JUDGMENT [ENTITY], J.
1. The question raised in [CASE NUMBER], is whether the assessee-company, which is engaged in the business of catching, purchasing, processing and exporting fish, is entitled to claim deduction under [SECTION] of the [ACT]. In [CASE NUMBER], the issue is whether the assessee, which is carrying on the business of the same nature, is entitled to claim deduction under [SECTION] of the [ACT].
2. Following the principle laid down in [PRECEDENT], this court had taken the view that assessees carrying on similar activity as in the present cases, are entitled to deduction under [SECTION] (vide [PRECEDENT] and [PRECEDENT]. On the very same principle, it was held in [PRECEDENT], that the assessee carrying on similar activities, is entitled to deduction under [SECTION]. 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.
3. But, learned standing counsel for the 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 CIT v. [ENTITY] and Co. [PRECEDENT]. Following [PRECEDENT], this court has taken the view that peeling, deveining and deheading of the prawn would amount to production as contemplated by [SECTION] and [SECTION]. According to learned standing counsel, the above view can no longer be accepted as correct in the light of the following observation of the Supreme Court in CIT v. [ENTITY] and Co. [PRECEDENT] (headnole) :
"The word 'production' or 'produce' when used in juxtaposition with the word 'manufacture', takes in bringing into existence new goods by a process which may or may not amount to manufacture."
4. Learned counsel further points out that considering the very same process for the purpose of entitlement under [SECTION] of the [ACT], the Supreme Court in [PRECEDENT], 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 [SECTION] or [SECTION] .
5. Learned counsel for the assessee, on the other hand, points out that the observation made by the Supreme Court in [ENTITY] and Co.'s [PRECEDENT], has to be understood in the context it was made. In that case, the claim was put forward under [SECTION] in respect of an activity of construction of a dam. The Supreme Court took the view that a dam cannot be treated as an "article" occurring in [SECTION]. He also points out that in the earlier portion of the very same judgment, Supreme Court has observed that the word "production" had a wider connotation than the word "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 the 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 ([PRECEDENT] and [PRECEDENT]. The Madras High Court has followed the Calcutta decision as well as the Kerala decision in [PRECEDENT] [PRECEDENT]. The Bombay High Court has dissented from [PRECEDENT] and in [PRECEDENT].
6. Learned counsel for the assessee contended that the consideration as to whether raw prawns, shrimps, etc., continue as the same goods after the process for the purpose of [SECTION] of the [ACT], is entirely different from consideration that is required to see whether there was production for the purpose of [SECTION] [SECTION] of the [ACT].
7. 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 Chief Justice for appropriate orders for being posted before a larger Bench.
[ENTITY], J.
8. The Revenue is the applicant in all these income-tax reference cases with the assessee(s) figuring as respondent(s). We are concerned with the assessment years 1978-79 in [CASE NUMBER] in [CASE NUMBER], the assessment years 1974-75 and 1975-76 in [CASE NUMBER] and the assessment year 1980-81 in [CASE NUMBER]. The assessee-company is engaged in the business of catching, purchasing, processing and exporting fish and selling the same. The assessee-company put forward a plea that it is entitled to claim deduction under [SECTION] and [SECTION] of the [ACT] (for short "the Act"). The Income-tax Officer negatived the said plea. In appeal, the Appellate Assistant Commissioner upheld the pleas of the assessee(s). In second appeal, the Income-tax Appellate Tribunal concurred with the Commissioner of Income-tax (Appeals) by placing reliance on the decision of the Special Bench of the Tribunal in the case of Poyilakada Fisheries (P.) Ltd., vide order dated June 12, 1985, in [CASE NUMBER] wherein the Tribunal had held in similar circumstances that the assessee therein was entitled to relief under [SECTION] of the Act with reference to the capital employed in the undertaking as a whole. Following the reasoning in the said order, the Tribunal confirmed the order of the Commissioner of Income-tax (Appeals) and dismissed the appeal preferred by the Revenue. Thereafter, the Revenue filed reference applications before the Tribunal under [SECTION] of the Act requiring the Tribunal to refer to this court for its opinion, the question of law set out therein. The Tribunal, thereupon referred the question of law to this court. The common question raised in [CASE NUMBER] is as follows :
"Whether the assessee-company which is engaged in the business of catching, purchasing, processing and exporting fish is entitled to claim deduction under [SECTION] of the Act ?"
