Commissioner of Income-Tax, Trivandrum Vs. Relish Goods [1999] INSC 62 (11 March 1999)

S.P.Bharucha, S.S.M. Quadri S.P. Bharucha, J.

The only question with which we are concerned in this appeal by the Revenue, relating to the Assessment Year 1977-78, reads thus :

"Whether, on the facts and in the circumstances of the case :- i) the assessee's business involves 'production' ? ii) the assessee is entitled to exemption under Section 80HH of the 1.T. Act, 1961?" The assessee claimed the allowance under Section 80HH of the Income-Tax Act, 1961, on the ground that it was an industrial undertaking that manufactured/produced articles.

It would appear from the judgment of the Tribunal that the assessee bought shrimps, peeled them and froze them. There is no other material on the record which indicates what was done by the assessee and how it was done. The Income-Tax Officer negatived the claim. The Commissioner of Income-Tax (Appeals) and the Tribunal upheld the claim.

From the order of the Tribunal the question aforementioned was referred to the High Court for its opinion. The High Court held that buying and processing of shrimps involved production and, therefore, the assessee was entitled to the allowance that it claimed. It followed its judgment in Commissioner of Income-Tax v. Marwe II Sea.

Foods [(1987) 166 I.T.R. 624].

We find from the judgment of the Keraia High Court in the case of Harwell Sea Foods (supra) that Harwell Sea Foods had placed before the taxing authorities a detailed description of the process by which prawns were prepared for export and that the appellate authorities had understood the various stages through which the prawns passed as processes involving production or manufacture. The High Court was of the view that the Tribunal having affirmed the finding of the A.A.C., it should be extremely slow to doubt the correctness of the finding unless it was perverse.

As has been pointed out, there is upon the record before us no detailed description of what the assessee does to the shrimps it buys, other than the bald statement that it peels and freezes them. We cannot accept the statement at the Bar that the process to which the assessee puts the shrimps is the process that Harwell Sea Foods used in regard to its prawns.

Apart therefrom, there is the judgment of this Court in Sterling Foods v. The State of Karnataka a.nd Another, [(1986) 63 S.T.C. 239, where it has b°en held that processed or frozen shrimps and prawns are commercially regarded as the same commodity as raw shrimps and prawns.

When raw shrimps and prawns are subjected to the process of cutting of heads and tails, peeling, deveining, cleaning and freezing they do not cease to be shrimps and prawns and become other distinct commodities. There is no essential difference between raw shrimps and prawns and processed or frozen shrimps and prawns. In common parlance they remain known as shrimps and prawns. This judgment in Sterling Foods (supra) has been rightly applied by the Bombay High Court, in the case of Commissioner of Income-Tax v.

Sterling Foods (Goa) [(1995) 213 I.T.R. 8513, to a claim under Section 80HH of the Income-Tax Act and it has been held that the activity of processing of prawns is not an activity of manufacture or production.

We are of the view that the judgment of this Court aforementioned in Sterling Foods (supra) is apposite to the question that we have to decide and, upon the material that is before us, we must reverse the view taken by the High Court in the judgment under appeal.

Learned counsel for the assessee submitted that the matter should be remanded to the appropriate authority to enable the assessee to lay before it evidence in detail of what the purchased shrimps were subjected to. We think it is far too late in the day for the assessee to do that in relation to the assessment year with which we are concerned.

The appeal is, therefore, allowed. The judgment and order under appeal is set aside to the extent it deals with the said question. The said question is answered in the negative in relation to both its parts and in favour of the Revenue.

No order as to costs.

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