COMMISSIONER OF INCOME TAX vs KING FISHERIES (P) LTD.

MRS. K.K. USHA, J:

The question raised in IT Ref. Nos. 123 & 169 of 1986 is whether the assesseecompany, which is engaged in the business of catching, purchasing, processing and exporting fish, is entitled to claim deduction under s. 80J of the IT Act. In IT Ref. Nos. 3 & 4 of 1987, the issue is whether the assessee, which is carrying on the business of same nature, is entitled to claim deduction under s. 80HH of the IT Act.

Following the principle laid down in Commissioner of Income Tax Vs. Marwell Sea Foods, , this Court had taken the view that assessees carrying on similar activity as in the present cases, are entitled to deduction under s. 80J vide Commissioner of Income Tax Vs. Poyilakkada Fisheries Pvt. Ltd., and Commissioner of Income Tax Vs. Poyilakada Fisheries (P.) Ltd., . On the very same principle, it was held in Commissioner of Income Tax Vs. Marwell Sea Foods, that assessee carrying on similar activities, is entitled to deduction under s. 80HH. If these decisions are to be followed, the questions raised in the present reference cases are to be answered in favour of the assessee and against the Revenue.

But, learned standing counsel for Revenue submits that a fresh view has to be taken on this issue in the light of certain observations contained in the decision of the Supreme Court in Commissioner of Income Tax, Orissa and Others Vs. N.C. Budharaja and Company and Others, . Following Marwell Sea Foods case (supra), this Court has taken the view that peeling, deveining and deheading of the prawn would amount to production as contemplated by ss. 80J and 80H11. According to learned standing counsel, the above view can no longer be accepted as correct in the light of the following observations of the Supreme Court in Commissioner of Income Tax, Orissa and Others Vs. N.C. Budharaja and Company and Others, :

''The word "production" or "produce" when used in juxtaposition with the word 11 manufacture", takes in bringing into existence new goods by a process which may or may not amount to manufacture''.

Learned counsel further points out that considering the very same process for the purpose of entitlement under sub-s. (3) of s. 5 of Central ST Act, 1956, Supreme Court in Sterling Foods, A Partnership Firm represented by its Partner Shri Ramesh Dalpatram Vs. State of Karnataka and Another, took the view that prawns lobsters and shrimps continue to be the same goods even after suffering the processing. If that be so, according to learned counsel, it cannot be contended that the process would involve production so as to come within the purview of s. 80J or s. 80HH

Learned counsel for the assessee, on the other hand, points out that the observation made by the Supreme Court Commissioner of Income Tax, Orissa and Others Vs. N.C. Budharaja and Company and Others, has to be understood in the context it was made. In that case, claim was put forward under s. 80HH in respect of an activity of construction of a Dam. Supreme Court took the view that a Dam cannot be treated as an ''article'' occurring in s. 80HH. He also pointed out that in the earlier portion of the very same judgment, Supreme Court had observed that the word "production" had a wider connotation than the word 11 manufacture". While every ''manufacture'' can be characterised as ''production'', every ''production'' need not amount to manufacture. Therefore, according to learned counsel, even when the end result of the process is not a new article, there can be production even though there is no manufacture. Learned counsel points out that Calcutta High Court had uniformly taken the view that the end product of fish after similar process, is not the same as the raw fish [vide Commissioner of Income Tax Vs. Union Carbide India Ltd., and Commissioner of Income Tax Vs. Union Carbide India Ltd., . Madras High Court has followed the Calcutta decision as well as the Kerala decision in Commissioner of Income Tax Vs. Orient Marine Products Pvt. Ltd., . Bombay High Court has dissented from Marwell Sea Foods case (supra), in Commissioner of Income Tax Vs. Sterling Foods (Goa), .

Learned counsel for the assessee contended that the consideration as to whether raw prawns, shrimps etc., continue as the dme goods after the process for the purpose of sub-s. (3) of s. 5 of the Central ST Act, 1956, is entirely different from consideration that is required to see whether there was production for the purpose of s. 80J and s. 80HH of the IT Act.

After hearing both sides, we feel that the arguments put forward by counsel require serious consideration by a larger Bench for an authoritative decision on the issue. We, therefore, direct the registry to place the above mentioned reference cases before the Hon''ble Chief Justice for appropriate orders for being posted before a larger Bench.

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