9. The common question raised in [CASE NUMBER] and [CASE NUMBER] reads as follows :
"Whether the assessee, which is carrying on the business of same nature, is entitled to claim deduction under [SECTION] of the [ACT] ?"
10. The relevant portion of [SECTION] and [SECTION] of the [ACT] are extracted below :
"80J. Deduction in respect of profits and gains from newly established industrial undertakings or ships or hotel business in certain cases. (1) Where the gross total income of an assessee includes any profits and gains derived from an industrial undertaking or a ship or the business of a hotel, to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains (reduced by the deduction, if any, admissible to the assessee under [SECTION] or [SECTION]) of so much of the amount thereof as does not exceed the amount calculated at the rate of six per cent, per annum on the capital employed in the industrial undertaking or ship or business of the hotel, as the case may be, computed in the prescribed manner specified in Sub-section (1A) in respect of the previous year relevant to the assessment year (the amount calculated as aforesaid being hereafter, in this section, referred to as the relevant amount of capital employed during the previous year). . . .
(4) This section applies to any industrial undertaking which fulfils all the following conditions, namely : . . .
(iii) it manufactures or produces articles, or operates one or more cold storage plant or plants, in any part of India, and has begun or begins to manufacture or produce articles or to operate such plant or plants, at any time within the period of thirty-three years next following the 1st day of April, 1948, or such further period as the Central Government may, by notification in the Official Gazette, specify with reference to any particular industrial undertaking.
[SECTION]. Deduction in respect of profits and gains from newly established industrial undertakings or hotel business in backward areas. (1) Where the gross total income of an assessee includes any profits and gains derived from an industrial undertaking, or the business of a hotel, to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to twenty per cent, thereof.
(2) This section applies to any industrial undertaking which fulfils all the following conditions, namely :
(i) it has begun or begins to manufacture or produce articles after the 31st day of December, 1970, in any backward area ; . . ."
11. When the matter came up for hearing before the Division Bench, it was brought to its notice the principles laid down in [PRECEDENT], wherein this court had taken the view that assessees carrying on a similar activity as in the present cases, are entitled to deduction under [SECTION] of the Act (vide [PRECEDENT] and [PRECEDENT] (Appex. . On the very same principle, it was held in [PRECEDENT] that the assessee carrying on similar activities, is entitled to deduction under [SECTION] and if these decisions are to be followed, the question raised in the present reference cases are to be answered in favour of the assessee and against the Revenue. But learned standing counsel for the Revenue submitted that a fresh view had to be taken on this issue in the light of certain observations contained in the decision of the Supreme Court in CIT v. [ENTITY] and Co. [PRECEDENT]. Learned counsel for the assessee, on the other hand, pointed out that the observation made by the apex court in CIT v. [ENTITY] and Co, [PRECEDENT] has to be understood in the context it was made. Learned counsel for the assessee has also brought to the notice of this court the decision of the other High Courts in their favour rendered under similar circumstances. After hearing both sides, the Bench felt that the arguments put forward by counsel require "serious consideration by a larger Bench for an authoritative decision on the issue". Accordingly, the Registry was directed to place the abovementioned reference cases before the Chief Justice for appropriate orders for being posted before a larger Bench. It was under the above circumstances that the matter was posted before this Full Bench.
12. Heard counsel on both sides at length.
13. Since the question(s) of law raised in all these I. T. R. cases is the same, they are being disposed of by a common judgment. Since [CASE NUMBER] are being treated as the main case, the decision on [CASE NUMBER] and [CASE NUMBER] will depend upon the out come of the decision in [CASE NUMBER]. To recapitulate, the question raised in [CASE NUMBER] is :
"Whether the assessee-company, which is engaged in the business of catching, purchasing, processing and exporting fish, is entitled to claim deduction under [SECTION] of the Act ?"
