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TMI Blog1997 (4) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... 8017 of 1995 is preferred against the judgment of the same High Court dated April 4, 1995, in Tax Case No. 998 of 1982 and relates to the assessment year 1976-77 (The judgment of the High Court is reported in [1996] 220 ITR 411). Civil Appeal No. 15346 of 1996 is preferred against the judgment of the same High Court dated June 27, 1996 in Tax Case (Reference) No. 893 of 1984 and relates to the assessment year 1977-78. Regarding the assessment year 1974-75, we are concerned with the Finance Act of 1974, section 2(8)(c) ; for the assessment year 1976-77, Finance Act, 1976, section 2(9)(c) ; and for the assessment year 1977-78, Finance Act (No. 2) of 1977, section 2(7)(c). A similar provision occurring as section 2(6)(c) of the Finance Act (No. 2) of 1971 and relating to the income-tax assessment of the appellant for the assessment year 1971-72 was construed by the Madras High Court and the decision was rendered on December 8, 1977, and the judgment is reported as Addl. CIT v. Chillies Export House Ltd. [1978] 115 ITR 73. Since the language of the different Finance Acts relating to the issue in controversy is substantially the same, we shall quote the earliest provision contained in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the goods purchased and exported are chillies and the assessee cannot be considered to be an " industrial company " carrying on the business of processing of goods. An identical matter came up for consideration before the Madras High Court relating to the same assessee-appellant for the assessment year 1971-72 and the court held that the assessee is not an industrial company coming within the meaning of section 2(6)(c) of the Finance (No. 2) Act of 1971. The said decision is reported in Addl. CIT v. Chillies Export House Ltd. [1978] 115 ITR 73. When the matter came up for consideration in the subsequent years 1974-75, 1976-77 and 1977-78, the earlier decision rendered for the assessment year 1971-72 (Addl. CIT v. Chillies Export House Ltd. [1978] 115 ITR 73) was followed without discussion. In this batch of appeals, the appellant assails the reasoning and conclusion of the High Court contained in its judgment dated December 8, 1977, relating to the assessment year 1971-72 in Addl. CIT v. Chillies Export House Ltd. [1978] 115 ITR 73 as incorrect and unsustainable. We heard counsel. The appellant's counsel vehemently contended that the decision of the High Court rendered for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dergo processing when it is blended, a three-member Bench of this court in Chowgule and Co. Pvt. Ltd. v. Union of India [1981] 47 STC 124, at pages 130-131, stated thus : "....whether the ore blended in the course of loading through the mechanical ore handling plant can be said to undergo processing when it is blended. The answer to this question depends upon what is the true meaning and connotation of the word ' processing ' in section 8(3)(b) and rule 13. This word has not been defined in the Act and it must therefore be interpreted according to its plain natural meaning. Webster's Dictionary gives the following meaning of the word ' process ' : ' to subject to some special process or treatment, to subject (especially raw material) to a process of manufacture, development or preparation for the market, etc., to convert into marketable form as livestock by slaughtering, grain by milling, cotton by spinning, milk by pasteurising, fruits and vegetables by sorting and repacking.' Where therefore any commodity is subjected to a process or treatment with a view to its ' development or preparation for the market ', as, for example, by sorting and rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee Mulchand Co. Ltd. v. CIT [1986] 162 ITR 764 held that when a company purchases wool, sorts out the same in different qualities and colours and staple lengths, and then hand-washes it to eliminate dirt, etc., and dries it in sun and blends it uniformly for sale and export, a new commercial commodity is brought into existence and the operation carried on amounts to processing of goods and the assessee is an industrial company, entitled to the concessional rate of tax under the Finance (No. 2) Act of 1971. The Kerala High Court in CIT v. Rajmohan Cashews (P.) Ltd. [1990] 185 ITR 472 held that when the assessee-company was engaged in processing raw cashew nuts and the major operation of processing work was done by outside agencies on behalf of the assessee and the charges therefor were paid by the assessee, the assessee was engaged in the manufacture and processing of the goods and was an industrial company within the meaning of section 2(6)(c) of the Finance Act, 1972. The court held that the fact that the processing was not done in the factory of the assessee but in the factory of someone else would not necessarily mean that the assessee is not mainly engaged in the processing of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T v. Chillies Export House Ltd. [1978] 115 ITR 73 is to the effect that the activity done by the assessee, namely, sorting and grading of Chillies as per Agmark specifications and making them fit for export and before export clipping and stemming of chillies were alone done by them but the activity relating to fumigation by the treatment of methyl bromide was done by another on its behalf, and so the assessee cannot claim the benefit and the totality of the activities cannot be considered as having been done by the assessee and it is on this basis of reasoning, it was held that in this view it cannot be said that the assessee was engaged in the processing of goods within the meaning of the Finance (No. 2) Act of 1971. The plea urged before us is that the word " processing " has been understood in a very wide sense by the three-member Bench of this court in Chowgule's case [1981] 47 STC 124 and by various High Courts referred to hereinabove and, even if one or more of such activities in the series are entrusted to any other person like a contractor, to enable the assessee to complete the task, it will not disable or disentitle the assessee to claim the concessional rate of tax.& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relating to fumigation by the treatment with methyl bromide on the ground that it was done by another (Mysodet Pvt. Ltd., Bangalore) on behalf of the assessee. That is an irrelevant or immaterial factor. The sole question is, whether on a consideration of the totality of the activities including the one relating to fumigation by the treatment with methyl bromide which enables the goods to be exported as a marketable commodity, amounted to the business of processing of goods. The High Court had omitted to consider the matter in that perspective. It also does not stand to reason to state that the dictum laid down by the three-member Bench in Chowgule's case [1981] 47 STC 124 (SC) has been departed from in the later decision rendered by another co-ordinate Bench in Delhi Cold Storage P. Ltd. v. CIT [1991] 191 ITR 656 (SC). It appears that since in a cold storage there was only an act of preservation -- without any positive action --- this court was inclined to take the view that the company running the cold storage is not an industrial company and no process is involved. Fumigation requires positive action. The dictionary meaning of the said word is, " to treat (something contami ..... 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