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Issues Involved:
1. Whether the assessee-company qualifies as an "industrial company" u/s 2(7)(d) of the Finance Acts of 1966 and 1967. 2. Whether the activities of running a cold storage can be considered as "processing of goods" under the said section. Summary: Issue 1: Definition of "Industrial Company" The core issue is the interpretation of "industrial company" as defined u/s 2(7)(d) of the Finance Acts of 1966 and 1967. The section defines an industrial company as one mainly engaged in the business of generation or distribution of electricity, construction of ships, manufacture or processing of goods, or mining. The explanation clarifies that if the income from these activities is not less than 51% of the total income, the company qualifies as an industrial company. There is no dispute that the income from the cold storage business exceeded 51%. Issue 2: Interpretation of "Processing of Goods" The revenue contended that preservation of goods by cold storage does not constitute "processing of goods" as it does not result in a finished article. The court referred to the case of Kilmarnock Equitable Co-operative Society Ltd. v. Commissioners of Inland Revenue, where it was held that processing means an activity that falls short of manufacture. The court agreed with this interpretation, stating that "processing of goods" need not result in the manufacture of new goods but must adapt the goods for a particular use. Application to Cold Storage The court examined whether subjecting goods to a particular temperature in cold storage amounts to processing. The assessee explained the refrigeration process, which involves absorbing undesirable heat from potatoes and transferring it to the atmosphere through a cooling medium. The court noted that preservation by refrigeration is a well-known method for keeping edible goods fit for consumption and that this process involves treating the goods in a manner that prevents decay. Conclusion The court concluded that the activities of the assessee-company in running cold storages do amount to "processing of goods" as defined u/s 2(7)(d) of the Finance Acts. Therefore, the assessee-company qualifies as an industrial company and is entitled to the concessional rate of tax. Judgment The question referred was answered in the affirmative, in favor of the assessee and against the department. The assessee is entitled to costs assessed at Rs. 200, with counsel fees also assessed at the same figure.
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