1989 (2) TMI 178 - AT - Income Tax

Summary

Issues:
- Interpretation of the term "manufacture" or "production" under section 80HH of the Income-tax Act, 1961.
- Whether processing frozen sea food constitutes an activity of manufacture or production eligible for deduction under section 80HH.
- Comparison of relevant provisions under sections 33 and 80HH of the Income-tax Act.
- Application of judicial precedents from the decisions of Calcutta and Kerala High Courts and the Special Bench of the Tribunal.
- Impact of decisions of the Supreme Court of America on the interpretation of the term "manufacture" or "production" under the Income-tax Act.

Detailed Analysis:

The judgment by the Appellate Tribunal ITAT Pune involved appeals by the assessee against the Commissioner of Income-tax's order disallowing deduction under section 80HH of the Income-tax Act, 1961. The primary issue revolved around whether the assessee's business of manufacturing frozen sea food from shrimps obtained from the sea qualified as an industrial undertaking eligible for the deduction. The Commissioner contended that the deduction had been wrongly allowed as the business did not constitute the manufacture or production of an article. The assessee argued that the processing of frozen sea food fell within the ambit of manufacture or production as per relevant provisions. The Tribunal analyzed the legislative intent behind section 80HH, emphasizing the encouragement of industries in backward areas. It noted that the term "manufacture" or "produce" appeared in both sections 33 and 80HH, indicating a similarity in the scope of activities eligible for relief. The Tribunal highlighted the significance of processed (including frozen) fish and fish products as a new commercial article under the Fifth Schedule, supporting the view that such processing constituted manufacture or production for the purpose of availing benefits under the Act.

The Tribunal considered the decisions of the Calcutta and Kerala High Courts, along with the Special Bench of the Tribunal, which supported the assessee's position. It distinguished the decisions of the Supreme Court of America cited by the Commissioner, emphasizing the contextual interpretation of the terms "manufacture" or "production" within the Income-tax Act. The Tribunal rejected the applicability of the Supreme Court's rulings in cases unrelated to the specific provisions of the Act, asserting that the processing of sea food by the assessee qualified as an activity of manufacture or production based on the legislative intent and judicial precedents. It concluded that the decisions of the Calcutta and Kerala High Courts, as well as the Special Bench of the Tribunal, guided the resolution of the controversy in favor of the assessee. Consequently, the Tribunal set aside the Commissioner's order and reinstated the original assessment orders, allowing the appeals in favor of the assessee.