Cold Storage Pvt. Ltd. Vs. Commissioner of Income-Tax, Delhi-I, New Delhi  INSC 194 (14 August 1991)
Rangnath (Cj) Misra, Rangnath (Cj) Kania, M.H. Kuldip Singh (J)
1991 AIR 2125 1991 SCR (3) 589 1991 SCC (4) 239 JT 1991 (3) 449 1991 SCALE
Act, 1973: Section 2(7)(c)--Assessee running a cold storage--Whether an
'Industrial company'--Activities of cold storage --Whether involve processing
and Phrases--Word 'Processing'--Meaning of.
'industrial Company', as defined in Section 2(7)(c) of Finance Act, 1973 was
entitled to certain concessions in the matter of taxation. The appellant, a
private limited company running a cold storage, laid claim to such benefits
contending that it came within the meaning of 'industrial company' since the
activity carried on by it came within the words 'processing of goods'.
income-Tax Officer, rejected the assessee's claim but the Appellate Assistant
Commissioner conceded the claim, and directed remission of the proceedings to
the income-Tax Officer for re-computation of the tax by treating the appel- lant
as an 'industrial company'. The Tribunal accepted the appeal of the Revenue and
held that the appellant was not an 'industrial company'. This was upheld by the
the appeal preferred by the assessee, this Court,
1.1 The term 'processing' is of a wider amplitude and has various aspects and
meanings. in common parlance 'processing, is understood as an action which brings
forth some change or alteration of the goods or material which is subjected to
the act of processing. The dictionary meaning of the term is not very different
from this meaning in one sense while various other meanings of Wider amplitude
are also available. [593G-H, 594A]
a cold storage, vegetables, fruits and several other articles, which require
preservation by re- frigeration are stored. While as a result of long storage,
scientific examination might indicate loss of moisture content, that is not
sufficient for holding that the stored articles have 590 undergone a process
within the meaning of Sec.2(7)(c) of the Finance Act, 1973. [594C] Chowgule,
& Co. Pvt. Ltd. and Anr. v. Union
of India & Ors.,  1 SCC 653, relied on.
of Income-tax v. Radha. Nagar Chid Storage (P) Ltd., 126 I.T.R. 66 and Addl.
Commissioner of Income- tax, Kanpur v. Farrukhabad
Cold Storage (P) Ltd., 107 I.T.R.
Equitable Co-operative Society Ltd. v. IRC.,  42TC 675 at Page 681,
APPELLATE JURISDICTION: Civil Appeal No. 3164 (NT) or 1991.
the Judgment and Order dated 19.4.1984 of the Delhi High Court in I. Tax Ref.
No. 250 of 1975.
Salve and Pramod Dayal for the Appellant.
Ramamurthy, Vijay.K. Verma and Ms. A. Subhashini for the Respondent.
Judgment of the Court was delivered by RANGANATH MISRA, CJ. Special leave
judgment of the High Court of Delhi is challenged by the assessee in this
appeal. Assessee is a private' limited company running a cold storage. The year
of assessment is 1973-74. An 'industrial company', as defined in sectiOn
2(7)(c) of Finance Act, 1973 for ,the purposes of the First Schedule of that
Act was entitled to certain concessions in the matter of taxation. The
appellant laid claim to such benefits by contending that it came within the
meaning of 'industrial company'. The question that was referred by the
Income-tax Appel late Tribunal to the High Court was:
on the facts and in the circumstanCeS of the case the assessee company running
a cold storage could be held to be an industrial company for purposes of
section 2C7)(c) of the Finance Act,' 1973 and the First Schedule thereto?"
591 The Income-tax Officer had not accepted the claim of.
but the Appellate Assistant Commissioner conceded the claim and directed
remission of the proceedings to the Income-tax Officer for re-computation of
the tax by treating the appellant as an 'industrial company', The Tribunal
accepted the appeal of the Revenue and held that the appellant was not an
'industrial company'. The High Court has approved the conclusions reached by
compnay' has been defined in section 2(7)(c) of the Finance Act., 1973 thus:
company means a company which is mainly engaged in the business of generation
or distribution of electricity or any other form of power or in the
construction of ships or in the manufacture or processing of goods or in
is ours) The appellant had taken the stand that the activity carried on by it
came within the words 'processing of goods'. The short question for
examination, therefore, is whether the cold storage of the appellant can be
held to have been engaged in the processing of goods.
question directly arose for consideration of a Division Bench of the Calcutta
High Court in Commissioner of Income-tax v. Radha Nagar Cold Storage(P) Ltd.,
126 I.T.R. 66. Sabyasachi Mukharji, J., (as he then was) spoke for the Court in
this.case. Certain English cases were taken into consideration to find out the
difference between manufactur- ing and processing and to find the true meaning
of the word "processing". The word 'processing' has not been defined
in the Income-tax Act. The word 'process' has various meanings, some wider than
others. Lord Guthrie in Kilmarnock Equita- ble Co-operative Society Ltd. v. IRC
[19661 42 TC 675 at page 681 observed that the word "does not have the
widest significance of 'anything done to the goods or materials'.
