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PETITIONER: DELHI COLD STORAGE PVT. LTD.

       Vs.

RESPONDENT: COMMISSIONER OF INCOME-TAX, DELHI-I, NEW DELHI.

DATE OF JUDGMENT14/08/1991

BENCH: MISRA, RANGNATH (CJ) BENCH: MISRA, RANGNATH (CJ) KANIA, M.H. KULDIP SINGH (J)

CITATION:  1991 AIR 2125            1991 SCR  (3) 589  1991 SCC  (4) 239        JT 1991 (3)   449  1991 SCALE  (2)346

ACT:     Finance  Act, 1973: Section 2(7)(c)--Assessee running  a cold storage--Whether an ’Industrial company’--Activities of cold storage --Whether involve processing of goods. Words and Phrases--Word ’Processing’--Meaning of.

HEADNOTE:     An  ’industrial Company’, as defined in Section  2(7)(c) of Finance Act, 1973 was entitled to certain concessions  in the  matter  of taxation. The appellant, a  private  limited company running a cold storage, laid claim to such  benefits contending  that it came within the meaning  of  ’industrial company’ since the activity carried on by it came within the words ’processing of goods’.     The  income-Tax Officer, rejected the  assessee’s  claim but the Appellate Assistant Commissioner conceded the claim, and directed remission of the proceedings to the  income-Tax Officer for re-computation of the tax by treating the appel- lant  as an ’industrial company’. The Tribunal accepted  the appeal of the Revenue and held that the appellant was not an ’industrial company’. This was upheld by the High Court. Dismissing the appeal preferred by the assessee, this Court,     HELD: 1.1 The term ’processing’ is of a wider  amplitude and  has  various aspects and meanings. in  common  parlance ’processing,  is understood as an action which brings  forth some change or alteration of the goods or material which  is subjected  to the act of processing. The dictionary  meaning of  the term is not very different from this meaning in  one sense  while various other meanings of Wider  amplitude  are also available. [593G-H, 594A]          1.2  In  a  cold storage,  vegetables,  fruits  and several  other articles, which require preservation  by  re- frigeration  are stored. While as a result of long  storage, scientific  examination  might  indicate  loss  of  moisture content, that is not sufficient for holding that the  stored articles have 590 undergone a process within the meaning of Sec.2(7)(c) of the Finance Act, 1973. [594C]      Chowgule, & Co. Pvt. Ltd. and Anr. v. Union of India  &

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Ors., [1981] 1 SCC 653, relied on.      Commissioner of Income-tax v. Radha. Nagar Chid Storage (P)  Ltd., 126 I.T.R. 66 and Addl. Commissioner  of  Income- tax, Kanpur v. Farrukhabad Cold Storage (P) Ltd., 107 I.T.R. 816, referred to.      Kilmarnock Equitable Co-operative Society Ltd. v. IRC., [1966] 42TC 675 at Page 681, referred to.

