TMI Blog1986 (8) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacture, the main operation being processing of potatoes by chilling so that they remained fresh. The Income-tax Officer rejected the contention of the assessee holding that the plant and machinery installed by the assessee were not used for the purpose of any business of manufacture or production of any article or thing but were used only for storage and preservation of potatoes. The claim of the assessee was disallowed. Being aggrieved, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals). The Commissioner (Appeals) held that in order to be entitled to claim investment allowance under section 32A of the Act, the assessee had to establish that its plant and machinery had been used in an industrial undertaking for the purpose of business of manufacture or production of any article or thing. He held that the plant and machinery of the assessee were only for the purpose of storage and preservation of the potatoes. The assessee did not manufacture or produce any article or thing. The Commissioner (Appeals) noted that in section 80J(4)(iii) of the Act, the cold storage plant has been specifically included for the purpose of allowing the relief under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ored in cold storage became a commodity different from ordinary potatoes. Accordingly, it was submitted that by processing of potatoes in its cold storage plant, the assessee was involved in production within the meaning of section 32A of the Act. In support of his contentions, learned advocate for the assessee cited the following decisions: (a) Addl. CIT v. Farrukhabad Cold Storage (P.) Ltd. [1977] 107 ITR 816 (All). In this case, a Division Bench of the Allahabad High Court held that storing of potatoes in a cold storage amounted to processing of goods within the meaning of section 2(7)(d) of the Finance Acts, 1966 and 1967, and an assessee earning income from storing potatoes in cold storage was taxable at the concessional rate prescribed under the said Acts. The High Court noted that in the Acts a distinction had been made between manufacture and processing and that an activity which fell short of manufacture could be described as processing of goods. After considering the scientific text books cited, the High Court came to the conclusion that by storing potatoes in a cold storage, their decay was prevented. The temperature was admittedly regulated by the use of machinery. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r effort, a product; a product of human activity or effort. " On the basis of the observations of the Mica Enquiry Committee Report, the Supreme Court held that the operation of obtaining split mica from crude mica amounted to production within the dictionary meaning of the said term. (d) Chowgule Co. P. Ltd. v. Union of India [1981] 47 STC 124 (SC); AIR 1981 SC 1014. In this case, the Supreme Court held that blending of different qualities of ore, possessing different chemical and physical compositions, in order to produce ore of a particular specification could not be said to be a process of manufacture as the ore which was the result of such blending could not be regarded as a commercially new and distinct commodity from the original ore of different specification, but this operation of blending amounted to processing of ore within the meaning of section 8(3)(v) of the Central Sales Tax Act, 1956, and rule 13 of the Central Sales Tax Rules. The Supreme Court observed further that whenever commodity underwent a change as a result of some operation performed on it or in respect of it, the same would amount to processing of the commodity and a commodity subjected to a process ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to some processes in order that these might be brought to the state in which they might become fit for consumption. To speak of coal, the Division Bench was of the opinion, as produced in the sense of its being made a material of consumption by human skill and labour was entirely correct and had sanction of approved usage... expenditure of human skill and material have been used in the processing and it may not be that the raw material was first transformed, but over the transformed material, further transformation was done by human labour and skill making it fit for human consumption. " (g) An unreported judgment dated June 9, 1986, in Income-tax Reference No. 91 of 1983 intituled CIT v. Union Carbide India Ltd. since reported in [1987] 165 ITR 550. This is a judgment of this Bench. The assessee in that case in its Deep Sea Fishing Division used trawlers and equipments for fishing shrimps in deep sea and thereafter decapitated, peeled and packed the shrimps in special containers and froze them in quick freezing chambers for being marketed. It was held on the basis of the finding of the Tribunal that as a result of the aforesaid operations by the assessee, a commercially new p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Palampadam Plantations Ltd. [1969] 24 STC 231 : In this decision, the Supreme Court considered and construed the meaning of the word " produced " with reference to the standard dictionaries and observed as follows (at p. 233): " The context in which the word 'produced' appeared in the definition can only mean to bring forth, bring into being or existence to bring (a thing) into existence from its raw materials or elements' : (See the meaning of the word 'produce' in the Shorter Oxford English Dictionary). According to Webster's International English Dictionary, the verb 'produce' means to bring forward, beget, etc." (d) Farrukhabad Cold Storage (P) Ltd. v. CIT [1979] 119 ITR 895 (All): In this case, the assessee, which was engaged in running a cold storage plant, claimed to be a priority industry within the meaning of section 80-I of the Income-tax Act, 1961, on the ground that it was engaged in the activity of production of processed seed and as such was priority industry within the meaning of the said section as also section 80B(7) read with item 28 of Schedule VI to the said Act. It was held by a Division Bench of the Allahabad High Court that the assessee primarily was o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issions made on behalf of the parties and the decisions cited, it appears to us that it remains undisputed that the assessee, which stores potatoes in its cold storage plant, carries out an operation of processing within the meaning of the said expression as understood in legal parlance. The question which is to be decided is, whether the assessee in the course of such processing is manufacturing or producing any article or goods. The material on which the processing is carried out is potato. After the processing, the materials remain potatoes. In fact, the entire object of such processing is to ensure that the potatoes remain in the condition they were in when stored to the fullest extent possible. The object of putting the goods in cold storage is mainly to preserve their original condition and not to produce anything new. By such preservation, no new article is brought into existence. It also cannot be said that by reason of such processing, something which was not marketable to start with becomes marketable. It is nobody's case that the potatoes before they were put in the cold storage were not marketable. Further, it cannot be said that as a result of such processing, the po ..... X X X X Extracts X X X X X X X X Extracts X X X X
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