foreign client has been reproduced by Assessing Officer at page 2 of assessment order, still neither Assessing Officer nor learned Commissioner of Income-tax (Appeals) have appreciated these aspects in right perspective." In decision of this court, reported as CIT v. Lovlesh Jain [2012] 204 Taxman 134 (Delhi), it was held that: "10. word'manufacture' can be given, both wider as well as narrower connotation. In wider sense, it simply means to make, fabricate or bring into existence article or product either by physical labour or by mechanical power. Given narrower connotation it means transforming of raw material into commercial product/ commodity or finished product which has new, separate entity but this does not necessarily mean that material by which commodity is manufactured must lose its identity. latter connotation has been accepted and applied with some moderation/clarification in several decisions, keeping in view context in which word 'manufacture' has been used. Supreme Court in Gramophone Co. of India Ltd. v. Collector of Customs [2000] 1 SCC 549 and Union of India v. Delhi Cloth and General Mills Co. Ltd., AIR 1963 SC 791 has held that manufacture has to be understood to mean transformation of goods into new commodity commercially distinct and separate, and having its own character, use and name whether it be result of one or several processes. However, every change does not result in 'manufacture' though every change in article may be result of treatment or manipulation by labour or/and machines. If operation or process that renders commodity or article fit for use, which it is otherwise not fit, change/process falls within meaning of word'manufacture'. Besides referring to and following above decision, Income-tax Appellate Tribunal also cited CIT v. Tara Agencies [2007] 292 ITR 444 (SC) where Supreme Court, after noticing that Act did not define "manufacture" turned to definition of that expression in Central Excise Act, 1944 relevant extracts of that decision are as follows (page 450): "The term'manufacture' has not been defined in Income-tax Act, 1961. term'manufacture' has been defined in section 2(f) of Central Excise Act, 1944. Parts (i) and (ii) of section 2(f) read as under: '2. (f) "manufacture" includes any process- (i) incidental or ancillary to completion of manufactured product; and (ii) which is specified in relation to any goods in section or Chapter notes of Schedule to Central Excise Tariff Act, 1985, as amounting to manufacture.'" Referring to Anheuser-Busch Brewing Association v. United States [1907] 52 L Ed 336 it was held by Income-tax Appellate Tribunal that concept of "manufacture" was followed in subsequent American, English and Indian cases. Supreme Court then held that: "The definition reads as under: Manufacture implies change, but every change is not manufacture, and yet every change in article is result of treatment, labour and manipulation. But something more is necessary." treatment, labour and manipulation. But something more is necessary." Income-tax Appellate Tribunal also relied upon Gujarat High Court decision, in CIT v. Ajay Printery P. Ltd. [1965] 58 ITR 811 (Guj) where it was held that "manufacture" has wider and narrower connotation (page 167 of 32 ITR (Trib)): "In wider sense it simply means to make, or fabricate or bring into existence article or product either by physical labour or by power. word'manufacture' in ordinary parlance would mean person who makes, fabricates or brings into existence product or article by physical labour or power. other shade of meaning which is narrower meaning implies transforming raw materials into commercial commodity or finished product which has entity by itself, but this does not necessarily mean that materials with which commodity is so manufactured must lose their identity. Thus both words'manufacture' and'produce' apply as well to bringing into existence of something which is different from its components. One manufactures or produces article which is necessarily different from its components." Section 10B of Act provides as follows: "10B.(1) Subject to provisions of this section, deduction of such profits and gains as are derived by hundred per cent. exportoriented undertaking from export of articles or things or computer software for period of ten consecutive assessment years beginning with assessment year relevant to previous year in which undertaking begins to manufacture or produce articles or things or computer software, as case may be, shall be allowed from total income of assessee.... (2) This section applies to any undertaking which fulfils all following conditions, namely:- (i) it manufactures or produces any articles or things or computer software; (ii) it is not formed by splitting up, or reconstruction, of business already in existence:... Explanation 2.