COMMISSIONER OF INCOMETAX Vs. PREMIER EXPORT INTERNATIONAL

JUDGEMENT

(1.) The Income Tax Appellate Tribunal in compliance with the direction of this Court in O.P. No.12081 of 1998, has referred the following questions of law:

(2.) When the matter came up for hearing learned Standing Counsel appearing for the Department brought to our notice the decision of the Apex Court in C.I.T. v. Kala Cartoons Pvt. Ltd. ( 2001 (252) ITR 658 ). The question involved in that case was whether purchasing, peeling, freezing and exporting of shrimps would involve production or manufacture. The Apex Court held that the assessee had not established that the activities would amount to manufacture or production. Counsel also referred to the decision of a Division Bench of this Court in C.I.T. v. Poyilakada Fisheries Ltd. ( 2000 (247) ITR 195 ). The question arose in that case was whether assessee is entitled to special deduction for processing and export of shrimps. Following the decision of the Apex Court in Sterling Foods v. State of Karnataka ( 1986 (63) STC 239 ) it was held that the processed or frozen shrimps and prawns are commercially regarded as the same commodity as raw shrimps and prawns. It was held that when raw shrimps and prawns are subjected to the process of cutting of heads and tails, peeling, deveining, cleaning and freezing, they do not cease to be shrimps and prawns. In common parlance they remain the same and continue to be known as shrimps and prawns. In this connection, we may also refer to the decision of another Division Bench of this Court in Commissioner of Income Tax v. Poyilakada Fisheries Ltd. ( 2001 (252) ITR 661 ). It was held in that decision that the assessee was not entitled to investment allowance on the plant and machinery used in its activity of processing fish.

(3.) We are of the view, the principle enunciated in the above mentioned decisions would apply in the instant case as well. In this case, assessee is exporting prawns and shrimps after subjecting to various treatment like deveining, peeling etc. When raw prawns are subjected to process of deveining and peeling they did not cease to be prawns and become other distinguished commodity. There is no essential difference between raw prawns and processed prawns. They continue to be known as prawns. This being the position, we are of the view, the Tribunal is not justified in holding that the assessee is entitled to investment allowance under S.32A of the Income Tax Act. We therefore answer the question in favour of the Revenue and against the assessee. Reference is answered accordingly.