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TMI Blog1986 (5) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... t qualify for relief under section 32A. Hence, he started proceedings under section 263 and asked the assessee to explain as to why the aforesaid investment allowance granted by the ITO should not be withdrawn. The assessee objected to the proposal of Commissioner on several grounds. In particular, it was urged by the assessee that the act of cold storage involved manufacturing and, thus, the action of the ITO was justified. Reliance was placed on the decision in the case of CIT v. Yamuna Cold Storage [1981] 129 ITR 728(Punj. Har.). The Commissioner did not agree with he submissions of the assessee. He stated that in the case of Yamuna Cold Storage the issue involved was as to whether the assessee therein was engaged in manufacturing process, the emphasis being on the processing activity. Hence, the High Court held the at the building of a cold storage is entitled to depreciation at rates applicable to a factory building. According to the Commissioner, the aforesaid case was no authority for granting investment allowance under section 32A to a person engaged in cold storage business. He also referred to the decisions in the cases of CIT v. Radha Nager Cold Storage (P.) Ltd. [1980 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 255(3) of the Act in order to decide the following point : "Whether, on the facts and in the circumstances of the case, the investment allowance under section 32A of the Income-tax Act, 1961, could be allowed to a cold storage ?" That is how the present appeal has come up for hearing before us. 5. Dr. Debi Pal, the learned advocate, appearing as intervener for Dhirendra Narayan Cold Storage [IT Appeal Nos. 671 (Cal.) of 1981 and 315 and 316 (Cal.) of 1983] opened the case for the appellant before us. At the outset, he stated that the activity of the assessee does not amount to manufacture as has been held in the case of Delhi Cloth General Mills Co. Ltd. His case was that a cold storage is engaged in the production of an article or thing. In this connection, he referred to the decision of the supreme Court in the case of Chrestien Mica Industries Ltd. v. State of Bihar [1961] 12 STC 150. That was case under the Bihar Sales Tax Act, 1947. In that case, the assessee was engaged in extracting crude mica from the mines and breaking them into small pieces. The question which arose for consideration in that case was as to whether the process of mining mica, which was a commo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct of processing to which the potatoes are subjected to in the cold storage changes its very nature and converts them into a different commodity. Then, Dr. Pal referred to the decision in the case of Farrukhabad Cold Storage (P.) Ltd. which has been followed by the Calcutta High Court in the case of Radha Nagar Cold Storage (P.) Ltd. Anticipating an argument from the other side, Dr. Pal referred to the decision in the case of Farrukhabad Cold Storage (P.) Ltd. v. CIT [1979] 119 ITR 895 (All.). In that case, the question which arose for consideration was as to whether the assessee which was running a cold storage was engaged in a priority industry in the sense that it was engaged in the production of processing seeds. He stated that the judgment in that case went against the assessee because the issue for consideration therein was quite different. Processing of seeds is different from the keeping of potatoes in the cold storage. In that case there was no evidence to show that the potatoes stored in the cold storage of the assessee were used entirely for speed purposes after they came out of the cold storage. Dr. Pal stated before us that the decision in that case went against the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f coolness was the other form of power. The use of electricity to produce cool air constituted generation. Hence, he urged that the assessee was rightly allowed investment allowance under section 32A. 7. Shri N. K. Poddar, the learned representative for the intervener, in the case of Rameshwarpur Cold Storage.[IT Appeal No. 2058 (Cal.) of 1985] continued the argument. He stated that electricity is a form of power. The Factories Act, 1948 defines 'power' in section 2(g) of that Act. According to him, generation of any form of power is the same thing as its production. Referring to the decision in the case of Yamuna Cold Storage, he urged that a cold storage is engaged in a complicated process of modern science and so its building was regarded as factory building. Next, he referred to the decision in the case of Usha Prints India (P.) Ltd. v. Employees State Insurance Corpn. AIR 1964 Bom. 94. He referred to paragraph 9 of that case for the proposition that heat is a form of energy. He urged that the cold storage was engaged in the production of a form of power and sop it fulfilled the condition laid down in clause (b) (i) of section 32A (2). Next, he referred to the observation sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee had argued before the Commissioner in course of the proceedings under section 263 that it was engaged in the manufacture of an article or thing and, consequently, the case of the assessee now made out before us was a new one. He referred to the decision in the case of Singh Engg. Works (P.) Ltd. v. [1979] 119 ITR 891 (All.) wherein the activities of manufacture, processing and production have been explained. According to him, production is different from processing. That was a case in which the assessee was engaged in the manufacture of iron bar and rods out of ingots manufactured