Law: Income Tax Act, 1922

Section:

Income-tax----Industrial company ---Concessional rate of tax---Meanings of "industrial company", "processing" and "fumigation" ---Chillies made ready for export---Series of activities undertaken including fumigation---Whether cumulative effect of activities including fumigation amount to "processing requires proper evaluation---Decision of High Court set aside and matter remanded---Indian Finance Act, 1974, S.2(8)(c)---Indian Finance Act, 1976, S.2(9)(c)---Indian Finance (No.2) Act, 1977 S.2(7)(c). The expression "industrial company" has been defined in section 2 of the Finance Act, 1974, as meaning 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. In Chowgule & Co. (Pvt.) Ltd. v. Union of India (1981) 47 STC 124, the Supreme Court stated that the word "processing" has not been defined in the Act and it must, therefore, be interpreted according to its plain natural meaning. Webster's Dictionary gives the following meaning of the word "process": "to subject to some special process or treatment, to subject (especially raw material) to a process of manufacture, development or preparation for the market, etc., to convert into marketable form as livestock by slaughtering, grain by milling, cotton by spinning, milk by pasteurising, fruits and vegetables by sorting and repacking". Where, therefore, any commodity is subjected to a process or treatment with a view to its "development or preparation for the market'", as for example, by sorting and repacking fruits and vegetables, it would amount to processing of the commodity. The nature and extent of processing may vary from case to case; in one case the processing may be slight and in another it may be extensive; but with each process suffered, the commodity would experience a change. Wherever a commodity undergoes a change as a result of some operation performed on it or in regard to it, such operation would amount to processing of the commodity. The dictum laid down by the Supreme Court in Chowgule's case has not been departed from in the later decision…

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