THE HON’BLE SRI JUSTICE V.V.S.RAO AND THE HON’BLE SRI JUSTICE B.N.RAO NALLA REFERRED CASE No.61 OF 1995 Dated: 30.12.2001 Between: The Commissioner of Income Tax, Guntur .. Applicant And M/s.Hemsons Industries Oil Mill, Anantapur .. Respondent THE HON’BLE SRI JUSTICE V.V.S.RAO AND THE HON’BLE SRI JUSTICE B.N.RAO NALLA REFERRED CASE No.61 OF 1995 ORDER: (Per Hon’ble Sri Justice V.V.S.Rao) The Income Tax Appellate Tribunal, Hyderabad Bench ‘B’ referred the following question under Section 256(1) of the Income Tax Act, 1961 (the Act, for brevity), at the instance of the Revenue. Whether on the facts and in the circumstances of the case, the ITAT was justified in law in holding that assessee’s activity of decortication of groundnuts was in industrial under taking engaged in manufacture or production activity and therefore entitled to deduction under Section 80HH of the I.T.Act, 1961? The brief background of the matter is as follows. The assessee is in the business of purchase and sale of groundnuts as well as decortication of groundnuts into kernel and selling the same at its factory at Gooty. In their return of income for the assessment year 1985-1986, the assessee claimed deduction under Section 80HH of the Act in respect of decortication of groundnuts. The assessing authority disallowed the assessee’s claim on the ground that decortication of groundnuts did not involve any manufacturing activity. The Commissioner of Income Tax (Appeals), however, followed a decision of the Appellate Tribunal in the case of the assessee itself for the other assessment years and allowed the appeals duly directing the assessing officer to allow deduction under Section 80HH to the extent admissible under law. The Tribunal upheld the same, whereupon the Revenue sought the reference. The respondent/assessee is served, but none appears. We have heard the Junior Standing Counsel for Income Tax Department. During the course of submissions, our attention has been invited to the decision of the Division Bench of this Court in the case of assessee itself viz., Commissioner of Income Tax v Hemsons Industries[1]. Inter alia, this Court considered a similar question. After referring to the decision of the Supreme Court in Ganesh Trading Company v. State of Harynana[2] and other High Court decisions, this Court held that decortication of groundnuts into kernel involves manufacturing activity and therefore the assessee is entitled to the benefit under Section 80HH of the Act. Following the same, the question referred to is answered in the affirmative in favour of the assessee and against the Revenue. The Referred Case shall stand disposed of accordingly. _______________ (V.V.S.RAO, J) _____________________ (B.N.RAO NALLA, J) 30.12.2011 KH [1] (2001) 251 ITR 693 [2] (1973) 32 STC 623 (SC)