Delhi Cold Storage Pvt. Ltd vs Commissioner Of Income-Tax, Delhi-I, ... on 14 August, 1991 Equivalent citations: 1991 AIR 2125, 1991 SCR (3) 589, AIR 1991 SUPREME COURT 2125, 1991 (4) SCC 239, 1991 AIR SCW 2478, 1991 TAX. L. R. 978, (1991) 3 SCR 589 (SC), (1991) 59 TAXMAN 144, 1991 (2) UPTC 1104, 1991 KERLJ(TAX) 723, 1991 (3) SCR 589, 1991 BRLJ 75 213, (1991) 3 COMLJ 131, 1991 UPTC 2 1104, (1991) 3 JT 449 (SC), (1991) 72 COMCAS 723, (1991) 191 ITR 656, (1991) 79 FJR 308, (1992) 1 SCJ 303, (1991) 98 CURTAXREP 165, (1991) 45 DLT 227, 1991 (2) KLT SN 52 (SC) Author: Rangnath Misra Bench: Rangnath Misra, M.H. Kania, Kuldip Singh PETITIONER: DELHI COLD STORAGE PVT. LTD. Vs. RESPONDENT: COMMISSIONER OF INCOME-TAX, DELHI-I, NEW DELHI. DATE OF JUDGMENT14/08/1991 BENCH: MISRA, RANGNATH (CJ) BENCH: MISRA, RANGNATH (CJ) KANIA, M.H. KULDIP SINGH (J) CITATION: 1991 AIR 2125 1991 SCR (3) 589 1991 SCC (4) 239 JT 1991 (3) 449 1991 SCALE (2)346 ACT: Finance Act, 1973: Section 2(7)(c)--Assessee running a cold storage--Whether an 'Industrial company'--Activities of cold storage --Whether involve processing of goods. Words and Phrases--Word 'Processing'--Meaning of. HEADNOTE: Delhi Cold Storage Pvt. Ltd vs Commissioner Of Income-Tax, Delhi-I, ... on 14 August, 1991  1 An 'industrial Company', as defined in Section 2(7)(c) of Finance Act, 1973 was entitled to certain concessions in the matter of taxation. The appellant, a private limited company running a cold storage, laid claim to such benefits contending that it came within the meaning of 'industrial company' since the activity carried on by it came within the words 'processing of goods'. The income-Tax Officer, rejected the assessee's claim but the Appellate Assistant Commissioner conceded the claim, and directed remission of the proceedings to the income-Tax Officer for re-computation of the tax by treating the appel- lant as an 'industrial company'. The Tribunal accepted the appeal of the Revenue and held that the appellant was not an 'industrial company'. This was upheld by the High Court. Dismissing the appeal preferred by the assessee, this Court, HELD: 1.1 The term 'processing' is of a wider amplitude and has various aspects and meanings. in common parlance 'processing, is understood as an action which brings forth some change or alteration of the goods or material which is subjected to the act of processing. The dictionary meaning of the term is not very different from this meaning in one sense while various other meanings of Wider amplitude are also available. [593G-H, 594A] 1.2 In a cold storage, vegetables, fruits and several other articles, which require preservation by re- frigeration are stored. While as a result of long storage, scientific examination might indicate loss of moisture content, that is not sufficient for holding that the stored articles have 590 undergone a process within the meaning of Sec.2(7)(c) of the Finance Act, 1973. [594C] Chowgule, & Co. Pvt. Ltd. and Anr. v. Union of India & Ors., [1981] 1 SCC 653, relied on. Commissioner of Income-tax v. Radha. Nagar Chid Storage (P) Ltd., 126 I.T.R. 66 and Addl. Commissioner of Income- tax, Kanpur v. Farrukhabad Cold Storage (P) Ltd., 107 I.T.R. 816, referred to. Kilmarnock Equitable Co-operative Society Ltd. v. IRC., [1966] 42TC 675 at Page 681, referred to. JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3164 (NT) or 1991. From the Judgment and Order dated 19.4.1984 of the Delhi High Court in I. Tax Ref. No. 250 of 1975. H.N. Salve and Pramod Dayal for the Appellant. J. Ramamurthy, Vijay.K. Verma and Ms. A. Subhashini for the Respondent. Delhi Cold Storage Pvt. Ltd vs Commissioner Of Income-Tax, Delhi-I, ... on 14 August, 1991  2 The Judgment of the Court was delivered by RANGANATH MISRA, CJ. Special leave granted. The judgment of the High Court of Delhi is challenged by the assessee in this appeal. Assessee is a private' limited company running a cold storage. The year of assessment is 1973-74. An 'industrial company', as defined in sectiOn 2(7)(c) of Finance Act, 1973 for ,the purposes of the First Schedule of that Act was entitled to certain concessions in the matter of taxation. The appellant laid claim to such benefits by contending that it came within the meaning of 'industrial company'. The question that was referred by the Income-tax