9911796707
TMI Blog2005 (8) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts necessary for the determination of the question are taken from the said reference. The assessment year is 1983-84 and the relevant accounting period is December 31, 1982. The assessee, a State Government Corporation, is carrying on business of export of various commodities. A deduction was claimed under section 80HHC of the Act, and the same was allowed by the Assessing Officer vide assessment order dated March 17, 1986, framed under section 143(3) of the Act. The Commissioner of Income-tax (the CIT) initiated action under section 263 of the Act and vide order dated March 28, 1988, after hearing the assessee, partially set aside the assessment order on the issue of deduction under section 80HHC of the Act, by holding the original assessment order as being erroneous and prejudicial to the interests of the Revenue. The assessee carried the matter in appeal before the Tribunal, who allowed the appeal of the assessee vide its order dated April 1, 1991. It is this order which is under challenge. Mrs. M.M. Bhatt, learned standing counsel for the applicant-Revenue submitted that the assessee had exported groundnuts which were agricultural primary commodity within the meaning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in favour of the assessee. Section 80HHC, as was applicable for the three assessment years under consideration, and relevant for the present, reads as under: "80HHC. Deduction in respect of export turnover.-(1) Where the assessee, being an Indian company or a person (other than a company), who is resident in India, exports out of India during the previous year relevant to an assessment year any goods or merchandise 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, the following deductions, namely:- (a) a deduction of an amount equal to one per cent, of the export turnover of such goods or merchandise during the previous year; and (b) a deduction of an amount equal to five per cent, of the amount by which the export turnover of such goods or merchandise during the previous year exceeds the export turnover of such goods or merchandise during the immediately preceding previous year. (2)(a) This section applies to all goods or merchandise [other than those specified in clause (b)] if the sale proceeds of such goods or merchandise exported out of India are receivab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icultural" denotes that the commodity in question is a produce of agricultural operations. To that extent, there is a consensus amongst the parties. The real lis is whether HPS groundnuts can be termed to be a "primary commodity". According to the Revenue, HPS groundnuts remained groundnuts and, hence, they are "primary commodities" obtained after agricultural operations on land. The Tribunal has held that, for a commodity to be a primary commodity, it should not have been obtained after processing. In other words, the commodity which is the produce of the land on which agricultural operations are carried out, would be a primary commodity till the point of time it is not processed further. Once the commodity undergoes a process or processes, it ceases to be a primary commodity though it may continue to remain an agricultural commodity. The Tribunal has recorded that the processes which are undertaken by the assessee and the commodity which is exported by the assessee as a consequence of such processes, result in the commodity ceasing to be "agricultural primary commodity". For recording this finding, the Tribunal has appreciated the evidence on record and recorded the following fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s it actually grows, but also a product which undergoes a simple operation so as to make it more saleable or more usable. The rice and the husk though separated remain as they were produced and hence continue to be 'agricultural product' or 'product of agriculture'." Hence, it can be concluded that a primary product is as it actually grows, and on the other hand, a product which undergoes a simple operation so as to make it more saleable or more usable does not cease to be a product of agriculture. For the purpose of determining whether the present assessee's case is covered by the exclusionary clause or not, what is required to be determined is, whether the exported goods, i.e., HPS groundnuts are primary commodities? Even if HPS groundnuts continue to remain agricultural commodities, whether they continue to be primary commodities or not, has to be determined. Applying the aforesaid ratio of the apex court, one can say that considering the process reproduced and recorded by the Tribunal, the goods in question are not in the form as actually grown and hence cease to be a primary commodity. The issue can be approached from a slightly different angle. What would be the approach of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pt the contention for the simple reason that, whether the characteristics remain the same or not, what is material is that the commodity ceases to be a primary commodity and is known as a commercially different product. It is necessary to take note of the fact that the aforesaid view was also expressed by the High Court of Hyderabad in the case of Kishenlal Oil Mills v. CST [1955] 6 STC 650, in the context of rule 5 of the Hyderabad General Sales Tax Rules, which levied tax on various goods purchased by a dealer, one of the goods being groundnut. It was observed: "In this view of the matter, the word 'groundnut' for the purpose of sub-rule (2) of rule 5, in our view, would be the unshelled groundnut produced by the agriculturists and not the kernel ... Whenever the word 'groundnut' is used, it generically connotes to the mind the pod or unshelled ground-nut rather than the seed or the nut or the kernel, which in Hindustani is termed as 'singhdana' as opposed to 'mungphalli' (unshelled groundnut). If it was intended that the purchase turnover not only of the unshelled groundnut but also of kernel should be liable to sales tax, it could have been easily specified by including the ke ..... X X X X Extracts X X X X X X X X Extracts X X X X
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