The process of curing coffee amounts to manufacturing if it results in a commercially different article or commodity, entitling the assessee to the investment allowance under S.32A of the Income Tax Act.

1. Aggrieved by the judgment/ order of the High Court, the assessee-appellant has come up in appeal. By the impugned judgment, the High Court in a reference made under S.256(1) of the Income Tax Act, 1961 (for short, 'the Act') by the Income Tax Appellate Tribunal, Cochin (for short 'the Tribunal') has answered the following question of law in the negative.

"Whether, on the facts and in the circumstances of the case, the tribunal is right in law and fact in holding that the assessee's activity of curing coffee amounts to manufacturing and the assessee is entitled to relief under S.32A of the Income Tax Act?"

i.e., against the assessee and in favour of the revenue.

2. The High Court opined that the assessee is not entitled to the investment allowance under S.32A of the Act in respect of the machinery used for curing coffee and its sale.

3. The relevant facts giving rise to the above question of law are:

The assessment years in question are 1980-1981 and 1983-1984. The assessee is a public limited company. It is engaged in the export of coir products, distribution of insecticides and pesticides, running and managing of estates on service contracts. In addition, the assessee has coffee curing plants. For the machinery installed for curing of the coffee, the assessee claimed investment allowance under S.32A for both the assessment years. The income tax officer held that the assessee was not entitled to the investment allowance. Assessee preferred appeal before the Commissioner of income tax (appeals) (for short'C.I.T. (appeals)) who allowed the appeals and held that the assessee was entitled to the investment allowance as provided under S.32A of the Act.

4. On further appeal by the revenue, the tribunal noticed that a similar issue had come before it in ITA No. 421/Coch/1984 in the assessee's own case wherein the tribunal had held that the assessee was entitled to the investment allowance. Following its earlier decision, the tribunal upheld the order of C.I.T. (appeals).

5. The matter was taken up in reference before the High Court. To ascertain the factual position as to what is meant by curing of coffee, the court directed the counsel for the parties to produce the order of the tribunal for the earlier assessment year, which was taken on record.

6. To appreciate as to what is understood by the word 'coffee' as is generally known in the commercial parlance, the High Court referred to the Encyclopedia Britannica, Volume 6 (1972 edition) and concluded that'coffee' is a beverage made from the roasted seeds (beans) of the coffee plant. The said beverage is consumed as either a hot or cold drink and is considered to be having an invigorating effect. Coffee is prepared by either a dry or a wash process. In the dry process, known as natural process, the coffee cherries are thoroughly rinsed in water and then spread out on cement patios in the open air and sun to dry. After drying, the coffee is repeatedly run through fanning and hulling machines to remove the hulls, dried pulp and parchment. As against this, the wash process is quite different. In this process, the cherries are first put through a pulping machine that breaks them open and virtually squeezes the beans out of the pulpy skin. Such beans go into large tanks where they are left for about 24 hours. Fermentation in the process is avoided, because it loosens what is known as a jelly like substance understood as 'honey' in regard thereto. Even in this process, after washing, the coffee is spread out in patios to dry. It takes two to three weeks in the sun for the coffee to become thoroughly dried and during this time it requires shuffling and turning over so as to give sufficient natural heat depending on the climatic conditions. The usual expected aroma is available only after the process of roasting. Roasting also changes the colour giving it a brown colour and a consequent process of chemical change also. The process of roasting brings with its splendid aromatic qualities