TMI Blog1976 (9) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... s then preferred by the assessee. It was contended that the assessee was an industrial company within the meaning of section 2(7)(d) of the Finance Acts of 1966 and 1967 and, therefore, its income was taxable at the concessional rate of 55 per cent. only. The Appellate Assistant Commissioner of Income-tax held that the activities of running the cold storage falls in the category of processing of goods and, as such, the assessee-company was an industrial company as defined in section 2(7)(d) of the Finance Acts. He, as such, directed the Income-tax Officer to treat the assessee-company as industrial company and levy tax accordingly. An appeal filed by the department to the Tribunal failed. Answer to the question referred to us depends upon the interpretation to be put on the word "industrial company" as defined in section 2(7)(d) of the Finance Acts of 1966 and 1967. The word "industrial company" was defined in the Finance Act of 1966 and has been similarly defined in the Finance Act of 1967. Section 2(7)(d) of the Finance Act runs as follows : " 2. (7)(d).--Industrial company means a company which is mainly engaged in the business of generation or distribution of electricity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether the building in which the operation of the breaking up of bulk, separating out the dross from the coal by screening and packeting the coal in bags of 28 lbs. each in weight was carried on was an industrial building or structure within the meaning of section 271(1)(c) of the Income-tax Act, 1952, which runs as under : "building or structure in use for the purposes of a trade which consists in the manufacture of goods or materials or the subjection of goods or materials to any process." It may be noted that in section 271(1)(c), quoted above, both the words "manufacture" and "process" were used as are used in the present seetion 2(7)(d) of the Finance Acts in hand. Lord President Clyde held : " That processing of goods as contemplated by that section means an activity which falls short of manufacture." He observed : "Clearly this provision contemplates that an industrial building may connote something other than a place where goods or materials are manufactured: it may include within the category of an industrial building a place where goods or materials are subjected to a process which falls short of the manufacturing of a new article." He then went on to ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of goods. The matter further appears to be clinched by the decision of the Supreme Court in the case of Union of India v. Delhi Cloth and General Mills Co. Ltd. AIR 1963 SC 791, where their Lordships specifically rejected the contention that processing and manufacture can be equated. At page 794 of the report, Das Gupta J., speaking for the court, observed : "To say this is to equate 'processing' to 'manufacture' and for this we can find no warrant in law. The word 'manufacture' used as a verb is generally understood to mean as 'bringing into existence a new substance' and does not mean merely 'to produce some change in a substance', however minor in consequence the change may be. This distinction is well brought about in a passage thus quoted in permanent edition of Words and Phrases, Vol. 26, from an American judgment. The passage runs thus : ' "Manufacture" implies a change, but every change is not a manufacture and yet every change of an article is the result of treatment, labour and manipulation. But something more is necessary and there must be transformation; a new and different article must emerge having a distinctive name, character or use.'" Thus, the contention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) includes preserving or preparing fish or producing any substance or article from fish by any method for human or animal consumption". Thus, if we take dictionary meanings of the word "processing", preservation of the potatoes by refrigeration would be a process. Preservation by refrigeration in cold storage is a well-known method of keeping edible goods fit for human consumption. In Encyclopaedia Britanica, volume 9, pages 543 and 545, various preservation processes for food are described : "There are several major processes for food preservation. The growth of micro-organisms (and enzyme activity) in foods may be retarded by cooling or almost entirely prevented by freezing. Since water is necessary for the growth of micro-organisms, dried (dehydrated) foods will be kept for long periods. Or the enzymes and micro-organisms present in foods may be completely or almost completely destroyed by the application of heat as a thermal processing (canning)." At page 545 what has been stated about cold storage is as under : "The only method by which fresh foods may be preserved for a considerable period in the raw state is by subjecting them to as low a temperature as possible wit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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