Appel late Tribunal to the High Court was: "Whether on the facts and in the circumstanCeS of the case the assessee company running a cold storage could be held to be an industrial company for purposes of section 2C7)(c) of the Finance Act,' 1973 and the First Schedule thereto?" The Income-tax Officer had not accepted the claim of. the appellant but the Appellate Assistant Commissioner conceded the claim and directed remission of the proceedings to the Income-tax Officer for re-computation of the tax by treating the appellant as an 'industrial company', The Tribunal accepted the appeal of the Revenue and held that the appellant was not an 'industrial company'. The High Court has approved the conclusions reached by the Tribunal. 'Industrial compnay' has been defined in section 2(7)(c) of the Finance Act., 1973 thus: "Industrial company means a company which is mainly engaged in the business of generation or distribution of electricity or any other form of power or in the construction of ships or in the manufacture or processing of goods or in mining. (Underlining is ours) The appellant had taken the stand that the activity carried on by it came within the words 'processing of goods'. The short question for examination, therefore, is whether the cold storage of the appellant can be held to have been engaged in the processing of goods. This question directly arose for consideration of a Division Bench of the Calcutta High Court in Commissioner of Income-tax v. Radha Nagar Cold Storage(P) Ltd., 126 I.T.R. 66. Sabyasachi Mukharji, J., (as he then was) spoke for the Court in this.case. Certain English cases were taken into consideration to find out the difference between manufactur- ing and processing and to find the true meaning of the word "processing". The word 'processing' has not been defined in the Income-tax Act. The word 'process' has various meanings, some wider than others. Lord Guthrie in Kilmarnock Equita- ble Co-operative Society Ltd. v. IRC [19661 42 TC 675 at page 681 observed that the word "does not have the widest significance of 'anything done to the goods or materials'. The Division Bench of the Calcutta High Court' looked 'for the meaning in the Oxford DictiOnarY, Webster's New Interna- tional Dictionary, Words and Phrases Legally Defined' Vol. 4 and in Encyclopaedia Britannica Vol. 9. The High Court was impressed by the statement in Encyclopaedia Britannica, vol. 9 where it was said' "The only method by which fresh foods may be preserved for a considerable period in the raw state is by subjecting them to as low a temperature as Delhi Cold Storage Pvt. Ltd vs Commissioner Of Income-Tax, Delhi-I, ... on 14 August, 1991  3 possible without causing damage by freezing.. Storage at temperature above freezing, in the neigh- bourhood of 35 F/2 C is known as cold storage. Storage at such temperature makes possible the holding in good condition of many fresh foods for considerable periods and their shipment to distant markets to consumers." The High Court proceeded to state: "The act of cold storage appears to us to bean act whereby foods or' products stored in the cold storage are prevented from their. natural decay. The potatoes which are kept in the cold storage are preserved in the original state and their normal decay is prevented. That, in our opinion, would be processing the goods, that is to say, preser- vation applying a method to 'the goods, where- by the. goods. are prevented from taking its/normal course. There fore, looking from a broad point of view, in the light of the definition provided in the several diction- aries to which we have referred, is appears to us, that in the context of the present stat- ute, ,which has used the expression "process- ing" in contradistinction or differently from the expression "manufacture", the assessee- company was engaged in the act of processing the goods in terms of the Finance Act at the relevant time.." The Court referred with approval to a decision of the 'Allahabad High Court in Addl. Commissioner of Income-tax, Kanpur v. Farrukhabad Cold' Storage (P) Ltd., 107 ITR 8 16. The Calcutta High Court's view directly supports the appel- lant's stand. In the impugned judgment reported in 156 ITR 97, after dealing with the cases of the Calcutta and Allahabad High Court,. reference was.made to the decision