JUDGMENT:      CIVIL  APPELLATE  JURISDICTION: Civil Appeal  No.  3164 (NT) or 1991.      From  the  Judgment and Order dated  19.4.1984  of  the Delhi High Court in I. Tax Ref. No. 250 of 1975. H.N. Salve and Pramod Dayal for the Appellant.      J. Ramamurthy, Vijay.K. Verma and Ms. A. Subhashini for the Respondent. The Judgment of the Court was delivered by RANGANATH MISRA, CJ. Special leave granted.     The judgment of the High Court of Delhi is challenged by the assessee in this appeal. Assessee is a private’  limited company  running a cold storage. The year of  assessment  is 1973-74.  An  ’industrial company’, as  defined  in  sectiOn 2(7)(c) of Finance Act, 1973 for ,the purposes of the  First Schedule of that Act was entitled to certain concessions  in the  matter  of taxation. The appellant laid claim  to  such benefits  by contending that it came within the  meaning  of ’industrial company’. The question that was referred by  the Income-tax Appel late Tribunal to the High Court was:               "Whether on the facts and in the circumstanCeS               of  the  case the assessee company  running  a               cold storage could be held to be an industrial               company for purposes of section 2C7)(c) of the               Finance  Act,’  1973 and  the  First  Schedule               thereto?" 591     The  Income-tax Officer had not accepted the  claim  of. the  appellant  but  the  Appellate  Assistant  Commissioner conceded the claim and directed remission of the proceedings to  the Income-tax Officer for re-computation of the tax  by treating  the  appellant  as an  ’industrial  company’,  The Tribunal  accepted the appeal of the Revenue and  held  that the  appellant  was not an ’industrial  company’.  The  High Court has approved the conclusions reached by the Tribunal.                   ’Industrial  compnay’ has been defined  in               section  2(7)(c)  of the  Finance  Act.,  1973               thus:                "Industrial company means a company which  is               mainly  engaged in the business of  generation               or  distribution of electricity or  any  other               form of power or in the construction of  ships               or  in the manufacture or processing of  goods               or in mining.                                        (Underlining is ours)     The  appellant  had taken the stand  that  the  activity carried  on  by  it came within  the  words  ’processing  of goods’.  The short question for examination,  therefore,  is whether  the  cold storage of the appellant can be  held  to have been engaged in the processing of goods.     This  question  directly arose for  consideration  of  a Division Bench of the Calcutta High Court in Commissioner of Income-tax  v. Radha Nagar Cold Storage(P) Ltd., 126  I.T.R. 66. Sabyasachi Mukharji, J., (as he then was) spoke for  the Court  in this.case. Certain English cases were  taken  into

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consideration to find out the difference between manufactur- ing and processing and to find the true meaning of the  word "processing". The word ’processing’ has not been defined  in the Income-tax Act. The word ’process’ has various meanings, some  wider than others. Lord Guthrie in Kilmarnock  Equita- ble  Co-operative  Society Ltd. v. IRC [19661 42 TC  675  at page  681 observed that the word "does not have  the  widest significance  of ’anything done to the goods or  materials’. The  Division Bench of the Calcutta High Court’ looked  ’for the meaning in the Oxford DictiOnarY, Webster’s New Interna- tional Dictionary, Words and Phrases Legally Defined’ Vol. 4 and  in Encyclopaedia Britannica Vol. 9. The High Court  was impressed by the statement in Encyclopaedia Britannica, vol. 9 where it was said’               "The  only method by which fresh foods may  be               preserved for a considerable period in the raw               state is by subjecting               592               them  to  as  low a  temperature  as  possible               without  causing damage by freezing..  Storage               at  temperature above freezing, in the  neigh-               bourhood of 35 F/2 C is known as cold storage.               Storage at such temperature makes possible the               holding in good condition of many fresh  foods               for considerable periods and their shipment to               distant markets to consumers."               The High Court proceeded to state:                         "The act of cold storage appears  to               us  to  bean act whereby  foods  or’  products               stored in the cold storage are prevented  from               their.  natural decay. The potatoes which  are               kept in the cold storage are preserved in  the               original  state  and  their  normal  decay  is               prevented.  That,  in our  opinion,  would  be               processing the goods, that is to say,  preser-               vation applying a method to ’the goods, where-               by  the.  goods.  are  prevented  from  taking               its/normal course. There fore, looking from  a               broad  point  of  view, in the  light  of  the               definition  provided in the  several  diction-               aries to which we have referred, is appears to               us,  that in the context of the present  stat-               ute, ,which has used the expression  "process-               ing" in contradistinction or differently  from               the  expression "manufacture",  the  assessee-               company  was engaged in the act of  processing               the  goods in terms of the Finance Act at  the               relevant time.."     The  Court referred with approval to a decision  of  the ’Allahabad  High Court in Addl. Commissioner of  Income-tax, Kanpur v. Farrukhabad Cold’ Storage (P) Ltd., 107 ITR 8  16. The Calcutta High Court’s view directly supports the  appel- lant’s stand. In  the  impugned  judgment reported in 156  ITR  97,  after dealing  with the cases of the Calcutta and  Allahabad  High Court,. reference was.made to the decision of this Court  in Chowgule  &  Co. Pvt. Ltd. and Ant. v.  Union  of.India  and Ors.,  [1981] 1 SCC653 to find out the true meaning  of  the two  words ’manufacture’ and ’processing’. After  discussing some precedents this Court observed thus: "What is necessary in Order to characterise an operation  as "processing"  is that the ’commodity must., as a  result  of the operation,-experience some change., Here, in the-present case, diverse quantities of ore possessing different  chemi- cal and