14. The point for consideration is whether the assessee in these cases can be considered to be an industrial undertaking manufacturing or processing article entitling them to the relief under [SECTION] of the Act.
15. An identical question was the subject-matter of the Bench decision of this court in [PRECEDENT], wherein it was held that processing of prawns amounts to production of an article and the business will be an industrial undertaking for the purpose of [SECTION] of the Act. The Bench after posing the question whether or not the prawns in question are articles produced or manufactured by the assessee so as to attract the benefit of the section went on to observe as follows (page 627) :
"It is true that ordinarily the process by which the prawns are prepared for the market is not referred to in common parlance as manufacture or production. But it must be borne in mind that [SECTION] confers a benefit on the new industry for the ultimate development of backward areas.
There is substance in the contention that, if processed or frozen fish and fish products are regarded as articles " manufactured " or " produced" for the purpose of the development rebate, it was the legislative intent to attribute the same meaning to the identical expression appearing in another provision of the same statute, the object of which is to confer a benefit on the newly established industrial undertaking with a view to the advancement of the backward areas.
In this context, we must refer to the finding of the Appellate Assistant Commissioner (at page 8 of the paper book) which was confirmed in appeal by the Tribunal. There is a detailed description of the process by which prawns are prepared for export One of the vital stages of this process is beheading, peeling and deveining of the prawns. Both the appellate authorities understood the various stages through which prawns are prepared for export as processes involving production or manufacture. The Tribunal having affirmed the finding of the Appellate Assistant Commissioner, we should be extremely slow to doubt the correctness of that finding unless it is perverse. In our view, the finding is not only not perverse, but it is perfectly in harmony with the legislative intent as disclosed by the scheme of the relevant provisions of the statute. Accordingly, we answer questions Nos. 2 and 3 in the affirmative, that is, in favour of the assessee and against the Revenue."
16. Following the decision in [PRECEDENT], this court held in [PRECEDENT], that processing of prawns will amount to production of articles and so it is an industrial undertaking for the purpose of [SECTION] of the Act. This court further held that the Tribunal was justified in affording relief to the assessee under [SECTION] of the Act. Both [PRECEDENT] and [PRECEDENT] were followed by this court in [PRECEDENT] in the following terms (page 92) :
"The second point that falls to be considered is whether the assessee is eligible for allowance under [SECTION] [SECTION] of the [ACT]. In the case of the very same assessee the matter came up before us for the assessment years 1976-77 and 1978-79 at the instance of the Revenue in [CASE NUMBER] ([PRECEDENT] (Ker . An identical question was considered therein. Following the earlier Bench decision of this court in [PRECEDENT], this court held in [CASE NUMBER] (see [PRECEDENT], that 'processing of prawns will amount to production of articles and so it is an industrial undertaking for the purpose of [SECTION] of the [ACT]'. This court further held 'that the Tribunal was justified in affording relief to the assessee herein under [SECTION] of the Act.' In the light of the earlier Bench decision in the case of the very same assessee in [CASE NUMBER] (see [PRECEDENT], we answer question No. 2 in the affirmative against the Revenue and in favour of the assessee. The Appellate Tribunal was justified in holding that the entire business of the assessee is eligible for the allowance under [SECTION] of the Act."
