K.C. Agrawal, J. - (1.) THE assessee is a private limited company engaged in running cold storages at Farrukhabad, Kamalganj and Allahabad. For the assessment years 1969-70 and 1970-71, the assessee filed income-tax returns and claimed relief under Section 80-1 of the I.T. Act, 1961 (hereinafter described as "the Act"). THE case of the assessee was that as it was engaged in the activity of production of processed seed and, as such, being a "priority industry" within the meaning of Section 80B(7) was entitled to a deduction as provided in Section 80-1 of the Act. THE ITO negatived the claim. In appeal the judgment of the ITO was affirmed by the AAC of Income-tax. THE AAC held that the assessee stored the potatoes belonging to Others by maintaining the temperature at 35 degrees. It further found that by trying to preserve the seeds in the same condition in which it was placed, it cannot be said that the assessee was engaged in the production, of processed seeds. THE assessee took up the matter to the Income-fax Appellate Tribunal. THE Appellate Tribunal agreed with the view of the AAC and held that the assessee was not entitled to any relief under Section 80-1. THEreupon, on an application under Section 256(1) of the Act being filed by the assessee, the Tribunal, being satisfied that the following question of law arises, referred the same to the High Court for its opinion : "Whether, on the facts and in the circumstances of the case, the assessee was a priority industry within the meaning of Section 80-1 and, therefore, entitled to relief under this section for assessment years 1969-70 and 1970-71?"
(2.) IN order to appreciate the rival contentions it is desirable to reproduce Section 80-1 of the Act, which provides : "80-I. Deduction in respect of profits and gains from priority industries in the case of certain companies.--(1) IN the case of a company to which this section applies where the gross total income includes any profits and gains attributable to any priority industry, there shall be allowed, in accordance with and subject to the provisions of this section, a deduction from such profits and gains of an amount equal to eight per cent, thereof, in computing the total income of the company....." Section 80B(7) of the I. T. Act gives the definition of "priority industry ". It means "the business of generation or distribution of electricity, or any other form of power or of construction, manufacture or production of any one or more of the articles or things specified in the list in the Sixth Schedule or the business of any hotel where such business is carried on by an INdian company and the hotel is for the time being approved in this behalf by the Central Government." The case of the assessee was that as it was engaged in the production of processed seeds mentioned at item No. 28 of the Sixth Schedule, as such, it was entitled to the benefit of the aforesaid provision. The first question that arises for consideration is whether the assessee is a priority industry. In order to be a priority industry it is essential that it must be engaged in the business of construction, manufacture or production of any one or more of the articles or things specified in the list in the Sixth Schedule. Admittedly, the assessee was neither constructing nor manufacturing any one or more of the articles or things specified in the list in the Sixth Schedule. Its claim was based on the basis of production. The word "production" is not defined in the Act. It is, therefore, necessary to consider what it means in the section. The word "production" does not have any rigid meaning. It is, therefore, necessary that we should give the said word a meaning in which it best harmonises with the object of the statute and it effectuates the purpose of the enactment.
(3.) IN Words and Phrases (Permanent Edition), Vol. 34, the word "produce" has been defined as "means the production, or that which is produced, brought forth or yielded". According to the Webster's INternational English Dictionary, the word "produce" means "to bring forward, to get together". It would be seen that the word "production" meant, amongst other things, that which was produced, a thing that results from any action, process or effort. It is, however, to be noted that, as stated in the Law Lexicon by P. Ramanathan, the word "produce" is not necessarily confined to what is grown from the ground. It refers also to a finished article or semi-finished article made from the raw material. Thus, molasses can fairly be called the produce of the sugar mills. It would be thus seen that the word "production" is not to be understood in a narrow sense so as to mean only something produced by another or a natural process. After having considered the meaning of the word "production" we are now required to find whether the assessee was engaged in an activity which may lead us to hold that it was engaged in the business of production of processed seeds. The income-tax authorities found that the assessee used to store the potatoes belonging to others and by maintaining the temperature at 35 degrees, it tries to preserve them in the same condition in which it was placed.;