COMMISSIONER OF INCOME TAX Vs. ELITE SEA FOODS

JUDGEMENT

(1.) AT the instance of the Revenue, the Income-tax Appellate Tribunal (in short "the Tribunal") has referred the following two questions of law for the decision of this court;

(2.) THE respondent is an assessee to income-tax. We are concerned with the assessment year 1978-79. THE respondent-assessee purchases seafood, namely, shrimps, and subjects them to various processes like de-heading, peeling, de-veining and freezing. THEreafter, the sea-food is exported. For the above purpose, the respondent has installed a "plant freezer". He claimed investment allowance of Rs. 39,500 being 25% of the cost of the freezer in the sum of Rs. 1,58,000. THE deduction claimed was disallowed by the Income-tax Officer. He held that the new machinery was not installed for the purpose of construction, manufacture or production of any one or more of the articles or things specified in the Ninth Schedule to the Income-tax Act (in short "the Act"). In appeal, the assessee relied on Section 32A(2)(b)(iii) of the Income-tax Act and pleaded that in the light of the modified provision, which is applicable for the year 1978-79, the assessee may be allowed the deduction. THE Appellate Assistant Commissioner accepted the said plea. He took the view that the amendment of Section 32A took effect from April 1, 1978. THE Revenue took up the matter in appeal before the Appellate Tribunal. It was contended that the asses-see is not entitled to the investment allowance since the assessee was not manufacturing or producing any article or thing. Ignoring this vital aspect, the only question considered was whether there was exclusion of the product from the Ninth Schedule to the Act. That led to the erroneous finding. THE Tribunal, however, relying on the decision of this court in CIT v. Castlerock Fisheries [1980] 126 ITR 382, and the decisions of the Calcutta and Allahabad High Courts -- CIT v. Radha Nagar Cold Storage P. Ltd. [1980] 126 ITR 66 (Cal) and Addl. CIT v. Farrukhabad Cold Storage (P.) Ltd. [1977] 107 ITR 816 (All)--held that taking into account the processes carried on by the assessee, it should be considered to have been engaged in the production of an article. THE Tribunal referred to the decision in CIT v. Marwell Sea Foods [1987] 166 ITR 624 (Ker) and held that the assessee must be considered to have been engaged in the production of an article and so the order of the Appellate Assistant Commissioner does not merit interference. THEreafter, on a motion by the Revenue, the two questions of law, extracted hereinabove, have been referred for the decision of this court.