of this Court in Chowgule & Co. Pvt. Ltd. and Ant. v. Union of.India and Ors., [1981] 1 SCC653 to find out the true meaning of the two words 'manufacture' and 'processing'. After discussing some precedents this Court observed thus: "What is necessary in Order to characterise an operation as "processing" is that the 'commodity must., as a result of the operation,-experience some change., Here, in the-present case, diverse quantities of ore possessing different chemi- cal and physical compositions are blended together to produce ore of the requisite chemical and physical composition demanded by the foreign purchaser and obviously as a result of this blending, the quantities of ore mixed together in the course of loading through the mechanical ore handling plant experi- ence change in their respective chemical and physical compo- sitions, because what is produced by such blending is ore of a different chemical and physical composi- tion. When the chemical and physical composi- tion of each kind of ore which goes into the blending is changed; there can be no doubt that the operation of blending would amount to "processing" of ore within the meaning of section 8(3)(b) and Rule 13. It is.no doubt true that the blending of ore of diverse physical and chemical compositions is carried out by the simple act of physically mixing diifferent quantities of such ore on the conveyor belt of the mechanical ore handling' 'plant. But to our mind it is immaterial as to how the blending is done and what process is utilised for the purpose of blending. What is Delhi Cold Storage Pvt. Ltd vs Commissioner Of Income-Tax, Delhi-I, ... on 14 August, 1991  4 material to consider is whether the different quantities of ore which are. blended together in the course of loading through the Mechani- cal ore handing plant undergo any change in their. physical and chemical composition as a result of blending and so far as this aspect of the question is concerned, it is. impossi- ble to argue that they do not suffer any change in their respective chemical and physi- cal compositions-". The meaning given to the word 'processing' and the test laid down to find out whether the operation amounts to processing by the three-Judge Bench of 'this Court runs counter to the conclusions. reached by the Allahabad and Calcutta High Courts. As we have already pointed out, the two direct decisions on the point are the cases from Allaha- bad and Calcutta. The other cases that have been cited in the Calcutta judgment or at the Bar are cases not relating to the meaning or ambit of the relevant expression in the definition of section 2(7)(c) of the Finance Act, 1973. We have already noted that processing is a term of wide amplitude and has various aspects and meanings. In common parlance 'processing' is understood as an action which brings forth some change or alteration of the goods or material which is subjected to the act Of process- ing- The dictionary meaning of the term is not Very different from this meaning. in one sense while various other meanings of wider amplitude are also available. The view taken by Allahabad and Calcutta High Courts did not find favour with the three-Judge Bench of this Court and in clear terms the judgment indicates that processing involves bringing into existence a different substance from what the material was at the commencement of the process. In a cold storage, vegetables, fruits and several other articles which require preservation by referigeration are stored. While 'as a result of long storage, scientific examination might indicate loss of moisture content that is,not sufficient for holding that the stored articles have undergone a process within the meaning of section 2(7)(c) of the Finance Act, 1973. The three-Judge Bench decision must be taken to have overruled the view of the Allahabad High Court in Addl. Commissioner of Income-tax,' Kanpur v. Far- rukhabad Cold Storage (P) Ltd., (supra) and that of the Calcutta High Court in Commissioner of Income-tax v. Radha Nagar Cold Storage (P) Ltd., (supra). The appeal has, therefore, to be dismissed and the opinion of the Delhi High Court has to be affirmed. Parties are directed to bear their own costs. N.P.V. Apppeal 'dis- missed. Delhi Cold Storage Pvt. Ltd vs Commissioner Of Income-Tax, Delhi-I, ... on 14 August, 1991  5