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TMI Blog1997 (9) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... chinery and plant of the cold storage business. The claim made by the assessee was disallowed by the Income-tax Officer holding that investment allowance was admissible only in respect of the industrial undertaking in the business of manufacture or production of any article or thing and that "cold storage" was not covered by the provisions of section 32A(2)(b)(ii) of the Act which are as under : "32A. (2) The ship or aircraft or machinery or plant referred to in sub-section (1) shall be the following namely :---..... (ii) in a small-scale industrial undertaking for the purposes of business of manufacture or production of any article or thing; or" The assessee filed an appeal before the appellate authority which was dismissed. The Tribunal relying upon the decision of this court in CIT v. Yamuna Cold Storage [1981] 129 ITR 729, and its own decision in the case of ITO v. S. Warriam Singh Cold Storage dismissed the appeal. It was held that the assessee is entitled to the investment allowance claimed by it. At the instance of the Revenue, the question reproduced in the earlier part of the judgment, has been referred to this court for its opinion. In spite of service and issuance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law was referred to this court by the Income-tax Appellate Tribunal, Amritsar (for short, "the Tribunal"), under section 256(1) of the Income-tax Act, 1961 (for short "the Act") : "Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is right in law in holding that cold storage business is covered under the language of section 32A(2)(b)(ii) of the Income-tax Act, 1961, and that machinery installed in cold storage is entitled to the investment allowance?" The assessee, as a partnership firm, commenced business of cold storage during the previous year relevant to the assessment year 1979-80 and derived income from cold storage. The accounting year ended on March 31, 1979. A return was filed, declaring loss of Rs. 49,160. That return was revised and loss was enhanced to Rs. 61,630. The assessee claimed investment allowance on the purchase of new machines at Rs. 44,370 under section 32A of the Act. The Assessing Officer was of the view that the cold storage of the assessee was not an industrial undertaking manufacturing or producing any article or thing and was, therefore, not eligible for investment allowance. The assessee went in appeal and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the cold storage was in the nature of manufacturing process inasmuch as the assessee produced cool air/cold temperature for carrying on the business of preservation of articles and goods. Since it was in the nature of an intermediate manufacturing process, it fulfilled the requirement of sub-clause (iii) of clause (b) of section 32A(2) of the Act. Shri Sanjay Bansal, learned counsel for the Department, has opposed the assessee's contention with the plea that the cold storage plant was like any plant or machinery whereby nothing was produced. Such a plant kept the goods in a preserved condition. The function of the cold storage was not to manufacture or produce any article or thing but only to preserve an article or thing stored there. Shri Bansal has further argued that, if it was assumed that a cold storage plant manufactured or produced cool air, it did not produce it as a distinct commercial commodity which had a market where it could be sold. Cool air produced in the cold storage plant was not an article or thing sold by the assessee but it was used to preserve commodities. An article or thing produced by a machinery or a plant must have a market where it could be sold. A pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the context as meaning bringing into existence a new and distinct commercial commodity and, therefore, that section could not be invoked by the assessee as the operation of a cold storage plant did not result in bringing into existence any new and distinct marketable commodity. The articles or goods preserved in a cold storage plant remained the same as they were prior to their preservation. There is no manufacture or production of "cool air" because no marketable product was brought into existence by the operation of a cold storage plant. The aforesaid view has been followed by the same High Court in a subsequent case CIT v. Everest Cold Storage [1996] 220 ITR 241. It was again held that the operation of a cold storage plant did not result in bringing into existence any new and distinct marketable commodity and, therefore, the assessee was not entitled to claim investment allowance under section 32A of the Act in respect of the machinery or plant. The Calcutta High Court had also an occasion to examine a similar controversy in S. B. Cold Storage Industries Pvt. Ltd. v. CIT [1987] 166 ITR 646. It was observed that the expressions "processing" and "production" were not identical. