Case: Commissioner of Income Tax Vs. Kala Cartoons P. Limited (And Others Appeals and Special Leave Petitions)

C.A. Nos. 3967-71 of 1999 : At the instance of the Revenue, the following questions relating to the 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, 1961 : "(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 per cent. ? (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 are not the findings wrong, unreasonable and illogical ?" * The High Court by the judgment and order under appeal answered questions Nos. 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 Foods 1987 KER 263 and CIT v. Relish Foods 1989 KER 106. The case of the assessee for claiming allowance under section 80HH 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 Foods 1989 KER 106, has been set aside by this court in the case of CIT v. Relish Foods 1999 SC 431 . In respect of Marwell Sea Foods case 1987 KER 263 (Ker), 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 Foods 1999 SC 431 (SC).

Decision reasoning: 1[ds]The case of the assessee for claiming allowance under section 80HH 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 Foods 1989 KER 106, has been set aside by this court in the case of CIT v. Relish Foods 1999 SC 431 . In respect of Marwell Sea Foods case 1987 KER 263 (Ker), 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 Foods 1999 SC 431 (SC).