17. The Calcutta High Court had occasion to consider an identical question in [PRECEDENT] and [PRECEDENT]. In [PRECEDENT], the facts are as follows (headnote) :
"The assessee-company acquired trawlers with sophisticated equipment like echo-sounders, electronic fish finding equipment, radars, etc., for deep sea fishing and set up a 'Deep Sea Fishing Division' for fishing shrimps in deep seas. The trawlers and the equipment were utilised not only for fishing but also for decapitating, peeling and packing shrimps in special containers and freezing them in special quick-freezing chambers installed in the vessels. The assessee claimed relief under [SECTION] of the [ACT], in respect of its undertaking, 'Deep Sea Fishing Division'. The Income-tax Officer rejected the claim for relief on the ground that the profits and gains from the activity of catching fish in deep sea with ships could not be regarded as profits and gains derived from ships. The Tribunal found that the undertaking of the assessee was actually engaged in the production of articles, namely, frozen fish and fish products, if not manufacturing the same, that the Deep Sea Fishing Division of the assessee was a separate undertaking and carried on an integrated activity for the marketing of shrimps, that unless the shrimps caught underwent the processes carried put by the undertaking, they would not be marketable in the export market, that if a particular item was required to be processed in order to become marketable, the operation involved processing and that, therefore, the undertaking of the assessee was engaged in manufacture and production and was entitled to relief under [SECTION]"
18. On a reference the Calcutta High Court upheld the Tribunal's order that as a result of the operations carried out by the assessee in its "Deep Sea Fishing Division", the natural produce, that is, the shrimps caught from the deep seas, was converted into frozen fish and fish products and that the operations consisting of cleaning, peeling, packing and freezing the shrimps without which the same were not marketable resulted in the bringing into existence of a new commercial product. Moreover, in view of [SECTION] in [SECTION] of the [ACT], which item covered processed (including frozen) fish and fish products, a person who owned machinery or plant engaged in the manufacture or production of processed fish (including frozen) and fish products was entitled to development rebate under [SECTION] at a higher rate. If, for the purpose of a higher development rebate under the said section, processed fish (including frozen) and fish products were the result of production or manufacture, a fortiori on analogy it should be held that for the purpose of [SECTION] of the Act such items should be capable of being produced or manufactured. Therefore, the Deep Sea Fishing Division of the assessee was held to be an "industrial undertaking" within the meaning of [SECTION] of the Act and entitled to relief under the section. The aforesaid decision was followed by the Calcutta High Court in [PRECEDENT], wherein the facts are as follows : The assessee derived income from business in various manufacturing and other activities. It claimed investment allowance in respect of its Deep Sea Fishing Division II. The Income-tax Officer rejected the claim of the assessee on the ground that catching and/or processing of fish cannot be said to produce an article or thing and such activities do not constitute an industrial undertaking. The Commissioner of Income-tax (Appeals), following the order of the Tribunal in the assessee's own case for the assessment year 1978-79 allowed the claim of the assessee. The Tribunal, however, upheld the said order of the Commissioner of Income-tax (Appeals), following the earlier decision of the court in [PRECEDENT], where the court had held that the deep sea fishing division of the assessee is an industrial undertaking within the meaning of [SECTION] of the Act. It has come out on record that the assessee-company acquired trawlers with sophisticated equipments like echo-sounders, electronic fish finding equipment, radars, etc., for deep sea fishing and set up a Deep Sea Fishing Division for fishing shrimps in deep seas. The trawlers and the equipment were utilised not only for fishing but also for decapitating, peeling and packing shrimps in special containers arid freezing them in special quick-freezing chambers installed in the vessels. Investment allowance will be allowed in respect of new machinery or plant, inter alia, for the purpose of, production of articles or things except certain articles or things specified in the list in the [SECTION]. The question is whether the assessee produces any article in its Deep Sea Fishing Division. The operations consisted of cleaning, peeling, packing and freezing the shrimps without which the same were not marketable and as a result of such processing, a new commercial product came into existence and as such, the assessee was held to be entitled to development rebate under [SECTION] of the Act at a higher rate. By an analogy, the Calcutta High Court took the view that if for the purpose of a higher development rebate under [SECTION] of the Act, processed fish (including frozen) and fish products are the result of production or manufacture, it should be held that for the purpose of [SECTION], such items should be capable of being produced or manufactured. According to the Calcutta High Court, the processing of fish in this case amounted to production of an article. Therefore, the deep sea fishing division of the assessee which is an industrial undertaking within the meaning of [SECTION] of the Act is also entitled to relief under [SECTION] of the Act,