from scrap in its own electric furnace and also billets purchased from outside. The question was whether the assessee was a priority industry under section 80-I of the Act in sense that it was manufacturing iron and steel (metal) as stated in item (1) of the Sixth Schedule of Act. It was held that the assessee was indeed engaged in processing or production of iron rods out of billets. Next, he referred to the decision in the case of Farrukhabad Cold Storage (P.) Ltd., v. CIT [1979] 119 ITR 895 (All.) and urged that the Court held in that case that running a cold storage does not amount to engage in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... met by Shri B. K. Bagchi, the assessee is entitled to succeed on the authority of Chrestien Mica Industries Ltd.'s case. In this connection, he also referred to the decision of the Tribunal in the case of Union Carbide India Ltd. [It Appeal No. 2038 (Cal.) of 1977-78 dated 19-5-1980] wherein preservation of fish has been held to be an act of production as it involved processing. 11. Shri Majumdar also relied that conversion of one form of energy into another involved generation of power and the assessee was engaged in converting electricity into coolness which is nothing but a variation of heat energy. According to him, the assessee was engaged in the production of a thermal state which is used for the preservation of potatoes. He urged that the assessee need not sell cool gas produced by it. It was using the said cool gas for the purpose of furthering its own business of preserving potatoes. 12. We have considered the contentions of the parties as well as the facts on record. The moot question is whether a cold storage which is mainly used for storing potatoes and/or other perishable food stuffs for the purpose of preventing them from natural decay satisfies the conditions la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one can use electricity for light, fans, air-conditioners refrigerators, television sets, radio and video, cold storage, plant, etc. It is only the use of electricity and not even the conversion of it, not to speak of generation of electricity or any other form of power. 13.2 It must be stated in fairness to the counsels that they did not even claim that the cold storage could be said to be engaged in distribution of electricity or any other form of power. For reasons given above, we have already held that the cold storage uses the electricity for a particular purpose, but certainly does not generate electricity or any other form of power. 13.3 Besides, it would not be fair to the Legislature to overlook the fact that the sub-clause does not simply lay down that machinery or plant installed should be for generation or distribution of electricity or any form of power. It has advisedly used the expression 'for the purpose of business of generation or distribution of electricity or any other form of power'. Assuming for the sake of argument that a cold storage generates electricity or any other form of power, the pertinent question will still remain whether such a generation is f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not simply breaking the crude mica into split mica which is a commercial commodity. It was carrying on mica mining operations by which crude mica was taken out of the mines and, thereafter, it was processing the same into split mica which is a commercial commodity. The Supreme Court's observations have, thus, to be read in the context of the entire activity of the assessee and not merely confined to the breaking/processing of crude mica into split mica. The Allahabad High Court decision in the case of Singh Engg. Works (P.) Ltd. supports the view we are taking in this case at least indirectly. Under the circumstances we are not inclined to accept that the cold storage produces an article or a thing. Mere fact that there would be some qualitative difference in the potatoes after they are taken out of the cold storages does not make them a different article or thing. This is again clear from the above Calcutta High Court decision in which Justice Sabyasachi Mukharji, as he then was, observed as under : "... That, in our opinion would be processing the goods, that is to say, preservation applying a method to the goods whereby the goods are prevented from taking its normal course. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not lead to manufacture of a new article. The other decision of the Allahabad High Court in the case of Farrukhabad Cold Storage (P.) Ltd. v. CIT [1979] 119 ITR 895 was concerned with the definition of 'priority industry' and the claim was rejected by observing that the benefit of section 80-I could accrue to a company which was engaged in the production of processed seeds and that processing of seeds is different from the keeping of potatoes in a cold storage. The decision was rendered on the basis of a finding that there was no evidence to show that the assessee was keeping potato tubers for seed purposes. The above two Allahabad High Court decision have, thus, no application in this case. The issue involved before the Delhi High Court in Indian Co-operative Union Ltd.'s case has been regarding the interpretation of the expression 'cottage industry'. The issue before the Kerala High Court in the case of Casino (P.) Ltd. also related to the expression 'industrial company' under section 2(6) (d) of the Finance Act, 1968. It was held that a hotel was primarily a trading company and preparation of food was not manufacture or processing of goods. In the English case of Chesterfiel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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