1986 (7) TMI 45 - HC - Income Tax

Summary

Issues Involved:
1. Whether the "Deep Sea Fishing Division" of the assessee qualifies as an "industrial undertaking" within the meaning of section 80J of the Income-tax Act, 1961.
2. Whether the operations carried out by the assessee in preparing shrimps for the export market amount to "manufacture" or "production".

Summary:

Issue 1: Qualification as an Industrial Undertaking
The Tribunal found that the "Deep Sea Fishing Division" of the assessee was engaged in the production of processed fish and fish products. The Tribunal held that the division fulfilled all conditions of a new industrial undertaking as laid down in section 80J(4). The High Court upheld this finding, noting that the Tribunal's conclusion that the division was engaged in production or manufacture was unchallenged. The High Court also referenced item 30 in Schedule V of the Income-tax Act, 1961, which includes processed (including frozen) fish and fish products, to support the conclusion that the division qualifies as an industrial undertaking.

Issue 2: Manufacture or Production
The Tribunal held that the operations carried out by the assessee, such as cleaning, peeling, packing, and freezing shrimps, resulted in the production of a commercially new product. The High Court agreed, stating that these operations converted the natural produce into frozen fish and fish products, which are marketable. The High Court cited several precedents, including the Supreme Court's decision in Chrestien Mica Industries Ltd. v. State of Bihar, to support the view that such processing constitutes production. The High Court also noted that the term "processing" has a broader meaning than "manufacture" and includes any operation that makes a commodity marketable.

Conclusion:
The High Court affirmed the Tribunal's decision, holding that the "Deep Sea Fishing Division" of the assessee qualifies as an "industrial undertaking" within the meaning of section 80J of the Income-tax Act, 1961. The operations carried out by the division amount to the production of processed and frozen fish, entitling the assessee to relief u/s 80J. The question referred was answered in the affirmative and in favor of the assessee, with no order as to costs.