19. The Madras High Court has followed the decision of the Calcutta High Court and the decision of this court in [PRECEDENT] and held that the assessee's activities in processing the shrimps, frog legs, prawns and lobsters amounted to manufacturing activities as contemplated under [SECTION] of the Act, 1961, and as such the assessee was entitled to deduction under [SECTION] of the Act for the assessment year 1974-75. In the light of the judicial pronouncements noted supra, we are satisfied that the activities carried on by the assessee amount to an activity of production, if not manufacture. Neither of the words "manufacture" or "production" is defined in the Act, but according to the Oxford English Dictionary "production" means amongst other things, that which is produced ; a thing that results from any action, process or effort, a product of human activity or effort. It is obvious, therefore, that the raw fish which has undergone extensive processing by way of peeling, decapitating, etc., will certainly fall within the dictionary meaning of the word "production". Accordingly, on the. facts disclosed, we are not satisfied that an interference is called for with the order of the Tribunal. In our view, this results in production of an article, entitling the assessee(s) to deduction under [SECTION] of the Act. Viewed in the above perspective and having regard to the object and scheme of the Act, we hold that for production of processed and frozen fish, the assessee(s) would be entitled to relief under [SECTION] of the Act.
20. No doubt, learned counsel for the Revenue, submits that a fresh look has to be made on this issue in the light of certain observations contained in the decision of the Supreme Court in CIT v. [ENTITY] and Co. [1995] 204 ITR 412. According to learned counsel, the view taken by this court in Marwell Sea Foods' case [CASE NUMBER], that peeling, deveining and beheading of the prawn would amount to production as contemplated by [SECTION] and [SECTION] of the Act, can no longer be accepted as correct in the light of the following observations of the apex court in [PRECEDENT] (head note) :
"The word 'production' or 'produce' when used in juxtaposition with the word 'manufacture', takes in bringing into existence new goods by a process which may or may not amount to manufacture".
21. Learned counsel for the Revenue further points out that considering the very same process for the purpose of entitlement under [SECTION] of the [ACT], the Supreme Court in [PRECEDENT], took the view that prawns, lobsters and shrimps continue to be the same goods even after suffering the processing and 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 [SECTION] or [SECTION] of the Act. Having bestowed our anxious consideration on the aforesaid contentions, we are afraid, we cannot accept the same. In this connection, it has to be pointed out that the observation made by the Supreme Court in [ENTITY]'s case [PRECEDENT] has to be understood in the context it was made. In [ENTITY]'s case [PRECEDENT], the claim was put forward under [SECTION] of the Act in respect of an activity of construction of a dam. The Income-tax Officer allowed the same. The Commissioner of Income-tax, however, reversed the order of the Income tax Officer to the extent of grant of relief under [SECTION] of the Act. He was of the opinion that the assessee engaged in construction of a dam cannot be said to be engaged in manufacture or production of an article in as much as "a dam is constructed and not manufactured. It would be absurd to say that the assessee is manufacturing the dam or the dam is capable of being sold. In short, the firm cannot be held as an industrial undertaking merely because it has to undertake certain manufacturing process in the course of construction of the irrigation project". He also referred to the fact that the assessee-firm was constituted only for the purpose of constructing a particular dam, on the completion of which work the firm would cease to exist automatically. The assessee preferred an appeal before the Income-tax Appellate Tribunal which was allowed on the ground, inter alia, that the activity of construction of a dam can be characterised as processing as well as manufacturing. At the instance of the Revenue, the aforesaid question, namely, whether the activity of construction of a dam can be characterised as processing as well as manufacturing