Holding

Peeling and freezing shrimps does not constitute production; therefore, the assessee is not eligible for the Section 80HH exemption.

Summary

Relish Goods bought raw shrimps, peeled and froze them, and claimed a deduction under Section 80HH of the Income‑Tax Act, 1961, asserting that its activity amounted to production by an industrial undertaking. The Income‑Tax Officer rejected the claim, but the Commissioner (Appeals) and the Income‑Tax Appellate Tribunal allowed it. The Revenue appealed, and the Kerala High Court upheld the claim, holding that buying and processing shrimps constituted production. The Supreme Court examined the record, found no detailed description of any manufacturing process beyond peeling and freezing, and relied on its earlier decision in Sterling Foods that such processing does not amount to production. Consequently, the Court held that the activity does not qualify for Section 80HH and reversed the High Court’s decision, refusing to remand the matter for further evidence as it was too late for the assessment year in question.

Issues considered

Whether the assessee's business of buying, peeling and freezing shrimps involves 'production' within the meaning of Section 80HH of the Income‑Tax Act, 1961.
Whether the assessee is entitled to the exemption/allowance under Section 80HH.

Legislation cited

Income Tax Act, 1961s. 80HH

Subjects

Section 80HHproductionmanufacturingincome tax exemptionshrimp processingindustrial undertakingtax law

Judgment

\
!)
I~
COMMISSIONER OF INCOME-TAX TRIVANDRUM .....
A
v.
RELISH GOODS

MARCH 11, 1999

B
(
[S.P. BHARUCHA, S.S. MOHAMMED QUADRI
~
AND R.C. LAHOTI, JJ.)

Income Tax Act, 1961 :

c S. 80HH-Peeling and freezing of shrimps-Held, does not involve
production-Assessee not ellfitled to allowance.

The respondent-assessee was engaged in the business of shrimps.
The assessee, after buying shrimps, peeled and froze them. In the assess-
ment year 1977-78, the assessee claimed the allowance under Section 80HH
D of the Income Tax Act, 1961 on the ground that it was an industrial
undertaking engaged in manufacture/production. The Income-Tax Officer
negatived the claim but the Commissioner of Income Tax (Appeals) and
the Income Tax appellate Tribunal held in favour of the assessee. Ag-
grieved, Revenue filed the present appeal.
E
Allowing the appeal, this Court

HELD : 1.1. There is nothing on record indicating the description of
what the assessee does to the shrimps it buys, except the bald statement
that it peels and freezes them. The High Court was, therefore, not rigt.t in
F holding that buying and processing of shrimps by the assessee involved
<'

production to entitle the assessee to the allowance that it claimed.
[994-D; 993-H] .___

Sterling Foods v. The State of Kamataka and Another, (1986} 63 S.T.C.
239, relied on.
G
Commissioner of Income-Tax v. Sterling Foods (Goa), (1995) 213
I.T.R. 851, approved.
,(_ r
· Commissioner of Income-Tax v. Marwell Sea Foods, (1987) 166 I.T.R.
H 624, distinguished.
992
L
C.I.T. v. RELISH GOODS [S.P. BHARUCHA, J.) 993

.... 1.2. As regards assessee's submission that the matter should be A
remanded to appropriate authority to enable the assessee to lay before it
evidence in detail of what the purchased shrimps were subjected to, it is
too late for the assessee to do that in relation to the relevant assessment
year, viz. 1977-78. [995-A]

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 3255 of B
1995.

From the Judgment and Order dated 16.3.89 of the Kerala High
Court in l.T.R. No. 310 of 1982.

B. Krishna Prasad for the Appellant. c
E.M.S. Anam for the Respondent.

The Judgment of the Court was delivered by

S.P. BHARUCHA, J. The only question with which we are concerned D
in this appeal by the Revenue, relating to the Assessment Year 1977-78,
reads thus:

"Whether, on the facts and in the circumstances of the case :-

i) the assessee's business involves 'production' ? E
ii) the assessee is entitled to exemption under Section 80HH
of the l.T. Act, 1961 ?"

The assessee claimed the allowance under Section 80HH of the
Income-Tax Act, 1961, on the ground that it was an industrial undertaking F
that manufactured/produced articles. It would appear from the judgment
of the Tribunal that the assessee bought shrimps, peeled them and froze
them. There is. no other material on the record which indicates what was
done by the assessee and how it was done. The Income-Tax Officer
negatived the ciaim. The Commissioner of Income-Tax (Appeals) and the G
Tribunal upheld the claim.

From the order of the Tribunal the question aforementioned was
referred to the High Court for its opinion. The High Court held that bu)'.ing
and processing of shrimps involved production and, therefore, the assessee
was entitled to the allowance that it claimed. It followed its judgment in H
994 SUPREME COURT REPORTS (1999] 1 S.C.R.
A Commissioner of Income-Tax v. Marwe 11 Sea Foods ((1987) 166 I.T.R.
624].

We find from the judgment of the Kerala High Court in the case of
Maiwell Sea Foods (supra) that Harwell Sea Foods had placed before the
B taxing authorities a detailed description of the process by which prawns
were prepared for export and that the appellate authorities had understood
the various stages through which the prawns passed as processes involving
production or manufacture. The High Court was of the view that the
Tribunal having affirmed the finding of the A.AC., it should be extremely
slow to doubt the correctness of the finding unless it was perverse.
c
As has been pointed out, there is upon the record before us no
detailed description of what the assessee does to the shrimps it buys, other
than the bald statement that it peels and freezes them. We cannot accept
the statement at the Bar that the process to which the assessee puts the
D shrimps is the process that Marwell Sea Foods used in regard to its prawns.

Apart therefrom, there is the judgment of this Court in Sterling Foods
v. The State of Kamataka and Another, (1986) 63 S.T.C. 239, where it has
been held that processed or frozen shrimps and prawns are commercial
E ly regarded as the same commodity as raw shrimps and prawns. When
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 no essential difference between raw shrimps and prawns and
F processed or frozen shrimps and prawns. In common parlance they
remain known as shrimps and prawns. This judgment in Sterling Foods
(supra) has been rightly applied by the Bombay High Court, in the case of
Commissioner of Income- Tax v. Sterling Foods (Goa), [1995) 213 l.T.R.
851, to a claim u_nder Section 80HH of the Income-Tax Act and it has been
held that the activity of processing of prawns is not an activity of manufac-
G ture 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 reverse the view taken
H by the High Court in the judgment under appeal.
C.I.T. v. RELISH GOODS [S.P. BHARUCHA, J.] 995
Learned counsel for the assessee submitted that the matter should A
be remanded to the appropriate authority to enable the assessee to lay
before it evidence in detail of what the purchased shrimps were subjected
to. We think it is far too late in the day for the assessee to do that in relation
to the assessment year with which we are concerned.

The appeal is, therefore, allowed. The judgment and order under B
appeal is set aside to the extent it deals with the said question. The said
question is answered in the negative in relation to both its parts and in
favour of the Revenue.

No order as to costs.
c
R.P. Appeal allowed.

>