Processing of goods does not automatically qualify as manufacturing or production for the purpose of claiming investment allowance under Section 32a of the Income Tax Act, 1961.

DIPAK KUMAR SEN, J.

( 1 ) S. B. COLD Storage Industries Pvt. Ltd. , the assessee, owns and runs a cold storage plant for storage of potatoes. The assessee was assessed to income-tax for the assessment year 1979-80, the accounting year ending on December 31, 1978. In the assessment, the assessee claimed investment allowance under Section 32a of the Income-tax Act, 1961, contending that it had installed new plant and machinery of the value of Rs. 2,29,315 in the cold storage during the accounting year which had been used wholly and exclusively for the purpose of its business. The investment allowance was claimed on the said amount. The assessee contended that an amount of over 75% of its claim for investment allowance had been debited in its profit and loss account of the year involved under an " Investment Allowance Reserve Account". The assessee contended that the operations in its cold storage plant amounted to manufacture, the main operation being processing of potatoes by chilling so that they remained fresh.

( 2 ) 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.

( 3 ) 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 the said section. Operation of a cold storage plant was not similarly mentioned in Section 32a of the Act. The Commissioner (Appeals) rejected the contentions of the assessee and upheld the decision of the Income-tax Officer.

( 4 ) BEING aggrieved, the assessee went in further appeal before the Income-tax Appellate Tribunal. It was contended on behalf of the assessee before the Tribunal that storing of potatoes in cold storage was an act of processing of goods. Such processing resulted in production within the meaning of Section 32 of the Act. In support of his contentions, the assessee cited a decision of the Supreme Court in the case of Chrestien Mica Industries Ltd. [1961] 12 STC 150. The assessee also cited and relied on another decision of this court in Radhanagar Cold Storage (P.) Ltd. 's case [1980] 126 ITR 66.

( 5 ) IT was contended on behalf of the Revenue that the processing done by the assessee in its cold storage plant could not be equated with production of an article. The Revenue cited and relied on an earlier decision of the Tribunal in Singhur Cold Storage P. Ltd. 's case.

( 6 ) THE Tribunal, following its earlier decision, held that processing of potatoes in cold storage could not be equated with production of an article. The appeal of the assessee was rejected.

( 7 ) ON an application of the assessee under Section 256 (1) of the Income-tax Act, 1961, the following question has been referred by the Tribunal, as a question of law arising out of its order, for the opinion of this court:"whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee was not entitled to investment allowance of Rs. 57,329 on the cost of new plant or machinery installed during the previous year under Section 32a of the Income-tax Act ?"

( 8 ) AT the hearing, learned advocate for the

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