1993 (5) TMI 57 - AT - Income Tax

Summary

Issues:
1. Interpretation of the term "primary agricultural produce" under section 80HHC.
2. Eligibility of dried cocoa seeds for deduction under section 80HHC.
3. Discrepancy between Assessing Officer and CIT(A) regarding the classification of dried cocoa seeds.

Detailed Analysis:
1. The primary issue in this case is the interpretation of the term "primary agricultural produce" under section 80HHC of the Income-tax Act. The Assessing Officer contended that dried cocoa seeds, being an agricultural produce, were not eligible for deduction under section 80HHC. The Assessing Officer argued that even though the seeds underwent a process before export, their nature, form, and character remained unchanged, thus falling under the category of agricultural produce. However, the CIT(A) disagreed with this classification, leading to the appeal by the revenue.

2. The second issue revolves around the eligibility of dried cocoa seeds for deduction under section 80HHC. The CIT(A) concluded that dried cocoa seeds do not qualify as "primary agricultural produce," thereby allowing the claim of the assessee under section 80HHC. The revenue, being dissatisfied with this decision, pursued a second appeal. The Tribunal examined the nature of cocoa fruits, wet seeds, and dried seeds presented by the Chartered Accountant. It was observed that the process involved in obtaining dried cocoa seeds rendered them unsuitable for classification as primary agricultural produce, thus upholding the decision of the CIT(A).

3. The discrepancy between the Assessing Officer and the CIT(A) regarding the classification of dried cocoa seeds was a crucial point of contention. While the Assessing Officer maintained that the seeds should be considered agricultural produce due to the minimal change in their characteristics post-processing, the CIT(A) diverged from this view. The Tribunal, relying on the definition of "primary" from Chambers Twentieth Century Dictionary, determined that dried cocoa seeds did not meet the criteria of primary produce. The Tribunal emphasized that the process involved in obtaining dried cocoa seeds distinguished them from the original cocoa fruits, thereby affirming the eligibility of the assessee for deduction under section 80HHC.

In conclusion, the Tribunal dismissed the revenue's appeal, ruling in favor of the assessee and allowing the deduction under section 80HHC for the export of lemon grass oil while excluding the dried cocoa seeds from the calculation.