was referred for the opinion of the High Court. The High Court agreed with the Tribunal that the assessee-firm constituted for the purpose of constructing a dam for storing water can be called an "industrial undertaking". The High Court agreed with the Tribunal that the word "article" need not be confined to mere movables and that "there would be no justification to hold that a dam is not an article in that sense of the term". The correctness of the said view was in question before the Supreme Court in [ENTITY]'s case [PRECEDENT]. The Supreme Court, after adverting to the scheme, context and legislative history of the provision, observed that the statute cannot always be interpreted with the dictionary in one hand and the statute in the other. It also observed that regard must also be had to the scheme, context and legislative history of provision and a literal and pedantic interpretation would inevitably lead to absurdity. The apex court after posing the question "would any person who has constructed a dam say that he has manufactured an article or that he has produced an article"?, answered the question with an emphatic negative, viz., obviously not and held as follows (page 424) :
"If a dam is an article, so would be a bridge, a road, an underground canal and a multi-storied building. To say that all of them fall within the meaning of word 'articles' is to overstrain the language beyond its normal and ordinary meaning. It is equally difficult to say that the process of constructing a dam is a process of manufacture or a process of production. It is true that a dam is composed of several articles ; it is composed of stones, concrete, cement, steel and other manufactured articles like gates, sluices, etc. But to say that the end-product the dam is an article is to be unfaithful to the normal connotation of the word. A dam is constructed ; it is not manufactured or produced. The expressions 'manufacture' and 'produce' are normally associated with movables articles and goods, big and small but they are never employed to denote the construction activity of the nature involved in the construction of a dam or for that matter a bridge, a road or a building".
22. The Supreme Court in [ENTITY]'s case [PRECEDENT], took the view that a dam cannot be treated as an "article" occurring in [SECTION] of the Act. Moreover, in the earlier portion of the very same judgment the Supreme Court had observed that the word "production" had a wider connotation than the word "manufacture". While every "manufacture" can be characterised as "production", every "production" need not amount to manufacture. Therefore, even when the end result of the process is not a new article, there can be "production" even though there is no "manufacture". In the aforesaid view, [ENTITY]'s case [PRECEDENT], can be of no assistance to the Revenue as the context and setting in which it was rendered are entirely different.
23. The reliance by learned counsel for the [PRECEDENT], is also misplaced. The aforesaid decision was rendered in the context of the provisions of the [ACT]. When [PRECEDENT] and CIT v. Poyilak-
kada Fisheries (P.) Ltd. [1992] 197 ITR 85 (Ker) and [PRECEDENT] were rendered in the years 1987 and 1992, [PRECEDENT], was available, but no reference was made to the above case by this court in the three decisions referred to above. It is also relevant to note that the special leave petition filed from [PRECEDENT], was dismissed by the Supreme Court by order dated July 12, 1995. This would also show that the dictum laid down in [PRECEDENT], has no application to [SECTION] of the [ACT]. Exemption under the section is intended to be an incentive to an assessee who owns a new industrial undertaking. We cannot also lose sight of the fact that the section which is intended to encourage the setting up of new industrial enterprises must be construed liberally (see CIT v. Simpson and Company [1980] 122 ITR 283, 286-87 (Mad , in a broad sense from a commonsense point of view (see CIT v. Orient Paper Mills Ltd. [1974] 94 ITR 73, 83 (Cal , and in a manner that will promote the object of the Legislature. Viewed in the above back-drop, we have no hesitation in rejecting the contention of learned counsel for the Revenue based on the aforesaid decision of the Supreme Court.
24. In the result, on a construction of [SECTION] of the Act and in view of the scheme and object of the Act, we hold that for production or manufacture of processed fish, the assessee(s) would be entitled to relief under [SECTION] of the Act. For the aforesaid reasons, we answer the question referred in [CASE NUMBER] in the affirmative and in favour of the assessee.
25. For the very same reason we hold that the assessee is entitled to the benefit under [SECTION] of the Act also. Thus, we answer the question referred to in [CASE NUMBER] in the affirmative and in favour of the assessee.
26. A copy of this judgment under the seal of the court and signature of the Registrar shall be forwarded to the Income-tax Appellate Tribunal, Cochin Bench, as required by law.