DCIT, Alappuzha V. Cochin Frozen Food Exports P.Ltd, Aroor

ITA 197/COCH/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61449 (ITAT-COCHIN)
• Duration Of Justice: 2 year(s) 1 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2012
• Appeal Filed By: Department
• Bench Allotted: DB
• Next Hearing Date: 20-03-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 12-03-2010
• Court: TRIBUNAL
• Department Lawyers: VIJAYAPRABHA
• Assessee Lawyers: GEORGE JOSEPH
• Keywords: Depreciation; Additional depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.A. NO.197/COCH/2010 ASSESSMENT YEAR : 2006-07 THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-1, ALLEPPEY M/S. COCHIN FROZEN FOOD EXPORTS PVT. LTD., IV/398, AROOKUTTY, FERRY ROAD, AROOR-688 534. [PAN:AAACC 8506G] (REVENUE-APPELLANT) (ASSESSEE - RESPONDENT) REVENUE BY SMT. VIJAYAPRABHA, JR. DR ASSESSEE BY SHRI GEORGE JOSEPH, FCA DATE OF HEARING 20/03/2012 DATE OF PRONOUNCEMENT 27/04/2012 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 02-12-2009 PASSED BY THE LD. CIT(A)-IV, KOCHI AND IT RELATES TO THE A SSESSMENT YEAR 2006-07. 2. THE SOLITARY ISSUED URGED IN THIS APPEAL IS WHET HER THE ACTIVITIES CARRIED OUT BY THE ASSESSEE CAN BE TERMED AS MANUFACTURE OR PRODUCTIO N OF AN ARTICLE OR THING IN THE CONTEXT OF ALLOWING ADDITIONAL DEPRECIATION U/S. 32(1)(IIA) OF THE ACT. 3. THE FACTS RELATING TO THE ISSUE ARE STATED IN BR IEF. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PROCESSING AND EXPORTING OF MARINE PROD UCTS LIKE SHRIMP, SQUID, FISH ETC. THE ASSESSEE PROCURES RAW FISH, SHRIMP AND SQUID FROM F ISHERMEN AND PROCESSES THEM TO MAKE THEM FIT FOR EXPORT. THE PROCESSES INVOLVED ARE GR ADING, CLEANING, PEELING, CUTTING, FREEZING AND PACKING. THE ASSESSEE CLAIMED ADDITIO NAL DEPRECIATION UNDER SECTION ITA NO. 197COCH/ 2010 2 32(1)(IIA) ON THE GROUND THAT THE PROCESSES CARRIED OUT BY IT AMOUNTS TO MANUFACTURE OR PRODUCTION OF AN ARTICLE OR THING. THE ASSESSING O FFICER REJECTED THE SAID CLAIM WITH THE OBSERVATION THAT THE MARINE PRODUCTS, VIZ. SHRIMPS , FISH AND SQUID REMAIN AS SHRIMP, FISH AND SQUID EVEN AFTER PROCESSING AND THUS, THERE IS NO EMERGENCE OF ANY NEW PRODUCT IN ORDER TO TERM THE ACTIVITIES OF THE ASSESSEE AS MAN UFACTURE OR PRODUCTION. ACCORDINGLY, HE DISALLOWED THE ADDITIONAL DEPRECIATION CLAIMED BY T HE ASSESSEE. THE ORDER OF THE ASSESSING OFFICER WAS CHALLENGED BEFORE THE LD. CIT (A) AND THE FIRST APPELLATE AUTHORITY ALLOWED THE CLAIM OF THE ASSESSEE. AGGRIEVED BY T HE ORDER OF THE LD, CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 4. THE LD. DR SUBMITTED THAT THE PROCESSES UNDE RTAKEN BY THE ASSESSEE CONSISTED OF ONLY CLEANING THE MARINE PRODUCTS IN ORDER TO MAKE IT FIT FOR EXPORT. THE SAID PROCESSES DO NOT BRING IN ANY NEW PRODUCT AND HENCE THE ACTIV ITIES CARRIED ON BY THE ASSESSEE CANNOT BE CONSIDERED AS PRODUCTION OR MANUFACTURE OF A THI NG OR ARTICLE. ON THE CONTRARY, THE LD. COUNSEL FOR THE ASSESSEE INVITED OUR ATTENTION TO T HE NATIONAL INDUSTRIAL CLASSIFICATION MANUAL ISSUED BY CENTRAL STATISTICAL ORGANISATION, MINISTRY OF STATISTICS AND PROGRAMME IMPLEMENTATION, GOVERNMENT OF INDIA AND SUBMITTED T HAT THE PROCESSING AND PRESERVATION OF FISH IS CLASSIFIED AS A MANUFACTURE ACTIVITY IN THAT MANUAL. HE FURTHER SUBMITTED THAT THE MARINE PRODUCTS, AT THE TIME OF CATCH, CANNOT B E CONSUMED BY THE CUSTOMERS AND ONLY AFTER PERFORMING VARIOUS PROCESSES, THEY BECOME FIT FOR HUMAN CONSUMPTION. ACCORDINGLY, HE SUBMITTED THAT THE ACTIVITY CARRIED ON BY THE ASSESSEE RESULTS IN A COMMERCIALLY DISTINCT PRODUCT AND HENCE SUCH ACTIVI TIES FALL IN THE CATEGORY OF MANUFACTURE OR PRODUCTION OF AN ARTICLE OR THING. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFULL Y PERUSED THE RECORD. WE NOTICE THAT THE HONBLE SUPREME COURT OF INDIA HAD AN OCCA SION TO CONSIDER THE QUESTION WHETHER THE PROCESSION OF SHRIMPS FALL IN THE CATEG ORY OF MANUFACTURE OR PRODUCTION IN THE CONTEXT OF S. 80HH OF THE ACT IN THE CASE OF CIT VS . RELISH FOODS REPORTED IN (1999) (237 ITR 59) (SC). THE HONBLE APEX COURT HELD THAT PRO CESSING OF SHRIMPS DID NOT INVOLVE PRODUCTION AND HENCE, THE ASSESSEE ENGAGED IN SUCH ACTIVITY WAS NOT ENTITLED TO DEDUCTION ITA NO. 197COCH/ 2010 3 U/S. 80HH OF THE ACT. ACCORDINGLY, THE DECISION OF HONBLE KERALA HIGH COURT IN THE CASE OF CIT VS. RELISH FOOD (1989)(180 ITR 454) WAS REVERSED. 6. FOR THE SAKE OF CONVENIENCE, WE EXTRACT BELOW TH E RELEVANT OBSERVATIONS MADE BY THE HONBLE APEX COURT IN THE ABOVE CITED CASE:- APART THERE FROM, THERE IS THE JUDGMENT OF THIS CO URT IN STERLING FOODS VS. STATE OF KARNATAKA & ANR. (1986) 63 STC 239 (SC), WHERE IT HAS BEEN HELD THAT PROCESSED OR FROZEN SHRIMPS AND PRAWNS ARE CO MMERCIALLY REGARDED AS THE SAME COMMODITY AS RAW SHRIMPS AND PRAWNS. WHE N RAW SHRIMPS AND PRAWNS ARE SUBJECTED TO THE PROCESS OF CUTTING OF HEADS AND TAILS, PEELING, DEVEINING, CLEANING AND FREEZING THEY DO NOT CEASE TO BE SHRIMPS AND PRAWNS AND BECOME OTHER DISTINCT COMMODITIES. THERE IS N O ESSENTIAL DIFFERENCE BETWEEN RAW SHRIMPS AND PRAWNS AND PROCESSED OR FR OZEN SHRIMPS AND PRAWNS. IN COMMON PARLANCE THEY REMAIN KNOWN AS S HRIMPS AND PRAWNS. THIS JUDGMENT IN STERLING FOODS (SUPRA) HAS BEEN R IGHTLY APPLIED BY THE BOMBAY HIGH COURT, IN THE CASE OF CIT VS. STERLING FOOD (GOA) (1995) 127 CTR (BOM.) 30: (1995) 213 ITR 851 (BOM.) TO A CLAI M UNDER S. 80HH OF THE IT ACT AND IT HAS BEEN HELD THAT THE ACTIVITY OF P ROCESSING OF PRAWNS IS NOT AN ACTIVITY OF MANUFACTURE OR PRODUCTION. WE ARE OF THE VIEW THAT THE JUDGMENT OF THIS COURT AFOREMENTIONED IN STERLING FOODS (SUPRA) IS APPOSITE TO THE QUESTION THAT WE HAVE TO DECIDE AND, UPON THE MATERIAL THAT IS BEFORE US, WE MUST REVERS E THE VIEW TAKEN BY THE HIGH COURT IN THE JUDGMENT UNDER APPEAL. 7. IN VIEW OF THE DECISION OF THE HONBLE APEX COURT C ITED ABOVE, WE HOLD THAT THE PROCESSING OF MARINE PRODUCTS DOES NOT INVOLVE PROD UCTION AND HENCE, THE ASSESSEE IS NOT ENTITLED TO ADDITIONAL DEPRECIATION U/S. 32(1)(IIA) OF THE ACT. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLO WED. PRONOUNCED ACCORDINGLY O N 27-04-2012 SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 27TH APRIL, 2012 ITA NO. 197COCH/ 2010 4 GJ COPY TO: 1. M/S. COCHIN FROZEN FOOD EXPORTS PVT. LTD., IV/39 8, AROOKUTTY, FERRY ROAD, AROOR- 688 534. 2. THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-1, ALLEPPEY 3. THE COMMISSIONER OF INCOME-TAX (APPEALS)-IV, KOC HI. 4. THE COMMISSIONER OF INCOME-TAX, KOTTAYAM 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE . BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN ITA NO. 197COCH/ 2010 5