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TMI Blog1991 (4) TMI 158X X X X Extracts X X X X X X X X Extracts X X X X ..... er under section 143(3) of the Act on 17-3-1986 determining the total income of Rs. 10,50,400. The assessee had claimed deduction under section 80HHC amounting to Rs. 1,28,07,322 which was allowed by the Income-tax Officer. The learned Commissioner initiated proceedings under section 263 of the Act. He noticed that the exports included exports of HPS groundnuts of Rs. 11,99,83,060. According to him HPS groundnuts were " agricultural primary commodities " and as such in view of provisions in section 80HHC(25 (b)(a) of the Act, deduction under section 80HHC(1) was not allowable on these exports. He rejected the plea of the assessee that the HPS groundnuts did not come within the ambit of the expression " agricultural primary commodities ". He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed position that other conditions for allowance of said deduction are fulfilled. Consequently, the only question to be decided is whether BPS groundnuts come within the ambit of goods and commodities mentioned in clause (b) of sub-section (2) of section 80HHC. The learned Commissioner has relied on sub-clause (i) of clause (b) of sub-section (2) of section 80HHC which reads " agricultural primary commodities, not being produce of plantations ". The crucial question therefore to be decided is whether HPS groundnuts come within the ambit of the expression " agricultural primary commodities " in section 80HHC(2)(b)(i) of the Act. If HPS groundnuts come within the ambit of said expression then deduction under section 80HHC(1) would not be allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re not agricultural primary commodities. Agricultural primary commodities are groundnuts in shell. The kernels that are ultimately exported are obtained after processing and as a result of the said processing they ceased to be agricultural primary commodities. Consequently, deduction under section 80HHC(1) would be allowable. We are supported in this view of the latter by the decision of A.P. High Court in Kishenlal Oil Mills' case. The A.P. High Court in said decision was interpreting expression ' groundnut ' in sub-rule (2) of Rule 5 of Hyderabad General Sales-tax Rules. It was held that the expression ' groundnut ' would mean unshelled groundnut produced by the agriculturists and not the kernel. The A.P. High Court made distinction betwe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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