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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 ..... whether the appellant is an ' industrial company ' as defined in the respective Finance Acts and can therefore be taxed only at 55 per cent. ? The Revenue is the respondent in all the appeals. Civil Appeal No. 3637 of 1983 is filed against the judgment of the Madras High Court dated December 18, 1981, in Tax Case No. 469 of 1978 (Reference No. 289 of 1978) and relates to the assessment year 1974-75. Civil Appeal No. 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted to fumigation under expert technical hands in order to prevent deterioration and with a view to give better polish and appearance and during that process they are treated with methyl bromide. A substantial part of the goods are exported. According to the assessee, it is engaged in the business of processing of goods and so entitled to the concessional rate of income-tax as per the Finance Act. The Revenue disputes this claim. According to it, no processing is involved 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o them in brief. (These decisions were not available when the Madras High Court rendered the earlier decision in Addl. CIT v. Chillies Export House Ltd. [1978] 115 ITR 73, dated December 8, 1977). Construing the word processing occurring in section 8(3)(b) of the Central Sales Tax Act and rule 13 of the Central Sales Tax (Registration and Turnover) Rules, 1957, to decide 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, 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 pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... balance-sheets, stock accounts, etc., amounts to processing of goods within the meaning of the term contained in the Finance Act and so, the assessee is entitled to the concessional rate of tax. The Allahabad High Court in CWT v. Syed Amjad Ali [1993] 202 ITR 19 held that the activity of crushing of tobacco leaves and separating stems and dust therefrom amounts to processing within the meaning of the relevant expression that occurred in the Wealth-tax Act. The Bombay High Court in Shree 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rought to the notice of all officers working under your charge. (emphasis supplied). On the basis of the above materials, counsel for the appellant vehemently contends that the entire approach made by the High Court and the conclusion reached by it is unsustainable and the above materials were not available to the Madras High Court when it rendered the parent decision in Addl. CIT v. Chillies Export House Ltd. [19781 115 ITR 73. It was contended that the main reasoning in the said decision in Addl. CIT 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 meanin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above as also the circular of the Central Board of Direct Taxes were not available to the Madras High Court when it rendered its main decision in Addl. CIT v. Chillies Export House Ltd. [1978] 115 ITR 73. The ultimate conclusion as to whether the assessee was carrying on the business of processing of goods would depend upon the consideration of all relevant materials available in the case. The Madras High Court has eschewed from consideration one important activity carried on in the matter, namely, the activity 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 1 ..... 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