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1986 Supreme(Cal) 287
High Court Of Calcutta
Dipak Kumar Sen, Monjula Bose
COMMISSIONER OF INCOME-TAX - Appellant
Versus
UNION CARBIDE INDIA LTD. - Respondent
Income-Tax Reference 91 Of 1983
Decided On : 07/09/1986
Debi Pal, M.SEAL, P.K.PAL, R.C.PROSAD
Processing of fish can amount to manufacture or production for the purpose of Section 80j of the Income-tax Act, 1961.
Headnote:
INCOME TAX - SECTION 80J - PROCESSING OF FISH - WHETHER PROCESSING OF FISH AMOUNTS TO MANUFACTURE OR PRODUCTION - YES
Fact of the Case:
The assessee, Union Carbide India Ltd., carried on business of manufacture of various products. In the assessment year 1975-76, the assessee acquired some trawlers with sophisticated equipment for deep sea fishing and set up a "deep Sea Fishing Division" for fishing shrimps in the deep sea.
Finding of the Court:
The Tribunal found that the assessee was engaged in the production of an article being processed fish and fish products. The Tribunal held further that the "deep Sea Fishing Division" of the assessee fulfilled all the conditions of a new industrial undertaking as laid down in Section 80j (4).
Issues: Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the Deep Sea Fishing Division of the assessee was an 'industrial undertaking' within the meaning of Section 80j of the Income-tax Act, 1961?
Ratio Decidendi: The court held that the operations carried out by the assessee in its "deep Sea Fishing Division" resulted in the processing of the goods to make it marketable and that, without such processing, the goods, namely, the shrimps, would not be marketable for export. The court also noted that item 30 in Schedule V of the Income-tax Act, 1961, covers processed (including frozen) fish and fish products. In view of the said entry, a person who owns machinery or plant engaged in manufacture or production of processed fish (including frozen) and fish products is entitled to development rebate under Section 33 of the Income-tax Act, 1961, at a higher rate.
Final Decision: The court answered the question referred in the affirmative and in favor of the assessee.
( 1 ) THE material facts and proceedings leading up to the present reference are as follows :
( 2 ) UNION Carbide India Ltd. , the assessee, carries on business of manufacture of various products. In the assessment year 1975-76, the relevant accounting year ending on December 25, 1971, the assessee acquired some trawlers with sophisticated equipment like echosounders, electronic fish finding equipment, trawlers, radars, etc. , for deep sea fishing and set up a "deep Sea Fishing Division" for fishing shrimps in the deep sea.
( 3 ) THE trawlers and the equipments were utilised not only for fishing but also for decapitating, peeling and packing shrimps in special containers and freezing them in special quick-freezing chambers installed in the vessels.
( 4 ) IN the assessment year 1975-76, the assessee was assessed to income-tax. In the assessment, the assessee claimed relief under Section 80j of the Income-tax Act, 1961, in respect of its undertaking, "deep Sea Fishing Division". The Income-tax Officer, following the decision of the Bombay High Court in New India Fisheries Ltd. v. ITO [1971] 82 ITR 765, held that the profits and gains from the activity of catching fish in the deep sea with ships could not be regarded as profits and gains derived from ships and disallowed the claim.
( 5 ) BEING aggrieved, the assessee preferred an appeal before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner held that the term "manufacture" or "processing" of goods had not been defined in the Act. In its ordinary meaning, "manufacture" is a process which results in an alteration or a change of the goods subjected to manufacture and a commercially new article is produced. Under Section 80j, if the undertaking was not engaged in manufacturing or processing or production of the goods, the industrial undertaking would not be entitled to any relief. Following a decision of the Kerala High Court in CIT v. Casino (Pvt.) Ltd. [1973] 91 ITR 289, the Appellate Assistant Commissioner held that the Deep Sea Fishing Division of the assessee was not an industrial undertaking entitled to claim any deduction under Section 80j.
( 6 ) BEING aggrieved, the assessee preferred a further appeal before the Income-tax Appellate Tribunal. It was contended before the Tribunal on behalf of the assessee that to find out whether the assessee was manufacturing or producing any article within the meaning of Section 80j, Schedule V of the Income-tax Act, 1961, which provided for concessions in respect of particular production and manufacture, should be looked into. One item, viz. , item 30 in the said Schedule, refers to processed (including frozen) fish and fish products. It was contended that in view of the said item in the said Schedule, if an industrial undertaking was entitled to development rebate, on the same analogy, the same ought to be entitled to relief under Section 80 J.
( 7 ) A decision of the Allahabad High Court in Tarai Development Corporation v. CIT [1979] 120 ITR 342 was relied on. On the facts on record, the Tribunal held that the assessee was engaged in the production of an article being processed fish and fish products. The Tribunal held further that the "deep Sea Fishing Division" of the assessee fulfilled all the conditions of a new industrial undertaking as laid down in Section 80j (4 ). The only dispute raised by the Revenue was whether the said undertaking manufactured or produced articles. On the facts and in view of the operations carried on by the assessee in the said undertaking, the Tribunal held that the assessee was actually engaged in the production of articles, namely, frozen fish and fish products, if not manufacturing the same.
( 8 ) THE Tribunal found further that the "deep Sea Fishing Division" of the assessee was a separate undertaking and carried on an integrated activity for the purpose of marketing shrimps. The Tribunal found that unless the shrimps caught underwent the process carr
