Commissioner of Income Tax vs Kala Cartoons P. Ltd.

Y.K. Sabharwal J.-At the instance of the Revenue, the following questions relating to Assessment Years 1980-81 to 1984-85 were referred for the opinion of the High Court under Section 256(2) of the Income Tax Act:

"(1) Whether, on the facts and in the circumstances of the case, the Tribunal is right in law and fact in holding that the assessee is an industrial company eligible to be taxed only at the rate of 55%?

(1)(a) Whether processing of marine products for export would make the assessee an industrial company?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal is right in law and fact in holding that it cannot be said that the issue involved herein is a debatable issue and on that basis there was no mistake on the face of the record and the findings are not wrong, unreasonable and illogical?"

The High Court by the judgment and order under appeal answered Questions (1) and (1)(a) in the affirmative, that is, in favour of the assessee and against the Revenue. The second question was returned unanswered.

In these appeals, we are not concerned with the second question and in relation thereto, learned counsel for the Revenue did not make any submission. The Tribunal, while answering the aforesaid questions in favour of the assessee, has relied upon the decisions of the Kerala High Court in CIT v. Marwell Sea Foods1 and CIT v. Relish Foods2.

The case of the assessee for claiming allowance under Section 80-HH is that it is an industrial undertaking that manufactures/produces articles. The Tribunal has held that the activities of the assessee involve purchasing, peeling, freezing and export of shrimps. The said activities were held to be amounting to production. Apart from the above activities, there is no description of what the assessee does to the shrimps after buying except peeling and freezing and thereafter exporting.

The decision of the High Court in the case of Relish Foods2 has been set aside by this Court in the case of CIT v. Relish Foods3. In respect of Marwell Sea Foods1 it was noticed by this Court that the assessee therein had placed before the taxing authorities a detailed description of the process by which prawns were prepared for export and the Appellate Authorities had understood the various stages through which the prawns passed as processes involving production or manufacture. Here nothing of the kind was placed by the assessee before the taxing authorities. The present case is squarely covered by the decision in the case of Relish Foods3.

For the aforesaid reasons, we answer the aforesaid questions in the negative, that is, in favour of the Revenue and against the assessee.

The appeals are allowed accordingly, leaving the parties to bear their own costs.

CAs Nos. 3972-73 of 1999 and SLPs (C) Nos. 18397-98 of 1999

Leave granted in SLPs (C) Nos. 18397-98 of 1999.

In view of the order just made in CAs Nos. 3967-71 of 1999, these appeals are allowed, leaving the parties to bear their own costs.