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593 physical compositions are blended together to produce ore of the requisite chemical and physical composition demanded  by the  foreign  purchaser and obviously as a  result  of  this blending, the quantities of ore mixed together in the course of loading through the mechanical ore handling plant experi- ence change in their respective chemical and physical compo- sitions,  because  what is produced by such blending is  ore               of a different chemical and physical  composi-               tion. When the chemical and physical  composi-               tion  of each kind of ore which goes into  the               blending  is  changed; there can be  no  doubt               that the operation of blending would amount to               "processing"  of  ore within  the  meaning  of               section  8(3)(b) and Rule 13. It  is.no  doubt               true  that  the  blending of  ore  of  diverse               physical and chemical compositions is  carried               out  by  the simple act of  physically  mixing               diifferent  quantities  of  such  ore  on  the               conveyor belt of the mechanical ore  handling’               ’plant. But to our mind it is immaterial as to               how  the blending is done and what process  is               utilised for the purpose of blending. What  is               material to consider is whether the  different               quantities of ore which are. blended  together               in the course of loading through the  Mechani-               cal  ore handing plant undergo any  change  in               their. physical and chemical composition as  a               result  of blending and so far as this  aspect               of the question is concerned, it is.  impossi-               ble  to  argue  that they do  not  suffer  any               change in their respective chemical and physi-               cal compositions-".     The meaning given to the word ’processing’ and the  test laid  down  to  find out whether the  operation  amounts  to processing  by  the three-Judge Bench of  ’this  Court  runs counter  to  the conclusions. reached by the  Allahabad  and Calcutta  High Courts. As we have already pointed  out,  the two direct decisions on the point are the cases from Allaha- bad  and Calcutta. The other cases that have been  cited  in the  Calcutta judgment or at the Bar are cases not  relating to  the meaning or ambit of the relevant expression  in  the definition of section 2(7)(c) of the Finance Act, 1973.     We have already noted that processing is a term of  wide amplitude and has various aspects and meanings.       In  common  parlance ’processing’ is understood  as  an action  which brings forth some change or alteration of  the goods or material which is subjected to the act Of  process- ing- The dictionary meaning of 594 the  term  is not Very different from this meaning.  in  one sense  while various other meanings of wider  amplitude  are also  available.  The view taken by Allahabad  and  Calcutta High  Courts did not find favour with the three-Judge  Bench of this Court and in clear terms the judgment indicates that processing  involves  bringing into  existence  a  different substance from what the material was at the commencement  of the process.      In a cold storage, vegetables, fruits and several other articles  which require preservation by  referigeration  are stored.  While  ’as  a result of  long  storage,  scientific examination  might  indicate loss of moisture  content  that is,not sufficient for holding that the stored articles  have undergone a process within the meaning of section 2(7)(c) of the  Finance Act, 1973. The three-Judge Bench decision  must

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be  taken to have overruled the view of the  Allahabad  High Court  in Addl. Commissioner of Income-tax,’ Kanpur v.  Far- rukhabad  Cold  Storage (P) Ltd., (supra) and  that  of  the Calcutta  High Court in Commissioner of Income-tax v.  Radha Nagar Cold Storage (P) Ltd., (supra).         The  appeal has, therefore, to be dismissed  and  the opinion of the Delhi High Court has to be affirmed. Parties are directed to bear their own costs. N.P.V.                                       Apppeal   ’dis- missed. 595