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... form of power or in the construction of ships or in the manufacture or processing of goods or in mining. The controversy revolved round the words "processing of goods". It was to be seen whether the activity carried on in a cold storage was one of manufacture or processing of goods. It was noticed that the question had been settled by the decision of the Supreme Court in the case of Chowgule and Co. Pvt. Ltd. v. Union of India [1981] 47 STC 124. Following the ratio laid down by the Supreme Court, it was held that the word "processing" implied that a commodity must, as a result of the operation, experience some change. The keeping of goods in a cold storage did not bring about any change whatsoever in the goods stored therein. To the contrary, they are kept intact, in the same nature and form in which they were originally stored. It was, therefore, held that running of a cold storage could not be said to involve processing of goods stored therein. The aforesaid decision of the Delhi High Court was examined in appeal by the Supreme Court and the view taken by the Delhi High Court was upheld in Delhi Cold Storage P. Ltd. v. CIT [1991] 191 ITR 656. Reference was made to an earlier dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reating it as a machinery. The Appellate Assistant Commissioner reduced the depreciation to 5 per cent. on both the items, treating it to be a godown and, as such, an ordinary building. The assessee went in further appeal before the Tribunal which restored the order of the Income-tax Officer, holding that the cold storage was a factory building and that the thermocole insulation was covered by the definition of "plant" as defined in section 43(3) of the Act. The court noticed that the words "factory building" had not been defined in the Act but, under the Factories Act, 1948, the word "factory" was defined to mean any premises wherein ten or more workers were working and in which a manufacturing process was carried on with the aid of power or where twenty or more workers were working and a manufacturing process was carried on without the aid of power. The words, "manufacturing process" had been defined in section 2(k) of the Factories Act. The court noticed that, according to the definition of the words "manufacturing process" in section 2(k), a process of treating the articles or goods to preserve them for their use or sale amounted to "manufacturing process" and, therefore, the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt took the view that the assessee was entitled to the investment allowance in respect of the oxygen unit set up by it. Shri Sanjay Bansal, learned counsel for the Department, has urged this court to take a fresh look at the question whether a cold storage was engaged in the manufacture or production of any article or thing and not to follow the view taken earlier by this court in S. Warriam Singh Cold Stores' case [1989] 178 ITR 585 and Partap Steel Rolling Mills' case [1989] 179 ITR 554 (P & H). Since the controversy has been finally settled by the Supreme Court in Delhi Cold Storage (P.) Limited's case [1991] 191 ITR 656, the view taken by this court is said to have been impliedly overruled and not approved. The Delhi High Court in Delhi Cold Storage (P.) Ltd. v. CIT [1985] 156 ITR 97, considered the view taken by this court in the case of Yamuna Cold Storage [1981] 129 ITR 728 and observed that the said case, having been decided prior to the decision of the Supreme Court in Chowgule and Co. Pvt. Ltd.'s case [1981] 47 STC 124, could no longer be considered to be laying down a good law. The Allahabad High Court in CIT v. Nandlal Cold Storage [1993] 199 ITR 327 and the Patna Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The said words had been defined in the said section. According to that definition, a company, which was mainly engaged in the business of the manufacture or processing of goods, was an industrial company. The Supreme Court specifically examined whether an assessee, running a cold storage plant, was engaged in the manufacture or processing of goods and then answered in the negative. The ratio of the decision would be, therefore, relevant to decide whether a cold storage plant was eligible for investment allowance under clause (b)(ii) of section 32A(2) of the Act. As has been seen, the emphasis in clause (b)(iii) was on an industrial undertaking which had installed a new machinery or plant for the business of manufacture or production of any article or thing. Thus, the question to be decided is whether the assessee, running a cold storage, was engaged in the business of manufacturing any article or thing. The Supreme Court has, in Delhi Cold Storage (P.) Ltd.'s case [1991] 191 ITR 656, laid down that an assessee, running a cold storage, was not engaged "in the manufacture or processing of goods". The law laid down by the Supreme Court, therefore, settles the controversy. The view tak ..... X X X X Extracts X X X X X X X X Extracts X X X X
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