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TMI Blog2007 (6) TMI 302X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 80HHC. The Assessing Officer observed that the deduction under section 80-IB is allowable to an industrial undertaking which fulfils certain conditions. As a basic condition to be satisfied is that it should be an industrial undertaking and it should also operate a cold storage plant, he relied on the judgment of the Hon'ble Supreme Court in the case of CIT v. Relish Foods [1999] 237 ITR 591 and held that processing of fish cannot be held as an industrial undertaking and thus he denied exemption. The first appellate authority, while agreeing with the contentions of the assessee that it is eligible for deduction under section 80-IB(3)(ii), dismissed the claim of the assessee on the ground that a separate computation of profit from cold storage is not provided by the assessee and also held that no income can be said to have been generated from the cold storage as it is just one stage of the total export business of the assessee. He rejected the claim of the assessee. Aggrieved, the assessee is in appeal before us. 3. Shri Arvind Sonde appearing for the assessee took this Bench through the history of the legislation and submitted that it was the intention of the Legislat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relied on Circular No. 005P, dated 9-10-1967 issued in the context of provisions of section 84 of the Income-tax Act and submitted that the intention of the Legislature, right from that time till date was expressed by this circular which states that "An industrial undertaking operating cold storage plant in India will be eligible for the 'tax holiday' concession in the same manner as an industrial undertaking which manufactures or produces articles in India". Thus he submits that the Legislature has specifically provided that operation of a cold storage plant is at par with the activity of manufacturing of an article or thing. He vehemently contended that it is impossible to visualise export activity of fish and other marine products without processing of storing the same in a cold storage plant. Thus his case is that the entire profits are totally an outcome of the operation of a cold storage plant. He further submits that purchases, preservation and sale of perishable goods is the only business of a cold storage undertaking and this activity is an integrated, inter-linked and inseparable activity and has to be considered as a whole. On the reliance placed by the first appellate a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght in refusing deduction, on the ground that the assessee has not furnished any computation of such profits and on the ground that no profits as such can be said to have been derived from the operation of the cold storage plant. He relied on the orders of the Revenue authorities and prayed that the same be upheld. 6. Rival contentions are heard. On a careful consideration of the facts and circumstances of the case and on a perusal of the papers on record and the case laws cited before us we hold as follows: 6.1 Section 80-IB(1) is extracted for ready reference: "(1) Where the gross total income of an assessee includes any profits and gains derived from any business referred to in sub-sections (3) to (11) [and (11A)] (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to such percentage and for such number of assessment years as specified in this section." [Emphasis supplied] Section 80-IB(2) lays down the conditions to be fulfilled under this section. The conditio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ross appeal or cross objection to the finding of the CIT(A) that the assessee is entitled to deduction under section 80-IB(3)(ii) read with section 80-IB(2)(iii). The condition that the eligible undertaking should operate its cold storage plant is an alternative to an undertaking which, manufactures or produces article or thing. As the Revenue has not disputed that the assessee is an industrial undertaking and that it operates its own cold storage plant, we do not disturb the finding of the first appellate authority. 6.3 Even otherwise the erstwhile section 80J read as follows:-- '"80J. Deduction in respect of profits and gains from newly established industrial undertakings or ships or hotel business in certain cases.--(1) Where the gross total income of an assessee includes any profits and gains derived from an industrial undertaking or a ship or the business of a hotel, to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains (reduced by the deduction, if any admissible to the assessee under section 80HH or section 80HHA) of so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order passed by the Tribunal and we answer the first question in favour of the assessee and against the Revenue." As the wording used both under sections 80J and 80-IB are para materia, as in the case considered by the Hon'ble High Court is a case of sea food business, where cold storage facility is operated we apply the judgment of the Hon'ble Madras High Court in the case of George Marjo Exports (P.) Ltd. (supra) and uphold the findings of the appellate authority that the assessee is eligible for deduction under section 80-IB(3)(ii) of the Act. 6.4 We now consider the issue whether the entire profits and gains derived from the business of a small scale industrial undertaking which operates its cold storage plant is exempt from taxation or not. This argument of Shri Arvind Sonde on the issue cannot be accepted for the reason that the deduction in this case is governed by section 80-IB(3). This section clearly provides that the amount of deduction shall be a particular percentage of the profits and gains derived from its industrial undertaking which operates its cold storage plant. In our humble opinion, in the case of an industrial undertaking operating its cold storage plant, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would definitely result in certain value addition to a product and such value addition should be considered as profits derived from operation of a cold storage plant. As we have held that the entire profits derived from an industrial undertaking which operates its cold storage plant as one of its critical processes, is eligible for deduction, we do not find it necessary to comment on this issue. This much has to be said that the stand of the first appellate authority is against the facts of the case and also against the wording and spirit of the section. If the assessee had no cold storage plant of its own, it would have to depend on some other facilities, or otherwise, perishable goods, i.e. sea foods being a product of the assessee would get destroyed and the entire profits would be wiped out. 7. Thus we set aside the issue to the file of the Assessing Officer with the direction to consider and compute the "profits and gains derived from the industrial undertaking which operates its cold storage plant" and to grant suitable deduction under section 80-IB(1) read with section 80-IB(3) of the Act. The Assessing Officer shall exclude such business profits which cannot be said to ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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