COMMISSIONER OF INCOME TAX Vs. GEORGE MAIJO

JUDGEMENT

(1.) THE question required to be considered by us in this reference is, as to whether the processing of shrimps amounts to production or manufacture entitling the assessee to deduction under Section 80HH of the Income-tax Act, 1961 ? THE question arises out of the assessment of the income of the respondent, George Maijo (Cuddalore), Madras, for the assessment years 1979-80 and 1980-81. THE reference is made at the instance of the Revenue.

(2.) THE assessee is engaged in the business of processing and exporting shrimps. Its claim for deduction under Section 80HH of the Act was rejected by the Income-tax Officer on the ground that such processing does not amount to production or manufacture. THE Commissioner of Income- tax, however, was of the view that it does amount to manufacture and allowed the assessee's appeal. THE Revenue carried the matter further in appeal to the Tribunal which agreed with the view of the Commissioner. THE Tribunal relied upon the decision of the Karnataka High Court in the case of Sterling Foods v. CIT [1984] 150 ITR 292, where the question did not arise for consideration and the decision of the Delhi High Court in the case of Delhi Cold Storage (P.) Ltd. v. CIT , to hold that processing of shrimps amounts to manufacture. THE Delhi High Court also in that case was not concerned with the question which arises for consideration here. THE court held in that case that keeping of goods in a cold storage plant does not bring about any change and that to characterise an operation as "processing" that commodity must, as a result of the operation, experience some change.

(3.) LEARNED counsel relied on the decision of this court in the case of CIT v. Orient Marine. Products Pvt. Ltd. (19951 214 ITR 44, wherein it was held following the decision of the Calcutta High Court and the Kerala High Court that the processing of shrimps, frog legs and prawns would amount to manufacturing activiiy as contemplated under Section 80J(ii) of the Act. That decision was rendered by this court without referring to the judgment of the Supreme Court in the case of Sterling Foods [198G] 63 STC 239 and applying the law laid down therein and must be regarded as per incu-riam. Counsel also relied on the decisions of the Kerala High Court in CIT v. Poyilakkada Fisheries (P.) Ltd. and CIT v. Marwell Sea Foods [1987] 166 ITR 624, wherein it was, inter alia, held that processing of prawns will amount to production of articles and the processor assessee is entitled to allowance under Section 80J and Section 32A of the Income-tax Act, and the decision of the Calcutta High Court in CIT v. Union Carbide. India Ltd. , wherein it was held by the Calcutta High Court that a new commercial product comes into being when raw shrimps are cleaned, peeled, packed and frozen. These decisions which run counter to the decision of the apex court in the case of Sterling Foods [1986] G3 STC 239 must be held to have been incorrectly decided, and with great respect we must dissent from those rulings.