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TMI Blog1986 (7) TMI 45X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 80J of the Income-tax Act, 1961, in respect of its undertaking, "Deep Sea Fishing Division ". The Income-tax Officer, following the decision of the Bombay High Court in New India Fisheries Ltd. v. ITO [1971] 82 ITR 765, held that the profits and gains from the activity of catching fish in the deep sea with ships could not be regarded as profits and gains derived from ships and disallowed the claim. Being aggrieved, the assessee preferred an appeal before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner held that the term " manufacture " or " processing " of goods had not been defined in the Act. In its ordinary meaning, " manufacture " is a process which results in an alteration or a change of the goods subjected to manufacture and a commercially new article is produced. Under section 80J, if the undertaking was not engaged in manufacturing or processing or production of the goods, the industrial undertaking would not be entitled to any relief. Following a decision of the Kerala High Court in CIT v. Casino (Pvt.) Ltd. [1973] 91 ITR 289, the Appellate Assistant Commissioner held that the Deep Sea Fishing Division of the assessee was not an industrial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Tribunal by the assessee, namely, that the income was derived from ships and was thus otherwise entitled to relief under section 80J and that the assessee was also operating a cold storage in its " Deep Sea Fishing Division " were not considered nor decided. On an application of the Revenue under section 256(2) of the Incometax Act, 1961, the Tribunal, as directed, has referred the following question, as a question of law arising out of its order, for the opinion of this court : " Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the Deep Sea Fishing Division of the assessee was an 'industrial undertaking' within the meaning of section 80J of the Income-tax Act, 1961 ? " At the hearing before us, the learned advocate for the Revenue contended that the Tribunal had erred in holding that the " Deep Sea Fishing Division " of the assessee was carrying on an activity of production or manufacture. He submitted that the operations carried on by the said division of the assessee in preparing the shrimps for the export market would not amount to either manufacture or production inasmuch as the item produced remained the same, namely, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... repaying the loans forthwith as the same had not fallen due and were kept in deposit with banks. The assessee earned interest from such deposits and claimed that it was entitled to deduction under section 80J on the amount of interest inasmuch as such interest was income arising from the industrial undertaking of the assessee engaged in the business of production or refining mineral oil. On these facts, it was held by the Kerala High Court that the expression occurring in section 80J was "derived from". Such derivation of income must be directly connected with the business of the assessee. The fact, that the income was generated by the exploitation of any particular asset of the business, would not be sufficient to entitle the assessee to claim relief under section 80J. It was held that the interest earned was not derived from the business activity of the undertaking of the assessee. The learned advocate for the assessee contended, on the other hand, that the Tribunal had categorically found that the assessee was engaged in production or manufacture of processed or frozen fish or fish products. This finding has not been challenged. It was further found by the Tribunal that the op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 2(g) of the Bihar Sales Tax Act, 1947, which, inter alia, laid down that the sale of any goods produced or manufactured in Bihar by the producer or manufacturer would, wherever the delivery or contract of sale was made, be deemed, for the purpose of the Act, to have taken place in Bihar. The assessee in the case before the Supreme Court carried on the business in Bihar in mining mica. The operations consisted of taking out crude mica from the mines and thereafter processing it into split mica, a commercial commodity. The processing consisted of splitting the crude mica into thinner plates and cutting to sizes. In respect of the split mica sold, the assessee was assessed to sales tax. The assessee contended that it did not produce or manufacture as the only operation carried out was splitting up of mica from crude mica, without any change in the product. The Supreme Court after considering standard texts on mica and the operation of obtaining split mica from crude in detail, distinguished between the expressions " production " and " manufacture " and observed as follows (at page 153) : " Neither of the words 'production' or 'manufacture' is defined in the Bihar Sales Tax A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vers processed (including frozen) fish and fish products. In view of the said entry, a person who owns machinery or plant engaged in manufacture or production of processed fish (including frozen) and fish products is entitled to development rebate under section 33 of the Incometax Act, 1961, at a higher rate. If for the purpose of higher development rebate under the said section, processed fish (including frozen) and fish products are the result of production or manufacture, on analogy, it should be held that for the purpose of section 80J, such items should be capable of being produced or manufactured. On both grounds, the assessee is entitled to succeed in this case. It is clear from the finding of the Tribunal that as a result of the operations carried on by the assessee in its " Deep Sea Fishing Division ", a commercially new product comes into existence. This product is processed and frozen fish. On a construction of section 80J and in view of the scheme of the Income-tax Act, 1961, we hold that for production or manufacture of processed and frozen fish, the assessee would be entitled to relief under section 80J. For the above reasons, we answer the question referred in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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