Bench of the Calcutta High Court' looked 'for the meaning in the Oxford DictiOnarY,
Webster's New Interna- tional Dictionary, Words and Phrases Legally Defined'
Vol. 4 and in Encyclopaedia Britannica Vol. 9. The High Court was impressed by
the statement in Encyclopaedia Britannica, vol. 9 where it was said' "The
only method by which fresh foods may be preserved for a considerable period in
the raw state is by subjecting 592 them to as low a temperature as possible
without causing damage by freezing.. Storage at temperature above freezing, in
the neigh- bourhood of 35 F/2 C is known as cold storage.
at such temperature makes possible the holding in good condition of many fresh
foods for considerable periods and their shipment to distant markets to
consumers." The High Court proceeded to state:
act of cold storage appears to us to bean act whereby foods or' products stored
in the cold storage are prevented from their. natural decay. The potatoes which
are kept in the cold storage are preserved in the original state and their
normal decay is prevented. That, in our opinion, would be processing the goods,
that is to say, preser- vation applying a method to 'the goods, where- by the. goods.
are prevented from taking its/normal course. There fore, looking from a broad
point of view, in the light of the definition provided in the several diction- aries
to which we have referred, is appears to us, that in the context of the present
stat- ute, ,which has used the expression "process- ing" in contradistinction
or differently from the expression "manufacture", the assessee-
company was engaged in the act of processing the goods in terms of the Finance
Act at the relevant time.." The Court referred with approval to a decision
of the 'Allahabad High Court in Addl. Commissioner of Income-tax, Kanpur v. Farrukhabad
Cold' Storage (P) Ltd., 107 ITR 8 16.
Calcutta High Court's view directly supports the appel- lant's stand.
impugned judgment reported in 156 ITR 97, after dealing with the cases of the Calcutta and Allahabad High Court,.
reference was.made to the decision of this Court in Chowgule & Co. Pvt.
Ltd. and Ant. v. Union of.India and Ors.,  1 SCC653 to find out the true
meaning of the two words 'manufacture' and 'processing'. After discussing some
precedents this Court observed thus:
is necessary in Order to characterise an operation as "processing" is
that the 'commodity must., as a result of the operation,-experience some
change., Here, in the-present case, diverse quantities of ore possessing
different chemi- cal and 593 physical compositions are blended together to
produce ore of the requisite chemical and physical composition demanded by the
foreign purchaser and obviously as a result of this blending, the quantities of
ore mixed together in the course of loading through the mechanical ore handling
plant experi- ence change in their respective chemical and physical compo- sitions,
because what is produced by such blending is ore of a different chemical and
physical composi- tion. When the chemical and physical composi- tion of each
kind of ore which goes into the blending is changed; there can be no doubt that
the operation of blending would amount to "processing" of ore within
the meaning of section 8(3)(b) and Rule 13. It is.no doubt true that the
blending of ore of diverse physical and chemical compositions is carried out by
the simple act of physically mixing diifferent quantities of such ore on the
conveyor belt of the mechanical ore handling' 'plant. But to our mind it is
immaterial as to how the blending is done and what process is utilised for the
purpose of blending. What is material to consider is whether the different
quantities of ore which are. blended together in the course of loading through
the Mechani- cal ore handing plant undergo any change in their. physical and
chemical composition as a result of blending and so far as this aspect of the
question is concerned, it is. impossi- ble to argue that they do not suffer any
change in their respective chemical and physi- cal compositions-".
meaning given to the word 'processing' and the test laid down to find out
whether the operation amounts to processing by the three-Judge Bench of 'this
Court runs counter to the conclusions. reached by the Allahabad and Calcutta High Courts. As we
have already pointed out, the two direct decisions on the point are the cases
from Allaha- bad and Calcutta. The other cases that have been
cited in the Calcutta judgment or at the Bar are cases
not relating to the meaning or ambit of the relevant expression in the
definition of section 2(7)(c) of the Finance Act, 1973.
have already noted that processing is a term of wide amplitude and has various
aspects and meanings.
common parlance 'processing' is understood as an action which brings forth some
change or alteration of the goods or material which is subjected to the act Of
process- ing- The dictionary meaning of 594 the term is not Very different from
this meaning. in one sense while various other meanings of wider amplitude are
also available. The view taken by Allahabad and Calcutta High Courts did not find favour with the three-Judge Bench
of this Court and in clear terms the judgment indicates that processing
involves bringing into existence a different substance from what the material
was at the commencement of the process.
cold storage, vegetables, fruits and several other articles which require
preservation by referigeration are stored. While 'as a result of long storage,
scientific examination might indicate loss of moisture content that is,not
sufficient for holding that the stored articles have undergone a process within
the meaning of section 2(7)(c) of the Finance Act, 1973. The three-Judge Bench
decision must be taken to have overruled the view of the Allahabad High Court
in Addl. Commissioner of Income-tax,' Kanpur v. Far- rukhabad Cold Storage (P)
Ltd., (supra) and that of the Calcutta High Court in Commissioner of Income-tax
v. Radha Nagar Cold Storage (P) Ltd., (supra).
appeal has, therefore, to be dismissed and the opinion of the Delhi High Court
has to be affirmed.
are directed to bear their own costs.
Apppeal 'dis- missed.