-For purposes of this section,- (i)'computer software' means- (a) any computer programme recorded on any disc, tape, perforated media or other information storage device; or (b) any customised electronic data or any product or service of similar nature as may be notified by Board, which is transmitted or exported from India to any place outside India by any means;" In two decisions of Supreme Court, construction placed on term "manufacture" was liberal one. extracts of those decisions are Deputy CST v. Pio Food Packers [1980] 46 STC 63 (SC); [1980] (Supp.) SCC 174: "... commonly, manufacture is end result of one or more processes through which original commodity is made to pass. nature and extent of processing may vary from one case to another, and indeed there may be several stages of processing and perhaps different kind of processing at each stage. With each process suffered, original commodity experiences change. But it is only when change, or series of changes, take commodity to point where commercially it can no longer be regarded as original commodity but instead is recognized as new and distinct article that manufacture can be said to take place." Again, in Aspinwall and Co. Ltd. v. CIT [2001] 251 ITR 323 (SC) it was held as follows (page 327): "The word'manufacture' has not been defined in Act. In absence of definition of word'manufacture' it has to be given meaning as is understood in common parlance. It is to be understood as meaning production of articles for use from raw or prepared materials by giving such materials new forms, qualities or combinations whether by hand labour or machines. If change made in article results in new and different article then it would amount to manufacturing activity." term "manufacture" is of wide import and in numerous occasions was held by Supreme Court to include variety of activities. Thus, refining crude oil (B. P. Oil Mills Ltd. v. Sales Tax Tribunal [1998] 111 STC 188 (SC); AIR 1998 SC 3055); extracting oil from oil-seeds (the Constitution Bench in Devi Das Gopal Krishnan v. State of Punjab [1967] 20 STC 430 (SC); AIR 1967 SC 1895; cutting and shearing of metal scrap for use by rolling mills (Ashirwad Ispat Udyog v. State Level Committee [1998] 8 SCC 85; [1999] 112 STC 207 (SC)); conversion of coconut husk into fibres (in CST (Deputy), Board of Revenue (Taxes) v. Coco Fibres [1991] 80 STC 249 (SC); AIR 1991 SC 378); lamination of paper (Laminated Packings P. Ltd. v. Collector of Customs [1990] 4 SCC 51), were all held to be activities that qualify as "manufacture". In Sonebhadra Fuels v. Commissioner Trade Tax [2006] 147 STC 594 (SC); [2006] 7 SCC 322 Supreme Court clarified that term manufacture is of wide import and that: "... expression'manufacture' covers within its sweep not only such activities which bring into existence new commercial commodity different from articles on which that activity was carried on, but also such activities which do not necessarily result in bringing into existence article different from articles on which such activity was carried on. For example, activity of ornamenting of goods does not result in manufacturing any goods which are commercially different from goods which had been subjected to ornamentation, but yet it will amount to manufacture..." In present case, section 10B uses expression "manufactures or produces... things or computer software". four stage process of compiling material, collating text, designing layout, scanning, digital image editing (to remove distortion) and final arrangement of data, ultimately transmitted according to customer's specification-and ready to be used for printing, (or even e-book publication) is undoubtedly manufacture or production. second question is whether assessee's manufacturing activity described earlier results in "computer software". main thrust of Revenue's contention here was that final product or "thing" does not answer that description because it is not software per se, but mere compilation of data. This court is of opinion that this contention is unpersuasive. expression "computer software" is wide enough to embrace diverse activities. To eliminate any doubt, reference to "customised electronic data" in second Explanation to section 10B(2), Parliament enabled Board (CBDT) to include (by notification) diverse activities. which involve export of software, etc. notification relied on in present case uses expressions "(iii) content development or animation (iv) data processing... (vii) human resources services" and "(ix) legal databases". Here, very first head "content development or animation" describes process and is wide enough to cover compilation of material or data and its transformation into ready to print/ready to publish book. It is also "legal database". expression "legal" here cannot be confined to databases that cater to law students or legal practitioners or academics; it is again of wide import to include databases that are legal-as databases. This court also notices that term "computer software" is defined by Copyright Act, 1957, by section 2(ffc) as follows: "(ffc)'computer programme' means set of instructions expressed in words, codes, schemes or in any other form, including machine readable medium, capable of causing computer to perform particular task or achieve particular result." In present case, work which ultimately results as culmination of assessee's efforts of compiling, editing, digital designing, etc., "is transmitted or exported from India to any place outside India by any means". It is, therefore, computer software that are produced or manufactured, to qualify for benefit under section 10B. For above reasons, questions of law framed in this case are answered against Revenue and in favour of assessee. appeals are consequently dismissed. *** Commissioner of Income-tax v. Ms. Kiran Kapoor